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ESR Annual Report 2005
...and further
     A single word which, right across ESR, sums up an entire year.
                            More than ever, we are reaching out to new opportunities, new
                            relationships, new understanding. Often this involves working with world-
                            renowned specialists and teams.
                            Without exception, it means calling on expertise and tireless commitment
                            right here in New Zealand. From exploring new frontiers in science and
                            health research, to vital assistance in tragedy like the Asian tsunami, ESR
                            is contributing to the health and well-being of people worldwide.
                            We participate in, we contribute to and we benefit from the ever-
                            expanding resource and knowledge that is today’s world.
                            We help make a difference.

                                         And tomorrow? Even further.
Financial result                                  Science delivery and outputs
ESR increased annual revenue to $40.6m, an        ESR again significantly increased the number                                                            Public good and international aid
increase from last year. The net surplus after    of scientific and technical reports produced,                                                           Much of ESR’s core work is in the public good
taxation was $2.2m.                               reflecting increased work and science delivery.                                                         area and underpins the health and justice
                                                  ESR scientists and technical staff also served on                                                      sectors. Our work contributes to the health
Some of this revenue increase is a result of                                                                                                                                                                 1
                                                  a large number of international and national                                                           and well-being of New Zealanders, providing
increased services provided to key clients. A

                                                                                                                                                                                                            ESR Annual Report 2005
                                                  organisations and advisory groups.                                                                     significant social and economic benefits.
new three-year contract with the police was
signed during the year.                                                                                                                                  Our expertise in forensic science and health is
                                                  Scientific and                                       National Centre of Biosecurity and
ESR also continued to grow its clients in key                                                                                                            also contributing increasingly to international
                                                  commercial collaborations                           Infectious Disease – Wallaceville                  projects. This year the company was particularly
areas, particularly in the workplace drug and
alcohol testing programme and in the water        Collaborations and alliances with a variety of      ESR is delighted that the centre has come to       proud to be able to respond to an international
management area.                                  international and national partners came to         fruition, with government funding allocated        crisis, the Boxing Day tsunami. Information on
                                                  fruition in commercial and research areas.          through the budget. ESR is a key partner in the    ESR’s contribution is on page 9.
                                                                                                      centre alongside MAF Agriquality and AgResearch.
Developing new capabilities                       A collaboration with AUSTHOS led to the
and science platforms                             purchase by the Malaysian police of an ESR-         The multi-agency Wallaceville initiative is a
                                                  developed DNA databank system (see page             significant step for New Zealand’s emergency
ESR is investing in enhancing its core
                                                  11 for details). More sales in the region are       and preparedness planning to meet global
capabilities and developing associated new
                                                  expected to follow. ESR is also accessing new       threats from pandemic disease, bioterrorism and
capabilities in key areas: biosecurity/disease
                                                  forensic technologies through an alliance with      biosecurity breaches.
surveillance/zoonoses, envirogenomics,
                                                  the UK Forensic Science Service.
proteomics and chemical genetics, microbial
forensics and risk management.                    At home, partnerships with iwi have led to
                                                  some exciting science research projects being
The company was pleased to gain additional
                                                  undertaken which will provide major health
capability funding for the coming 2005/06
                                                  benefits for New Zealanders in the future (see
financial year through the Ministry of Research,
                                                  pages 26 – 29).
Science and Technology.

      1    Highlights                              14   What’s nitrate doing to drinking water?   24   Partnership with communities                  34   Scientific Output Performance Indicators

      3    ESR During the Year                     15   Quality water                             24   Back to the future                            35   Key Financial Performance Measures
      4    Strategic direction                     16   Smoking                                   24   Healthy marae                                 35   Corporate Governance

      6    Chairman’s review                       16   Fresh approach to health                  25   State of the takiwa                           36   Statement of Responsibility

      7    Chief Executive Officer’s review         17   A smoking gene?                           25   Shellfish health study drives awareness        36   General Disclosures

      8    World                                   18   Nicotine know-how                         26   Education                                     38   Audit Report

      8    World view                              19   Beyond nicotine                           26   Knowledge gains                               40   Statement of Financial Performance

      9    Tsunami aid                             19   Testing the air                           27   Meeting Awanuiarangi                          40   Statement of Movements in Equity

      10   Huge “P” bust in Fiji                   20   Commercialisation                         27   Wide-reaching benefits from student research   41   Statement of Financial Position

      10   Aboriginal genetics milestone           20   Opening the commercialisation pipeline    28   Science degree next goal for teen mum         42   Statement of Cash Flows

      11   Malaysia buys ESR forensic system       21   Glow sensor finds toxic killers            29   Tikanga respect                               44   Notes to the Financial Statements

      12   Food                                    22   Health                                    29   ESR has new Maori logo                        52   Directory

      12   Food safe                               22   Fighting the flu                           30   Human resources

      13   Survey reveals contaminated baby food   22   Wellington flu                             30   ESR attracts world’s best

      13   Keeping chill                           23   Dioxin study – Paritutu                   31   PSA and ESR – working together

      14   Water                                                                                  32   Science and Research Highlights
ESR During the Year                                                                            Undertook more than 20,000 analyses            Undertook the annual         review of the
                                                                                               on drink-drive blood samples.                  quality of New Zealand’s drinking water.

Analysed about 1,500 drug cases for            Managed and maintained four websites:           Analysed 34,000 workplace drug                 Analysed more than 4,000 bottles of wine          3
police and customs. Some of the odder cases;;          testing samples.                               for export certification.

                                                                                                                                                                                               ESR Annual Report 2005
included identifying methamphetamine in (public health
                                                                                               Found 30      per cent of workplace drug       Investigated about 500 food samples for
lava lamps, pseudoephedrine in candles and     surveillance); and
                                                                                               tests undertaken post-accident or under        contamination, spoilage and adulteration.
dimethylamphetamine in moon cakes.             (drinking water supplies).
                                                                                               reasonable cause tested positive for drugs.
                                                                                                                                              Produced 199,100 individual analysed
Delivered forensic training to approximately   Received more than 3,600 exhibits in
                                                                                               Linked one individual to 14 different crimes   pesticide residue results as part of the total
1,000 New Zealand police officers.              relation to homicides.
                                                                                               through the DNA databank.                      diet survey.
Provided police with a DNA profile              Produced 111 scientific and
                                                                                               Collected and analysed surveillance data for   Tested 30,000 condoms.
in a 12-year-old murder case.                  technical reports.
                                                                                               23,000 cases of notifiable disease.
Attended and gathered evidence at more         Processed nearly 24,000 forensic
                                                                                               Identified more than 300 outbreaks
than 210 general crime scenes.                 DNA samples.
                                                                                               of disease.
Dealt with 230 new “P lab” cases.              Undertook more than 5,000 toxicological
                                                                                               Produced weekly, monthly, quarterly and
                                               tests on criminal and coronial blood samples.
Answered more than 500 media inquiries.                                                        annual reports for a range of diseases.
                                               Repaired, maintained and calibrated 3,600
                                               breath alcohol testing devices.
    Strategic Direction                         ESR is a research organisation that discovers new knowledge and
                                                develops new products and services for key government clients in the
                                                environmental health and justice sectors. In accordance with ESR’s
                                                                                                                       To meet this vision ESR’s
                                                                                                                       long-term goals are:
                                                stated purpose and statutory role the organisation maintains and
      ESR is committed to being the leading     develops core capabilities of national benefits in these areas.         •   Increasing ESR’s contribution to the
                                                                                                                           New Zealand science system
     provider of specialist science solutions   Key objectives are:
                                                                                                                           Diversifying to include the provision of
         which contribute to innovation in       •   Retaining the scientific cutting edge in the environmental
                                                                                                                           new and enhanced products and services
    New Zealand and protect people in their          health field                                                           to existing and new clients

                  Asia/Pacific environment.       •   Continuing to provide the New Zealand justice system with         •   Attracting, retaining and rewarding
                                                     a first-class forensic service                                         high-quality staff.
                                                 •   Ongoing enhancement of ESR’s national and international           We recognise that achieving these is
                                                     scientific reputation.                                             dependent on a set of organisational
                                                Over the next five years, ESR will consolidate its unique strengths     values, which underpin all our work:
                                                by investing in the scientific disciplines and activities pertinent     •   Science excellence
                                                to the rapidly developing field of environmental health and some
                                                key interdisciplinary fields of envirogenomics, microbial forensics,    •   Trust, objectivity, independence
                                                biosecurity and surveillance.                                              and integrity

                                                                                                                       •   Valuing staff

                                                                                                                       •   Quality

                                                                                                                       •   Client primacy

                                                                                                                       •   Cultural respect and responsiveness.
                                                                                                      Corporate citizenship                                responsiveness capability while contributing to
                                                                                                                                                           Maori development and advancement in the
                                                                                                      ESR is committed to being part of, and
                                                                                                                                                           wider community.
                                                                                                      maintaining a positive profile in, its
                                                                                                      local communities.                                   ESR will also seek to achieve greater understanding
                                                                                                                                                           of other cultures within New Zealand including
                                                                                                      It will continue to build on partnerships
                                                                                                                                                           Pacific Island cultures. This will be undertaken
                                                                                                      with Maori to increase their participation
                                                                                                                                                           through a range of mutually agreed initiatives
                                                                                                      in the science system and in ESR’s research.
                                                                                                                                                           including scholarship programmes and science
                                                                                                      A clear goal is to continue to improve Maori
                                                                                                                                                           promotion projects in schools.

                                                Research and investment                               Infrastructure                                       Cross-programme groups
                                                ESR has an investment strategy to actively pursue     To sustain growth as a business, ESR has made        Cross-programme groups draw on scientists
                                                new opportunities with new and existing clients.      considerable investment in its infrastructure. A     from across ESR’s various scientific programmes
Commercialisation                               It includes the development of enhanced and           major part of this is in human capital, the other    and disciplines (water, food safety, population
                                                new capabilities. Investment options include          major component being in capital development,        and environmental health, communicable
and sales                                       mergers and acquisitions, collaborations and          buildings, specialised equipment and IT.             disease and forensic science) to cluster core          5
Internationally the company will continue       alliances. The major requirement for any new                                                               competencies. Through these ESR can ensure

                                                                                                                                                                                                                 ESR Annual Report 2005
                                                                                                      ESR will grow the intellectual capability of staff
its successful approach of selling products     opportunity is that it adds to the overall value of                                                        sufficient internal critical mass to undertake
                                                                                                      through a programme of targeted recruitment
originally developed for the New Zealand        ESR within a reasonable time frame and with a                                                              research and development, commercialisation
                                                                                                      and partnerships with other organisations.
market. ESR is well placed to provide “total    reasonable risk profile.                                                                                    and new business solution projects. The
                                                                                                      The capability of existing staff will also be
solutions” to other science organisations                                                                                                                  organisation is unique in having such a mix
                                                The organisation is continuing to grow its            grown through a variety of competency
and particularly for jurisdictions wishing to                                                                                                              of competencies.
                                                research base, aiding innovative science delivery     development initiatives.
implement DNA sampling regimes.
                                                and seeding commercial initiatives. The new                                                                Leveraging off this, four cross-programme
The workplace drug and alcohol testing and      capability fund has opened up new investment          Partnerships and                                     groups have been established: enteric
pharmaceutical programmes have identified a      opportunities to further build a molecular                                                                 microbiology, pathogens risk and risk
number of opportunities in the private sector   technology platform.                                  collaborations                                       management, surveillance information
and continued expansion of these is planned.                                                                                                               management and envirogenomics. They will
                                                ESR also continues to build a successful and          Strategic partnerships and relationships, with
The board and management will ensure that                                                                                                                  target an increasing proportion of reinvestment
                                                responsible reinvestment programme. The               both existing and new clients and partners, are
the investment required for progress and the                                                                                                               funds and will focus on commercialisation
                                                programme supports projects that benefit               the key to achieving goals.
associated risks are balanced.                                                                                                                             projects and clustering competencies to provide
                                                staff and advance ESR in priority areas. It also
                                                                                                      ESR will continue to work on establishing a          services to new clients.
                                                provides a tool for rewarding staff who have
                                                                                                      number of new collaborative relationships.
                                                contributed significantly to the organisation.
                                                                                                      These will be a mix of research and
                                                                                                      development, commercialisation and route-to-
                                                                                                      market collaborations, primarily with leading
                                                                                                      international organisations. It is anticipated
                                                                                                      that some of these will provide opportunities to
                                                                                                      access overseas funding mechanisms.
                                                                                      Ian Wilson
    Again I am delighted         Since 2000/01 ESR’s revenue has grown by
                                 more than 50 per cent from $27m to $40.6m in
                                                                                      There is a growing emphasis on the contribution
                                                                                      to the New Zealand economy by CRIs
                                                                                                                                          and an organisation to meet the changing global
                                                                                                                                          threats is a huge step forward for New Zealand.
    to report that ESR has       2004/05. The organisation has strengthened its       developing their intellectual property resources
                                                                                                                                          The company’s international reputation
    delivered more work, done    balance sheet and in particular consolidated its
                                 asset base to provide a foundation for growth from
                                                                                      and an increased focus on collaboration and the
                                                                                      development of research partnerships. ESR is
                                                                                                                                          continues to grow, through both sale of products

