Pag

e1

Financial statements The directors are pleased to present the audited Financial statements of EcoCentral Limited For the year ended 30th June 2011

__________________________ ________________________ Paul Joseph Anderson Sarah Louise Astor Director Director Date 10th August 2011 Date 10th August 2011

Pag

e2

Eco Central Limited

Contents

Directory ------------------------------------------------------------------------------------------------- 3

Chairman's Report----------------------------------------------------------------------------------------4

General Manager's Report ---------------------------------------------------------------------- -5-8

Corporate Governance------------------------------------------------------------------------------9-10

Statement of comprehensive income ----------------------------------------------------------- 11

Balance sheet ---------------------------------------------------------------------------------------- 12

Statement of changes in equity ------------------------------------------------------------------- 13

Cash flow statement -------------------------------------------------------------------------------- 14

Notes to the financial statements ----------------------------------------------------------- -15-44

General Disclosures---------------------------------------------------------------------------------45-46 Independent Auditor's Report - Audit New Zealand-----------------------------------------47-49

EcoSort sorting and processing facility in Parkhouse Road

Pag

e3

Directory

Registered Office 53 Hereford Street, Christchurch Principal Place of Business Level 1, No 9 Baigent Way Middleton Chairperson Paul Joseph Anderson

(David William Kerr was appointed as Chairman 28th July 2011, Paul Joseph Anderson remains on the Board as a Director)

Directors Sarah Louise Astor William John Dwyer (resigned 31st July 2011) Gregory Shane Campbell Anthony John Marryatt (resigned 26th May 2011) General Manager Robert Douglas Gerrie Company Secretary Robert Douglas Gerrie Bankers ANZ National Bank Limited Christchurch Bank of New Zealand Limited Christchurch Solicitors Anderson Lloyd

Christchurch Auditors Audit New Zealand (on behalf of the Controller and

Auditor-General) Christchurch

Ownership 100% owned by Christchurch City Holdings Limited Website www.ecocentral.co.nz

Pag

e4

The Chairman’s Report

On behalf of the EcoCentral Board it is my pleasure to present the Annual Report of EcoCentral Ltd for the year ended 30 June 2011. It has been a significant year for EcoCentral and marks the end of the transition from its former ownership to the new permanent shareholder, Christchurch City Holdings Ltd (CCHL).

This transfer of ownership to CCHL was completed on 1 January 2011 following a period of direct ownership by the Christchurch City Council after the Council acquired the business from Meta Holdings Ltd in August 2008. The Council's decision to purchase the business ensured essential services provided at the EcoDrops and EcoSort were not disrupted. It also gave the Council an opportunity to consider the appropriate long-term ownership structure for these assets and in July 2010 it resolved to sell the business to Christchurch City Holdings Ltd.

The main strategic focus for the company during the 2010/11 year was to continue to streamline and improve the efficiency of its operations, focus on its core business and improve health and safety practices. This important work has continued despite the considerable impact of the Canterbury earthquakes during the year. The work has resulted in a company that is both profitable and well-focused on the sustainability, environmental and social objectives set out in its Statement of Intent.

From a financial perspective, the company increased its profitability significantly. On a normalised basis it increased revenue by 32.4% to $27.6 million and, by containing cost increases to 24.1%, increased its net profit before tax to $2.228 million - up from $0.125 million in 2009/10. The strong financial performance enabled the repayment of $3.8 million of the company's long-term debt.

The company had a vital role to play in assisting the city with the immediate response to the Canterbury earthquakes. The charts in the General Manager's report show the massive impact on general refuse volumes, with total tonnes handled reaching 119,419 tonnes up 44.2% from a year earlier. Despite the massive increase in volume, the company diverted in excess of 47% of the general refuse material to other uses, consequently avoiding the need for landfill. While this increase in general volumes enhanced the company's profitability, the earthquakes also put pressure on the quality of materials arriving at the EcoSort. Volumes at the EcoSort reached 55,495 tonnes, up 7.8% on a year earlier; however the lower quality of the incoming co-mingled recyclables increased the cost of sorting this material and lowered the gross margin from the EcoSort.

Management plans to focus on product quality in the coming year with a number of initiatives planned to ensure the EcoCentral's product sales are of the highest standard. The Board and management also remain committed to further initiatives aimed at furthering the programme of health and safety improvements at all company sites, as well completing the efficiency initiatives which were interrupted by the earthquakes.

I would like to acknowledge the considerable efforts of staff and management of EcoCentral during this challenging year and thank them for their dedication and commitment. I was heartened by the way the company handled the additional refuse volumes within existing capacity, and I am confident

the company is well-placed for future growth.

Paul Anderson – Chairman 10

th August 2011

Pag

e5

General Manager’s Report

EcoCentral has had a year marked by significant changes and also challenges. Although some were planned strategic initiatives, others, such as thousands of earthquakes that rocked the Canterbury region, were neither planned nor predicted. Despite these turbulent times, our management team and employees have remained enthusiastic and committed to our mission of championing responsible waste management for Canterbury. I am pleased to present the audited financial statements of the EcoCentral Limited for the year ended 30 June 2011.

New Name

One of our most significant changes this year was a complete organisational rebrand on 1st January

2011. Recognising our key role in promoting and supporting waste minimisation, recycling and product reuse in the Canterbury region, we chose a new brand identity that more closely reflected this. Our new company brand is EcoCentral, which replaces our previous name of CCC Two. The Eco prefix is also used for each of our operating divisions to consistently communicate their individual roles in contributing to responsible waste management in the region. EcoShop is the new name for the SuperShed, EcoDrops replace EcoDepots, and the Material Recovery Facility (MRF) is now known as EcoSort. In addition to the new brand names, we also have a new visual identity which is based on the cyclical nature of our activities in keeping waste out of landfill, and varies by colour for each operating division. We are gradually rolling out the new livery across the business and anticipate this will be completed by the end of the coming financial year.

New Ownership

In addition to a new name and visual identity, EcoCentral also has a new owner. On 1st January 2011

the Company changed ownership from Christchurch City Council to Christchurch City Holdings Limited, the latter being a wholly owned entity of Christchurch City Council.

Nature of Business

EcoCentral Limited is wholly owned by Christchurch City Holdings Limited, and is a ‘for profit’ Council Controlled Trading Organisation (CCTO) for the purposes of the Local Government Act 2002. Automated Recycling EcoCentral has a long term build, own and operate contract with Christchurch City Council to own and operate the EcoSort (Materials Recovery Facility) at Parkhouse Road. This facility processes recyclable materials collected from the wider Canterbury Region, including paper, glass, plastics and metals, and sells the output commercially to external parties. Ownership of this EcoSort facility will transfer back to Christchurch City Council in 2024. Reuse Retailing EcoShop, a large reused product department store at 191 Blenheim Road, Christchurch, is operated under a long term contract from Christchurch City Council. A vast range of second hand goods are collected from a variety of sources, sorted, priced and sold to retail customers who visit the store.

Waste Minimisation & Transfer

Pag

e6

There are three EcoDrops, or solid waste transfer stations, located around Christchurch city at

Parkhouse, Bromley and Styx Mill. These provide services to both retail and commercial customers

for the disposal of reusable, recyclable and waste materials and products. EcoDrops use appropriate

mobile plant to maximise the efficiency of their activities. EcoCentral limited runs the three EcoDrops

with a 10 year contract on behalf of Christchurch City Council until 30th June 2015.

Financial Performance

The financial year ending 30th June 2011 was EcoCentral’s first full 12 months, and our second year

of operation. It’s been an eventful period, with the Canterbury earthquakes contributing to a significant increase in volumes arriving at the EcoDrops. Net profit before tax for the 2011 year was $2,288k up from $125k in 2010. This was well ahead of both the budget and financial target for FY 2011. Revenue for the period was $33.50 million, a year on year increase of 32.4% on a normalised year. The surplus cash generated over the year allowed EcoCentral to repay $3.8 million of its long term borrowings, and a resulting equity to debt ratio of 9.43%. This was a significant improvement on the previous year which was adversely impacted by the building depreciation and deferred tax expense of FY 2010.

