REPORTING AND FINANCIAL STATEMENTS

REPORTING AND FINANCIAL STATEMENTS

33

BOARD MEMBER PROFILES 34

DECLARATION OF DIRECTORS’ INTERESTS 35

CORPORATE GOvERNANCE 36 CRI CAPABILITY FUND REPORT 38

PERFORMANCE INDICATORS 40

REPORT OF ThE DIRECTORS 42 STATEMENT OF FINANCIAL PERFORMANCE 43 STATEMENT OF MOvEMENTS IN EqUITY 43 STATEMENT OF FINANCIAL POSITION 44 STATEMENT OF CASh FLOwS 45 NOTES TO ThE FINANCIAL STATEMENTS 46

STATEMENT OF RESPONSIBILITY 54 REPORT OF ThE AUDITOR-GENERAL 55

DIRECTORY 56

GNS SCIENCE ANNUAL REPORT 2006

34


BOARD MEMBER PROFILES

ALLAN FREEThPhD, MBA (Dist), BSc (Hons) Wellington AllanisChiefExecutiveofTelstraClearLtd,andamemberoftheNewZealandTreasuryAdvisoryBoard.PreviouspositionsincludedManagingDirectorandChiefExecutiveofWrightsonLtdandSeniorManagementroleswithTrustBank.AllanwasalsoaDirectorofGenesisResearchandDevelopmentCorporationLtd.HehasaPhDinpopulationgeneticsfromAustralianNationalUniversityandanMBAfromCanterburyUniversity.

SARAh SChIESSMSc, Civil Engineering (Colorado State University) WellingtonSarahisEnvironmentalManagerwithBPOilNewZealandLtd.Herportfolioincludessoilandgroundwaterremediation,climatechange,emissionsreporting,andindustrystandards.ShehasextensiveexperienceworkingforenvironmentalandengineeringfirmsintheUSandNewZealandspecialisinginquantitativegroundwaterflowanalysis,minedewatering,andenvironmentalprojects.SarahhasalsoworkedfortheUSGeologicalSurveyWaterResourcesDivisiondoingnumericalanalysisofaquifersystems.

BRENDA TAhIBSocSc, MBA (Henley) RuatahunaBrendaisDirectorofBrendaTahiandAssociates,herownconsultancyinstrategicmanage-mentandresearch.BrendaisNga-tiPorouandformerlyheldsenioradvisoryandmanagementpositionsinthepublicservice.SheisDeputyChairoftheAccidentCompensationCorporation,andalsoservesontheboardsforNgaPaeoTeMaramatanga(TheNationalCentreofMa-oriResearchExcellence),HuiaNewZealand,andtheTuhoeTuawhenuaTrust.

CON ANASTASIOUChairmanBA, LLB (Hons) WellingtonConisprincipalofhisownlawfirminWellington.Hespecialisesincorporatecommerciallaw,intellectualproperty,andresourcemanagement.HeisamemberoftheNewZealandLawSociety,aFellowoftheNewZealandInstituteofManagement,amemberoftheNewZealandInstituteofDirectors,andanAssociateoftheArbitratorsandMediatorsInstituteofNewZealand.ConisalsoChairmanofAirwaysCorporationofNewZealandLimited.

RIChARD wESTLAkEDeputy ChairmanMA (Oxon), F Inst D, FNZIMWellington (Retired 30 June 2006)RichardisChairmanoftheStandardsCouncilofNewZealandandaDirectorofKiwibankLimitedandtheCentreforAdvancedEngineering.HeisalsoChairofTextilesNewZealandandBetterBorderBiosecurity(“B3”).After20yearsinexecutiveroles,mainlyinbankingandmerchantbanking,henowoperateshisownconsultancy,advisingonstrategyandorganisationalgovernance.

ELLEN FO..

RChPhDAucklandEllenisDirectorofResearchDevelopmentatAucklandUniversityofTechnology.Heractivityisfocusedonbuildingresearchculturesanddevelopingresearchfundingstrategies.PreviouspositionsincludebeingDirectorofResearchAdvancementintheVC’sOfficeattheUniversityofAuckland,ManagerofEnvironmentalMonitoringatHawke’sBayRegionalCouncil,ResearchManagerattheOpenPolytechnicofNewZealand,andaProgrammeManagerattheFoundationforResearch,ScienceandTechnology.SheisalsoaDirectoroftheCawthronInstitute,Nelson.

THEBOARDANDCHIEFEXECUTIVE

Fromleft:MikeWilliams,EllenForch,

ConAnastasiou(Chairman),AllanFreeth,BrendaTahi,

AlexanderMalahoff(ChiefExecutive),RossButler,SarahSchiess.

MIkE wILLIAMSMA (Hons) Auckland MikeisPresidentoftheNewZealandLabourParty,andaDirectorofGenesisEnergy,TransitNewZealand,andNewZealandRailwaysCorporation.HeisalsoaTrusteeofEnterpriseWaitakereandamemberoftheAucklandRegionalTransportAuthority.

ROSS BUTLERBA (Economics), Graduate Diploma in Applied Finance and InvestmentsNelson (Appointed 1 July 2006)RossisChairmanofMortgageLink(NZ)Limited,WilkinsonInsuranceBrokersLimited,andDeputyChairofYHANZ.DirectorshipsincludeSwimmingNZ.HeisaMinisterialAppointeeontheCouncilofNelsonMarlboroughInstituteofTechnology.RossisDeputyChairofthetrustboardsoftheNelsonSchoolofMusicandtheNelsonBaysEducationBusinessPartnership,andisontheNelsonCounciloftheInstituteofDirectors(NewZealand).MerlotLimited,hisownconsultinggroup,providesinterimchiefexecutive,governance,andprojectservices.

35


SPECIFIC DISCLOSURES

CON ANASTASIOU

AirwaysCorporationofNewZealandLimitedChair

AirwaysConsultingLimitedDirector

AirwaysInternationalLimitedDirector

IsoscanLimitedDirector

IsoscanFoodLimitedDirector

GeologicalSurveys(NZ)LimitedDirector

GeologicalRiskLimitedDirector

MIkE wILLIAMS

TheLabourPartyofNewZealandPresident

TransitNewZealandBoard member

GenesisEnergyDirector

EnterpriseWaitakereTrustee

AucklandRegionalTransportAuthorityAuthority Member

NewZealandFilmFundDirector

NZRailwaysCorporationDirector

TransportBoardReferenceGroupChairman

DECLARATION OF DIRECTORS’ INTERESTS

BRENDA TAhI

Nga-tiPorouIwi

ACCBoardDeputy Chair

NgaPaeoteMaramatangaBoardMember

TuawhenuaTrustBoardTrustee

PaehinahinaMoureaShareholder

Rotoitoi15IncorporationShareholder

OnukuTrustShareholder

Huia(NZ)Limited Director

SARAh SChIESS

BPOilNewZealandLimitedEmployee

PropertyInsight Board member

ELLEN FO..

RCh

AucklandUniversityofTechnology(AUT) Employee

CawthronInstitute Director

ALLAN FREETh

StillwellAssociatesLimitedManaging Director

QueenMargaretCollegeChairman

NewZealandTreasury Member, Advisory Board

TelstraClearLimitedChief Executive

MasseyUniversityAgriculturalResearch Trustee

SytecLimited Chair

ROSS BUTLER

MortgageLink(NZ)LimitedChairman

WilkinsonInsuranceBrokers(Wgtn)LimitedIndependent Chairman

NelsonMarlboroughInstituteofTechnologyMinisterial Appointee to Council

MerlotLimitedChairman

InstituteofFinancialAdvisers(until30September2006)Acting CEO

YHANZIndependent Deputy Chairman

SwimmingNewZealandIndependent Director

NelsonSchoolofMusicDeputy Chair

InstituteofDirectorsofNewZealand–NelsonBranchCommittee member

NelsonBaysEducationBusinessPartnershipTrustChair

GENERAL DISCLOSURES

1. InsurancehasbeeneffectedforDirectorsinrespectofanyactoromissionintheircapacityasaDirectoroftheCompany.

2.DeedofIndemnityasdefinedinDirectors’resolutions17October1996.