    more science, had more       both core capabilities and new potential.            no exception.
                                                                                                                                          and promotion of our capabilities. This year the
                                                                                                                                          company was chosen by the Malaysian police to
    international exposure and   As the financial reports show, ESR ended the          The company has been working hard at                provide a DNA laboratory system and associated
    increased revenue.           2004/05 year with a net surplus after taxation
                                 of $2.2m.
                                                                                      establishing both domestic and international
                                                                                      research partnerships and collaborations.
                                                                                                                                          training. We expect further sales to eventuate in
                                                                                                                                          the region over the next few years.
                                                                                      This has led to new research areas, notably
                                 ESR is committed to achieving its shareholding                                                           To conclude I would like to acknowledge
                                                                                      in envirogenomics. Research begun this year
                                 Ministers’ expectation in relation to both return                                                        the superb efforts of all board members,
                                                                                      related to Maori, genetics, smoking and disease
                                 and capital structure, while at the same time                                                            management and staff. CEO Dr John Hay has
                                                                                      has the potential to deliver huge health savings
                                 continuing to enhance the “public good”. The                                                             again met all the challenges presented to him
                                                                                      and benefits to New Zealand.
                                 board acknowledges that the provision of these                                                           with integrity, fortitude and inspiration.
                                 services often provides a less than adequate         Increased revenue this year from the Foundation
                                                                                                                                          Once again ESR has delivered excellent science
                                 commercial return.                                   for Research, Science and Technology’s
                                                                                                                                          that makes a difference to the lives of New
                                                                                      capability fund has enabled ESR to acquire
                                 The company operates in an environment of                                                                Zealanders and is also increasingly reaching out
                                                                                      more expert capabilities in science platforms,
                                 increasing globalisation of science. This affects                                                        beyond New Zealand.
                                                                                      underpinning our core science delivery.
                                 the competition for science resource and
                                 the supply of both funding and staff in New          The board is delighted that the extensive work
                                 Zealand. Purchasing and funding strategies           undertaken by ESR, MAF and other agencies
                                 for science in New Zealand are changing, as is       has come to fruition, with the government
                                 society’s expectations of science.                   providing full support for the establishment of
                                                                                      a National Centre, Biosecurity and Disease at
                                                                                      Wallaceville. The establishment of infrastructure   Ian Wilson
Chief Executive Officer,
Dr John Hay
We have seen another year      Our ability to undertake vital science and
                               research work to help people and the
                                                                                    current clients are met beyond expectation.
                                                                                    Independent surveys of the New Zealand
                                                                                                                                          overseas expert and OSH, found that the
                                                                                                                                          standard operating procedures and practices
of strong performance          environment has been extended again this             police and our workplace drug and alcohol             reflected safe laboratory practice requirements,
financially, scientifically      year – reaching into the many communities
                               of New Zealand and further afield.
                                                                                    programme clients indicate overall success.           that the scientist appeared to be a competent
                                                                                                                                          and careful worker and that there was no
and in our service delivery.   I am particularly proud of ESR’s ability to assist
                                                                                    The police survey confirmed that ESR is
                                                                                    regarded as a highly reliable supplier of goods
                                                                                                                                          evidence to suggest that any laboratory accident
                                                                                                                                          or incident had occurred.                           7
                               Thailand following the Boxing Day tsunami.           and services. A new three-year agreement

                                                                                                                                                                                             ESR Annual Report 2005
                               The relationship established between ESR and         established with police will provide greater          Finally I salute all our staff, who never cease
                               the Central Institute of Forensic Science in         clarity for service delivery between ESR              to go the extra mile that the workload and
                               Bangkok following last year’s sale of a DNA          and police.                                           our clients demand of them. Every one of our
                               sample management system meant we were able                                                                staff is committed to improving the health and
                                                                                    The survey of workplace drug and alcohol
                               to provide a tailored response to the disaster                                                             well-being of New Zealanders and increasingly
                                                                                    programme clients also delivered very positive
                               aftermath. (You can find an article about this                                                              people in the Asia/Pacific region. People work
                                                                                    results. That’s a testament to staff dedication
                               on page 9.)                                                                                                for ESR because they want to work in a team
                                                                                    and commitment to ensuring continual quality
                                                                                                                                          that makes a difference. I say with immense
                               At home, the organisation achieved a crime-          – and working with numerous clients to meet
                                                                                                                                          respect – together, you most certainly do.
                               fighting milestone in April when the 50,000th         their needs.
                               DNA profile was loaded onto the national
                                                                                    We will undertake surveys of our other major
                               DNA database. In addition, an internationally
                                                                                    clients in the coming year.
                               unprecedented crime-to-person-matching rate
                               of 55 per cent was achieved. Both of these events    On a sombre note, I take this opportunity to
                               demonstrate the place forensic science has in        reiterate on behalf of all staff our best wishes to
                               underpinning the New Zealand justice system.         the Chiron scientist who was diagnosed with           Dr John Hay
                                                                                    meningococcal disease while in New Zealand.
                               ESR organises its activities to ensure excellence
                                                                                    It is a tragedy that a scientist dedicated to
                               in delivering contracted outcomes to its clients.
                                                                                    finding ways to combat the disease was herself
                               Growth through new clients and revenue is
                                                                                    struck down with it. The subsequent inquiries,
                               very important. Equally we assign great value
                                                                                    which included reports by an independent
                               and resources to ensuring that the needs of our

            World View
             Whether it’s an emergency, a special investigation or
              an ongoing assignment, ESR plays an active role in
                  providing forensic expertise around the world.
                                                                        ESR forensic scientists and staff also worked

   Tsunami aid                                                          for several months in Bangkok to help process
                                                                        difficult samples (tissue and bone) and assist
                                                                        with DNA profile data for kinship matching and
                                                                        reporting. DNA identification was carried out
                                                                        by “pedigree analysis”, matching victims’ DNA
 Soon after the Boxing Day 2004 tsunami,                                with the DNA of living relatives. Dr Sally Ann      9
   ESR staff were providing Thailand with                               Harbison, ESR’s forensic biology science leader,

                                                                                                                           ESR Annual Report 2005
                                                                        travelled to Thailand to initiate this work.
forensic expertise to help identify victims.
                                                                        In all work, the focus was to provide support of
                                                                        lasting benefit as well as address the immediate
               The partnership began long before the wave.
                                                                        issues. The new victim identification system
               Early in 2004, ESR helped Thailand to set
                                                                        included Thai language interfaces, and will
               up a national DNA laboratory and criminal
                                                                        eventually evolve into a national missing
               databank system. This saw the Central
                                                                        persons system.
               Institute of Forensic Science in Bangkok
               purchase ESR-developed systems, software                 Every emergency is an opportunity to move
               and training.                                            forward. The scale of the disaster and the high
                                                                        temperatures meant there were problems with
               Following a request by the Thai authorities
                                                                        obtaining and linking DNA profiles because
               to Foreign Affairs Minister Phil Goff, the
                                                                        biological samples had deteriorated. ESR has
               New Zealand Government agreed to provide
                                                                        initiated research to develop new statistical
               an ESR-developed disaster victim identification
                                                                        methods, and improve identification outcomes
               (DVI) software package and other assistance.
                                                                        in future DVI situations.
               In the following weeks, ESR staff helped
               to integrate the new DVI software with the
               laboratory’s sample management systems. ESR staff
               installed the software, trained local staff and helped
               the laboratory consolidate its DVI processes.

                 Queensland forensic review
                                                                                                                        Aboriginal genetics
                 ESR undertook an independent review of Queensland Health’s Scientific Services Forensic Sciences        milestone
                 Centre following claims that DNA evidence could be inaccurate. ESR reviewed the use of DNA
                                                                                                                        A trans-Tasman collaboration saw ESR
                 quantitation and undertook a technical audit of forensic biology activities. The organisation also
                 provided general advice and assistance to the laboratory and to the ministerial taskforce looking at   forensic scientist Dr John Buckleton carry
                 forensic science delivery in Queensland.                                                               out groundbreaking DNA research into
                                                                                                                        Aboriginal genetics following a high-
                                                                                                                        profile Australian rape case.
             Huge “P” bust in Fiji
             ESR’s specialist forensic chemists played a key        “Methamphetamine labs produce highly                Australia’s most comprehensive population             with varying formats for coding of information,
             role in helping Fijian police tackle the largest       flammable, volatile and toxic substances.            genetics study designed to assess population          as well as ethical, privacy and ownership issues.
             methamphetamine factory ever found in the              The volume of materials that needed to be           diversity for forensic purposes was carried out       Because of the implications for other cases,
             southern hemisphere.                                   dismantled and removed was unparalleled,”           in 2004. This study was initiated by Wayne            speed was imperative.
                                                                    he said.                                            Chisnall, ESR’s General Manager – Forensic
             The scale of the lab in Suva was fearsome.                                                                                                                       Following the research, Buckleton and Walsh
                                                                                                                        and Dr Tony Raymond, National Institute of
             The “cooks” had been using industrial-sized              • ESR has invested $400,000 in                                                                          reported a mean estimate of inbreeding
                                                                                                                        Forensic Sciences. The collaborative study was
        10   machinery to mix ingredients. The lab was                  sophisticated instruments for drug                                                                    coefficient in the Aboriginal population of
                                                                                                                        led by ESR’s Dr John Buckleton, former ESR
             capable of producing 500 kg of “P” a week,                 analysis to support the clan lab work.                                                                1.2 per cent, with an upper limit of 3 per cent.
                                                                                                                        employee Simon Walsh, now at the University
             more than five times the amount it’s estimated                                                                                                                    These figures were publicly released, countering
                                                                      • ESR worked extensively with police and          of Technology, Sydney, and John Mitchell from
             is produced in New Zealand over a year.                                                                                                                          the defence’s argument of widespread half-
                                                                        justice representatives to identify how         La Trobe University, Melbourne.
                                                                                                                                                                              sibling relationships. At the first subsequent trial
             Thanks to a highly successful partnership                  best to streamline the weight of evidence
                                                                                                                        The study was initiated after a rape case             the defendant pleaded guilty.
             approach, New Zealand police, ESR and Fijian               needed to take cases to court. Enhanced
                                                                                                                        ruling acquitted the Aboriginal defendant and
             authorities shut down the lab in June. ESR’s               communication between agencies                                                                        Following the conclusion of the case, Dr
                                                                                                                        undermined the basis for DNA testimony. The
             specialist clan lab investigating chemists                 is further helping to define testing                                                                   Buckleton has been involved in training lawyers,
                                                                                                                        original DNA evidence focused on the parentage
             stayed on in Fiji to dismantle the lab. Back in            requirements and case timelines.                                                                      judges and other members of Australia’s legal
                                                                                                                        of a child allegedly conceived by rape. The defence
             New Zealand, they undertook further analysis                                                                                                                     service in Aboriginal population genetics and
                                                                                                                        argued that Aboriginals were all related as half-
             in preparation for the associated court case.                                                                                                                    forensic anthropology.
                                                                                                                        siblings, so DNA could not prove parentage.
             Tropical heat and the scale of the lab meant it                                                                                                                  “This was an outstanding example of multi-
                                                                                                                        The acquittal had prompted the Aboriginal
             wasn’t an easy job. “Working in the heat and                                                                                                                     laboratory collaboration in a short time,”
                                                                                                                        legal service to recommend that, for all cases
             humidity of Suva in full protective clothing                                                                                                                     he said. “It was necessary to get the news to
                                                                                                                        involving Aboriginals throughout Western and
             and breathing apparatus was a real challenge,”                                                                                                                   the laboratories but more importantly to the
                                                                                                                        South Australia, defendants plead not guilty and
             recalled ESR Forensic Programme Manager                                                                                                                          judges and lawyers because of the far-reaching
                                                                                                                        prosecutors defer trials.
             Keith Bedford.                                                                                                                                                   implications the original ruling had for the
                                                                                                                        The study saw data collected from various             Australian legal system.”
                                                                                                                        Aboriginal tribes from Western Australia,
                                                                                                                        South Australia, the Northern Territory and
                                                                                                                        Queensland. There were considerable issues
                                                            The New Zealand DNA databank has the highest
                                                           “hit rate” in the world – with 55 per cent of crime
                                                                            scene profiles linked to individuals

Malaysia buys ESR forensic system
A partnership with AUSTHOS saw an ESR team launch         DNA gives a precise genetic fingerprint.              through AUSTHOS enables us to focus on the
                                                          Matching DNA samples from crime scenes with          areas of forensics we know, while they manage
    the first phase of a new forensic database system in   samples from individuals is a powerful tool to       all other aspects of the project.”
                                Malaysia in early 2005.   solve cases.
                                                                                                               The value of ESR’s work in developing forensic
                                                          To do that, of course, authorities need an           systems overseas has increased in the last year,
                                                          effective and dependable DNA management and          and is expected to keep on rising, he said.

                                                                                                                                                                  ESR Annual Report 2005
                                                          matching system – which opens a new area of
                                                                                                                • New Zealand’s forensic database system,
                                                          opportunity. ESR is increasingly developing and
                                                                                                                  developed and managed by ESR, is
                                                          implementing DNA systems overseas.
                                                                                                                  considered a world leader. By the end of
                                                          The first half of 2005 saw the launch of phase           June 2005 the database held over 53,000
                                                          one of a new system in Malaysia. Signs are              individual DNA profiles.
                                                          also good for a contract in Oman and for
                                                                                                                • Prominent crime cases which the system
                                                          further work on the Thai forensic database
                                                                                                                  helped to solve in the last year included
                                                          system which ESR implemented in 2004. The
                                                                                                                  William Katipa, jailed for a 1994 rape.
                                                          Malaysian contract saw several ESR staff travel
                                                          to Malaysia. Malay scientists also visited the ESR
                                                          lab in New Zealand for training.