Operational Performance

EcoCentral was fortunate not to sustain any significant damage to plant or property during the Canterbury earthquakes, although there was minor disruption to operations in the eastern suburbs. We received additional volumes of refuse and hardfill following two of the major earthquakes but these were managed with existing operational capacity. The graph below shows the split of revenue for each operating division of EcoCentral Limited for the FY 2011.

Pag

e7

EcoSort

The EcoSort had a disruptive year with reduced volumes following the major September and February earthquakes, but recovered well due to additional volumes received from outside the region. The main focus of management attention has been, and will continue to be, on improving product quality. The graph below shows the product split that EcoSort obtains from the co-mingled material that it received in FY 2011.

EcoShop

EcoShop underwent a successful brand transformation and relocation in May 2011. The new location at 191 Blenheim Road offers a significantly improved shopping experience with enhanced merchandising and 100% of product under cover. In addition, the employee experience has improved with the product sorting and testing facility now also fully under cover. With an emphasis on customer service, the successful launch of the new EcoShop provides EcoCentral with an ideal opportunity to communicate the wider benefits of the group to a retail audience.

Pag

e8

EcoDrops

The EcoDrops continued their fine financial performance this year boosted by additional volumes from new commercial contracts, earthquake damage, and solid support from the Christchurch ratepayers. The graph below shows the volume of refuse received and processed by the three EcoDrops over the last two years. The graph reflects the additional volumes received as a consequence of the major earthquakes in the Canterbury region over FY 2011.

Outlook

We have now successfully entered the third phase of implementing our strategic plan in marketing and rebranding our operations. Improving the quality and performance of our products and services will be a key focus over the next 12 months. Procurement and enhanced communications with suppliers and customers will be key to these activities. We will also be leveraging a broad range of media channels and partnerships to communicate our message of sustainability and support to the Canterbury region.

Acknowledgments

I would like to acknowledge the significant contributions made by the management and staff of EcoCentral throughout this period of challenge and change. Several staff members, despite suffering earthquake damage to their homes, and personal hardship, still managed to make a wonderful contribution to the success of our business. I would also acknowledge the support of the Elected Council, Directors of EcoCentral, and officers of Christchurch City Council and Christchurch City Holdings Limited in aiding our business to effectively

serve the people of Canterbury. Robert Gerrie General Manager Date 10th August 2011

Pag

e9

Corporate governance statement

This statement gives readers an overview of EcoCentral’s main corporate governance policies and processes adopted or followed by the EcoCentral Board.

Role of the Board

The primary role of the Board is the governance of the Company. The Board undertakes stewardship on behalf of the shareholders to ensure the on-going health and viability of the Company. The Board effectively represents and promotes the shareholders interests to adding long-term value to the Company’s shares. The Board has all the powers necessary for managing, and directing and supervising the management of the business and affairs of the Company. Having regard to its role, the Board directs and overviews the business and affairs of the Company, including in particular:

Ensuring that the Company goals are clearly established and that strategies are in place to

achieve them.

Establishing policies for strengthening the overall performance of the operation to ensure

enhancement of the shareholder value

Overviewing the role the company can play in the recycling & waste industry in the

Canterbury region.

Monitor the performance of the different operations within the Company.

Take the necessary steps to protect the financial position of the Company.

Ensuring the Company’s financial statements are true and fair and otherwise conform with the

law

Ensuring that the Company adheres to high standards of ethics and corporate behaviour, and

Reviewing and approving the Company’s annual plan and Statement of Intent.

The Board monitors economic, political, social and legal issues and other relevant external matters that may influence or effect the development of the business or the interests of the shareholder and, if thought appropriate, will take outside expert advice on these matters.

Conduct of Directors

The conduct of directors is required to be consistent with their duties and responsibilities to the Company and, indirectly to the shareholders. In carrying out its role the Board places emphasis on strategic issues and policy. Directors are expected to keep themselves abreast of changes and trends in the business and in the company’s environment and markets. Directors are entitled to have access, at all reasonable times, to all relevant company information and to management.

Pag

e10

Board composition and mix

The composition of the Board reflects the duties and responsibilities it has to discharge and perform in the interests of the shareholders, and in setting the company’s strategy and seeing that it is implemented.

The Board of EcoCentral limited comprises four directors. The Board meets at least eleven times a year. In the 2011 Financial Year the Board met 12 times. The Board receives monthly board papers, which covers health & safety, financial & operational performance. It also receives updates on progress of strategic initiatives against plan & statement of intent.

Directors’ remuneration

The Shareholders recommend and approve the level of remuneration paid to directors.

Protocol on conflicts of interest.

The Board maintains a separate policy on conflicts of interest which meets all current legislative requirements. The Board maintains a full and updated register which is available at all Board meetings.

Indemnities and Insurance

The Company provides directors with, and pays the premiums for, directors and officers liability insurance cover while acting in their capacity as directors, to the fullest extent permitted by the Companies Act 1993.

The General Manager

The general manager is an employee of the Company and employed in terms of a contract between the general manager and the Company. On an annual basis the Chairperson will undertake a performance appraisal with the general manager and set the appropriate key performance targets for the year ahead.

Board – management relationship

The Board delegates management of the day-to-day affairs, and management responsibility of the Company, to the senior management under the leadership of the general manager to deliver the strategic direction and goals determined by the Board. All Board authority conferred on management is delegated through the general manager. The general manager is responsible to the Board to provide advice and implement Board policy. The general manager is expected to act within all specific authorities delegated to him or her by the Board.

Pag

e11

EcoCentral Limited

Statement of comprehensive income For the Year ended 30 June 2011

30 June 11 30 Jun 10

Note $000 $000

Revenue

Operating and other revenue 2 33,431 23,116

Finance income 3 18 5

Other gains 4 49 65

Total revenue 33,498 23,187

Expenditure

Depreciation, amortisation and impairment 5 1,412 1,359

Finance costs 6 619 712

Personnel costs 7 5,417 4,461

Other expenses 8 23,729 16,309

Other losses 4 33 221

Total operating expenses 31,210 23,062

Profit / (Loss) before income tax expense 2,288 125

Income tax expense 10(a) 812 865

Profit / (loss)from continuing operations 1,476 (740)

Profit/ (Loss) for the Year 1,476 (740)

Other comprehensive income

Cash flow hedges 21 197 (172)

Total comprehensive income for the period, net of tax 1,673 (912)

Profit / (Loss) for the Year attributable to:

Equity holders of the parent 1,476 (740)

1,476 (740)

Total comprehensive income attributable to:

Equity holders of the parent 1,673 (912)

1,673 (912)

Comparative figures for FY 2010 are for 11 months

The accompanying notes form part of these financial statements

Pag

e12

EcoCentral Limited

Balance sheet As at 30 June 2011

30 June 11 30 June 10

Note $'000 $'000

Current assets

Cash and cash equivalents 11 448 470

Debtors and other receivables 12(a) 2,220 1,596

Derivative financial instruments 13(a) 25 -

Prepayments 62 23

Inventories 14(a) 233 157

Total current assets 2,988 2,246

Non-current assets

Property, plant and equipment 15 14,260 14,972

Intangible assets 16 34 89

Deferred tax assets 10(c) 187 110

Goodwill 17 4,129 4,129

Total non-current assets 18,610 19,299

Total assets 21,598 21,546

Current liabilities

Creditors and other payables 18 3,723 1,790

Derivative financial instruments 13(b) - 172

Employee entitlements 20 679 622

Current tax liabilities 10(b) 237 12

Total current liabilities 4,639 2,596

Non-current liabilities

Borrowings 19 14,000 17,800

Deferred tax liabilities 10(c) 1,098 962

Total non-current liabilities 15,098 18,762

Total liabilities 19,737 21,358

Net assets 1,861 188

Equity

Capital and other equity instruments 1,100 1,100

Reserves 21 25 (172)