APPROvAL OF DISCLOSURE OF INFORMATION

Approvalsoughtandgivenfordisclosureofinformationtooutsideparties–Nil

36


Overview

TheBoardandGNSSciencemanagementarecommittedto

ensuringthattheCompanymaintainsbestpracticegovernance

andadherestothehighestethicalstandards.Thebasisfor

theseissetoutinaBoardCharter,adoptedinJune2002,

andinpoliciesandproceduresmaintainedbytheCompany.

Role of the Board

TheBoardisresponsibletotheshareholdingministersfor

directingandsupervisingthemanagementofthebusiness

andaffairsofGNSScience,including:

• appointingtheChiefExecutive,agreeingontheobjectives

heisrequiredtoachieve,andmonitoringandevaluating

hisperformance

• ensuringthattheCompany’sgoalsareclearlyestablished

andthatstrategiesareinplacetoachievethem

• approvingtheCompany’sStrategicPlanandStatement

ofCorporateIntentincludingoperatingandcapital

expenditurebudgets

• monitoringtheperformanceofmanagementagainst

establishedgoalsandbusinessplans

• approvingmajortransactions,jointventuresand

collaborations

• approvingthedelegationsofauthoritiespolicy

• ensuringthatGNSSciencehasappropriateriskmanage-

mentandregulatorycompliancepoliciesinplaceand

reviewingtheCompany’sperformanceinthoseareas

• monitoringandapprovingtheCompany’sfinancialreporting

anddividendpolicies

• ensuringthatGNSScienceisagoodemployer,demonstrating

socialresponsibility,andmaintainingitsfinancialviability

asrequiredundertheCrownResearchInstitutesAct1992.

Appointment of Directors and composition

of the Board

TheBoardcancompriseuptoninenon-executiveDirectors.

ItcurrentlyconsistsofaChairmanandsixindependent

Directors.Directorsareappointedbytheshareholdingministers

–theMinisterofFinanceandtheMinisterofCrownResearch

Institutes.Thetermisgenerallythreeyearswithreappointment

forasecondthree-yeartermatthediscretionofthe

shareholdingministers.TheChairmanandDeputyChairman

areappointedbytheshareholdingministers.

ProfilesofcurrentmembersoftheBoardaresetoutonpage34.

CORPORATE GOvERNANCE

Operation of the Board

TheBoardChartersetsoutpoliciesandproceduresforthe

operationoftheBoard.TheChairmanprovidesleadershipto

theBoardandisinregulardialoguewiththeChiefExecutive.

TheChairman,inconsultationwiththeChiefExecutive,

establishestheagendaforeachBoardmeetingensuring

adequatecoverageofkeyissuesthroughouttheyear.Each

Boardmembercan,throughtheChairman,suggestitemsfor

theagenda.TheChairmanensuresthatalldiscussionsresult

inlogicalandunderstandableoutcomes.Boardmembers

areentitledtohaveaccesstoallrelevantCompanyinformation

andtomanagement.

Directors’ meetings

ThefullBoardhad11formalmeetingsduringtheyearended

30June2006.Telephoneconferencecallswerealsoheld

duringtheyeartodiscussparticularissues.Thereisanongoing

programmeofsitevisitsandpresentationstotheBoard

bymanagementandstafftokeepDirectorsabreastofthe

Company’sactivities.

Meetings in the year to 30 June 2006

Board Meetings Held Attended

ConAnastasiou 11 10

RichardWestlake 11 9

EllenFo..

rch 11 10

AllanFreeth 11 11

SarahSchiess 11 10

BrendaTahi 11 10

MikeWilliams 11 11

Audit Committee Held Attended

ConAnastasiou 2 2

RichardWestlake 2 2

AllanFreeth 2*

SarahSchiess 2 2

* All Directors are entitled to attend Audit and Risk Committee meetings

37


Accountability of the Chief Executive

TheChiefExecutiveisaccountabletotheBoardforachieve-

mentoftheCompanygoals.TheBoardandtheChief

Executiveagreeonaperformancecontractunderwhich

theChiefExecutiveisauthorisedtomakedecisionsand

takeactionswithinagreedguidelines,toachieveCompany

goals.TheChairmanmeetsregularlywiththeChiefExecutive

todiscussbusinessissues.TheBoardevaluatestheChief

Executiveformallyeachyear.Theevaluationisbased

onbusinessperformance,achievementofstrategicand

operationalobjectives,andothernon-quantitativeobjectives

setoutintheperformancecontract.

Audit and Risk Committee

TheBoardhasonestandingcommittee–theAuditand

RiskCommittee.ItassiststheBoardincarryingoutits

responsibilitiesunderthevariousActsincludingtheCompanies

Act1993,PublicFinanceAct1989,CrownResearchInstitutes

Act1992,theFinancialReportingAct1993andtheCrown

EntitiesAct2004.Membersofthecommitteeinthelast

financialyearwereRichardWestlake(Chair),ConAnastasiou,

andSarahSchiess.AllDirectorsareentitledtoattendthe

meetings.Thecommitteeoperatesinaccordancewitha

TermsofReferencewhichisapprovedbytheBoard.TheChief

Executive,theChiefFinancialOfficer,theInternalAuditorand

representativesofDeloitte,theexternalauditors,arenormally

inattendance.

Thecommitteemettwiceduringthepastfinancialyear.

ThecommitteereviewedanddiscussedtheExternalAuditplan

andtheExternalAuditreport,theRiskAssessmentdocument,

theInternalAuditplanandInternalAuditreports,andstatutory

compliancereportingbymanagement.Italsoreviewedand

recommendedtothefullBoard,theapprovalofthehalf-yearly

andannualfinancialstatements,amendmentstothedelegated

authoritiesandcapitalexpenditurepoliciesandamendments

totheAuditandRiskCommitteeTermsofReferenceandthe

InternalAuditCharter.Thecommitteealwaysmeetsseparately

withtheexternalauditorforapartofthemeeting,without

managementpresent.Minutesofthecommitteemeetingswere

tabledatthesubsequentBoardmeetingsandkeyitemswere

discussedbythefullBoard.

Conflicts of interest

EachDirectormakesafulldeclarationoftheirinterests.Thisis

updatedateachBoardmeeting.Whereaconflictofinterest

exists,Directorsexcusethemselvesfromdiscussionanddonot

receivetherelevantpaperinrespectofthoseinterests.

Provision of professional services

Exceptinexceptionalcircumstances,Boardmemberswillnot

provideprofessionalservicestotheCompany.Thisistoavoid

aconflictofinterest,actualorperceived.

NoDirectorsprovidedprofessionalservicestotheCompany

duringtheyear.

Independent professional advice

Directorsareentitled,withapprovalfromtheChairman,

toobtainindependentprofessionaladvicerelatingtotheaffairs

oftheCompanyortotheirduties,attheCompany’sexpense.

Noindependentprofessionaladvicewassoughtorobtained

duringtheyear.

Board evaluation

EachyeartheBoardevaluatesitsownperformanceand

providestheresultstotheCrownCompanyMonitoring

AdvisoryUnit.

38


CRI CAPABILITY FUND REPORT

WereportachievementsfromactivitiesthatreceivedCRI

CapabilityFundingasspecifiedinPartCoftheGovernment’s

EstimatesofAppropriations.AsrequiredbyAgreement

withtheMinisterofResearch,ScienceandTechnology,we

elaborateupontheseachievementswithshortillustrations,and

providecommentaryonoverallcapabilityandorganisational

performance.Substantialachievementwasmadeineachofthe

11plannedareasofdevelopmentasindicatedintheStatement

ofCorporateIntent2005-06,with42ofthe46indicatorsbeing

achievedorover-achieved.Thefundingcoveredstaffsalaries,

associatedoverheads,andminordisbursements.