                                                          The Malaysian and Thai contracts were both
                                                          arranged through AUSTHOS, a not-for-profit
                                                          organisation which entered into a strategic
                                                          alliance for international business development
                                                          with ESR.

                                                          “It’s a true business relationship that works,”
                                                          said Jacob de Feijter of ESR. “We’re part of
                                                          their team, they’re part of ours. Doing projects

            Food Safe
            While unexpected food safety crises needing
            immediate management will always occur, it’s
            important that a structured approach is taken to
            long-term food safety issues – such as food-borne
       12   infectious diseases, Campylobacteriosis being
            particularly important in New Zealand. That’s why
            the New Zealand Food Safety Authority (NZFSA)
            is working to a risk management framework –
            and calling on ESR for help in making it a reality.
            Part of the framework involves risk management     on that situation. The ESR Food Group
            options assessment: of all the ways of attacking   began a two-year contract with NZFSA
            a problem, which one provides the best             in 2003, focusing on quantitative risk
            improvement in food safety? A valuable tool for    assessments involving microbial food safety
            making that decision is to construct a model of    for Campylobacter and Salmonella.
            the food chain, and use it to try out different
            options and predict what their effects might be.   “A key part of the mix is collaboration
                                                               with the food industry – which is asked
            Models are a computer-based representation
            of the food chain, where the inputs and effects    to provide data and details of processing,
            of each step can be altered to derive outputs      and has the opportunity to review the
            about food safety and human health. The initial    models in progress.”
            effort is to develop a model that represents the
            current New Zealand situation as closely as
            possible, and which captures all the influences
                                                                                                            Fridge wise:
                                                                                                            •   Ensure hot foods are cooled slightly
Survey reveals contaminated baby food                                                                           before putting in the fridge, to avoid
                                                                                                                warming other foods
                                                                                                                                                            Keeping chill
                                                                                                                                                            How healthy is the average Kiwi
A survey of New Zealanders’ diets in 2004 found baby food                                                   •   Store raw meats at the bottom to
                                                                                                                prevent juices, often containing live
                                                                                                                                                            fridge? Survey results suggest some
contaminated with lead and culminated in an investigation into                                                  bacteria, dripping onto other foods         fridges need attention.
cornflour in three countries.                                                                                •   Wipe up spills immediately and clean        When it comes to fridges, cold is good. The ideal

                                                                                                                                                                                                                 ESR Annual Report 2005
The New Zealand Total Diet Survey (NZTDS)             batches were contaminated. The manufacturer               your fridge every week or two               temperature is 1°C – 5°C. Warmer levels can
estimates the dietary exposure of the New             identified the source as imported cornflour.                                                            contribute to the risk of food-poisoning bacteria.
                                                                                                            •   To check the temperature put a
Zealand population to pesticide residues,             Traceback found around 135 tonnes of cornflour                                                         But the survey carried out by ESR for the NZFSA
                                                                                                                thermometer in a glass of water, leave
contaminants and selected nutrients, and              had been contaminated with up to 100 times                                                            has found many fridges aren’t that cold.
                                                                                                                in your fridge overnight, and take a
assesses whether they pose a significant               the regulatory limit for cereal products. Later,                                                      The ESR food safety scientists tested 127
                                                                                                                reading first thing in the morning (fridge
health risk.                                          the source was identified as corn imported from                                                        randomly chosen domestic fridges. Internal
                                                                                                                thermometers are available from some
                                                      China in a ship that had previously carried lead                                                      air temperatures were taken from the top and
“We estimate the dose from chemical hazards                                                                     hardware and kitchenware stores).
                                                      concentrate around Australia.                                                                         bottom shelves every 10 minutes over three
across a typical New Zealand diet, and compare
this with international health standards to see       The tracebacks led to 37 tonnes of cornflour                                                           days. Forty-four per cent had an average
if there is any potential health risk,” said survey   being recalled in New Zealand. Contaminated                                                           temperature of 5°C – 7°C while only 35 per cent
leader Dr Richard Vannoort.                           cornflour had also been exported to Australia                                                          were in the ideal temperature range. Of most
                                                      and Fiji so both countries’ government                                                                concern were the 21 per cent of fridges over
As part of the sampling plan a range of baby                                                                                                                7°C. Almost three-quarters of the fridges were
                                                      authorities were informed, resulting in extensive
foods was assessed. One brand, Robinson’s Egg                                                                                                               warmer on the top shelf than on the bottom.
Custard, showed elevated levels of lead. The
regulatory limit for lead in cereal-based foods is     •   The 1997/98 NZTDS showed the typical                                                             The unwanted warmth is significant. “Most
-0.2 mg/kg, whereas this custard had 0.8 mg/kg.            New Zealand diet has among the lowest lead                                                       pathogenic bacteria causing food poisoning
                                                           levels in the world, attributed to both the                                                      cannot grow at the recommended refrigeration
ESR promptly informed the NZFSA and the                                                                                                                     temperatures,” said ESR microbiologist
                                                           elimination of lead solder in canned foods
manufacturer, Nutricia NZ Ltd, initiated a                                                                                                                  Rosemary Whyte.
                                                           and the removal of leaded petrol in the 1990s.
product recall. Further investigative work by Dr
Vannoort and his team showed that only specific

             What’s nitrate doing to
             drinking water?
             A collaborative research group is investigating
             nitrate in groundwater.
             Nitrate can be transported long distances in groundwater systems.
             That means it can potentially contaminate drinking water – a
             health issue because around half of New Zealand’s drinking
             supplies call on groundwater supplies.

             To address the problem, a research group was formed in 2004.
             Called Integrated Research for Aquifer Protection (IRAP),
             the group is a collaborative venture involving ESR, Crop and
             Food, Environment Canterbury, AgResearch, Dexcel, Landcare
             Research and Lincoln Ventures. Ultimately the aim is to create a
             farm scale model to find out the effect of changing land uses on
             groundwater quality, and to identify which farm management
             decisions can lower nitrate levels without lowering production.

             ESR’s main role is investigating nitrate within the vadose zone
             – the area between soil and groundwater table. Little is known
             about this stage of groundwater nitrate contamination. ESR is
             assessing and modelling how nitrate, which is applied as fertiliser,
             can leach through the vadose zone, and how much of the nitrate
             is affected by transformations in this zone. A field site has been
             set up near Lincoln on the Canterbury Plains and the data is now
             being analysed.
Quality Water
    Good-quality water is vital to human health. But just
    because water is free of faecal coliforms doesn’t mean it’s
    free of waterborne viruses capable of causing disease.
    Until recently, very little has been known about those viruses – because
    detecting the organisms in water is a significant technical challenge. But
    today’s sophisticated molecular biology techniques are opening the way to
    monitoring water quality in unprecedented depth.

    During 2004/05 the ESR Water Group has been determining which viruses
    have been identified internationally as important for assessing water quality,    15
    and which may be important in New Zealand. The Group has begun

                                                                                     ESR Annual Report 2005
    researching ways to monitor viral contaminants in water. This project will
    lead to determining whether specific human viral pathogens are present.

    These are early days. But with ongoing advances in technology, there’s
    real potential for sensitive and accurate real-time analysis of water in the
    foreseeable future. That will undoubtedly improve management of water
    quality of groundwater, streams, rivers, lakes and marine reserves.

    “It is only in the last 30 years that scientists around the world have
    recognised the importance of parasites like cryptosporidium and giardia in
    drinking and recreational water. Today, we know little of the significance
    of viruses in water – it’s the next major step forward in quality water,” said
    Marion Savill of the ESR Water Group.

               Fresh approach
                    to health
                       Working with many partners, ESR is applying a
               multidisciplinary suite of research skills to attack one of
                          New Zealand’s most serious health problems.
“Maori metabolise nicotine more slowly” – Dr Rod Lea.

  A smoking gene?                                          The hard fact is that, for some people,
                                                           cigarettes are more addictive. That’s because the
                                                           neurological effects of nicotine and tobacco vary
                                                                                                               Maori smoke an average of maybe 10 cigarettes
                                                                                                               a day whereas Caucasians average 15. But their
                                                                                                               slower metabolism of nicotine does not mean
      We all know that cigarettes are highly addictive.    – and there are significant ethnic differences.      that the risks of disease are less.”
                                                           This has profound implications for public health.   The ESR research supports the fact that,
     Far more surprisingly – as a collaborative study is

                                                                                                                                                                   ESR Annual Report 2005
                                                           So during 2004/05 ESR has been building on          over the years, health promotions to counter
                finding – not all people face the same      recent international studies, researching the       smoking have been markedly less successful
                                                           effect of genetics on smoking addiction among       among Maori than among Caucasians.
                                     risks of addiction.   Maori. It is a totally new area of smoking
                                                                                                               “Health promotion is important, but we need
                                                           addiction research: there have been no prior
                                                                                                               to ask, can we help more Maori quit with more
                                                           studies into Maori or Pacific Island populations.
                                                                                                               effective therapy?” said Dr Lea. “It’s great that
                                                           The research, run in collaboration with the         New Zealand is one of the few countries in the
                                                           northern Hawke’s Bay iwi of Ngati Rakaipaaka        world with subsidised nicotine replacement
                                                           and Dr Neil Benowitz from the University of         therapy. But the dose may not be appropriate
                                                           California, has found that Maori metabolise         for the way Maori metabolise the nicotine.” This
                                                           nicotine more slowly than Caucasians. That          will be a key focus for the ESR research team in
                                                           means the nicotine is in the body longer            the year ahead.
                                                           – possibly making smoking easy to take up and
                                                                                                               The end results are a few years down the
                                                           harder to give up. This genetic fact supports
                                                                                                               track. “There’s no magic bullet,” said Dr Lea.
                                                           the reality that the percentage of smokers is far
                                                                                                               “But by looking at the biological as well as
                                                           higher in Maori than Caucasian populations.
                                                                                                               societal influences, we’re gaining a far greater
                                                           “As you would also expect, Maori smokers            understanding of the factors in addiction, and
                                                           generally smoke fewer cigarettes,” said research    how to tackle them.”
                                                           team leader Dr Rod Lea. “Studies show that

               What’s                                            ESR may ultimately be able to determine if different
               envirogenomics?                                   tobacco products are more or less addictive

               • Envirogenomics aims to understand the

                                                                 Nicotine know-how
                 interaction between our unique genetic
                 make-up and environmental agents such
                 as drugs, toxins and microbes – and the
                 implications these interactions have on the
                 development and prevention of disease.
               • Envirogenomics has emerged in the wake
                                                                 ESR is undertaking an envirogenomics pilot
                 of the sequencing of the human genome           study with smokers on the national “Quitline”.
                 and the development of cutting-edge
                 biotechnologies. The ESR smoking addiction
                 research involves saliva samples being          “Quitline” is a government-funded programme available to anyone who
                 analysed to see how fast the nicotine           wants to give up smoking. It offers subsidies on aids designed to help people
                 is metabolised.                                 stop smoking.
               • For ESR, envirogenomics is a major focus. As    The project is looking at how nicotine replacement therapy works and what
                 well as smoking, alcohol and other drugs are    mix of factors makes it successful for some smokers and not for others.
                 being studied – smoking leads the way because
                 it’s such a preventable cause of disease.       “We are investigating to what degree personalising nicotine replacement
                                                                 therapy makes it easier for someone to stop smoking,” Dr Lea said.
Beyond nicotine                                                                                         Testing the air
With thousands of chemicals in tobacco smoke,                                                           ESR environmental research for the Ministry of Health (MoH) will give a clear
there’s more to addiction than nicotine alone.                                                          picture of the change in the air quality of bars now they’re smoke-free.

Smoking tobacco-derived nicotine is more            “The ultimate aim is to be able to precisely        December 10, 2004 was a landmark in                  “In every bar there was clear evidence of          19
addictive than taking nicotine in other ways.       measure the total addictive activity of cigarette   New Zealand health. That’s the day indoor            exposure to second-hand tobacco smoke.

                                                                                                                                                                                                                ESR Annual Report 2005
What causes that extra addictive power is           smoke,” said Dr Lea. “With this ability, we may     areas of bars and other public places became         Even when subjects believed that the air was
a complex question. Of the thousands of             ultimately be able to determine if different        smoke-free by law.                                   ‘seemingly smoke-free’, they were exposed to
chemicals in cigarette smoke, some are capable      tobacco products are more or less addictive,                                                             it,” said Dr Jeff Fowles. The highest levels of
                                                                                                        The law’s effect on air quality in bars, and
of binding to the brain’s nicotinic receptors,      and provide this information to regulators.”                                                             cotinine were recorded in Invercargill, where as
                                                                                                        the benefit for non-smokers, won’t just be
which are important in the formation of                                                                                                                      many as 60 lit cigarettes from 100 total patrons
                                                    The research is groundbreaking, and with            guesswork. Before the law came into effect, the
nicotine addiction; while others are known to                                                                                                                were counted at one time.
                                                    clear potential for understanding addiction         MoH contracted ESR to run a comprehensive
inhibit monoamine oxidase, an enzyme related
                                                    it has already attracted considerable interest      “before and after” study. The first half of the       The follow-up study will take place in the same
to mood.
                                                    from around the world. ESR patented the new         study was run over the winter/spring of 2004,        bars, over the same months of 2005. In theory,
Currently, nicotine is the only part of cigarette   method in July 2004.                                including a total of 30 bars in Auckland,            the follow-up will show no exposure to smoke.
smoke that is routinely measured as an                                                                  Wellington and Invercargill, with each bar
                                                    In addition to the tobacco smoke research, ESR                                                           How high were the cotinine levels in 2004?
indicator of propensity to addiction. The role                                                          tested twice.
                                                    uses bioassays for research into communicable                                                            “About the same as in someone who lives with
of the other chemicals is unknown and, aside
                                                    disease, food safety, population and                Non-smokers spent three hours in a bar on a          a smoker. People were clearly breathing in
from carbon monoxide, there is no regulation
                                                    environmental health, and pharmaceutical areas.     Friday or Saturday night, after which the level of   carcinogens and cardiovascular toxins. Over
or monitoring on any of them.
                                                                                                        cotinine in their saliva was measured. Cotinine      time there would definitely be health risks,”
That could soon change. Over the last three                                                             is the body’s main metabolite of nicotine: it’s      said Dr Fowles.
years, ESR has been researching a new method                                                            an accurate measure of nicotine exposure. The
to assess the biological activity of cigarette                                                          non-smokers also made a subjective analysis of
smoke particulate matter. The method involves                                                           the bar’s air quality and counted the number of
laboratory-based in vitro research (bioassays)                                                          lit cigarettes over three 10-minute periods.
into how nerve cell receptors react to the
different chemicals.