Retained earnings 22 736 (740)

Total equity 1,861 188

Director Director For and on behalf of the Board 10th August 2011 The accompanying notes form part of these financial statements

Pag

e13

EcoCentral Limited

Statement of changes in equity For the Year ended 30 June 2011

30 June 11 30 Jun 10

Note $'000 $'000

Equity at beginning of financial year 188 -

Movements in reserves

Hedging reserve 21 197 (172)

197 (172)

Movements in share capital:

Issue of shares - 1,100

1,100

Retained earnings:

Net profit / (loss) for the period 1,476 (740)

Dividends paid or provided for 22 - -

1,476 (740)

Net movements in equity 1,673 188

Equity at end of financial year 1,861 188

The accompanying notes form part of these financial statements

Pag

e14

EcoCentral Limited

Cash flow statement For the Year ended 30 June 2011

30 June 11 30 Jun 10

Note $'000 $'000

Cash flows from operating activities

Receipts from customers and other sources 33,116 24,608

Interest received 18 5

Payments to suppliers and employees (27,606) (23,748)

Income tax paid (528) -

Interest and other finance costs paid (581) (622)

Net cash provided by/(used in) operating activities 23 4,419 243

Cash flows from investing activities

Payment for property, plant and equipment (1,139) (1,651)

Proceeds from sale of property, plant and equipment 498 534

Payment for intangible assets - (23)

Payment for acquisition of business - (16,892)

Net cash (used in)/provided by investing activities (641) (18,032)

Cash flows from financing activities

Proceeds from issue of equity securities - 1,100

Proceeds from borrowing 15,000 18,000

Repayment of borrowings (18,800) (200)

Repayment of finance leases - (641)

Net cash provided by/(used in) financing activities (3,800) 18,259

Net increase in cash and cash equivalents (22) 470

Cash and cash equivalents at beginning of year 470 -

Cash and cash equivalents at end of year 11 448 470

The accompanying notes form part of these financial statements

Pag

e15

EcoCentral Limited

Notes to the financial statements

For the Year ended 30 June 2011 1. Statement of accounting policies Reporting Entity EcoCentral Limited is a wholly-owned subsidiary of the Christchurch City Holdings Limited. CCC Two Limited changed its name to EcoCentral Limited in January 2011. The ultimate parent of EcoCentral Limited is Christchurch City Council. Until 4 August 2009 CCC Two Limited was an inactive company. On that date it acquired the assets and liabilities of the Meta group of companies and commenced operations on the 5

th August 2009. On

the 1st January 2011 Christchurch City Holdings Limited purchased all the shares in EcoCentral

Limited from Christchurch City Council EcoCentral Limited is a reporting entity for the purpose of the Financial Reporting Act 1993 and its financial statements comply with that Act. The reporting currency used in the preparation of these financial statements is New Zealand dollars.

Comparative Information: EcoCentral Limited was trading as CCC Two Limited in 2010 financial year and all comparatives are from 5

th August 2009 to 30

th June 2010

Basis of preparation Statement of compliance The financial statements of EcoCentral Limited have been prepared in accordance with the requirements of the Local Government Act 2002, which include the requirement to comply with generally accepted accounting practice in New Zealand (NZ GAAP). These financial statements have been prepared in accordance with NZ GAAP. They comply with NZ IFRS, and other applicable financial reporting standards, as appropriate for public benefit entities.

Measurement base The financial statements have been prepared on a historical cost basis, modified by the revaluation of certain financial instruments (including derivative instruments). The accounting policies have been consistently applied in determining the earnings and cash flows for the Year ended 30 June 2011, and

the financial position as at that date. Functional and presentation currency The financial statements are presented in New Zealand dollars and all values are rounded to the nearest thousand dollars ($000). The functional currency of the EcoCentral Limited is New Zealand

dollars.

Pag

e16

Significant Accounting Policies

Cash and cash equivalents Cash and cash equivalents in the statement of financial position comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

Foreign currency transactions Foreign currency transactions are translated at the foreign exchange rate ruling on the day of the transaction. Foreign currency monetary assets and liabilities at the balance date are translated to NZ dollars at the rate ruling at that date. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the surplus or deficit.

Trade and other receivables Trade receivables, which generally have 30-60 day terms, are recognised initially at fair value and subsequently less an allowance for impairment Collectability of trade receivables is reviewed on an on-going basis at an operating level. Individual debts that are known to be uncollectible are written off when identified. An impairment provision is recognised when there is objective evidence that EcoCentral Limited will not be able to collect the receivable.

Inventories Inventories including raw materials, work in progress and finished goods are valued at the lower of cost and net realisable value. Costs incurred in bringing each product to its present location and condition are accounted for as follows: Raw materials – purchase cost on a first-in, first-out basis. Finished goods and work-in-progress – cost of direct materials and labour and a proportion of variable and fixed manufacturing overheads based on normal operating capacity. Costs are assigned on the basis of weighted average costs. Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

Pag

e17

Derivative financial instruments and hedging EcoCentral Limited uses derivative financial instruments (including forward currency contracts) to hedge its risks associated with foreign currency. Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently re-measured to fair value at each reporting date. Derivatives are carried as assets when their fair value is positive and as liabilities when their fair value is negative. Derivative assets and liabilities held for the purpose of trading are classified as current in the statement of financial position. Derivative assets and liabilities are classified as non-current when the remaining maturity is more than 12 months, or current when the remaining maturity is less than 12 months. The fair values of forward currency contracts are calculated by reference to current forward exchange rates for contracts with similar maturity profiles. Any gains or losses arising from changes in the fair value of derivatives, except for those that qualify as cash flow hedges, are taken directly to profit or loss for the year. At each balance date, EcoCentral Limited measures ineffectiveness using the ratio offset method. For foreign currency cash flow hedges if the risk is over-hedged, the ineffective portion is taken immediately to Profit & Loss

Property, plant and equipment Property, plant and equipment is recognised at its historical cost or valuation less accumulated depreciation and any accumulated impairment losses. Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing the parts is incurred. Similarly, when each major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement only if it is eligible for capitalisation. All other repairs and maintenance are recognised in profit or loss as incurred. Depreciation is calculated on a straight-line basis over the estimated useful life of the specific assets as Follows: Buildings 15 - 50 years Plant and equipment 1 to 15 years Motor vehicles 4 – 5 years IT Systems & Equipment 1 – 3 years Furniture & Fittings 1 – 3 years

Additions The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits or service potential associated with the item will flow to EcoCentral and the cost of the item can be measured reliably. Work in progress is recognised at cost less impairment and is not depreciated. Property, plant and equipment is recognised at its cost. Where an asset is acquired at cost, or for a nominal cost, it is recognised at fair value as at the date of acquisition. The assets' residual values, useful lives and depreciation methods are reviewed annually, and adjusted if appropriate, at each financial year end.

Pag

e18

Disposals Gains & losses on disposals are determined by comparing the disposal proceeds with the carrying amounts of the asset. Gains & losses on disposals are reported net in the surplus or deficit. De-recognition An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal.

Leases The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset. (i) EcoCentral Limited as a lessee Finance leases, which transfer to EcoCentral Limited substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised as an expense in profit or loss. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term if there is no reasonable certainty that EcoCentral Limited will obtain ownership by the end of the lease term. Operating lease payments are recognised as an expense in the statement of comprehensive income on a straight-line basis over the lease term. Operating lease incentives are recognised as a liability when received and subsequently reduced by allocating lease payments between rental expense and reduction of the liability.