1. Information access systems & databases

(4 of 5 indicators achieved)

Ourgroundwaterdatabasehasbeenenhancedbyextensive

redesignofthearchitecturetoprotectsensitivedata,

constructionofawebinterfacethatpermitsdatadownloads

basedoncustomisablequeries,andimplementationoftwo

automateddatainterpretationtoolstopermitextractionofmore

thanjusttherawdata.OurPETLABpetrologicaldatabase

hasbeenenhancedbyadding3,36214Crecords,aroutineto

exportwholerockanalysesinasimplifiedformat,andAntarctic

1:250,000topography.Ouractivefaultsdatabasehasbeen

enhancedbyupdatingmappingofactivefaultsinthecentral

andnorthernSouthIsland,incorporatingrecentlypublished

faultdataandthelocationsofallknownfaulttrenches,and

beginningtodevelopatrenchdatabase.Nosignificant

additionsweremadetotheresistivitydatabase.Inallcases

onlineaccesshasimproved.

2. Groundwater (3 of 4 indicators achieved)

Wehavemaintainedandenhancedourthreatened

groundwaterage-dating,quantityandqualityassessment,

andsystem-modellingcapabilitiesbycontinuingthe3H,

CFC,andSF6methodsinournichewater-datinglaboratory,

developingasystemforremotemonitoringofnitrate

concentrations,andcommencingresearchongroundwater-

lakeinteractions.Interviewsforanisotopehydrologist

positionfailedtoidentifyasuitablecandidate.

3. Geological hazards (5 of 6 indicators achieved)

Wehavemaintainedthreatenednationalcapabilitiesin

(a)volcanoseismologybycommencingfrequency-magnitude

researchforAucklandvolcanoesfromtheirpasteruptive

history,andvolcanoforecastingresearchforimprovederuption

prediction;and(b)inearthquake,volcano,landslideand

tsunamihazardsbyresumingquantitativenationalhazards

modelling,continuingtestsofearthquakeforecastingmethods,

andcontinuingdevelopmentofquantitativetsunamihazard

models.Wehaveinthesewaysalsobeenabletoenhanceour

capabilitiestouseGeoNetdata.Wewillcontinueoureffortto

recruitastrong-motionseismologist.

4. Isotope sciences underpinning earth systems

research (7 of 8 indicators achieved)

Wehaveenhancedanddevelopednewresearchcapabilitiesin

acceleratormass-spectrometry(AMS)ofcosmogenicisotopes

byrefining14Cmeasurementsystems(but26Alsystemsremain

tobeimplemented),establishingcarbon-dynamicsresearch,

re-scopingpaleoclimateresearchinpreparationfor

implementingcomponent-specificradiocarbonmeasurements,

andrecruitinganAMSsoilscientist.Wehavemaintainedand

enhancedresearchcapabilityinstableisotopegeochemistry

byrecruitinganewteammember,commissioninganewmass

spectrometerforonline18OandD/Hmeasurementofwater

andiceisotopes,testingandcommissioninganewcompound-

specificgaschromatographformeasuring13Cinliquid

hydrocarbonmixtures,andcreatinganoilsdatabaseof

geochemicalandisotopicanalysisofNewZealandpetroleum

productsasthefirststageinestablishinganewresearch

programme.

5. Technology transfer (6 of 6 indicators achieved)

Wehaveenhancedourcapabilityfortechnologytransfer

bysupporting15pre-seedcommercialisationprojectsin

theareasofsoftwaredevelopment,non-invasivetechnology,

andwastewaterremediation.Wehaveenhancedour

capabilitytoassesspetroleumprospectivityinNewZealand

bydeterminingthesoftware,databasestructureandquality

controlfordigitalatlases,discoveringpotentialreservoirfacies

intheEastCoastbasintocomplementtheworkoftheMinistry

ofEconomicDevelopment,andgaininggreaterunderstanding

ofthebiostratigraphyandage-datingfortheanalogue

GippslandBasin.Wehaveenhancedourcapabilitytotransfer

hazardinformationtolocalgovernmentbyimprovingaccess

tosoftwareanddatabaseinformationforfaultruptureand

slopestabilityhazards.

6. Geo-energy (4 of 4 indicators achieved)

WehavemadeprogressinenhancingfacilitiesforNewZealand

geo-energyresearchbyassessingandsecuringpartial

stakeholdersupportforanationalPetroleumResearchCentre,

negotiatingwithpotentialpartnersingeothermalresearch,and

encouragingAucklandUniversitytorevitaliseitsGeothermal

Institute.WehavedevelopedgeologicalCO2sequestration

capabilitybycontributingtotheAustralian-basedCO2CRC

partnershipwithstaffexchangeandbycommencingworkon

theWesternAustraliaGorganprojectwithInnovativeCarbon

TechnologiesPtyLtd.

39


7. Deep ocean continental shelf exploration


WehavemaintainedanddevelopedcapabilitiesforOcean

Survey20/20ingeochemistry,geophysics,benthichabitats

andswath-mappingdatamanagementandinterpretationby

recruitingamarinegeochemist,developinginversionalgorithms

toinferseafloorpropertiesfromacousticmulti-beamswath-

reflectiondata,collectingandassessinggeochemicalsamples

ofmethanederivedfromgashydratesalongtheeastcoast

oftheNorthIsland,andextendingourknowledgeabout

hydrothermalsystemsfromtheanalysisofvolcanicmassive

sulphidesamplesfromLauBasinandMarianaback-arc.

8. Climate change (2 of 2 indicators achieved)

Wehavedevelopedice-coreanalysiscapabilityby

commissioninganewmassspectrometerforonline18O

andD/Hmeasurements,securingtemporarycommercialice-

corestorageareas,preparingthe$1.3millioncaseforcapital

expenditureonafullydevelopedfacility,andformingthe

JointAntarcticResearchInstituteasajointventurewith

VictoriaUniversityofWellington.

9. Geomicrobiology (3 of 3 indicators achieved)

Wehavedevelopedextremophilegeomicrobiology

capabilitybyaddingabioreactortoourWairakeilaboratory,

designinganextremophiledatabase,andrecruitingajunior

staffmember.

10. Intelligent Measurement Systems for Industry

(1 of 1 indicator achieved)

Wehavemaintainedandenhancedourradiation-based

capabilitybyidentifyingadditionalindustrialneedsinthe

radiationdetection,meat,timber,andfruitindustrysectors.

11. Nanotechnology and Ion Beam Analysis


Wehavemaintainedandenhancedionimplantation,

electron-beamannealing,andion-beamanalysisbyproducing,

understanding,andtestingnanowhiskerdiodeandtriode

structuresaselectronsourcesforX-rayemissionandlight

generation,discoveringthattheelectronemissionprocess

fromnanowhiskersisresonantelectrontunnelling,assessing

andpublishingpropertiesofSiCnanoboulders,buildingahigh

vacuumchamberforthe3MVaccelerator,anddevelopingand

testingaHallprobetoquicklycharacterisedopedthinfilms.

Commentary on overall capability and

organisational performance

Weconsiderthatalloftheforegoingcapabilitiespresent

opportunitiesforfurtherdevelopment.Together,theseareas

ofcapabilitydevelopmentaredirectlyalignedwithour

CoreGoalsandBoldChallengesasdiscussedinthe

StatementofCorporateIntent2005-06.Asnotedabove,

theat-riskcapabilitieswerethoseingeologicalhazards

andgroundwater.Moreover,untilagreementwasreached

withtheFoundationforResearch,ScienceandTechnology,

isotopesciencesandnanotechnologycapabilitieswerealso

atrisk.CRICapabilityFundinghasallowedustoimprove

performanceinareasofunderpinningscience(e.g.data

management,theearthquake-generationprocess,pastclimate

change,andisotopemethods),applicationsofscience

(e.g.hazardsassessment,energyandgroundwaterresource

assessment,industrialmeasurementsystems,andtechnology

transfer),andsciencediscovery(e.g.deep-oceanexploration,

geomicrobiology,andnanotechnology).