                                  Opening the commercialisation pipeline

                         “Increasingly ESR is involved in distinct
                                           As both a deliverer and a user of science and   “We have many of the pieces of the
                                                                                           commercialisation jigsaw puzzle,” says David
                                            biotechnology products and services, ESR is    Talbot, Manager Business Development &
                                      ideally placed to get involved in commercialising    Marketing. He’s talking about ESR’s ability to
                                                                                           turn research knowledge and processes into
                                       new products, software and processes. Working       saleable products or services.
                                        in collaboration with national and international   “We see a role in a number of stages along the
                                                                                           commercialisation pipeline for new scientific
                                          partners, ESR has seen some major advances.      solutions relevant to the health, justice and food
                                                                                           safety sectors.

                                                                                           “The company is making significant investments
                                                                                           relevant to this, particularly in building new
                                                                                           technology platforms.”

                                                                                           As a major user of specific scientific products,
                                                                                           David Talbot says ESR is ideally placed to take
                                                                                           some new technologies into commercial reality.
                                                                                           “We can be involved in proof-of-concept and
                                                                                           prototype developments, through to validation,
                                                                                           testing and implementation of new products or
                                                                                           services for operational use.”

                                                                                           He cites current work on a prototype soil
                                                                                           DNA fingerprinting solution as an example
                                                                                           of taking research and crossing the “valley
                                                                                           of death” to develop a prototype for forensic
                                                                                           science applications.
stages of the commercialisation process.”


                                                                                                                                                                                                        ESR Annual Report 2005
 Glow sensor finds                        ESR is developing “glowing” bacterial                  biosensor “glows” if there are no toxic chemicals    Initial investigations have shown that the
                                         biosensors to detect toxic chemicals in forensic       present but dims if there are. The decline in        biosensor can indicate the presence of a variety
 toxic killers                           toxicology cases.                                      light is in direct proportion to the concentration   of pesticides such as glyphosate, 2,4-D and
                                                                                                of toxic compound present.                           2,4,5-T, and inorganic poisons such as arsenic,
 In a future series of “CSI” you might   Biosensors are a bacterial canary. Just like the
                                                                                                                                                     mercury and cyanide.
                                         traditional canary in a mine, biosensors can detect    “Forensic toxicology laboratories are frequently
 just see the investigators using a
                                         the presence of toxic substances rapidly and safely.   asked to exclude chemical poisoning as a factor      ESR aims to develop a fast, cheap toxicological
 technology developed by                                                                        in an unexplained death. However, despite            screening test that can recognise within minutes
                                         Bacterial biosensors are organisms that show stress
 New Zealand microbiologists.                                                                   the increasing range and sophistication of           whether a toxic substance is present, enabling
                                         symptoms in the presence of a toxic compound.
                                                                                                modern instrumental techniques such screens          more focused chemical testing to be undertaken.
                                         While they have application in numerous fields          are not very cost-effective and generally only
                                         including medicine, environmental and food             limited screening dictated by individual case
                                         quality testing, this is the first time their use in    circumstances will be performed,” says Dr Stuart
                                         forensic toxicology has been investigated.             Dickson, Science Leader, Forensic Toxicology.

                                         In collaboration with Aberdeen University,             “The application of lux or light marked
                                         UK, researchers Jacqui Horswell and Natalie            biosensors to indicate the presence of a variety
                                         Redshaw have developed a particular biosensor          of chemical poisons in both urine and stomach
                                         that contains a “light”-producing gene. The            contents is new.”

              Fighting the flu
              Influenza has had high public
              awareness during the past year, with the                                   Wellington flu                                                             Identifying a strain which represents the
                                                                                                                                                                   majority of circulating viruses is very
              “Wellington flu” causing a late outbreak                                    Earlier this year, the World Health Organisation determined               important as it enables an effective vaccine to
              in the 2004 season and two B strains,                                      that “Wellington flu” be included in the southern                          be developed. Influenza continually reinvents
         22                                                                                                                                                        itself – a process known as ”antigenic drift”.
              particularly the B/Hong Kong strain,                                       hemisphere’s 2005 influenza vaccine. So where did that
                                                                                                                                                                   Around the world, H3N2 strains have been
                                                                                         name come from? The naming of a flu strain reflects where the
              sweeping though the country in 2005.                                                                                                                 evolving fast, posing a major challenge for
                                                                                                             strain was first isolated (identified) – not where      vaccine manufacturers. Most recently, in the
                                                                                                             it originated.                                        northern hemisphere, H3N2 has evolved into
              The outbreak in 2004 and the epidemic in 2005 have seen ESR’s
                                                                                                             So, while Wellington flu originated in China,          the A/California/7/2004 strain.
              influenza laboratory and surveillance staff deal with a significantly
                                                                                                             it was first isolated in Wellington. The sample        As well as heading the ESR virology team,
              increased workload.
                                                                                                             came from a 57-year-old Wellington man who            Dr Huang sits on the Australia Influenza
              ESR undertakes national disease surveillance for the Ministry of Health.                       was suffering from influenza after visiting            Vaccine Committee that assesses the southern
              The virology laboratory is the World Health Organisation’s national                            Guangzhou in South China.                             hemisphere’s current leading strains and
              influenza reference laboratory and collates, analyses and reports year
                                                                                                             It was the ESR public health virology laboratory      determines the make-up of vaccines from year
              round on virological surveillance. While influenza is not a notifiable
                                                                                                             team, headed by Dr Sue Huang, which isolated          to year.
              disease there is a comprehensive surveillance system in place.
                                                                                                             the A/Wellington/1/2004 (H3N2) strain. “We
              Virologist and head of the virology laboratory team Dr Sue Huang says                          were given the sample to analyse because at the       What’s in a name?
              influenza surveillance provides information about the incidence and                             time bird flu was spreading rapidly in Vietnam         A/Wellington/1/2004 (H3N2)
              distribution of influenza in the community, assists with early detection                        and Thailand. It was feared that was what the         A           means it is a type A influenza virus
              of influenza epidemics and helps identify the predominant strains in                            man was infected with,” said Dr Huang.                Wellington is the place the strain was isolated
              the community to help plan for an effective influenza vaccine for the                                                                                 1           is the culture number
                                                                                                             “Wellington flu is one of the dominant strains of
              subsequent year.                                                                                                                                     2004        is the year the strain was isolated
                                                                                                             influenza for New Zealand, Australia and South
                                                                                                                                                                   (H3N2)      is the strain’s type of hemagglutinin
                                                                                                             Africa. It is also a leading strain in the northern
                                                                                                                                                                               and neuraminidase (forms of protein).
                                                                                                             hemisphere,” she said.
Dioxin study – Paritutu
Years after the production of 2,4,5-T ceased at New Plymouth‘s Ivon Watkins-Dow
(IWD) plant a major study undertaken by ESR for the Ministry of Health provided
some answers on dioxin exposure among residents of the local suburb of Paritutu.
                                                                                                       Key points:                                                                                          23
The study was initially undertaken in response      This was thought to be from breathing fumes

                                                                                                                                                                                                            ESR Annual Report 2005
to the local community’s concerns about             from IWD. The 52 participants of the study had      •   Residents tested had to have lived within    •   Eating home-grown leafy vegetables
whether they were exposed to dioxin as a            blood levels of TCDD ranging from 0.85 to 33.3          two kilometres east or one kilometre south       and “exposed” fruits also contributed
result of past emissions from IWD (now Dow          parts per trillion (ppt). The average TCDD level        of the former plant for at least one year        to the dioxin levels found. No link was
AgroSciences), and whether health effects had       of this group was 6.5 ppt. The expected level           between 1962 and 1987 and not have               found between dioxin levels and eating
occurred as a result of that exposure.              was 1.7 ppt. (1 ppt = 0.000000000001 gram.)             worked at the plant. The average age of          home-grown root vegetables, “protected”
                                                                                                            the 52 participants (30 women, 22 men)           fruit such as citrus, poultry/eggs or local
By investigating the levels of serum dioxin         The study deliberately concentrated on people
                                                                                                            was 58 years                                     kaimoana (seafood)
in blood ESR set out to determine whether           calculated to be the most exposed to dioxins. It
residents who lived close to the agrichemical       did not try to determine whether health effects     •    Blood testing was undertaken in two         •   Spatial analysis of soil data is consistent
plant while the herbicide 2,4,5-T was being         had occurred in this group of people.                   rounds so that the results from the first         with a plume of TCDD extending about
made 18 years ago had dioxin levels higher than                                                             round could assist in the selection of           1,000 metres east and 400 metres south
                                                    ESR’s Dr Jeff Fowles said the project was
other New Zealanders.                                                                                       participants for the second round. Results       of the plant. The highest modelled soil
                                                    challenging to undertake. “Even before the
                                                                                                            were compared with those obtained in a           concentrations are immediately east of the
One particular type of dioxin, 2,3,7,8              study began we had to undertake significant
                                                                                                            national serum study carried out by the          boundary. It is not possible to determine
tetrachlorodibenzo-p-dioxin (or TCDD), is a by-     community consultation to ensure there was
                                                                                                            Ministry for the Environment (MfE) in            from the study whether these emissions
product of the manufacture of 2,4,5-T, which was    agreement that blood serum testing was
                                                                                                            1996/97                                          were regular or episodic
used extensively throughout New Zealand for gorse   the appropriate mechanism for assessing
control. Production of 2,4,5-T stopped in 1987.     this exposure.”                                     •   Duration of residence from 1962 to 1987      •   Results suggest the serum TCDD levels
                                                                                                            was an important factor in the level             found are due to historical aerial emissions
Both the interim and final reports confirmed          The study was undertaken in two phases, with
                                                                                                            of elevation                                     from the IWD plant throughout
that residents who had lived very near to the       an interim report on 24 residents produced in
                                                                                                                                                             production years.
plant for at least 15 years between 1962 and        September 2004 and a final report released in
1987 were more likely to have higher levels of      May 2005.
this dioxin (TCDD) than other New Zealanders.

                                    Back to the future
                               24   Te Iwi o Rakaipaaka of northern Hawke’s Bay have a known family tree                                                                                                                          2

                                    stretching back over many generations. But why does the community
                                    have high rates of serious disease? Together, medical science and ancestral
                                    information are being used to seek answers.

                                    Te Iwi o Rakaipaaka are descendants of the         have excellent historical knowledge and records   “The ancestral knowledge that’s been shared with
                                    paramount chief Rakaipaaka, grandson of the        of their whakapapa (ancestry), they’re an ideal   us is hugely detailed. It gives us vital clues about
                                    chief Kahungunu from the Nuhaka (Wairoa)           focus for such research.                          why individuals and the community suffer from
                                    region. Today’s 10,000 or so living relatives                                                        diseases that have a genetic basis.
                                                                                       In 2004, ESR and the iwi began ongoing
                                    stretch into the 15th generation.
                                                                                       research, led by Dr Rod Lea. The study            “When that knowledge is partnered with
                                    But the community faces ongoing challenges.        involves the entire iwi and utilises extensive    scientific techniques from today, you get a very
                                    While current health status has not been           family tree knowledge.                            clear indication of propensity for disease. It’s
                                    formally investigated, observational evidence                                                        really exciting to be in a position to gain an
                                                                                       The combination of ancestral information and
                                    suggests very high rates of diabetes, gout,                                                          understanding that could be of huge benefit to
                                                                                       medical science and technology may help reveal
                                    cancer, heart disease and cigarette smoking.                                                         people today and into the future,” said Dr Lea.
                                                                                       the genetic and related medical reasons why
                                    Inheritance – or lineage – studies of very large   the Rakaipaaka community – and perhaps the
                                    extended families are a powerful strategy for      broader Maori population – suffers from
                                    uncovering genetic factors which influence          serious diseases.
                                                                                                                                                                                                Rakaipaaka Tipuna Ihaka Whaanga
                                    medical characteristics. Because Rakaipaaka
                                                                                                            Local commitment: by forging
                                                                                                                    close partnerships and
                                                                                                                   collaborating with local
                                                                                                             communities, ESR is bringing
     with communities                                                                                           science to the real world –
                                                                                                                        to solve real-world


       Healthy marae                                    A failing septic tank system is a critical health
                                                        issue for many rural marae. Problems with
                                                        sewage lead to water and soil contamination,
                                                                                                             “Current solutions often don’t take into
                                                                                                             account unique wastewater needs,” said
                                                                                                             project leader Dr Jeff Foote of ESR.
                                                        and that’s a likely route for infectious disease.    “Inappropriate assumptions are made about
                                                        But for solutions to be effective they need to       the needs and resources of whanau, hapu
          A partnership between ESR and Northland’s     answer the specific needs of marae, and be            and iwi.
                                                        culturally appropriate.
                    Hauora Hokianga will lead to the                                                         “You need to consider issues such as the shock
                                                        In 2004 ESR and Hauora Hokianga began a              loading of septic tanks when large numbers
            development of Maori solutions to health    three-year research study into water and soil        attend hui, tangi or weddings. A septic tank is
        problems from sewage treatment and disposal     contamination caused by a failing septic tank.       also less effective in handling traditional high-fat
                                                        The research is funded by the Health Research        kai. Skills and maintenance requirements also
                                      in rural areas.   Council and will become a case study for             need to be factored in.”
                                                        Maori community development in managing
                                                        environmental health issues.