Goodwill and intangibles Goodwill Goodwill acquired in a business combination is initially measured at cost of the business combination being the excess of the consideration transferred over the fair value of net identifiable assets acquired and liabilities assumed. If this consideration transferred is lower than the fair value of the net identifiable assets of the subsidiary acquired, the difference is recognised in profit or loss. After initial recognition, goodwill is measured at the amount recognised at acquisition date less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the acquired cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities acquired are assigned to those units or groups of units. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes, is not larger than an operating segment determined in accordance with NZ IFRS 8, and includes: ► The Materials Recovery Facility (EcoSort) ► EcoDrops and the EcoShop EcoCentral Limited performs impairment testing annually, and in 2011 this testing was carried out independently by Ernst Young.

Pag

e19

When testing indicates that goodwill has been impaired an impairment loss is recognised. Impairment losses recognised for goodwill are not subsequently reversed. Intangibles Intangible assets acquired separately or in a business combination are initially measured at cost. The cost of an intangible asset acquired in a business combination is its fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. EcoCentral Limited amortises its software assets over a 3 year period Intangible assets with finite lives are amortised over their useful life and tested for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for an intangible asset with a finite useful life are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset are accounted for prospectively by changing the amortisation period or method, as appropriate, which is a change in accounting estimate. The amortisation expense on intangible assets with finite lives is recognised in profit or loss in the expense category consistent with the function of the intangible asset. Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash-generating unit level consistent with the methodology outlined for goodwill above. Such intangibles are not amortised. The useful life of an intangible asset with an indefinite life is reviewed each reporting period to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is accounted for as a change in

an accounting estimate and is thus accounted for on a prospective basis.

Trade and other payables

Trade and other payables are carried at amortised cost and due to their short-term nature they are not discounted. They represent liabilities for goods and services provided to EcoCentral Limited prior to the end of the financial year that are unpaid and arise when EcoCentral Limited becomes obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured and are usually paid within 30 days of recognition.

Interest-bearing loans and borrowings All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Fees paid on the establishment of loan facilities that are yield related are included as part of the carrying amount of the loans and borrowings. Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset (i.e. an asset that necessarily takes a substantial period of time to get ready for its intended use or sale) are capitalised as part of the cost of that asset. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

Pag

e20

Provisions and employee benefits Provisions are recognised when the entity has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. When the entity expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the statement of comprehensive income net of any reimbursement. Provisions are measured at the present value of management's best estimate of the expenditure required to settle the present obligation at the reporting date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision resulting from the passage of time is recognised in finance costs. Employee leave benefits (i) Wages, salaries, annual leave and sick leave Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the reporting date are recognised in respect of employees' services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Expenses for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable. (ii) Long service leave The liability for long service leave is recognised and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures, and periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity and currencies that match, as closely as possible, the estimated future cash outflows.

Revenue recognition Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent it is probable that the economic benefits will flow to EcoCentral Limited and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: (i) Sale of goods Revenue from the sale of goods is recognised when there has been a transfer of risks and rewards to the customer (through the execution of a sales agreement at the time of delivery of the goods to the customer),no further work or processing is required, the quantity and quality of the goods has been determined, the price is fixed and generally title has passed (for shipped goods this is the Free On Board date).

(ii) Rendering of services Revenue from the dumping of product or dropping off materials is recognised at reporting date or at the time of completion of the contract and billing to the customer.

(iii) Interest revenue Revenue is recognised as interest accrues using the effective interest method. Income tax and other taxes

Pag

e21

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities based on the current period's taxable income. The tax rates and tax laws used to compute the current tax amount based on rates which are enacted or substantively enacted by the reporting date. Deferred income tax is provided on all temporary differences at the reporting date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred income tax liabilities are recognised for all taxable temporary differences except when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting date. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation authority. Revenues, expenses and assets are recognised net of the amount of GST except: ►When the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable ► Receivables and payables, which are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.

Cash flows are included in the statement of cash flows on a net basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority is classified as part of operating cash flows. Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority

Significant accounting judgements, estimates and assumptions The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements and estimates on historical experience and on other various factors it believes to be reasonable under the circumstances, the result of which form

Pag

e22

the basis of the carrying values of assets and liabilities that are not readily apparent from other sources. Management has identified the following critical accounting policies for which significant judgements, estimates and assumptions are made. Actual results may differ from these estimates under different assumptions and conditions and may materially affect financial results or the financial position reported in future periods. Impairment of goodwill EcoCentral Limited determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the recoverable amount of the cash-generating units, using a value in use discounted cash flow methodology, to which the goodwill are allocated. For 2011 EcoCentral Limited has judged that there has been no impairment in goodwill, and in making this judgement Directors and Management have relied upon independent advice provided by Ernst Young.

Changes in accounting policy and disclosures

The accounting policies adopted are consistent with those of the previous financial year.

New standards and interpretations issued and not yet adopted

The following new standards, interpretations and amendments may have an impact on EcoCentral

Limited’s future financial statements, but are not yet effective for the year ended 30 June 2011, and

have not been applied in preparing these consolidated financial statements:

NZ IFRS 9 Financial Instruments will eventually replace NZ IAS 39 Financial Instruments: Recognition and Measurement. NZ IAS 39 is being replaced through the following three main phases: Phase 1 Classification and Measurement, Phase 2 Impairment Methodology, and Phase 3 Hedge Accounting. Phase 1 has been completed and has been published in the new financial instrument standard NZ IFRS 9. NZ IFRS 9 uses a single approach to determine whether a financial asset is measured at amortised cost or fair value, replacing the many different rules in NZ IAS 39. The approach in NZ IFRS 9 is based on how an entity manages its financial assets (its business model) and the contractual cash flow characteristics of the financial assets. The financial liability requirements are the same as those of NZ IAS 39, except for when an entity elects to designate a financial liability at fair value through the surplus or deficit. The new standard is required to be adopted for the year ended 30 June 2014. The EcoCentral Limited has not yet assessed the effect of

the new standard and expects it will not be early adopted.

FRS-44 New Zealand Additional Disclosures and Amendments to NZ IFRS to harmonise with IFRS and Australian Accounting Standards (Harmonisation Amendments)

These were issued in May 2011 with the purpose of harmonising Australia and New Zealand’s accounting standards with source IFRS and to eliminate many of the differences between the accounting standards in each jurisdiction. The amendments must first be adopted for the year ended 30 June 2012. EcoCentral Limited has not yet assessed the effects of FRS-44 and the Harmonisation Amendments.

Pag

e23

2. Operating and other revenue 30 June 11 30 Jun 10

$'000 $'000

Sale of goods 10,450 8,861

Rendering of services 22,918 14,096

Other rental revenue - 20

Net foreign exchange gains - 80

Other (CCC) - Hazardous Waste fee 15 15

Other (CCC) - Management fee recovery 48 44

33,431 23,116

3. Finance income

30 June 11 30 Jun 10

$'000 $'000

Interest income - bank deposits 18 5

18 5

4. Other gains and losses

30 June 11 30 Jun 10

$'000 $'000

Other gains

Non-financial instruments

Gains/(losses) on disposal of property, plant and equipment 49 65

49 65

Other gains 49 65

30 June 11 30 Jun 10

$'000 $'000

Other losses

Non-financial instruments

Gains/(losses) on disposal of property, plant and equipment (33) (221)

(33) (221)

Other losses (33) (221)

5. Depreciation, amortisation and impairment

30 June 11 30 Jun 10

$'000 $'000

Depreciation of non-current assets 1,357 1,330

Amortisation of intangible assets 32 29

Impairment of Intellectual Property 23 -

1,412 1,359

6. Finance Costs

30 June 11 30 Jun 10

$'000 $'000

Interest expense

Interest on finance leases - 83

Loan interest expense 619 629

619 712

Pag

e24

7. Personnel costs

30 June 11 30 Jun 10

$'000 $'000

Salaries and wages 5,137 4,260

Defined contribution plan employer contributions - -

KiwiSaver plan employer contributions 52 45

Defined benefit plan employer contributions 18 28

Increase/(decrease) in employee entitlements/liabilities 57 13

Other 153 115

5,417 4,461

8. Other expenses

30 June 11 30 Jun 10

$'000 $'000

Audit fees 40 54

Donations 2 3

Rental expenses 1,830 1,822

Other operating expenses 21,857 14,430

23,729 16,309

9. Remuneration of auditors

30 June 11 30 Jun 10

$'000 $'000

Audit New Zealand

Audit of the financial statements 40 54

40 54

10. Income taxes (a) Components of tax expense

30 June 11 30 Jun 10

$'000 $'000

Current tax expense/(income) 754 12

Deferred tax expense/(income) 58 853

Total tax expense/(income) 812 865

Reconciliation of prima facie income tax: 30 June 11 30 Jun 10

$'000 $'000

(Profit)/loss before tax 2,288 125

Income tax expense calculated at 30% 686 38

Non-deductible Items 62 (30)

Impact of change in deductibility of Tax Building Depreciation - 863

Other timing differences 64 (6)

812 865

The tax rate in the above reconciliation is the corporate tax rate of 30% payable by New Zealand companies on taxable profits under New Zealand tax law.