40


PERFORMANCE INDICATORS

Group Group Group

Actual Budget Actual

2006 2006 2005

FINANCIAl PERFORMANCE MEASuRES

Revenue (excluding interest received) ($000) 45,904 47,133 42,892

EBITmargin(Operating surplus before interest/Total revenue) 4.0% 5.4% 4.5%

Returnonequity(Surplus after taxation/Average equity) 6.1% 8.2% 7.5%

Returnonassets (Operating surplus before interest/Average total assets) 5.8% 8.0% 6.6%

Equityratio(Equity/Total assets) 50.5% 52.9% 56.9%

Currentratio(Total current assets/Total current liabilities) 0.8:1 1.1:1 1.0:1

Gearing(refernote7)(Term loan/Equity plus term loan) 22.7% 29.7% 15.8%

Interestcover(Operating surplus before interest/Interest expense) 5 times 5times 8times

Dividendproposed ($000) 300 300 –

OTHER PERFORMANCE MEASuRES

Revenue From

PublicGoodScience&Technology(PGST) ($000) 19,969 19,880 19,292

CapabilityFund ($000) 3,052 3,052 2,364

Marsden ($000) 1,519 1,804 1,050

Pre-SeedAcceleratorFund ($000) 451 510 232Publications

Papers–externallyrefereedjournals/books 189 150 159

Otherpapers 68 55 107

Conferencepapersandabstracts 210 150 104

Researchmonographsandmaps 8 3 5

Consultancyreports 203 100 158Full Time Equivalents

Researchers 207 218 198

Researchsupport 37 38 35

Generalsupportandmanagement 41 37 42Productivity Measures

RevenueperFTE ($000) 161 161 157

OperatingmarginperFTE ($000) 5.6 7.3 6.8

TotalassetsperFTE ($000) 122 117 107

Revenueearnedper$investedinassets 1.3 1.4 1.5

Health and Safety

Numberofworkdaysmissedduetoinjury 14 days 10days 1day

ACCworkplacesafetymanagementprogramme Yes Yes YesCommercial Activities

RevenuefromcommercialactivitiesfromNewZealand ($000) 11,159 11,670 11,271

Revenuefromcommercialactivitiesfromoverseas ($000) 2,257 2,500 1,702

RevenuefromGeoNet ($000) 7,026 7,316 5,945

Numberofclientsinexcessof$150,000revenueperannum 21 16 18

41


Group Group Group

Actual Budget Actual

2006 2006 2005

OTHER PERFORMANCE MEASuRES CONTINuED

Tertiary Education

Graduatescholarshipsfunded 18 20 18

Graduatestudentssupervised 61 62 61

Valueofcontractsin ($000) 581 100 537

Valueofcontractsout ($000) 1,483 450 932Other Non Financial Measures

InternationalforarepresentingNewZealand 11 15 23

OverseaspartnersinPGSTprojects 104 80 95

Overseasvisitreports 23 45 *PGSTprogrammeobjectivesmet 98.8% 98.0% 99.3%

MarsdenFundproposalssubmitted 16 15-20 *MarsdenFundbidsaccepted 1 3 4

*Measurechange

42


REPORT OF ThE DIRECTORS

The Directors have pleasure in presenting the Annual

Report and audited accounts of GNS Science for the year

ended 30 June 2006. TheFinancialStatementshavebeen

preparedinconformitywithgenerallyacceptedaccounting

principlestogiveatrueandfairviewoftheGroup’sfinancial

positionanditsoperationsandcashflows.

TheAuditor-Generalisthestatutoryauditorpursuantto

section21oftheCrownResearchInstitutesAct1992.

TheAuditor-GeneralhasappointedDeloittetoauditthe

FinancialStatementsandtoexpressanopiniononthem.

Theirreportissetoutonpage55.

Principal activity

GNSScience’sprincipalactivityistoconductscientific

research,consultancyservicesandproductdevelopment

inearthsciencesandisotopetechnologiesinaccordancewith

theprinciplesfortheoperationofCrownResearchInstitutes

setoutinsections4and5oftheCrownResearchInstitutes

Act1992.

Accounting policies

Therehavebeennochangesinaccountingpoliciesduring

theyear.

Dividend

Adividendof$300,000wasdeclaredfortheyearended

30June2006(2005:$NIL).

Remuneration of Directors

Directors’feespaidduringtheyearwereasfollows:

2006 ($) 2005 ($)

ConAnastasiou(Chairman) 40,000 38,000RichardWestlake(Deputy-Chairman) 25,000 23,750EllenFo

..rch 20,000 19,000

SarahSchiess 20,000 19,000BrendaTahi 20,000 19,000MikeWilliams 20,000 19,000AllanFreeth 20,000 –

Board composition

AllanFreethwasappointedtotheBoardon1July2005

andRichardWestlakeretiredfromtheBoardon30June2006.

On1July2006,RossButlerwasappointedtotheBoard.

Subsidiaries

TheCompanyhasfoursubsidiarycompanies:

IsoscanLimited

GeologicalSurveys(NZ)Limited

IsoscanFoodLimited

GeologicalRiskLimited

ConAnastasiouandAlexanderMalahoffaretheDirectors

ofeachofthesubsidiarycompanies.

Employee remuneration

Inaccordancewithsection211(1)(g)oftheCompaniesAct

1993,thenumbersofemployeeswhoreceivedremuneration

andotherbenefitstotalling$100,000ormore,in$10,000

bands,duringtheyearto30June2006were:

$000 2006 2005

100–109 4 9110–119 9 4120–129 3 6130–139 2 –150–159 – 4160–169 4 –170–179 – 1180–189 1 1190–199 1 –250–259 – 1*300–310 1* –

* Chief Executive

Inaccordancewithsection152(1)(d)oftheCrownEntitiesAct

2004,compensationtotalling$37,400waspaidtotwostaff

memberswholefttheCompanyduringtheyearended

30June2006.

Donations

GNSSciencedonated$1,000totheLifeFlightTrustduring

theyear(2005:$1,000).

Indemnity for Directors and employees

InsurancehasbeeneffectedforDirectorsandemployees

inrespectofanyactoromissionintheircapacityasaDirector

oremployeeoftheCompany.Directorshavedeclaredtheir

interestsinaDeedofIndemnitydated17October1996,

wherebytheCompanyindemnifiesDirectorsagainstanyliability

foranyactoromissionsincurredintheircapacityasaDirector.

Events subsequent to balance date

TheDirectorsarenotawareofanymatterorcircumstance

sincetheendofthefinancialyearnototherwisedealtwithin

thisreportthathas,ormayhave,asignificanteffectonthe

operationoftheCompany.

Certification

TheDirectorsconfirmthattheCompanyhasoperatedin

accordancewiththeCrownResearchInstitutesAct1992

andtheCompaniesAct1993duringtheyear.

Note: Directors’ disclosures can be found on page 35.

OnbehalfoftheDirectors

CON ANASTASIOUChairman23August2006

43


The accompanying notes form part of these Financial Statements.

STATEMENT OF MOvEMENTS IN EqUITY

FoR The YeAR enDeD 30 June 2006

Group Group Group Company Company Company

Actual Budget Actual Actual Budget Actual

2006 2006 2005 2006 2006 2005

Note $000 $000 $000 $000 $000 $000

Revenue

Crown 8 24,991 25,246 22,938 24,991 25,246 22,938

Commercial–NewZealand 11,159 11,670 11,271 10,971 11,670 10,974

Commercial–Overseas 2,257 2,500 1,702 2,257 2,500 1,702

GeoNet 8 7,026 7,316 5,945 7,026 7,316 5,945

Interestreceived 90 100 152 84 100 147

Other 471 401 1,036 263 401 873

Total revenue 45,994 47,233 43,044 45,592 47,233 42,579

Expenses

Personnel 22,277 22,482 20,394 22,277 22,482 20,394

Materials,supplies&services 2 15,255 15,057 14,677 14,928 15,057 14,256

GeoNetdirectexpenses 8 3,440 3,800 3,018 3,440 3,800 3,018

Depreciation 5 3,079 3,250 2,883 3,033 3,250 2,849

Interest 360 510 236 359 510 236

Total expenses 44,411 45,099 41,208 44,037 45,099 40,753

Operating surplus before taxation 1,583 2,134 1,836 1,555 2,134 1,826

Taxation 3 (538) (704) (628) (528) (704) (625)