With such issues in mind, the research is using   “Septic tanks and wastewater are a major
a variety of methods to evolve locally relevant   concern to marae in the Hokianga and the whole
knowledge about community development             motu,” said Hone Taimona, Hauora Hokianga
and the regulatory, institutional, cultural       community development researcher. “This will
and community contexts surrounding marae          give us a working model of Maori community
wastewater needs.                                 environmental health action, which we can
                                                  apply to other environmental health issues and
The study builds on the joint project “Learning
                                                  with adaptation may be used more widely for
from the stories of Nga Puna Wai o Hokianga”,
                                                  issues such as economic development.”
which examined the role tino rangatiratanga and
kaitiakitanga played in the success of the Nga
Puna Wai o Hokianga (safe drinking water) pilot
project, which was funded by the Ministry
of Health.
                                                     that is readily accessible, usable or defensible in   By systematically collecting, recording, collating       photos, site visits, questionnaire and
State of the Takiwa                                  a scientific context.                                  and reporting ongoing information on the                 historical information. The database features
                                                                                                           takiwa, Ngai Tahu and other iwi will be able to          a bilingual interface
ESR has partnered with Ngai Tahu to develop a        With this in mind, ESR is collaborating with
                                                                                                           better manage resources now and in the future.
system to help record, assess and report on the      Ngai Tahu whanui on the State of the Takiwa                                                                •   The system will assist local runanga and
health of the environment.                           (environment) project. The aim is to develop a        •   The concept has been tested at various sites         hapu with issues such as monitoring resource
                                                     culturally-based environmental monitoring and             within Southland’s Waiau River catchment             consents, as well as helping local authorities
Maori have historically collected a range of
                                                     reporting database system. This will enable Ngai                                                               to provide for cultural values
valuable environmental information. This                                                                   •   Data has been loaded into a site evaluation
                                                     Tahu to assess and report on the cultural health
continues today – however, due to its largely                                                                  database. This includes digital reference        •   Funding is from the Ministry for
                                                     of the natural resources and environment in the
oral nature, it is often not recorded in a form                                                                                                                     the Environment.
                                                     Ngai Tahu takiwa.

Shellfish health study drives awareness                                                                                                                                                                               25

                                                                                                                                                                                                                     ESR Annual Report 2005
A collaborative study into shellfish health at Waitangi is delivering widespread
community and environmental benefits.

Over the last year, an ESR team headed by Dr         sore tummies we will send additional samples,”        “People want to know about what we are
Gail Greening has identified norovirus and            says Emma Gibbs of Ngapuhi.                           doing and they want to know why. They
adenovirus in some shellfish harvested by                                                                   want to see the shellfish beds, see how the
                                                     “Initial results from the study gave us the
Ngapuhi iwi from historically important beds                                                               shellfish live. This is not about Maori saving
                                                     scientific evidence that there were problems
around Waitangi in Northland.                                                                              shellfish. It’s about all of us keeping the water
                                                     with sewage in the Waitangi area and that
                                                                                                           clean, protecting our kaimoana, saving our
The tests provided the community with                shellfish were making our people sick.
                                                                                                           environment. People are becoming more aware,
scientific evidence that the local shellfish beds
                                                     “People now have the confidence to talk and to         they are taking responsibility,” she says.
are occasionally contaminated with human
                                                     report health issues,” she says.
viruses and that the shellfish are at times unsafe                                                              • This testing is part of a two-year project
to eat. Large signs, installed by Northland          Ms Gibbs says the study is providing a                      involving commercial and recreational
Health, alert locals and visitors to the potential   foundation to build community awareness                     harvesting sites around New Zealand.
danger of shellfish contamination.                    about looking after the environment. She is now
                                                                                                               • The study is helping ESR to develop
                                                     lecturing to colleges, science groups, childcare
The two-year study involves Ngapuhi regularly                                                                    a faster and reliable way to detect
                                                     students and other groups about the study, and
collecting shellfish samples for testing by ESR.                                                                  noroviruses.
                                                     its importance.
“Whenever there’s a sewage spill or people get

                 Knowledge Gains   Encouraging scientists of the future
                                   is essential. So too is encouraging
                                   understanding and interaction between
                                   scientists and the wider community. ESR is
                                   committed to supporting science education.

      Meeting Awanuiarangi                Recognising that the wananga and ESR both            “We talked about how ESR can help them
                                          have interests in environmental science, the         and also the opportunities for research
            In February 2005, key ESR     wananga extended a formal invitation and             collaboration,” said Maui Hudson, ESR
       management visited Te Whare        senior ESR representatives visited Whakatane         Maori Development Manager. “We’re trying
 Wananga o Awanuiarangi to explore        in early 2005. It was a success, with both parties   to develop relationships that are mutually
                                          making presentations on latest projects              beneficial,“ he said.
opportunities for future collaboration.
                                          and goals.

                                                                                               Seven of the 10 students are working towards           Two earlier VUW student projects helped
Wide-reaching benefits

                                                                                               PhDs. Their research spans ESR’s operations,           ESR to respond quickly to the Boxing Day
                                                                                               including forensic, food safety, envirogenomics        tsunami, Mr de Feijter said. “A DVI system
                                                                                               and communicable disease. Several of the               and a parentage-matching module were the
from student research                                                                          students also benefit from joint ESR/
                                                                                               university scholarships.
                                                                                                                                                      starting point for the web-based DVI system
                                                                                                                                                      and kinship analysis (pedigree) module
                                                                                                                                                      provided to Thailand as part of the tsunami
                                                                                               In another effective partnership, ESR’s Science

                                                                                                                                                                                                    ESR Annual Report 2005
ESR is co-supervising 10 postgraduate students, in                                             Information Systems Group continues to
                                                                                                                                                      aid package. So the students’ work had
                                                                                                                                                      international benefits.”
                                                                                               host students from the Victoria University
association with Victoria, Lincoln, Auckland and                                               of Wellington (VUW) School of Information          •   ESR and Technology New Zealand
Canterbury Universities.                                                                       Management. Students’ projects this year have          hosted a group of US students from the
                                                                                               included developing GCMS library-checking              Massachusetts Institute of Technology
                                                                                               software for fibre analysis, and software for           entrepreneurship programme. The students
                                                                                               counting bacterial colonies in Petri dishes.           analysed the commercial viability and
                                                                                                                                                      potential of international forensic
                                                                                               Jacob de Feijter, Manager of ESR’s Science
                                                                                                                                                      training packages.
                                                                                               Information Systems, said the collaboration
                                                                                               was hugely successful for both ESR and             •   ESR is supporting the joint Sport and
                                                                                               students. “As well as getting innovative product       Recreation New Zealand (SPARC) Sport
                                                                                               development, some of the students have ended           Wellington Coachcorps initiative. Six staff
                                                                                               up working permanently for ESR after                   members of Kenepuru’s Science Centre
                                                                                               their studies.”                                        receive paid time off work to coach junior
                                                                                                                                                      sports teams.

                                                                                                                                                  •   Students at Titahi Bay Intermediate and
                                                                                                                                                      Mana College continue to be enthused
                                                                                                                                                      about science, with programmes in
                                                                                                                                                      association with ESR’s scientific staff.

                 Science degree next goal for teen mum
                               A young Porirua woman has her sights
                               set on becoming a forensic scientist –
                               and ESR is right behind her.
                                                                                                       Support into science

                               Helen Woolner of Porirua became a mum at 16. Four years later she       ESR provides a range of scholarships and
                               has finished her education at Huarahi Tamariki, Wellington’s school      support to encourage young people into a
                               for teenage parents – and launched into a science degree.               science career. A new opportunity to do just
                                                                                                       that was Christchurch’s 2005 Spacifically
                               Ms Woolner, of Cook Islands descent, said having a child provided
                                                                                                       Pacific Expo, for secondary school students of
                               motivation to carry on with her education. She lives with her mother,
                                                                                                       Pacific Island descent.
                               paying $120 a week board.
                                                                                                       ESR’s stand at the Expo featured vivid
                               While at Huarahi Tamariki, Ms Woolner gained work experience in
                                                                                                       displays such as blood splatter patterns, and
                               a laboratory at ESR’s Kenepuru Science Centre. Talking with forensic
                                                                                                       gave students the opportunity to analyse
                               scientists, she decided that is what she wants to do. When Ms
                                                                                                       bacteria cultures. Four ESR scientists were
                               Woolner’s story was reported in the newspaper in early 2005, ESR
                                                                                                       on the spot to encourage and enthuse the
                               stepped in, providing her with a $5,000 scholarship.
                                                                                                       students. The whole idea was to get students
                               “It’s a fantastic example of putting real commitment to get             to take a scientific questioning approach to
                               into a science career,” said ESR Strategic Manager Science and          discover answers – and they loved it. ESR also
                               Research Val Orchard. “Science offers superb opportunities, but         sponsored a new award for the region’s top
                               it takes effort – at ESR we want to support people who have the         Pacific science students.
                               focus to achieve.”
Tikanga respect                                     ESR has new
As well as meeting legal and scientific              Maori logo
demands, it’s important that ESR
                                                    D’signNation, a Maori design group
forensic crime scene investigations
                                                    in Porirua, took elements from the
show respect for the victim and family.                                                                 29
                                                    “Manaaki Tangata” carved panel at

                                                                                                        ESR Annual Report 2005
When ESR forensic scientists attend a crime         ESR’s Kenepuru Science Centre to
scene and the victim is Maori, how should
                                                    create this graphic. The design will
the body be handled? What if the grieving
family wants to do karakia? How should the          be used in material particularly for
investigators respect protocol?                     Maori audiences.
Over the last year, important steps have been       Following the tradition of Maori art, each
taken to ensure ESR offers the right training and   design element forms part of a story. The central
information in how to respect tikanga.              koru (three spirals based on the fern frond)
                                                    incorporates air, water and earth, as well as the
A new brochure clarifies the issues and how best
                                                    mother, father and child – the tangata or people
to show respect. ESR worked with police, iwi
                                                    our Maori name and mission statement commit
and ESR forensic representatives to develop the
                                                    us to care for. On each side are manaia, guardian
brochure – and a training programme which is
                                                    figures, whose three-fingered hands also
due to be launched in late 2005.
                                                    represent values such as faith, hope and love.
“It’s all about helping people know what to
expect and how to deal with it, and to help
encourage good communication all round,”
said Maui Hudson, ESR Maori
Development Manager.

                                                                                                                                      Martin Turver: Pharmaceuticals Scientist
                                                                                                       “We came to New Zealand because we feel it gave us a better lifestyle
                                                                                                                                      and a safer environment for our family to grow up in. The kids
                                                                                                                                      are enjoying school, the class sizes are smaller and there is lots of
                                                                                                                                      outdoor space for the many sports they enjoy. The climate is much
                                                                                                                                      more clement than our native Yorkshire – we were still having BBQs
                                                                                                                                      well into autumn.”

                       ESR attracts world’s best
                       With a worldwide shortage       “In the last year we have had specialist staff join the organisation from
                                                       several different countries including Zimbabwe, Britain and Canada,” says
                            of specialist scientists   Human Resources Manager Jocelyn Grainger.
                        ESR is actively recruiting     “The diversity of skills and culture makes for a vibrant and interesting
                               overseas to fill key     workplace. I call it the United Nations of ESR. It adds to the attraction of
                                                       working here,” she said.
                                         positions.    While the organisation’s first preference is to recruit New Zealanders the
                                                       reality is that for some specialist positions the right mix of skills is not
                                                       always available here.

                                                       “Science is an international career and skills are very transferable between
                                                                                                                                         HR initiatives this year
                                                       countries. Some specialist skills are highly sought after both here
                                                                                                                                         •   The ESR climate survey was undertaken this year. Seventy-eight per
                                                       and overseas.”
                                                                                                                                             cent of staff responded to the independent survey that questioned
                                                       Generally ESR doesn’t have too much trouble attracting people. Some                   staff on a range of issues including work/life balance issues,
                                                       general forensic positions have recently attracted upwards of 100                     management, and performance reviews. Results from the survey will
                                                       applicants. The organisation runs an extremely cost-effective and                     be used to refine human resources policy and practices. The survey
                                                       comprehensive international recruitment system through a dedicated                    also provides a benchmark against other CRIs.
                                                                                                                                         •   ESR has been working towards tertiary status in the ACC workplace
                                                       “We work closely with New Zealand Immigration, joining their recruitment              safety management programme. There has been an increased focus
                                                       fairs and utilising their recruitment publications. We also undertake our             on the health and safety culture throughout the year following the
                                                       own advertising in specialist scientific journals and websites.                        appointment of a full-time health and safety coordinator.
                                                       “One of our most important and successful recruitment methods is word             •   Profit share scheme – this sets aside 10 per cent of ESR’s previous
                                                       of mouth by our own staff. They are meeting and talking with colleagues               year’s net profit after tax as a contestable training fund. The scheme
                                                       here and overseas and are excellent ambassadors, both for ESR and for                 is aimed at junior scientific and support staff. This year 54 staff were
                                                       New Zealand.”                                                                         granted project funds through the scheme.
                                                  PSA and ESR -
                                                                             working together
                                                  ESR and the PSA continue to work together successfully
                                                  under the Partnership for Quality (PfQ) strategy.