Pag

e25

(b) Current tax payables 30 June 11 30 Jun 10

$'000 $'000

Income tax payable 237 12

237 12

(c) Imputation Credit Account

30 June 11 30 Jun 10

$'000 $'000

Imputation credit account balances

Balance at beginning of period - -

Taxation paid 528 -

528 -

(d) Deferred tax balance

30 June 2011

Opening Closing

balance Income balance

$'000 $'000 $'000

Deferred tax liabilities:

Property, plant and equipment 962 132 1,094

Intangible assets - 4 4

Other - - -

962 136 1,098

Deferred tax assets:

Provisions and employee entitlements 97 60 157

Doubtful debts and impairment losses 13 17 30

110 77 187

Net deferred tax liability/(asset) 852 59 911

30 June 2010

Opening Closing

balance Income balance

$'000 $'000 $'000

Deferred tax liabilities:

Property, plant and equipment - 962 962

- 962 962

Deferred tax assets:

Provisions and employee entitlements - 97 97

Doubtful debts and impairment losses - 13 13

- 110 110

Net deferred tax liability/(asset) - 852 852

Pag

e26

11. Cash and cash equivalents

30 June 11 30 Jun 10

$'000 $'000

Cash and cash equivalents (NZD) 443 238

Cash and cash equivalents (USD) 5 232

448 470

12. Debtors and other receivables (a) Current debtors and other receivables

30 June 11 30 Jun 10

$'000 $'000

Trade receivables (before impairment) 1,296 923

Other related parties 873 740

GST receivable 56 76

2,225 1,739

Provision for impairment - trade receivables (5) (143)

2,220 1,596

(b) Credit risk aging of receivables Individual impaired receivables have been determined to be impaired because of significant financial difficulties being experienced by the debtor. An analysis of these individually impaired debtors is as follows:

30 June 11 30 Jun 10

$'000 $'000

Gross receivables

Not past due 1905 1,386

Past due 0-30 days 251 68

Past due 31-60 days 4 18

Past due more than 60 days 9 191

2,169 1,663

Impairment

Past due more than 60 days (5) (143)

(5) (143)

Gross trade receivables 2,169 1,663

Individual impairment (5) (143)

Trade receivables (net) 2,164 1,520

Movements in provision for impairment of receivables

Balance at start of year 143 -

Provisions made during year 16 143

Receivables written off during year (154) -

Balance at end of year 5 143

EcoCentral holds no collateral as security or other credit enhancements over receivables that arte either past due or impaired.

Pag

e27

13. Derivative financial instruments

(a) Current assets

30 June 11 30 Jun 10

$'000 $'000

Forward foreign exchange contracts 25 -

25

-

Total derivative financial instrument assets 25 -

(b) Current liabilities

30 June 11 30 Jun 10

$'000 $'000

Forward foreign exchange contracts - 172

- 172

Total derivative financial instrument liabilities - 172

Fair Value Forward foreign exchange contracts

The fair values of forward foreign exchange contracts have been determined using a discounted cash flows valuation technique based on quoted market prices. The inputs into the valuation model are from independently sourced market parameters such as currency rates. Most market parameters are implied from instrument prices.

Forward foreign exchange contracts

The notional principal amounts of outstanding forward foreign exchange contracts were $859 thousand (2010 $6,847 thousand). 14. Inventories (a) Current inventories

30 June 11 30 Jun 10

$'000 $'000

Inventory - raw materials and maintenance items 84 64

Inventory - finished goods 149 93

233 157

Pag

e28

15. Property, plant and equipment

30 June 11 30 Jun 10

$'000 $'000

Operational assets 14,260 14,972

Balance at end of financial year 14,260 14,972

Reconciliation of movement in property, plant and equipment

Operational assets Plant &

Buildings equipment Total

$'000 $'000 $'000

Gross carrying amount

Cost/valuation at 1 July 2009 - - -

Additions 3,748 13,464 17,212

Disposals - (1,038) (1,038)

Net movements in work in progress - 24 24

Cost/valuation at 30 June 2010 3,748 12,450 16,198

Additions - 950 950

Disposals - (678) (678)

Net movements in work in progress - 175 175

Cost/valuation at 30 June 2011 3,748 12,897 16,645

Accumulated depreciation

Accumulated depreciation and impairment at 1 July 2009 - - -

Disposals - 133 133

Depreciation expense (98) (1,261) (1,359)

Accumulated depreciation & impairment at 30 June 2010 (98) (1,128) (1,226)

Disposals - 198 198

Depreciation expense (106) (1,251) (1,357)

Accumulated depreciation and impairment at 30 June 2011 (204) (2,181) (2,385)

Carrying amount at 30 June 2010 3,650 11,322 14,972

Carrying amount at 30 June 2011 3,544 10,716 14,260

There are no restrictions over the title of property, plant and equipment. No PPE assets are pledged as security for liabilities. The buildings & plant of EcoCentral Limited have been assessed for impairment subsequent to each large earthquake and no impairment factors noted, therefore there has been no insurance cover claimed.

Pag

e29

16. Intangibles Total

$'000

Cost Amount

Gross carrying amount at 1 July 2009 -

Additions 118

Cost amount at 30 June 2010 118

Additions -

Gross carrying amount at 30 June 2011 118

Accumulated amortisation and impairment

Accumulated depreciation and impairment at 1 July 2009 -

Amortisation expense (29)

Accumulated depreciation and impairment at 30 June 2010 (29)

Amortisation expense (32)

Impairment (23)

Accumulated depreciation and impairment at 30 June 2011 (84)

Carrying amount

Carrying amount at 30 June 2010 89

Carrying amount at 30 June 2011 34

There are no restrictions over the title of intangible assets. No intangible assets are pledged as security for liabilities

17. Goodwill

30 June 11 30 Jun 10

$'000 $'000

Gross carrying amount

Balance at beginning of financial year 4,129 -

Additional amounts recognised from business combinations - MRF CGU - 3,095

Additional amounts recognised from business combinations - Other CGU - 1,032

Balance at end of financial year 4,129 4,129

Accumulated impairment losses

Balance at beginning of financial year - -

Reassessment of goodwill - -

Balance at end of financial year - -

Carrying amount

At beginning of financial year 4,129 -

At end of financial year 4,129 4,129

On 4 August 2009 EcoCentral Limited purchased certain assets and liabilities of Meta processing Limited, including goodwill of $4.1 million. A report commissioned from independent valuers Ernst and Young tested the goodwill for impairment. Their report found there were no indicators of impairment as at 30 June 2011.

18. Creditors and other payables

30 June 11 30 Jun 10

$'000 $'000

Trade payables and accrued expenses 1,254 713

Amounts due to related parties 2,340 987

Interest payable 129 90

3,723 1,790

Pag

e30

19. Borrowings (a) Non current borrowings

30 June 11 30 Jun 10

$'000 $'000

Loans from group entities (Christchurch City Council) Floating - 17,800

Loans from group entities (Christchurch City Holding Limited) Fixed 9,000 -

Loans from group entities (Christchurch City Holding Limited) Floating 5,000 -

14,000 17,800

Christchurch City Holdings Limited refinanced EcoCentral Limited $15,000,000 after the Loan with CCC was repaid in April 2011.