Surplus after taxation 1,045 1,430 1,208 1,027 1,430 1,201



2006 2006 2005 2006 2006 2005

$000 $000 $000 $000 $000 $000

Equity at start of year 16,779 17,012 15,571 16,707 17,012 15,506

Surplusaftertaxation 1,045 1,430 1,208 1,027 1,430 1,201

Lessdividendproposed (300) (300) – (300) (300) –

Equity at end of year 17,524 18,142 16,779 17,434 18,142 16,707

STATEMENT OF FINANCIAL PERFORMANCE


44


STATEMENT OF FINANCIAL POSITION

AS AT 30 June 2006



2006 2006 2005 2006 2006 2005

Note $000 $000 $000 $000 $000 $000

Equity 4 17,524 18,142 16,779 17,434 18,142 16,707

Represented by:

Non current assets

Property,plantandequipment 5 25,479 26,183 20,682 25,413 26,183 20,618

Investments 10 – – – 258 – 273

25,479 26,183 20,682 25,671 26,183 20,891

Current assets

Cashandbank 1,504 563 536 1,281 563 226

Shortterminvestments – 2,950 1,990 – 2,950 1,990

Accountsreceivableandprepayments 4,670 3,440 3,808 4,677 3,440 3,827

Taxationrefund 811 – 319 773 – 272

Developmentprojects 536 500 351 330 500 245

Workinprogress 1,712 660 1,794 1,628 660 1,756

9,233 8,113 8,798 8,689 8,113 8,316

Total assets 34,712 34,296 29,480 34,360 34,296 29,207

Non current liabilities

Termloan 7 5,150 7,650 3,150 5,150 7,650 3,150

Futureincometaxliability 6 222 (96) 34 175 (96) 34

Retirementleaveprovision 13 425 443 445 425 443 445

Futurelongserviceleaveentitlements 13 479 457 443 479 457 443

6,276 8,454 4,072 6,229 8,454 4,072

Current liabilities

Accountspayableandaccruals 3,691 2,860 2,748 3,476 2,860 2,547

Employeeentitlements 2,228 2,240 1,770 2,228 2,240 1,770

Revenueinadvance 4,693 2,300 4,111 4,693 2,300 4,111

Provisionfordividend 300 300 – 300 300 –

10,912 7,700 8,629 10,697 7,700 8,428

Total liabilities 17,188 16,154 12,701 16,926 16,154 12,500

Net assets employed 17,524 18,142 16,779 17,434 18,142 16,707

ForandonbehalfoftheBoard

CON ANASTASIOU BRENDA TAhI

23August2006 23August2006


45


STATEMENT OF CASh FLOwS




2006 2006 2005 2006 2006 2005

Note $000 $000 $000 $000 $000 $000

Cash flows from operating activities

Cash was provided from:

Receiptsfromcustomers 45,174 46,754 41,219 44,914 46,754 40,957

GST(net) 170 – 14 171 – 14

Interestreceived 90 100 152 84 100 147

45,434 46,854 41,385 45,169 46,854 41,118

Cash was applied to:

Paymentstosuppliers&employees (39,117) (41,103) (38,634) (38,784) (41,103) (38,442)

Interestpaid (360) (510) (227) (359) (510) (236)

Incometaxpaid (858) (704) (470) (903) (704) (465)

(40,335) (42,317) (39,331) (40,046) (42,317) (39,143)

Net cash flow from operating activities 11 5,099 4,537 2,054 5,123 4,537 1,975

Cash flows from investing activities


Saleofproperty,plantandequipment 19 – 2 19 – 2

Repaymentofloantosubsidiaries – – – 15 – –

19 – 2 34 – 2

Cash was applied to:

Loantosubsidiaries – – – – – (131)

Purchaseofproperty,plantandequipment (8,140) (7,800) (2,695) (8,092) (7,800) (2,669)

(8,140) (7,800) (2,695) (8,092) (7,800) (2,800)

Net cash applied to investing activities (8,121) (7,800) (2,693) (8,058) (7,800) (2,798)

Cash flows from financing activities


Bankborrowings 2,000 4,500 – 2,000 4,500 –

Net cash provided from financing activities 2,000 4,500 – 2,000 4,500 –

Net increase/(decrease) in cash held (1,022) 1,237 (639) (935) 1,237 (823)

Add cash brought forward 2,526 2,276 3,165 2,216 2,276 3,039

Ending cash carried forward 1,504 3,513 2,526 1,281 3,513 2,216

Represented by:

Cash and bank 1,504 563 536 1,281 563 226

Short term investments – 2,950 1,990 – 2,950 1,990

1,504 3,513 2,526 1,281 3,513 2,216


46


1. STATEMENT OF ACCOuNTING POlICIES

REPORTING ENTITy AND ACTIvITIES

TheInstituteofGeologicalandNuclearSciencesLimitedis

establishedundertheCrownResearchInstitutesAct1992

andtheCompaniesAct1993.IsoscanLimited,IsoscanFood

Limited,GeologicalSurveys(NZ)LimitedandGeologicalRisk

LimitedareestablishedundertheCompaniesAct1993.The

financialstatementshavebeenpreparedinaccordancewith

section17oftheCrownResearchInstitutesAct1992,the

PublicFinanceAct1989,theCompaniesAct1993andthe

CrownEntitiesAct2004.

FinancialstatementsfortheInstituteofGeologicalandNuclear

SciencesLimited(the“Company”)andconsolidatedfinancial

statements(the“Group”)arepresented.Theconsolidated

financialstatementscomprisetheCompanyanditssubsidiaries

(setoutinnote10).

TheprincipalactivityoftheCompanyistoundertake

geoscienceandisotopescienceresearch,development

andconsultancy,predominantlyinNewZealand.

MEASuREMENT BASIS

Themeasurementandreportingoffinancialperformance

andfinancialpositionisbasedonhistoricalcost,exceptfor

therevaluationofcertainassets.

NOTES TO AND FORMING PART OF ThE FINANCIAL STATEMENTS


BASIS OF PREPARING CONSOlIDATED FINANCIAl

STATEMENTS

Subsidiaries

Subsidiariesarethoseentitiescontrolleddirectlyorindirectly

bytheCompany.Thefinancialstatementsofsubsidiariesare

includedintheconsolidatedfinancialstatementsusingthe

purchasemethodofconsolidation.

Joint ventures

Jointventuresarejointarrangementswiththeotherparties

inwhichtheCompanyhasjointandseveralliabilityinrespect

ofcostsandliabilitiesandsharesinanyresultingoutput.

TheCompany’sshareoftheassets,liabilities,revenuesand

expensesofjointventuresisincorporatedintotheCompany

andconsolidatedfinancialstatementsonaline-by-linebasis

usingtheproportionatemethod.

Transactions eliminated on consolidation

Theeffectsofintra-grouptransactionsareeliminatedin

preparingtheconsolidatedfinancialstatements.

PARTICulAR ACCOuNTING POlICIES

Revenue

Revenueisrecordedwhenearned,basedonthepercentage

ofworkcompleted.Anyamountsreceivedinrelationtowork

notyetcommencedisrecordedasrevenueinadvance.

Receivables

Receivablesarestatedattheirestimatedrealisablevalueafter

providingforbadanddoubtfuldebts.

Work in progress

Workinprogressisvaluedatthelowerofcostorthe

percentageofworkcompleted,lessamountsinvoiced.Cost

includeslabour,directcostsandanallocationofoverhead.

Property, plant and equipment

Property,plantandequipmentareincludedatcostandhave

beendepreciatedonastraightlinebasisatratescalculated

toallocatetheassets’costovertheirestimatedremaining

usefullives.

47


Usefullivesofassetsare:

Buildings

–woodenconstruction 40years

–concreteconstruction 50years

Plant,machineryandequipment 3–15years

Furniture,fittingsandofficeequipment 3–15years

ITequipmentandsoftware 4–8years

Vehicles 5years

Leaseholdimprovements 9–10years

Patents 4–17years

Income tax

TheincometaxexpensechargedtotheStatementofFinancial

Performanceincludesboththecurrentyearliabilityandthe

incometaxeffectoftimingdifferencescalculatedusingthe

liabilitymethod.