                                                  PfQ is all about PSA representatives and ESR
                                                                                                           The Public Service Association (PSA) is the only trade
                                                  decision-makers working together, taking an
                                                  open and consultative approach to address
                                                                                                           union representing ESR staff. Around 70 per cent
                                                  issues which affect staff and their workplaces.          of staff are members. PSA members within ESR are
Molly Ziki: Virology Technician                   Through PSA representatives, members are                 supported through their five site delegates and a
                                                  directly involved in decision-making – and
                                                                                                           professional PSA organiser.
“The main reasons for coming to New Zealand       share ownership of results with ESR.
were the lifestyle, opportunities and the
                                                  Latest successes through PfQ include:

                                                                                                                                                                    ESR Annual Report 2005
kids’ future.”
                                                   •   The 2004 development and introduction           •   Further development of the ESR work/life
Molly says that the family is fitting in very
                                                       of a new remuneration system for all                balance policy. A recent staff survey suggests
well to life in New Zealand, “although the
                                                       employees. Through the consultative                 that, for many, workload significantly impacts
first winter here was a bit cold!” She said her
                                                       approach, concerns of both ESR                      on work/life balance. It is envisaged that a
daughters, aged 11 and 9, didn’t take long to
                                                       management and employees were heard                 successful policy would enhance ESR’s profile
acclimatise. “They just can’t get enough of the
                                                       and addressed. This led to a very smooth            as an employer of choice. Employees would
beach! Coming from a landlocked country like
                                                       process of implementation.                          benefit from, and participate in developing,
Zimbabwe the beach is a real novelty.”
                                                                                                           innovative employment conditions.
                                                   •   A new “health benefit” for staff who are
                                                       covered by the collective employment           When PfQ was signed in 2001, it was agreed
50 per cent of all                                     agreement. ESR management and PSA
                                                       delegates developed the new benefit together.
                                                                                                      the strategy be fully reviewed every two years.
                                                                                                      This will next take place in 2006. “We intend
applicants are from                                    It meets ESR needs and is greatly valued by    to continue the same partnership approach.
                                                       members. In fact, the benefit has since been    We are confident that it is the best mechanism
people registered on                                   adopted by several other CRIs.                 for addressing both employer and employee

ESR’s career website                                                                                  concerns,” said PSA delegate Paula Scholes.

                                                                                                      “The last year has seen many positive
                                                                                                      achievements for everyone,” she said. “We look
                                                                                                      forward to working with ESR decision-makers
                                                                                                      on important issues impacting on members’
                                                                                                      working lives.”
     Science and Research
               PAPERS, CONFERENCES AND                            SENIOR FELLOW
               SCIENTIFIC REPORTS                                 Senior Scientist Dr Penny Truman was awarded     DRUG-DRIVING STUDY
               Staff presented 122 conference papers and          the ESR Senior Fellowship for 2004. Dr Truman    Preliminary results of a long-term study into
               abstracts and had more than 100 papers accepted    used the award to develop her work in the        drug-driving showed that up to a third of
               for publication in national and international      proteomics area.                                 drivers killed on roads and later tested had
               referenced journals, series and books.                                                              cannabis in their blood. The study, undertaken
                                                                  INTERNATIONAL FELLOW                             in collaboration with the police, should provide
               BOOKS                                              Smoking addiction expert Dr Neil Benowitz        a conclusive picture on how many drivers
                                                                  from the United States was ESR’s International   are using drugs and whether they are putting
               Two ESR staff published books during the year.
                                                                  Fellow for 2004. During his New Zealand          themselves and other road users at risk.
               Dr John Buckleton co-authored a definitive
               international DNA guide for forensic scientists,   visit he discussed potential collaborative
               “Forensic DNA Evidence Interpretation”.            envirogenomic research with ESR and gave         PCE PRAISES ESR/MoH
               Dr Gerald Midgley co-authored a book on            presentations to a number of organisations       PARTNERSHIP
               operational research and systems thinking          including ASH and the Wellington School
                                                                                                                   In a major report connecting science with
               for community development, “Community              of Medicine.
                                                                                                                   environmental policy, the Parliamentary
               Operational Research”.
                                                                                                                   Commissioner for the Environment praised the
                                                                                                                   ESR/Ministry of Health partnership which led to
                                                                                                                   guidelines for drinking water standards.
PROGRAMME                                           WHOOPING COUGH EPIDEMIC                              The 4th biannual ESR Science Conference
ESR undertakes drug and alcohol testing             ESR’s core surveillance work continues to track      provided an opportunity for a range of ESR’s
programmes for more than 500 clients, ranging       incidence and burden of disease in New Zealand       young scientists to present their work and
from major clients with multinational sites         providing vital data for health professionals. A     to hear from senior scientists across all the
to small businesses and contractors with less       re-emergence of a pertussis (whooping cough)         organisation’s scientific disciplines.

                                                                                                                                                         ESR Annual Report 2005
than 10 employees. Overall 10 per cent of all       epidemic was identified in mid-2004.
workplace drug tests test positive for drugs, and                                                        THESIS SUPPORT
30 per cent of workplace drug tests undertaken      PACKING POULTRY                                      ESR began support for 6 MSc and PhD students.
post-accident or under reasonable cause test
                                                    The poultry industry and major supermarkets
positive for drugs.                                                                                      ADVISORY ROLES AND BOARDS
                                                    have changed the way fresh poultry is packaged
                                                    in response to the findings of an ESR study.          Forty-four ESR staff were invited or
                                                    Food Safety scientists tested a range of poultry     elected this year to serve on national and
WORSENING                                           packs commonly purchased in supermarkets             international scientific agencies, boards and
ESR surveillance and analysis demonstrate that      and found a quarter of them had Campylobacter        advisory committees.
penicillin resistance among pneumococci has         on the exterior surface, creating a risk of cross-
increased from 0.8 per cent to 28 per cent in       contamination to other food products that came       DNA DATABANK MILESTONE
10 years. Pneumococci are a common cause of         either directly in contact with them or indirectly
                                                    from common surfaces such as supermarket             In April a “crime-fighting milestone” was
infections like sinusitis, middle ear infections
                                                    checkouts. The industry and many supermarkets        reached with the 50,000th DNA profile loaded
and pneumonia. Resistance to erythromycin
                                                    are now ensuring poultry is packed in leakproof      onto the national DNA database. The rate of
among pneumococci has also increased
                                                    bags and packaging.                                  matching crime samples with suspects is at a
dramatically and is now 21 per cent. ESR data
                                                                                                         record (and world) high of 55 per cent.
also indicates that amoxicillin resistance has
nearly tripled to 23 per cent in Haemophilus
influenzae, which is also a common cause of
chest and ear infections
     Scientific Output Performance Indicators
                                                                                                                      Actual    Target

       Science Output
       1. Papers accepted for publication in international externally refereed journals, series or books                100        60
       2. Papers in local internally or editor-refereed journals, series or books                                         5        25
       3. Conference papers and abstracts                                                                               122       120
       4. Research monographs or books                                                                                    1         1
       5. Scientific and technical reports                                                                               111       100
       6. Submissions for Research & Development funding                                                                 33        35

       Benefit to New Zealand
       1. Invitations or elections to serve on national or international scientific agencies, boards or
          advisory committees                                                                                            44        45
       2. Value of public good services provided in New Zealand ($m)                                                     35        35

       Application and Promotion of Science
       1. Involvement in conferences, workshops, hui and seminars
34        Number of events                                                                                              460       250
          Number of attendees                                                                                           730       600
       2. Availability and use of ESR culture collection; number of cultures issued                                   2,222     2,100
       3. Number of Technology Business Growth contracts                                                                  1         2
       4. Number of science promoting media events                                                                      147        80

       Good Employer
       1. Staff turnover as a percentage of total staff (excluding redundancies and fixed term contracts)               10.5    10 – 15
       2. Number of work days lost through workplace accidents (as a percentage of total days)                         <0.1      <0.1
       3. Staff composition: Staff composition by Full Time Equivalent (FTE) in the following groups:
          Business Services                                                                                              73        66
          Management/General                                                                                             32        33
          Science                                                                                                       250       259
          Total                                                                                                         355       358

       Social Responsibility
       1. Support for NZ Science system: Number of bids to funding agencies refereed, papers for scientific journals
          refereed, number of MSc or PhD students supervised, number of MSc and PhD theses
          externally examined                                                                                           127       100
       2. Value of ESR-funded scholarship and award programmes ($000)                                                   250       339
       3. Number of science-related talks to schools, community groups and service clubs                                 35        50

     Targets are as stated in the Statement of Corporate Intent.
                                                                                                                                  The Board also produces Half-Yearly and Annual Reports which
Key Financial                                            Corporate Governance                                                     detail the performance against SCI targets. These documents are
                                                                                                                                  tabled in Parliament and thereafter made available to the public.
Performance Measures                                     ESR is one of the nine CRIs created in mid-1992 with the reform
                                                         of New Zealand’s state-funded science services.                          The directors are required by the Companies Act 1993 to prepare
                      Year ended            Year ended                                                                            financial statements for each financial year. These statements are
                                                         As a CRI the company’s principal activity is to conduct scientific
                         30/6/05   Target      30/6/04                                                                            presented in the Annual Report.
                                                         research in accordance with the purpose and principles for CRIs as set
Revenue, $m                40.6     41.9         36.9    out in sections 4 and 5 of the Crown Research Institutes Act 1992.
EBIT Margin, %               7.9     5.0           7.5                                                                            The Strategic Leadership Team
                                                         ESR is wholly owned by the New Zealand Government, and
Return on equity, %        11.0     12.4           9.8                                                                            The responsibility for the operation and administration of the
                                                         has an independent Board of Directors that is responsible for its
Return on assets, %        11.2      7.9         10.8                                                                             organisation is delegated to the Chief Executive Officer who
                                                         strategic direction and operational performance. ESR has a Board
Acid Test                    1.4     0.9           1.2                                                                            in turn heads the Strategic Leadership Team (SLT). This team
                                                         of six directors including the chair.
Equity Ratio, %            71.1     77.7         71.2                                                                             develops and implements strategies that keep ESR focused on
Gearing, %                    –        –            –    Responsibility for the operation and administration of the               achieving its goals and strategic business objectives.
Interest Cover                –        –            –    company is delegated to the Chief Executive Officer who is
                                                                                                                                  The SLT includes the senior managers from the three business
Revenue/FTE, $000         114.5    117.0        108.6    accountable to the Board.
                                                                                                                                  groups (Forensic, Environmental Health, Science Information
                                                                                                                                  Management Services) and the four functional areas (Finance,
                                                         Role of the Board of Directors                                           Science & Research, Business Development & Marketing, Human
                                                         The Board acts on behalf of, and is accountable to, the                                                                                      35
                                                                                                                                  Resources) represented in the organisational structure.             35

                                                                                                                                                                                                       ESR Annual Report 2005
                                                         Shareholding Ministers (the Minister of Finance and the Minister

                                                                                                                                                                                                      ESR Annual Report 2005
                                                         of Crown Research Institutes).
                                                                                                                                  Crown Company Monitoring and Advisory Unit
                                                         It must also fulfil any regulatory expectations laid down in the          (CCMAU)
                                                         Companies Act 1993, the Crown Research Institutes Act 1992
                                                                                                                                  CCMAU performs the role of protecting the shareholders’
                                                         and the Public Finance Act 1989.
                                                                                                                                  interests and investment in the company. In addition to agreeing
                                                         The Board’s responsibility includes establishing strategic policy        the SCI and receiving the Half-Yearly and Annual Reports, the
                                                         and guiding and monitoring the business and affairs of the               Board submits quarterly reports on performance against the
                                                         company on behalf of shareholders. It is committed to a high             Strategic Plan objectives and targets.
                                                         standard of corporate governance by identifying business risks,
                                                         reporting to shareholders and overseeing the management of
                                                         the organisation.

                                                         In consultation with management, the Board determines a
                                                         Statement of Corporate Intent (SCI) and a Strategic Plan for the
                                                         coming year.