20. Employee entitlement (a) Current portion

30 June 11 30 Jun 10

$'000 $'000

Accrued pay 58 38

Annual leave 583 534

Retirement and long service leave 38 50

679 622

Employee benefits

The provision for long service leave is an actuarial assessment of entitlements that may become due to employees in the future. The provision is affected by a number of estimates, including the expected length of service of employees and the timing of benefits being taken. Most of the liability is expected to be incurred over the next year.

Pag

e31

21. Capital and other equity instruments Fully paid redeemable preference shares

30 June 11 30 Jun 10

$'000 $'000

Balance at beginning of financial year 1,100

Issue of fully paid redeemable preference shares 1,100

Balance at end of financial year 1,100 1,100

EcoCentral limited has made a name change and re branded our divisions during the 2011 year. Ownership has changed from Christchurch City Council to Christchurch City Holdings Limited. To facilitate the purchase Christchurch City Holdings Limited acquired the $1,100,000 in EcoCentral Limited being the 1,100,000 fully paid $1 redeemable preference shares and 100 $1 ordinary shares from CCC.

Reserves

30 June 11 30 Jun 10

$'000 $'000

Hedging reserve

Balance at beginning of financial year (172) -

Forward foreign exchange contracts 197 (172)

Balance at end of financial year 25 (172)

Hedging reserve

The hedging reserve represents hedging gains and losses recognised on the effective portion of cash flow hedges.

22. Retained earnings

30 June 11 30 Jun 10

$'000 $'000

Balance at beginning of financial year (740) -

Net profit for the period 1,476 (740)

Balance at end of financial year 736 (740)

Pag

e32

23. Reconciliation of surplus to net cash flows from operating activities

30 June 11 30 Jun 10

$'000 $'000

Profit / (Loss)for the period 1,476 (740)

Add/(less) non-cash items

Depreciation, amortisation and impairment expense 1,412 1,359

Deferred tax charged/(credited) to income 58 852

1,470 2,211

Add/(less) items classified as investing or financing activities

(Gain)/loss on disposal of Property, Plant & equipment (15) 156

Net working capital introduced on acquisition of business - (2,032)

(15) (1,876)

Add/(less) movement in working capital items

Current trade and other receivables (624) (1,596)

Current inventories (76) (157)

Current prepayments (39) (23)

Current payables 1,945 1,790

Current provisions and employee entitlements 57 622

Income tax payable 225 12

Net changes in net assets and liabilities 1,488 648

Net cash from operating activities 4,419 243

24. Capital commitments and operating leases (a) Capital and other operating commitments

30 June 11 30 Jun 10

$'000 $'000

Capital commitments

Property, plant & equipment 66 70

66 70

(b) Non-cancellable operating lease liabilities

30 June 11 30 Jun 10

$'000 $'000

No later than one year 2,030 2,185

Later than one year and not later than five years 6,296 7,509

Greater than 5 years 1,966 2,507

10,292 12,201

25. Contingent liabilities and contingent assets

30 June 11 30 Jun 10

$'000 $'000

Contingent liabilities

Personal Dispute Costs - 20

- 20

Pag

e33

EcoCentral Limited is involved in a legal declaration proceedings with a Customer over the determination of the price for a supply contract for 13 years. If successful in this case, EcoCentral Limited will receive a higher price for recycled grade of plastics and some amounts in arrears.

26. Financial instrument risks Interest rate risk management EcoCentral’s principal financial instruments comprise receivables, payables, bank loans and overdrafts, finance leases, cash and short-term deposits and derivatives.

Risk exposures and responses The main risks arising from the financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk. EcoCentral uses different methods to measure and manage different types of risks to which it is exposed. These include monitoring levels of exposure to interest rate and foreign exchange risk and assessments of market forecasts for interest rate, foreign exchange and commodity prices. Ageing analyses and monitoring of specific credit allowances are undertaken to manage credit risk. Liquidity risk is monitored through the development of future rolling cash flow forecasts. The board reviews and agrees policies for managing each of these risks as summarised below. Primary responsibility for identification and control of financial risks rests with the General Manager under the authority of the board. The board reviews and agrees policies for managing each of the risks identified below, including the setting of limits for trading in derivatives, hedging cover of foreign currency and interest rate risk, credit allowances, and future cash flow forecast projections.

Interest rate risk EcoCentral’s exposure to market interest rates relates primarily to the long-term debt obligations. At balance date, EcoCentral Limited had the following mix of financial assets and liabilities exposed to New Zealand variable interest rate risk that are not designated in cash flow hedges. The following table summaries EcoCentral Limited’s exposure to interest rate risk:

Price risk EcoCentral Limited also deals in electricity forward commodity contracts for the purposes of mitigating price risk relating to electricity costs. The limits of this trading are set by the board and are immaterial.

Non-interest Non-interest

Fixed Variable bearing Fixed Variable bearing

30 Jun 11 30 Jun 11 30 Jun 11 30 Jun 10 30 Jun 10 30 Jun 10

Financial assets $'000 $'000 $'000 $'000 $'000 $'000

Cash and cash equivalents - 448 - - 470 -

Debtors and other receivables - - 1,347 - - 856

Related party receivables - - 873 - - 740

- 448 2,220 - 470 1,596

Financial liabilities

Loans from Christchurch City Council - - - - (17,800) -

Loans from Christchurch City Holding Limited (9,000) (5,000)

(9,000) (5,000) - - (17,800) -

(9,000) (4,552) 2,220 - (17,330) 1,596

Pag

e34

Foreign currency risk management Foreign currency risk is the risk that the value of the assets and liabilities or revenues and expenses will fluctuate due to changes in foreign exchange rates. EcoCentral is exposed to currency risk as a result of transactions that are denominated in a currency other than New Zealand dollars. As a result of significant commodity sales denominated in United States Dollars, the statement of financial position can be affected significantly by movements in the US$/NZ$ exchange rates. EcoCentral seeks to mitigate the effect of its foreign currency exposure through the use of cash flow hedges and forward currency purchases where there is a firm commitment for a sale or purchase. Approximately 20% of sales are denominated in currencies other than the functional currency of the entity, whilst almost 100% of costs are denominated in New Zealand dollars.

The following table summarises the group’s exposure to foreign currency transactions (foreign currency is US dollars)

$'000

Foreign currency risk

Trade receivables 375

Net balance sheet exposure before hedging activity 375

Estimated forecast sales (3 months) 1,369

Net cash flow exposure before hedging activity 1,369

Forward exchange contracts

Notional amounts (3 months) (859)

Foreign currency on hand 5

Net unhedged exposure 890

30 June 2010

Foreign currency risk

Trade receivables 257

Net balance sheet exposure before hedging activity 257

Estimated forecast sales (12 months) 7,606

Net cash flow exposure before hedging activity 7,606

Forward exchange contracts

Notional amounts (12 months) (6,847)

Foreign currency on hand 232

Net unhedged exposure 1,247

Credit risk management Credit risk refers to the risk that a counter-party will default on its contractual obligations resulting in financial loss to the entity. Credit risk arises from the financial assets of EcoCentral Limited, which comprise cash and cash equivalents, trade and other receivables, available-for-sale financial assets, and derivative instruments. The exposure to credit risk arises from potential default of the counterparty, with a maximum exposure equal to the carrying amount of the financial assets as outlined in each applicable note.

EcoCentral Limited does not hold any credit derivatives to offset its credit exposure.