Taxeffectaccountingisappliedonacomprehensivebasisto

alltimingdifferences.Futureincometaxbenefitsarisingfrom

timingdifferencesareonlyrecognisedwhenthereisvirtual

certaintyofrealisation.

Foreign currencies

Transactionsinforeigncurrenciesareconvertedatthe

NewZealandrateofexchangerulingonthedateofthe

transaction.Monetaryassetsandliabilitiesatyearend

areconvertedtoNewZealanddollarsattheexchangerate

rulingatbalancedate.Allexchangedifferencesarerecorded

intheStatementofFinancialPerformance.

Investments

Investmentsarestatedatcost.

Research and development costs

ResearchcostsareexpensedintheStatementofFinancial

Performanceintheperiodincurred.Developmentcostsare

deferredwherefutureidentifiablebenefitscanreasonably

beexpectedtoexceedthesecosts.Deferreddevelopment

costsareamortisedoverfutureperiodsonabasisrelatedto

expectedfuturebenefits.

Library, databases and collections

Libraryresources,databasesandcollectionsownedbythe

Companyarenotvaluedforfinancialreportingpurposes.

Patents and trademarks

Patentsandtrademarksarerecordedatcostandamortised

overthetermoftheirestimatedusefullives.

Statement of Cash Flows

Investingactivitiescomprisethepurchaseanddisposalof

property,plantandequipment.Financingactivitiesinclude

changesinequityandborrowings.Operatingactivities

comprisetheprovisionofresearchandrelatedservicesand

allothertransactionsnotincludedundereitherinvestingor

financingactivities.

Financial instruments

TheCompanyisapartytofinancialinstrumentsaspartofits

normaloperations.Thesefinancialinstrumentsincludebank

accounts,shortterminvestments,accountsreceivableand

payableandbankloan.Revenueandexpensesinrelation

tofinancialinstrumentsarerecognisedintheStatementof

FinancialPerformance.

Provision for employee entitlements

Annualandlongserviceleavearerecognisedastheyaccrue

toemployees.Thefutureentitlementstolongserviceleave

arealsorecognised.Retirementleaveaccruestoemployees

inaccordancewiththeprovisionsofthecurrentcollective

employmentagreement.

Comparative information

Comparativeinformationhasbeenreclassified,where

necessary,toachieveconsistencyindisclosurewiththe

currentyear.

Changes in accounting policies

Therehavebeennootherchangesinaccountingpolicies.

Allpolicieshavebeenappliedonbasesconsistentwiththe

prioryear.

48


2. MATERIAlS, SuPPlIES & SERvICES Group Group Company Company 2006 2005 2006 2005 $000 $000 $000 $000

Auditfees 44 43 40 37Baddebts 15 – 15 –Directors’fees 165 138 165 138(Gain)/lossonforeignexchange (89) 28 (84) 17Rent 369 423 369 423Otherexpenses 14,751 14,045 14,423 13,641 15,255 14,677 14,928 14,256

3. TAxATION

Operatingsurplusbeforetaxation 1,583 1,836 1,555 1,826

Taxat33% 523 606 513 603Taxationeffectofpermanentdifferences 23 22 23 22Adjustmentinrespectofprioryears (8) – (8) –Totaltaxationchargereported 538 628 528 625

The taxation charge is represented by:Currenttaxation 350 531 387 528Futureincometaxliability 188 97 141 97 538 628 528 625

UndersectionME1oftheIncomeTaxAct1994,theCompanyisnotrequiredtomaintainanImputationCreditAccount.

4. EquITy

AuthorisedandIssuedCapital:6,167,000ordinaryshares 6,167 6,167 6,167 6,167Retainedearnings 11,657 10,612 11,567 10,540Dividendproposed (300) – (300) – 17,524 16,779 17,434 16,707

Allordinarysharesrankequallywithrespecttodividendandrepaymentofcapitalandeachcarrytherighttoonevoteatanyannualgeneralmeeting.

5. PROPERTy, PlANT AND EquIPMENT

GROuP Cost Dep’n Accum Book Book 2006 Dep’n Value Value 2006 2005 $000 $000 $000 $000 $000

Land 2,420 – – 2,420 2,420Buildings 8,333 162 1,467 6,866 5,588Leaseholdimprovements 380 88 194 186 341Plant&machinery 1,139 59 741 398 300Laboratoryequipment 16,943 1,204 9,288 7,655 7,262ITequipment 8,434 792 6,740 1,694 1,560Furniture&fittings 5,576 290 1,191 4,385 1,591Vehicles 655 19 513 142 27Officeequipment 479 54 260 219 164Software 3,986 397 2,674 1,312 1,290Patents 265 14 63 202 139 48,610 3,079 23,131 25,479 20,682

ThemostrecentrateablevaluationsasatFebruary2006,September2004andJuly2004oflandandbuildingstotalled$18,570,000(2005:$15,620,000).

NOTES TO AND FORMING PART OF ThE FINANCIAL STATEMENTS CONTINUED

49


5. PROPERTy, PlANT AND EquIPMENT CONTINuED

COMPANy Cost Dep’n Accum Book Book 2006 Dep’n Value Value 2006 2005 $000 $000 $000 $000 $000

Land 2,420 – – 2,420 2,420

Buildings 8,333 162 1,467 6,866 5,588

Leaseholdimprovements 380 88 194 186 341

Plant&machinery 1,139 59 741 398 300

Laboratoryequipment 16,943 1,204 9,288 7,655 7,262

ITequipment 8,434 792 6,740 1,694 1,564

Furniture&fittings 5,576 290 1,191 4,385 1,591

Vehicles 655 19 513 142 27

Officeequipment 479 54 260 219 164

Software 3,826 351 2,580 1,246 1,222

Patents 265 14 63 202 139

48,450 3,033 23,037 25,413 20,618

6. FuTuRE INCOME TAx BENEFIT/(lIABIlITy) Group Group Company Company 2006 2005 2006 2005 $000 $000 $000 $000

Openingbalance (34) 43 (34) 43

Currentyearmovement (188) (97) (141) (97)

Transferfromprovisionfortax – 20 – 20

(222) (34) (175) (34)

7. TERM lOAN

GROuP AND COMPANy 2006 2005

$000 $000

LoanfromTheNationalBankofNewZealandLimited 5,150 3,150

Facility:

Ofthe$7,650,000facilityinplace,$5,150,000hasbeendrawndown.

Interest:

Bankbillratecomputedonthefirstdayofthatinterestperiodplus0.80%perannum.

Repayment terms:

Principalrepayableon31July2007orearlierifmutuallyagreed.

Security:

Negativepledge.

50


8. RElATED PARTy TRANSACTIONS

TheultimateshareholderoftheCompanyistheCrown.

RevenuederivedfromtheCrownassetoutintheStatement

ofFinancialPerformanceincludesPublicGoodScienceand

Technologyfundingof$19,969,000(2005:$19,292,000),

andPre-SeedAcceleratorfunding$451,000(2005:$232,000)

fromtheFoundationforResearch,ScienceandTechnology,

Capabilityfundingof$3,052,000(2005:$2,364,000)fromthe

MinistryofResearch,ScienceandTechnology,andMarsden

fundingof$1,519,000(2005:$1,050,000)fromtheRoyal

SocietyofNewZealand.

TheCompanyenteredintoanagreementwiththeEarthquake

Commission(EQC)inJune2001wherebyGNSSciencewill

implementandoperateaseismicnetworkthroughoutNew

Zealandontheirbehalf,for$5millionperyearfor10years.

In2006theannualamountwasincreasedto$8million.

In2006,$7,026,000(2005:$5,945,000)wasrecognisedin

revenuewith$3,440,000(exclusiveofpersonnelandoverhead

recoveries)spentinrelationtodirectcostsincludingequipment

purchases(2005:$3,018,000).At30June2006,therewas

$18,000inrevenueinadvance(2005:$992,000).