                                                         These two documents encompass the vision, mission and strategy
                                                         statements for ESR as well as its business policies. The SCI
                                                         focuses on core business areas, as well as financial and non-
                                                         financial performance measures and targets. The Strategic Plan
                                                         details the organisation’s planned business initiatives.
     Statement of Responsibility                                          General Disclosures                                                     Remuneration of directors
                                                                                                                                                  The directors who held office in the period of this report and
     We certify that the company has operated in accordance with                                                                                  their total remuneration and other benefits were:
     the principles of the Crown Research Institutes Act 1992 and         Annual Report
                                                                                                                                                  Mr Ian Wilson (Chairman)                                  $38,700
     Companies Act 1993. The company has also complied with all           The Directors and Management of the Institute of Environmental
                                                                                                                                                  Mr Keith Oliver                                           $19,000
     statutory environmental obligations.                                 Science and Research Limited (ESR) present their report of the
                                                                                                                                                  Prof Kathryn Crosier                                      $19,700
                                                                          Institute for the year ended 30 June 2005.
     We acknowledge responsibility for the preparation of these                                                                                   Dr Roderick Ellis-Pegler                                  $19,700
     financial statements and for the judgements used therein.                                                                                     Dr Mere Roberts                                           $19,000
                                                                          Directors                                                               Ms Sharon Opai                                            $19,850
     Internal control procedures are considered to be sufficient to
                                                                          Dr Mere Roberts and Professor Keith Oliver accepted                     Total Directors’ Remuneration                             $135,950
     provide a reasonable assurance as to the integrity and reliability
                                                                          appointments to the board effective 1 July 2004. On 30 June
     of the financial reports.
                                                                          2005 Dr Rod Ellis-Pegler retired by rotation and accepted
                                                                                                                                                  Disclosures of interest by directors
     In our opinion these financial statements fairly reflect the           reappointment for a further two years. On 30 June 2005 Sharon
                                                                                                                                                  (a) General Disclosures
     financial position and operations of the Institute of Environmental   Opai retired by rotation and accepted reappointment for a further
     Science and Research Limited for the year ended 30 June 2005.        three years. Professor Kathy Crosier resigned on completion of             The following are particulars of general disclosures of interest
                                                                          her term on 30 June 2005.                                                  given during the year by the directors of the company
                                                                                                                                                     pursuant to section 140 (2) of the Companies Act 1993:
36                                                                        Principal activities of the Institute                                   Ian Andrew Wilson – Chairman
                                                                          The principal activities of ESR are the provision of scientific
                                                                                                                                                  Director/Shareholder            Corporate Involvements Limited
                                                                          consulting, research and analytical services. There were no
     Ian Wilson                                                                                                                                   Chairman                        MidCentral District Health Board
                                                                          changes to the principal activities of the Institute during the year.
     Chairman                                                                                                                                     Director                        Powerco Limited and Subsidiaries
                                                                                                                                                  Chairman                        Institute of Environmental Science
                                                                          Financial statements                                                                                    and Research Limited and Associate
                                                                          The financial statements for ESR, including the report of the            Director                        Estendart Limited
                                                                          auditors, for the year ended 30 June 2005 follow this report            Board Member                    Massey Palmerston North Regional
                                                                          from page 38.                                                                                           Advisory Board
     Dr John Hay                                                                                                                                  Committee Member                Ministerial Health Workforce
                                                                          There have been no changes to the accounting policy during
     Chief Executive Officer                                                                                                                                                       Advisory Committee
                                                                          the year.
                                                                                                                                                  Committee Member                Ministry of Health National
                                                                                                                                                                                  Capital Committee
                                                                          Auditors                                                                Director                        Learning Media Limited
                                                                          PricewaterhouseCoopers has indicated its willingness to continue
                                                                                                                                                  Director                        Learning Media Limited
                                                                          in office as auditor on behalf of the Controller and Auditor-
                                                                                                                                                  Director                        MCK Metals
     Peter O’Shea                                                         General. Details of the auditor’s remuneration and expenses are
     General Manager Finance                                              disclosed in note 3 to the financial statements.
Keith Oliver – Director                                                (e) Indemnity and Insurance                                           On behalf of the Board: 26 July 2005

Chairman                         Actronic Holdings Ltd                    In accordance with section 162 of the Companies Act 1993
Director                         ALTO Capital Ltd                         and the constitution of the company, the company has given
Director                         ALTO Capital Investments Ltd             indemnities to, and has effected insurance for, directors and
Director                         KOLT Investments Ltd                     executives of the company and its related companies which,
Chairman                         Mastip Technology Ltd                    except for specific matters which are expressly excluded,
                                                                                                                                             Ian Wilson
Chairman                         Truescape Ltd                            indemnify and insure directors and executives against
                                                                          monetary losses as a result of actions undertaken by them in
Kathy Crosier – Director
                                                                          the course of their duties. Specifically excluded are certain
Director                         New Zealand Blood Service                matters, such as incurring of penalties and fines, which may
Director                         Biofinz Limited                           be imposed for breaches of the law.
Professor                        The University of Auckland
Committee Member                 Royal College of Pathologists         Directors’ interests
                                 of Australasia
                                                                       No director held any interest in the shares of the Institute. No
                                                                                                                                             Keith Oliver
Dr Rod Ellis-Pegler – Director                                         material contracts involving directors’ interests were entered into
                                                                       during, or subsequent to, the period covered by this report.
Consultant Physician             Auckland City Hospital
Consultant Microbiologist        Diagnostic Medlab Auckland
Consultant Physician             Medical Specialists Group, Auckland   Remuneration of employees                                                                                    37
Clinical Associate Professor     The University of Auckland            Total remuneration in respect of employees paid above $100,000

                                                                                                                                                                                    ESR Annual Report 2005
                                                                       was as follows:
Sharon Opai – Director
                                                                       Remuneration range                                     No of staff
Director                         Waiariki Polytechnic                                                                                        Dr John Hay
                                                                       $100,000 – $109,999                                         3         Chief Executive Officer
(b) Specific Disclosures
                                                                       $110,000 – $119,999                                         3
   There are no specific disclosure notices given pursuant to           $120,000 – $129,000                                         1
   section 140 (1) of the Companies Act 1993.                          $130,000 – $139,999                                         2
                                                                       $140,000 – $149,999                                         4
(c) Share Dealings
                                                                       $180,000 – $189,999                                         1
   During the year no directors acquired or disposed of any            $290,000 – $299,999*                                        1
   equity securities in the parent company.                            * Chief Executive Officer

(d) Use of Company Information
                                                                       Events subsequent to balance date
   Pursuant to section 145 of the Companies Act 1993 the Board
                                                                       The directors are not aware of any matter or circumstance since
   recorded no notices from directors requesting to use company
                                                                       the end of the financial year that has significantly affected, or may
   information received in their capacity as directors which
                                                                       significantly affect, the operation of the Institute.
   would not otherwise have been available to them.
     Audit Report
     To the readers of Institute of Environmental Science and Research Limited’s Financial
     Statements for the year ended 30 June 2005

     The Auditor-General is the auditor of Institute of Environmental Science and Research Limited (the
     Company). The Auditor-General has appointed me, Karen Shires, using the staff and resources of
     PricewaterhouseCoopers, to carry out the audit of the financial statements of the Company, on his
     behalf, for the year ended 30 June 2005.

     Unqualified opinion
38   In our opinion:

     • The financial statements of the Company on pages 40 to 51:
       • comply with generally accepted accounting practice in New Zealand; and
       • give a true and fair view of:
         - the Company’s financial position as at 30 June 2005;
         - the results of its operations and cash flows for the year ended on that date.
         - Based on our examination the Company kept proper accounting records.

     The audit was completed on 26 July 2005, and is the date at which our opinion is expressed.

     The basis of the opinion is explained below. In addition, we outline the responsibilities of the Board of
     Directors and the Auditor, and explain our independence.

     Basis of opinion

     We carried out the audit in accordance with the Auditor-General’s Auditing Standards, which
     incorporate the New Zealand Auditing Standards.

     We planned and performed our audit to obtain all the information and explanations we considered
     necessary in order to obtain reasonable assurance that the financial statements did not have material
     misstatements, whether caused by fraud or error.

     Material misstatements are differences or omissions of amounts and disclosures that would affect a
     reader’s overall understanding of the financial statements. If we had found material misstatements that
     were not corrected, we would have referred to them in the opinion.
Our audit involved performing procedures to test the information presented in the financial statements.
We assessed the results of those procedures in forming our opinion.

Audit procedures generally include:

• determining whether significant financial and management controls are working and can be relied on
  to produce complete and accurate data;
• verifying samples of transactions and account balances;
• performing analyses to identify anomalies in the reported data;
• reviewing significant estimates and judgements made by the Board of Directors;
• confirming year-end balances;
• determining whether accounting policies are appropriate and consistently applied; and
• determining whether all financial statement disclosures are adequate.

We did not examine every transaction, nor do we guarantee complete accuracy of the financial statements.

We evaluated the overall adequacy of the presentation of information in the financial statements.
We obtained all the information and explanations we required to support the opinion above.

Responsibilities of the Board of Directors and the Auditor

The Board of Directors is responsible for preparing and submitting for audit financial statements in
accordance with generally accepted accounting practice in New Zealand. Those financial statements

                                                                                                                                                                              ESR Annual Report 2005
must give a true and fair view of the financial position of the Company as at 30 June 2005. They must       Matters Relating to the Electronic Presentation
also give a true and fair view of the results of its operations and cash flows for the year ended on that
                                                                                                           of the Audited Financial Statements
date. This responsibility is specified in the Crown Research Institutes Act 1992 and the Financial
Reporting Act 1993.                                                                                        This audit report relates to the financial statements of the
                                                                                                           Company for the year ended 30 June 2005 included on the
We are responsible for expressing an independent opinion on the financial statements and reporting that     Company’s web-site. The Company’s Board of Directors is
opinion to you. This responsibility is specified in section 15 of the Public Audit Act 2001.                responsible for the maintenance and integrity of the Company’s
Independence                                                                                               web site. We have not been engaged to report on the integrity
                                                                                                           of the Company’s web site. We accept no responsibility for any
When carrying out the audit we followed the independence requirements of the Auditor-General, which        changes that may have occurred to the financial statements since
incorporate the independence requirements of the Institute of Chartered Accountants of New Zealand.        they were initially presented on the web site.
In addition to the audit we have carried out taxation services assignments, which are compatible with      The audit report refers only to the financial statements named
those independence requirements. Other than the audit and these assignments, we have no relationship       above. It does not provide an opinion on any other information
with or interests in the Company.                                                                          which may have been hyperlinked to/from these financial
                                                                                                           statements. If readers of this report are concerned with the
                                                                                                           inherent risks arising from electronic data communication they
                                                                                                           should refer to the published hard copy of the audited financial
Karen Shires                                      PricewaterhouseCoopers                                   statements and related audit report dated 26 July 2005 to confirm
On behalf of the Auditor-General                                                                           the information included in the audited financial statements
Wellington, New Zealand                                                                                    presented on this web site.

                                                                                                           Legislation in New Zealand governing the preparation and
                                                                                                           dissemination of financial statements may differ from legislation
                                                                                                           in other jurisdictions.
     Statement of Financial Performance
     For the year ended 30 June 2005
                                                                                          2005 Actual    2005 Budget    2004 Actual
                                                                                             Audited       Unaudited       Audited
                                                                                  Notes        $’000s         $’000s         $’000s

       Operating Revenue                                                             2        40,640          41,897        36,931
       Operating Expenses                                                            3        (37,272)       (39,797)       (34,036)

       Operating Surplus before Taxation                                                        3,368          2,100          2,895
       Capital Gains                                                                                –          1,159              –
       Income Tax                                                                    4         (1,145)          (693)        (1,106)

       Net Surplus after Taxation                                                              2,223           2,566         1,789

     Statement of Movements in Equity
     For the year ended 30 June 2005
                                                                                          2005 Actual    2005 Budget    2004 Actual
                                                                                             Audited       Unaudited       Audited
                                                                                               $’000s         $’000s         $’000s

       Equity at the Beginning of the Year                                                    19,177         19,361         17,388
       Net Surplus after Taxation                                                              2,223          2,566          1,789

       Total Recognised Revenue and Expenses                                                   2,223          2,566          1,789

       Equity at the End of the Year                                                          21,400         21,927         19,177

     The accompanying notes form an integral part of these financial statements.
Statement of Financial Position
As at 30 June 2005
                                                                                       2005        2005      2004
                                                                                      Actual     Budget     Actual
                                                                                     Audited   Unaudited   Audited
                                                                             Notes    $’000s      $’000s    $’000s

 Non Current Assets
 Fixed Assets                                                                   5    19,892      21,586    18,954    The Board of Directors of the Institute of Environmental
 Future Income Tax Benefit                                                       4       (15)        164        63    Science & Research Limited authorised these financial
 Investments                                                                              –       1,700         –    statements for issue on 26 July 2005.
                                                                                     19,877      23,450    19,017    On behalf of the Board:
 Current Assets
 Cash and Bank Balances                                                               3,461       1,000     2,423
 Accounts Receivable & Prepayments                                              6     5,349       3,556     4,612
 Income Tax Receivable                                                                    –           –       278
 Stock and Work in Progress                                                     7       688         461       708
                                                                                                                     Ian Wilson                         Keith Oliver            41
 Property intended for sale                                                             643           –         –
                                                                                                                     Chairman                           Director

                                                                                                                                                                                ESR Annual Report 2005
                                                                                     10,141       5,017     8,021

 Current Liabilities
 Accounts Payable & Accruals                                                          6,705       4,530     6,129
 Income Tax Payable                                                                      45         302         –
 Leave Liabilities                                                                    1,446       1,230     1,256

                                                                                      8,196       6,062     7,385

 Net Current Assets (Liabilities)                                                     1,945      (1,045)      636

 Non Current Liabilities
 Term Debt                                                                      8         –           –         –
 Retirement Leave Liabilities                                                           422         478       476

                                                                                        422         478       476

 Net Assets                                                                          21,400      21,927    19,177

 Share Capital                                                                  9     8,494       8,494     8,494
 Retained Earnings                                                                   12,906      13,433    10,683

 Total Equity                                                                        21,400      21,927    19,177

The accompanying notes form an integral part of these financial statements.
     Statement of Cash Flows
     For the year ended 30 June 2005
                                                                                  2005 Actual   2005 Budget    2004 Actual
                                                                                     Audited      Unaudited       Audited
                                                                                       $’000s        $’000s         $’000s

      Cash Flows from/(used in) Operating Activities
      Cash was provided from:
      Customers                                                                       40,364        46,885         35,531
      Interest Received                                                                  179            14            132