Pag

e35

EcoCentral Limited trades only with recognised, creditworthy third parties, and as such collateral is not requested nor is it policy to securitise its trade and other receivables. It is policy that all customers who wish to trade on credit terms are subject to credit verification procedures including an assessment of their independent credit rating, financial position, past experience and industry reputation. Risk limits are set for each individual customer. These risk limits are regularly monitored. In addition, receivable balances are monitored on an on-going basis with the result that the experience of bad debts, other than those acquired from the Meta Group, has not been significant. EcoCentral‘s Investment policy includes parameters for investing in financial institutions and other organisations including where applicable entities that have required Standard and Poor’s credit ratings. EcoCentral manages its exposure to credit risk arising from trade receivables by performing credit evaluations on all significant customers requiring credit, wherever practicable, and continuously monitors the outstanding credit exposure to individual customers. The carrying value is the maximum exposure to credit risk for bank balances, accounts receivable and interest rate swaps. No collateral is held in respect of these financial assets. EcoCentral has not renegotiated the terms of any financial assets which would result in the carrying amount no longer being past due or avoid a possible past due status other than trade receivables.

Pag

e36

The following table summarises the maximum exposure to credit risk as at balance date:

30 June 11 30 Jun 10

$'000 $'000

Maximum exposure to credit risk

Cash at bank, term deposits and foreign currency 448

470

Debtors and other receivables 2,220

1,596

2,668

2,066

Counterparties

Cash at bank, term deposits and foreign currency AA 448

470

448

470

Liquidity risk Liquidity risk is the risk that EcoCentral will encounter difficulty raising liquid funds to meet commitments as they fall due. Prudent liquidity risk management implies maintaining sufficient cash, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Liquidity risk arises from the financial liabilities and the subsequent ability to meet the obligations to repay their financial liabilities as and when they fall due. The objective is to maintain a balance between continuity of funding and flexibility through the use of bank overdrafts, bank loans, preference shares, finance leases and committed available credit lines. EcoCentral manages its liquidity risk by monitoring the total cash inflows and outflows expected on a monthly basis. In meeting its liquidity requirements, manages its investments and borrowings in accordance with its written investment policies. In general EcoCentral generates sufficient cash flows from its operating activities to meet its obligations arising from its financial liabilities and has flexible debt repayment funding arrangements in place to manage cover potential shortfalls.

Pag

e37

The following tables analyse EcoCentral’s contractual cash flows for its financial assets and liabilities into relevant maturity groupings based on the remaining period at year end to the contractual maturity date. The amounts disclosed in the tables are the contractual undiscounted cash flows:

30 June 2011 Balance

Contractual Less than

-

-

-

sheet cash flows 1 year 1-2 years 2-5 years 5 years +

$'000 $'000 $'000 $'000 $'000 $'000

Financial liabilities:

Creditors and other payables 3,791 3,791

3,791

-

-

-

Loans from group entities 14,000 16,266

639

563

1,002

14,062

17,791 20,057

4,430

563

1,002

14,062

Financial assets:

Cash and cash equivalents 448 448

448

-

-

-

Debtors and other receivables 1,347 1,347

1,347

-

-

-

Related party receivables 873 873

873

-

-

-

Net settled derivative assets 25 25

25

-

-

-

2,693 2,693

2,693

-

-

-

30 June 2010 Balance

Contractual Less than

-

-

-

sheet cash flows 1 year 1-2 years 2-5 years 5 years +

$'000 $'000 $'000 $'000 $'000 $'000

Financial liabilities:

Creditors and other payables 2,075 2,075

2,075

-

-

-

Net settled derivative liabilities 172 172

172

-

-

-

Loans from group entities 17,800 20,064

612

513

971

17,968

20,047 22,311

2,859

513

971

17,968

Financial assets:

Cash and cash equivalents 470 470

470

-

-

-

Debtors and other receivables 856 856

856

-

-

-

Related party receivables 740 740

740

-

-

-

2,066 2,066

2,066

-

-

-

Pag

e38

Sensitivity analysis In aims to reduce the impact of earnings. Over the longer term, however, changes in interest rates will affect reported profits. The following table summarises the estimated impact of movements in interest rates and foreign exchange rates on pre-tax profits and equity:

Interest rate sensitivity summary

30th June 2011

Increase

Decrease

1.00% 1.00% -1.00% -1.00%

Other

Other

Pre-tax compr. Pre-tax compr.

Financial assets and liabilities at floating rate profit income profit income

$'000 $'000 $'000 $'000

Cash and cash equivalents 4 - (4) -

Related party loans (47) - 47 -

Total sensitivity to interest rate risk (43) - 43 -

Foreign exchange risk summary

30th June 2011

Increase Decrease

-10% -10% +10% +10%

Other

Other

Pre-tax compr. Pre-tax compr.

profit income profit income

(excl REs)

(excl REs)

$'000 $'000 $'000 $'000

US foreign currency account - - - -

Trade receivables 38 - (38) -

Derivatives - held for trading - (86)

(86)

Total sensitivity to foreign exchange risk 38 (86) (38) (86)

Pag

e39

Interest rate sensitivity summary

30th June 2010

Increase

Decrease

1.00% 1.00% -1.00% -1.00%

Other

Other

Pre-tax compr. Pre-tax compr.

Financial assets and liabilities at floating rate profit income profit income

$'000 $'000 $'000 $'000

Cash and cash equivalents 5 - (5) -

Related party loans (178) - 178 -

Total sensitivity to interest rate risk (173) - 173 -

Foreign exchange risk summary

30th June 2010

Increase Decrease

-10% -10% +10% +10%

Other

Other

Pre-tax compr. Pre-tax compr.

profit income profit income

(excl REs)

(excl REs)

$'000 $'000 $'000 $'000

US foreign currency account 23 - (23) -

Trade receivables 26 - (26) -

Derivatives - held for trading - (685)

685

Total sensitivity to foreign exchange risk 49 (685) (49) 685

Additional significant risks recognised by EcoCentral Limited Insurance risk Insurance risk is the risk EcoCentral will have insufficient coverage for their assets and operations in the event of another natural disaster. As a result of the Canterbury earthquakes, insurance companies have been hesitant to provide full insurance cover. When EcoCentral renews their insurance from 1st July 2011, cover for material damage and business interruption insurance will be limited to exclude

natural disasters. Commodity price and demand risk EcoCentral Limited acknowledges the significant risk / benefit of material fluctuations in the commodity prices and demand of EcoSort products which are influenced by International demand. EcoCentral Limited does mitigate some of this risk by tendering and entering into supply contracts.

Pag

e40

Classification of financial assets and liabilities The following tables classify the group’s financial assets and liabilities between the various categories set out in NZ IAS 39 and NZ IFRS 7:

Financial instruments

30 June 11 30 Jun 10

$'000 $'000

Financial assets

Derivatives that are hedge accounted

Derivative financial instrument assets 25 -

Cash and Receivables

Cash and cash equivalents 448 470

Debtors and other receivables 2,220 1,596

Subtotal Cash & Receivables 2,668 2,066

Total financial assets 2,693 2,066

Financial liabilities

Derivatives that are hedge accounted

Derivative financial instrument liabilities - 172

Financial liabilities at amortised cost

Creditors and other payables 3,791 2,077

Borrowings 14,000 17,800

17,791 19,877

Total financial liabilities 17,791 20,048

Fair value measurement basis

30 June 2011 Carrying

value Level 1 Level 2 Level 3

$'000 $'000 $'000 $'000

Derivatives that are hedge accounted

Derivative financial instrument assets 25 - 25 -

Net financial assets and liabilities 25 - 25 -

30 June 2010

Carrying

value Level 1 Level 2 Level 3

$'000 $'000 $'000 $'000

Derivatives that are hedge accounted

Derivative financial instrument liabilities 172 - 172 -

Net financial assets and liabilities 172 - 172 -

Pag

e41

27. Related Parties

30 June 11 30 Jun 10

$'000

1 CCHL

1 (a) Transactions with CCHL

Interest paid / payable to CCHL 129 -

1 (b) Balances with CCHL

Loan balance owing to CCHL (14,000) -

Other balances owing to CCHL (129) -

2 CCHL Subsidiaries

2 (a) Transactions with CCHL Subsidiaries

Services provided by CCHL Subsidiiaries (20) (43)