TheGrouphasajointventurewithCarterHoltHarveyLimited.

Alltransactionswerecarriedoutonacommercialandarm’s

lengthbasis.Thevalueofsalestothispartywas$404,000

(2005:$361,000).At30June2006,thereisareceivabletothe

Companyfromthejointventureof$174,000(2005:$27,000).

TheGrouphasajointventurewithQuotableValueLimited

andNiuPacificLimited.Alltransactionswerecarriedoutona

commercialandarm’slengthbasis.Thevalueofsalestothis

partywas$19,000(2005:$20,000).At30June2006,there

isareceivabletotheCompanyfromthejointventureof

$22,000(2005:$22,000).

TheGrouphasajointventurewithMeatVisionLimited.All

transactionswerecarriedoutonacommercialandarm’s

lengthbasis.Thevalueofsalestothispartywas$297,000

(2005:$315,000).At30June2006,thereisareceivabletothe

Companyfromthejointventureof$114,000(2005:$231,000).

TheGrouphasajointventurewithNationalInstituteofWater

andAtmosphericResearchLimited.Alltransactionswere

carriedoutonacommercialandarm’slengthbasis.Thevalue

ofsalestothispartywas$888,000(2005:$444,000).

TheGroupundertakesmanytransactionswithstate-owned

enterprises,governmentdepartments,otherCrownentities

andotherCrownResearchInstitutes.Thesetransactions

arecarriedoutonacommercialandarm’slengthbasisand

itisnotconsideredthattheserequirerelatedpartydisclosure.

9. FINANCIAl INSTRuMENTS

Credit risk

ThefinancialinstrumentswhichexposetheCompanytocredit

riskareprincipallybankbalances,shortterminvestmentsand

accountsreceivable.TheCompanymonitorscreditriskon

anongoingbasis.Bankbalancesandshortterminvestments

areheldwithNewZealandregisteredbanksinaccordance

withtheCompany’streasurypolicy.Aprovisionfordoubtful

debtsismaintainedinrespectofaccountsreceivableandthis

isreassessedonaregularbasis.Nocollateralisheldbythe

Companyinrespectofbankbalances,shortterminvestments

oraccountsreceivable.TheCompanyisnotexposedto

anyconcentrationsofcreditriskotherthanfromtheCrown

andEQC.

Currency risk

TheCompanyreducesitsexposuretocurrencyriskthrough

theuseofforwardexchangecontracts.Therewerenoforward

exchangecontractsat30June2006(2005:NIL).

Interest rate risk

ItisCompanypolicytoensureinterestrateexposureis

maintainedonafloatingratebasis.Inadditiontothis,

managementmonitorsthelevelofinterestratesonanongoing

basisand,fromtimetotime,willlockinfixedratesonthenext

floatingresetwhentheyconsiderthatinterestratesmayrise.

Theinterestrateonthetermloanissetoutinnote7.

Fair values

Therewerenomaterialdifferencesbetweenthefairvalue

andcarryingamountsoffinancialinstrumentsat30June2006

and30June2005.


51


10. INvESTMENTS

Subsidiary Balancedate Principalactivity

IsoscanLimited 30June 50%interestinTrueViewunincorporatedjointventure

developingandsellingnon-invasivescanningtechnology

IsoscanFoodLimited 30June 50%interestinMeatVisionLimitedjointventuredeveloping

andsellingnon-invasivescanningtechnology

GeologicalSurveys(NZ)Limited 30June 45%interestinPropertyInsightunincorporatedjointventure

sellingpropertydata

GeologicalRiskLimited 30June 50%interestinRiskscapeNZunincorporatedjointventure

undertakinghazardassessmentresearch

IncludedintheGroupaccountsistheGroup’sshareofthejointventuresasfollows:

2006 2005

$000 $000

Operatingprofitaftertaxation 18 7

Totalassets 352 273

Totalliabilities 215 201

Therearenocontingentliabilitiesinanyoftheabovejointventures.

11. RECONCIlIATION OF SuRPluS AFTER TAxATION TO STATEMENT OF CASH FlOwS

Group Group Company Company 2006 2005 2006 2005 $000 $000 $000 $000

Surplusaftertaxation 1,045 1,208 1,027 1,201

Adjust non cash items:

Depreciation 3,079 2,883 3,033 2,849

Futureincometaxliability 188 77 141 77

Lossonsaleofassets 245 20 245 20

Noncurrentprovision 16 52 16 52

4,573 4,240 4,462 4,199

Add/(less) movements in working capital items:

Accountsreceivableandprepayments (862) (158) (850) (189)

Currentliabilities 2,283 (766) 2,269 (872)

Workinprogressanddevelopmentprojects (103) (943) 43 (837)

Taxationrefund (492) 90 (501) 83

826 (1,777) 961 (1,815)

Lessmovementincurrentliabilitiesclassifiedasinvestingorfinancingactivities (300) (409) (300) (409)

Netcashflowfromoperatingactivities 5,099 2,054 5,123 1,975

52


12. COMMITMENTS AND CONTINGENCIES

GROuP AND COMPANy

COMMITMENTS

2006 2005

Operatingleasecommitments: $000 $000

Withinoneyear 124 187

Betweenoneandtwoyears 35 41

Betweentwoandthreeyears 26 35

Betweenthreeandfouryears 2 26

Fiveyearsandover 1 3

188 292

Contractedcapitalcommitments 1,281 5,094

CONTINGENT lIABIlITIES

TheCompanyhasnocontingentliabilitiesinrelationtopotentiallegalclaimsthatmaybemadeagainsttheCompany(2005:$52,500).

13. PROvISION FOR EMPlOyEE ENTITlEMENTS

RETIREMENT lEAvE Group Group Company Company 2006 2005 2006 2005 $000 $000 $000 $000

Balanceatbeginningofyear 445 443 445 443

Additionalprovisionrecognised 11 13 11 13

Amountutilised (31) (11) (31) (11)

425 445 425 445

FuTuRE lONG SERvICE lEAvE

Balanceatbeginningofyear 443 393 443 393

Effectofdiscounting (5) 16 (5) 16

Chargefortheyear 41 34 41 34

479 443 479 443

Theaboveprovisionsareaffectedbyanumberofestimates,includingtheexpectedemploymentperiodofemployeesandthetiming

ofemployeesutilisingthebenefits.


53


14. COllECTIONS

TheCompanyownsvariouscollectionsthatareanintegral

partoftheresearchworkundertakenbytheCompany.

Thesecollectionsarehighlyspecialisedandthereisnoreliable

basisforestablishingavaluation.Theyhavethereforenot

beenvaluedforfinancialreportingpurposes.Thetwomajor

collectionsare:

• theNationalPaleontologicalCollection

• theNationalPetrologyReferenceCollection.

15. SuBSEquENT EvENTS TO BAlANCE DATE

SubsequenttobalancedateIsoscanLimited,asubsidiary

ofGNSScience,enteredintoanagreementwithitsjoint

venturepartnertoendtheTrueViewjointventure.Theactivities

previouslyundertakenbythejointventurewillbeassumed

byIsoscanLimitedwhichwillacquiretheinventoryheldby

thejointventure.

16. ADOPTION OF INTERNATIONAl FINANCIAl

REPORTING STANDARDS

InDecember2002theNewZealandAccountingStandards

ReviewBoard(ASRB)announcedthatInternationalFinancial

ReportingStandards(IFRS)wouldapplytoallNewZealand

entitiesforfinancialperiodscommencingonorafter1January

2007.Entitiesalsohavetheoptionofvoluntaryearlyadoption

from1January2005.On24November2004theASRB

approvedthestableplatformofNewZealandEquivalentsto

InternationalFinancialReportingStandards(NZIFRS),which

includescertainadaptationstoIFRStoreflectNewZealand

circumstances.

TheGrouphasbegunreviewingitsaccountingpoliciesand

financialreportingtocomplywithNZIFRS,commencingwith

animpactassessmenttoisolatekeyareasthatwillbeimpacted

bythetransitiontoNZIFRS.

AstheGrouphasyettofinaliseitsaccountingpoliciesunder

NZIFRS,theadjustmentsthatwillberequiredtothefinancial

statementsonadoptionofNZIFRSareyettobequantified

withanydegreeofcertainty.TheGrouphasdeterminedthatit

willpublishitsfirstsetofannualfinancialstatementsprepared

underNZIFRSfortheyearending30June2008.

54


TheBoardandmanagementareresponsibleforthepreparation

oftheannualfinancialstatementsandthejudgementsused

therein.

TheBoardandmanagementareresponsibleforestablishing

andmaintainingasystemofinternalcontroldesignedtoprovide

reasonableassurancesastotheintegrityandreliabilityofthe

financialreporting.

IntheopinionoftheBoardandmanagement,theannual

financialstatementsforthefinancialyearfairlyreflectthe

financialpositionandoperationsoftheGroup.

CON ANASTASIOU Chairman

ALEXANDER MALAhOFF ChiefExecutive

23August2006

STATEMENT OF RESPONSIBILITY

55


To the readers of the Institute of Geological and Nuclear

Sciences limited and Group’s Financial Statements for

the year ended 30 June 2006.

TheAuditor-GeneralistheauditoroftheInstituteofGeological

andNuclearSciencesLimited(the“Company”)andGroup.

TheAuditor-Generalhasappointedme,GRMitchell,using

thestaffandresourcesofDeloitte,tocarryouttheauditofthe

financialstatementsoftheCompanyandGroup,onhisbehalf,

fortheyearended30June2006.

unqualified Opinion

Inouropinion:

• ThefinancialstatementsoftheCompanyandGrouponpages43to53:

– complywithgenerallyacceptedaccountingpractice inNewZealand;and

– giveatrueandfairviewof: – theCompanyandGroup’sfinancialpositionasat

30June2006;and – theresultsofoperationsandcashflowsfortheyear

endedonthatdate.• BasedonourexaminationtheCompanyandGroupkept

properaccountingrecords.

Theauditwascompletedon23August2006,andisthedate

atwhichouropinionisexpressed.

Thebasisofouropinionisexplainedbelow.Inaddition,

weoutlinetheresponsibilitiesoftheBoardofDirectorsand

theAuditor,andexplainourindependence.

Basis of Opinion

WecarriedouttheauditinaccordancewiththeAuditor-General’s

AuditingStandards,whichincorporatetheNewZealandAuditing

Standards.

Weplannedandperformedtheaudittoobtainalltheinformation

andexplanationsweconsiderednecessaryinordertoobtain

reasonableassurancethatthefinancialstatementsdidnothave

materialmisstatements,whethercausedbyfraudorerror.

Materialmisstatementsaredifferencesoromissionsofamounts

anddisclosuresthatwouldaffectareader’soverallunderstanding

ofthefinancialstatements.Ifwehadfoundmaterialmisstate-

mentsthatwerenotcorrected,wewouldhavereferredtothem

inouropinion.

Theauditinvolvedperformingprocedurestotesttheinformation

presentedinthefinancialstatements.Weassessedtheresults

ofthoseproceduresinformingouropinion.

Auditproceduresgenerallyinclude:

• determiningwhethersignificantfinancialandmanagement

controlsareworkingandcanbereliedontoproduce

completeandaccuratedata;

• verifyingsamplesoftransactionsandaccountbalances;

• performinganalysestoidentifyanomaliesinthereporteddata;

• reviewingsignificantestimatesandjudgementsmade

bytheBoardofDirectors;

• confirmingyear-endbalances;

• determiningwhetheraccountingpoliciesareappropriate

andconsistentlyapplied;and

• determiningwhetherallfinancialstatementdisclosures

areadequate.

Wedidnotexamineeverytransaction,nordoweguarantee

completeaccuracyofthefinancialstatements.

Weevaluatedtheoveralladequacyofthepresentationof

informationinthefinancialstatements.Weobtainedallthe

informationandexplanationswerequiredtosupportour

opinionabove.

Responsibilities of the Board of Directors and the Auditor

TheBoardofDirectorsisresponsibleforpreparingfinancial

statementsinaccordancewithgenerallyacceptedaccounting

practiceinNewZealand.Thosefinancialstatementsmustgive

atrueandfairviewofthefinancialpositionoftheCompanyand

Groupasat30June2006.Theymustalsogiveatrueandfair

viewoftheresultsofoperationsandcashflowsfortheyear

endedonthatdate.TheBoardofDirectors’responsibilities

arisefromtheCrownResearchInstitutesAct1992,thePublic

FinanceAct1989andtheFinancialReportingAct1993.

Weareresponsibleforexpressinganindependentopinionon

thefinancialstatementsandreportingthatopiniontoyou.

Thisresponsibilityarisesfromsection15ofthePublicAuditAct

2001,section21(1)oftheCrownResearchInstitutesAct1992

andthePublicFinanceAct1989.

Independence

Whencarryingouttheauditwefollowedtheindependence

requirementsoftheAuditor-General,whichincorporatethe

independencerequirementsoftheNewZealandInstituteof

CharteredAccountants.

Inadditiontotheauditwehavecarriedoutanimpactanalysis

regardingtheCompanyandGroup’simplementationof

NewZealandEquivalentstoInternationalFinancialReporting

Standards.Otherthantheauditandthisassignment,wehave

norelationshipwithorinterestsintheCompanyoranyofits

subsidiaries.

G R MITChELL

Partner, Deloitte

on behalf of the Auditor-General, Wellington, new Zealand

REPORT OF ThE AUDITOR-GENERAL


PRINCIPAl lOCATION AND REGISTERED OFFICE

1FairwayDriveAvalonPOBox30-368LowerHutt5010NewZealandTel:+6445701444Fax:+6445704600Email:[email protected]

OTHER lOCATIONS

wairakei Research Centre114KaretotoRoadWairakeiPrivateBag2000Taupo3352NewZealandTel:+6473748211Fax:+6473748199Email:[email protected]

National Isotope Centre30GracefieldRoadPOBox31312LowerHutt5040NewZealandTel:+6445701444Fax:+6445704657

Dunedin Research Centre764CumberlandStreetPrivateBag1930Dunedin9054NewZealandTel:+6434774050Fax:+6434775232Email:[email protected]

GNS SCIENCE OFFICE lOCATIONS

DIRECTORS

Con Anastasiou(Chairman)

Richard westlake(DeputyChairman)(Retired30June2006)

Ross Butler(Appointed1July2006)

Ellen Förch

Allan Freeth

Sarah Schiess

Brenda Tahi

Mike williams

ExECuTIvE

Chief ExecutiveDrAlexanderMalahoff

General ManagerNatural Hazards GroupDrTerryWebb

General ManagerNatural Resources GroupDrMichaelIsaac

General Manager National Isotope CentreDrFrankBruhn

Chief Financial OfficerGrahamClarke

General Manager Business Development & Information ServicesRobJohnston

General Manager Human ResourcesJennifervanHunen

General Manager ResearchDrRobinFalconer

General Manager StrategyDrDesmondDarby

Manager Ma-ori StrategyMurrayHemi

MARKETING MANAGERS

GeohazardsDrNoelTrustrumEmail:[email protected]:[email protected]

HydrocarbonsDrDavidDarbyEmail:[email protected]

Non-invasive Scanning TechnologiesJoeManningEmail:[email protected]

Groundwater and GeothermalMelissaClimoEmail:[email protected]

COMMuNICATIONS MANAGER

John CallanTel:+6445704732Mob:+64274402571Email:[email protected]

BANKERS

The National Bank of New Zealand limited

AuDITOR

Graeme Mitchell DeloitteOnbehalfoftheAuditor-General

SOlICITORS

Minter Ellison Rudd watts

56 DIRECTORY

GNS Science on the web:www.gns.cri.nz

PrincipallocationandNationalIsotopeCentre

DunedinResearchCentre

WairakeiResearchCentre

REPORTING AND FINANCIAL STATEMENTS

Documents

Transcript of REPORTING AND FINANCIAL STATEMENTS