Services provided to CCHL Subsidiaries 964 833

2 (b) Balances with CCHLSubsidiaries

Other balances owing to CCHL Subsidiaries (2) -

Other balances owing by CCHL Subsidiaries 83 119

-

3 CCC

3 (a) Transactions with CCC

Services provided by CCC (including rent & rates) (2,709) (3,550)

Interest paid / payable to CCC (490) (542)

Services provided to CCC 8,654 6,030

Other amounts paid/payable to CCC (1,145) -

3 (b) Balances with CCC

Loan balance owing to CCC (17,800)

Other balances owing to CCC (43)

Other balances owing by CCC 707 579

4 Group entities excluding CCHL and CCC

4 (a) Transactions with Group entities

Services provided by group entities (14,101) (9,202)

Services provided to group entities - -

4 (b) Balances with Group entities

Balances owing to group entities (1,158) (908)

Balances owing by group entities - -

EcoCentral Limited has a loan facility of $15,000,000 with CCHL, of which it used this to repay CCC on

19th April 2011with interest of $490,000 (2010 $542,000) recognised in the Statement of Comprehensive Income

Pag

e42

28. Remuneration Remuneration includes costs to EcoCentral Limited of benefits in addition to cash. In accordance with Section 211 of the Companies Act 1993 the remuneration and other benefits in excess of $NZ100,000 paid to current employees of EcoCentral Limited are:

Salary bands 30 June 11 30 Jun 10

$'000 $'000 No. of employees

100-110 - 1

110-120 1 2

120-130 - -

130-140 - -

140-150 - 1

150-160 1 -

160-170 - -

170-180 - -

180-190 - -

190-200 - -

200-210 - -

210-220 - -

220-230 - -

230-240 1 -

Directors' remuneration 30 June 11 30 Jun 10

$'000 $

Name of director

Anthony John Marryatt - -

Paul Joseph Anderson 13 -

Sarah Louise Astor 13 -

William John Dwyer 13 -

Gregory Shane Campbell 2 -

Key Management Personnel As at 30th June 2011, EcoCentral limited had the following key personnel: Robert Gerrie General Manager Adrian Marsh Operations Manager Richard Simpson Business development Manager John Ross EcoDrop & Transport Manager Clare Birch Office Accountant Averil Stevenson Procurement Manager

Total remuneration paid in 2010 to the Key Management Personnel was $520,267. Total remuneration paid in 2011 to the Key Management Personnel was $749,577 (These numbers do not include Directors Remuneration)

29. Earthquake Impact disclosure During the 2011 financial year, Canterbury experienced a number of earthquakes including 4 September 2010 (registering 7.1) and 22 February 2011 (registering 6.3). These events caused minor operational disruption to EcoCentral Limited and only minor damage to its buildings and infrastructure. EcoCentral Limited did receive additional volumes of material into its EcoDrops as a consequence of the damage to property of the Canterbury region.

Pag

e43

30. Statement of Service Performance The financial performance target for EcoCentral Limited were as follows

30 June 2011

30 June 2010

($000)

SOI Actual Variance

SOI Actual Variance

Sales 25,425 34,981 9,556

23,094 24,056 962

Net Profit before Tax 2,027 2,288 261

94 125 31

Shareholders funds to Total Assets 10.70% 8.61% -2.09%

4.70% 0.8% -3.9%

**

**Shareholders funds were impacted by the deferred tax liability related to non deductibility of Building Depreciation for tax purposes of $838k which was not contemplated at the time of completing the2010 &2011 SOI's

Key Operational Performance targets Actual 2011

Actual 2010 SOI Target

Residual Waste from the Material Recovery Facility

% of residual of the total received 7.20% 2.89% < 6%

The amount of diverted waste from the EcoDrops

% of the total volume received which is diverted to other users 47.04% 25.79% >25%

There were no reported breaches of legislative or contractual requirements recorded EcoCentral Limited has all required Resource Consents to legally operate EcoCentral Limited is presently working towards Health & Safety secondary ACC accreditation by December 2011

Pag

e44

31. Events subsequent to balance date

The significant events subsequent to balance date requiring disclosure up to the date of authorisation of these financial statements are:

1. Resignation of Director Mr William John Dwyer effective 31st July 2011.

2. Appointment of Mr David William Kerr as Chairman of EcoCentral Limited effective 28

th July

2011.

Pag

e45

General Disclosures The following are particulars of general disclosures of interest given by the company pursuant to Section 140(2) of the Companies Act 1993:

Directors' Interests The following Directors have made general disclosures of interest with respect to any transaction that may be entered into with certain organisations on the basis of their being a Director, Partner, Trustee or Officer of those organisations during the year:

Paul Joseph Anderson General Manager – Corporate Services

Christchurch City Council

Director - CCC One Ltd Director - Tuam Limited Director - Ellerslie International Flower Show Ltd

Sarah Astor

Chair – Meteorological Service of New Zealand Ltd Chair – Metra Information Ltd Director – Sasco Holdings Ltd Director – Selwyn Plantation Board Ltd Trustee – Church Property Trustees Trustee – Warren Architects Education Charitable Trust Trustee – Ohinetahi Charitable Trust Director – Cashel Properties Ltd Director – Oxford Estates Ltd Director – Devon Chambers Ltd Director – Verification NZ Ltd Director – Christchurch City Holdings Ltd

(Appointed 1

st January 2011)

Bill Dwyer

Partner – Lane Neave Lawyers Director – Christchurch City Networks Ltd Director – Lane Neave Ltd Director – Lane Neave Trustees Ltd Director – 24 Hour Surgery Ltd Director – Canterbury GP Group Capitated Funding Trust Ltd Director – Pegasus Health 24 Hour Surgery Ltd Director – Clinical Network Ltd Director – Canterbury Health Alliance Ltd Director – Canterbury Clinical Network Ltd Director – Victoria Square Investment Ltd Director – Demona Ltd Director – Straterra Ltd Director – Veritas (2006) Ltd

Director – Veritas (2007) No 1 Ltd Director – Veritas (2007) No 2 Ltd Director – Veritas (2007) No 3 Ltd

Pag

e46

Director – Veritas (2008) Ltd Director – Veritas (2009) Ltd Director – Veritas (2010) Ltd Director – Veritas (2011) Ltd Director – Obolus Ltd Director – Christchurch City Holdings Ltd Trustee – Emergency Care Foundation Trustee – Wavertree Trust

(Appointed 1

st January 2011)

Gregory Shane Campbell

Director – Vbase Limited Director – Jet Engine Facility Chief Executive – Ngāi Tahu Holdings Corporation Limited Director – Ngai Tahu Fisheries Settlement Limited Director – Ngāi Tahu Fisheries Limited Director – Ngāi Tahu Lobster Quota Limited Director – Ngāi Tahu Migratory Quota Limited Director – Ngāi Tahu Pāua Quota Limited Director - Ngāi Tahu Scampi Quota Limited Director – Ngāi Tahu Shellfish Quota Limited Director – Ngāi Tahu Wetfish Quota Limited

(Appointed 26

th May 2011)

Anthony John Marryatt Chief Executive Officer

Christchurch City Council Director - Tuam Limited Director - AJM Holdings Limited Director - New Zealand Local Government Insurance Corporation Limited Director - Local Government Mutual Funds Trustee Limited

(Resigned 26/5/2011)

Remuneration of Directors Remuneration was paid to four Directors totalling $39,583 during the 2011 year for services, there were no other benefits paid or due to directors for services as a director or in any other capacity during the year.

Use of Company Information During the year the Board received no notices from directors of the company requesting to use company information received in their capacity as directors which would not otherwise have been available to them.

Pag

e47

Pag

e48

Pag

e49

Pag

e50