                                                                                      40,543        46,899         35,663

      Cash was applied to:
      Suppliers and Employees                                                        (35,300)       (38,235)      (30,641)
      Interest Paid                                                                      (12)            (3)           (3)
      Net GST (Paid)/Received                                                            (30)        (3,207)           20
      Income Tax Paid                                                                   (744)         (881)        (1,112)

                                                                                     (36,086)       (42,326)      (31,736)
      Net Cash Inflow from Operating Activities                                         4,457          4,573         3,927

      Cash Flows from/(used in) Investing Activities
      Cash was provided from:
      Proceeds from Sale of Fixed Assets                                                  10          1,500           107
      Crown Contribution                                                                 750              –             –

                                                                                         760          1,500           107

      Cash was applied to:
      Purchase of Fixed Assets                                                        (4,179)        (5,204)       (2,770)
      Other Investments                                                                    –         (1,700)            –

                                                                                      (4,179)        (6,904)       (2,770)

      Net Cash Outflow from Investing Activities                                       (3,419)        (5,404)       (2,663)

      Cash Flows from/(used in) Financing Activities
      Cash was provided from/(applied to):
      Proceeds from / Repayment of Term Debt                                               –              –             –

      Net Cash Inflow/(Outflows) from Financing Activities                                   –              –             –

      Net Increase/(Decrease) in Cash Held                                             1,038          (831)         1,264
      Cash and Bank Balances at the Beginning of the Year                              2,423          1,831         1,159

      Cash and Bank Balances at the End of the Year                                    3,461         1,000          2,423

     The accompanying notes form an integral part of these financial statements.
Statement of Cash Flows (continued)
For the year ended 30 June 2005
                                                                                  2005 Actual   2004 Actual
                                                                                       $’000s        $’000s

 Net Surplus after Taxation                                                            2,223         1,789

 Add non-cash items:
 Depreciation                                                                          1,830         2,027
 Future Income Tax Benefit                                                                 78           101
 Bad Debt Expense                                                                          1             7
 Change in Provision for Doubtful Debts                                                    –            10
 Increase/(Decrease) in Retirement Leave Provision                                       (54)           14

                                                                                       1,855         2,159

 Add items classified as Investing Activities:
 Loss on Sale of Assets                                                                    7             9
                                                                                           7             9

                                                                                                              ESR Annual Report 2005
 Movements in Working Capital Items:
 (Increase)/Decrease in Receivables and Prepayments                                     (737)          496
 Increase/(Decrease) in Tax Payable/Receivable                                           323          (109)
 Decrease in Stock and Work in Progress                                                   20           117
 Increase/(Decrease) in Operating Payables                                               576          (651)
 Increase in Leave Provisions                                                            190           117

                                                                                         372           (30)

 Net Cash Inflow from Operating Activities                                              4,457         3,927

The accompanying notes form an integral part of these financial statements.
     Notes to the Financial Statements
     For the year ended 30 June 2005
     1. Statement of Accounting Policies
     Reporting Entity                                                    (iii) Depreciation                                               (vii) Statement of Cash Flows

     The reporting entity to which these financial statements relate          Depreciation is charged on a straight-line basis so as to    •   Cash means coins and notes, demand deposits and
     is the Institute of Environmental Science and Research Limited          write off the cost of the fixed assets over their expected        other highly liquid investments in which ESR has
     (ESR).                                                                  economic lives.                                                  invested as part of its day-to-day cash management.

     The financial statements have been prepared in accordance with           Major economic lives are:                                    •   Investing Activities are those activities relating to
     the Crown Research Institutes Act 1992, the Companies Act                                                                                the acquisition, holding and disposal of fixed assets
                                                                             Freehold Buildings                   25 – 50 years
     1993 and the Financial Reporting Act 1993.                                                                                               and investments.
                                                                             Leasehold Improvements               10 years
     Budgeted figures are included in the financial statements                 Plant, Equipment & Vehicles          3 – 10 years            •   Financing Activities are those activities which result
     pursuant to the Crown Research Institutes Act 1992. These               IT Equipment & Software              3 years                     in changes in the size and composition of the capital
     budgeted numbers are not subject to audit.                                                                                               structure of ESR.
                                                                         (iv) Accounts Receivable
     The financial statements are parent and group financial                                                                                •   Operating Activities include all other transactions
                                                                             Accounts Receivable are stated at their estimated
44   statements. The three subsidiaries and associate of ESR are                                                                              and events.
                                                                             realisable value after providing against debts where
     dormant non-trading entities, consequently there is no difference
                                                                             collection is doubtful. An estimate of the value of          (viii)Foreign Currency Transactions
     between the financial statements of the group and parent.
                                                                             doubtful debts is made based on a review of debts at
                                                                                                                                              Transactions in foreign currency are translated to
     Measurement Base                                                        year end. Bad debts are written off in the period in
                                                                                                                                              New Zealand dollars at the rate applying at the date of
                                                                             which they are identified.
     The financial statements are prepared on the basis of historical                                                                          the transaction.
     cost with the exception of certain items for which accounting       (v) Stock and Work in Progress
                                                                                                                                              Foreign currency monetary assets and liabilities are
     policies are stated below.
                                                                             Stocks of consumables and work in progress are                   translated at the rate applying at balance date.
     Accounting Policies                                                     stated at the lower of cost or net realisable value. Cost
                                                                                                                                              Where foreign exchange risk at balance date is covered
                                                                             is determined on a first in, first out basis. Work in
      (i) Operating Revenue                                                                                                                   by forward contracts, the translation is carried out at
                                                                             progress includes a portion of the costs appropriate to
                                                                                                                                              the rate contained in the applicable contract.
           Operating Revenue shown in the Statement of                       the stage of completion reached.
           Financial Performance comprises the amounts                                                                                    (ix) Research and Development
                                                                         (vi) Taxation
           received and receivable by ESR for services supplied to
                                                                                                                                              A portion of ESR’s normal operations relate to research
           customers in the ordinary course of business.                     The taxation charge against the accounting surplus
                                                                                                                                              activities. Such operating activities are externally
                                                                             for the year is the estimated liability in respect of that
      (ii) Fixed Assets                                                                                                                       funded and are accounted for as ordinary operating
                                                                             surplus after allowance for permanent differences
                                                                                                                                              expenses and revenues as the activities are performed.
           The cost of fixed assets includes the value of                     between accounting and tax rules.
           consideration given to acquire the assets and the value                                                                            Other research costs are expensed in the period in
                                                                             ESR accounts for deferred taxation using the partial
           of other directly attributable costs, which have been                                                                              which they arise.
                                                                             basis under the liability method. Future tax benefits
           incurred in bringing the assets to the location and
                                                                             attributable to tax losses or timing differences are only
           condition necessary for their intended use.
                                                                             recognised when there is virtual certainty of realisation.
(x) Goods and Services Tax                                         (xiii)Consolidation Policy

    Items in the Statements of Financial Performance and               The financial statements consolidate the results of
    Cash Flows are disclosed net of Goods and Services                 subsidiaries using the purchase method and the results
    Tax. All items in the Statement of Financial Position are          of associates using the equity method.
    stated net of GST with the exception of Receivables and
                                                                   (xiv) Properties Intended for Sale
    Payables, which include GST invoiced.
                                                                       Properties intended for sale are recorded at the book
(xi) Financial Instruments
                                                                       value of the property at the date the sale decision was
    ESR is a party to financial instruments as part of its              made, plus any costs incurred in getting the property
    normal operations. Financial instruments carried in                into a saleable condition. They are classified in current
    the Statement of Financial Position include cash and               assets when the sale is expected within one year of
    bank balances, short-term investments and account                  balance date.
    receivables. Such financial instruments are recognised in
                                                                   (xv) Changes in Accounting Policies                            45
    the Statement of Financial Position at net realisable value.

                                                                                                                                  ESR Annual Report 2005
                                                                       There have been no changes in accounting policies
    Financial instruments that are designated as hedges of
                                                                       during the year. The policies set out above have been
    specific items are recognised on the same basis as the
                                                                       applied on a basis consistent with the previous year.
    underlying hedged items.
                                                                       Certain comparative figures have been restated to ensure
    Financial instruments that do not constitute hedges are            consistency of classification with the current year.
    stated at market value and any resultant gain or loss is
    recognised in the Statement of Financial Performance.

    Forward exchange contracts entered into as hedges of
    foreign exchange assets and liabilities are valued at the
    exchange rate prevailing at year end. Any unrealised
    gains or losses are offset against foreign exchange gains
    or losses on the related asset or liability.

(xii) Impairment

    Annually, the directors assess the carrying value of
    each asset. Where the estimated recoverable amount
    of the asset is less than its carrying amount, the asset is
    written down. The impairment loss is recognised in the
    Statement of Financial Performance.
     2. Operating Revenues
     Operating Revenues comprise:

                                                         2005 Actual   2004 Actual
                                                              $’000s        $’000s

      Sales                                                  40,461        36,799
      Interest Revenue                                          179           132
      Gains on Sale of Fixed Assets                               –             –

                                                             40,640        36,931

     3. Operating Expenses
     Operating Expenses comprise:

                                                         2005 Actual   2004 Actual
                                                              $’000s        $’000s

      Audit Fees                                                 31            31
      Fees paid to Auditors for Other Services                   10            25
      Losses on Sale of Fixed Assets                              8              9
      Depreciation – Building & Leasehold Improvements          292           277
      Depreciation – IT Equipment & Software                    347           680
      Depreciation – Plant, Equipment & Vehicles              1,191         1,070
      Donations                                                  25            19
      Directors’ Fees                                           138           127
      Rental and Operating Lease Costs                          530           181
      Interest Expense                                           12              3
      Bad Debts                                                   1              7
      Doubtful Debts Provision Movement                           –            10
      Other                                                  34,687        31,597

                                                             37,272        34,036
4. Taxation
                                                       2005 Actual   2004 Actual
                                                            $’000s        $’000s

 The taxation charge has been calculated as follows:
 Operating Surplus before Taxation                          3,368         2,895
 Prima facie taxation at 33%                                1,111           955
 Plus taxation effect of:
 Net Prior Year Under Estimation                                5           133
 Non-deductible Items                                          29            18

 Tax Expense for the Year                                   1,145         1,106

 The taxation charge is represented by:
 Current Taxation                                           1,067         1,005
 Future Income Tax Benefit                                      78           101

                                                            1,145         1,106
 Future income tax benefit
 Balance at the Beginning of the Year                          63           164
 On Surplus for Year                                          (78)         (101)   47

                                                                                   ESR Annual Report 2005
 Balance at the End of the Year                               (15)           63
     5. Fixed Assets
                                                                                2005 Cost   2005 Acc Depn     2005 NBV
                                                                                   $’000s          $’000s        $’000s

      Freehold Land                                                                  475               –           475
      Buildings & Leasehold Improvements                                          14,410           2,173        12,237
      IT Equipment & Software                                                      6,340           5,839           501
      Plant, Equipment & Vehicles                                                 13,206           8,169         5,037
      Assets Under Construction                                                    1,642               –         1,642

                                                                                  36,073          16,181        19,892

                                                                                2004 Cost   2004 Acc Depn     2004 NBV
                                                                                   $’000s          $’000s        $’000s

      Freehold Land *                                                                601               –           601
      Buildings & Leasehold Improvements *                                        14,395           1,954        12,441
      IT Equipment & Software                                                      6,054           5,546           508
      Plant, Equipment & Vehicles                                                 12,122           7,194         4,928
      Assets Under Construction                                                      476               –           476
                                                                                  33,648          14,694        18,954

     6. Accounts Receivable & Prepayments
                                                                                             2005 Actual    2004 Actual
                                                                                                  $’000s         $’000s

      Trade Debtors                                                                                5,006         4,102
      Provision for Doubtful Debts                                                                   (50)          (50)

                                                                                                   4,956         4,052
      Prepayments & Other Receivables                                                               393            560

                                                                                                   5,349         4,612

     * Included in Freehold Land and Buildings is the Mount Eden
       property in Kelly Street, which, as at 30 June 2004, was subject to an
       unconditional sale and purchase agreement.
7. Stock and Work in Progress
                                                                   2005 Actual   2004 Actual
                                                                        $’000s        $’000s

 Scientific Materials and Consumables                                      676           654
 Work in Progress                                                          12            54

                                                                          688           708

8. Term Debt
ESR has a multi-option floating rate credit facility with Westpac
Banking Corporation for $6,000,000. This is secured by way of
a negative pledge and terminates in March 2007. There was no
term debt at the end of the financial year ended June 2005
(2004 nil).

9. Share Capital
Issued and Paid up Capital:
                                                                   2005 Actual   2004 Actual
                                                                        $’000s        $’000s

                                                                                               ESR Annual Report 2005
 8,494,000 ordinary shares (issued and fully paid)                      8,494         8,494

All ordinary shares rank equally with one vote attached to each
fully paid ordinary share.
     10. Investments
     Subsidiary Companies

     The Company has three wholly owned non-trading subsidiary

      Name                                                           Balance Date   Country of Incorporation      Paid up Share Capital

      ESR Limited                                                        30 June               New Zealand                           –
      ESR Holdings Sdn Bhd                                           31 December                   Malaysia                         $2
      ESR Limited                                                        30 June                   Australia                         –

     None of these companies have traded during the year.

     Associate Company

     The Company has a 30% interest in ESR (Malaysia) Sdn
     Bhd, which is dormant and non-trading. At balance date the
     investment had no carrying value in the accounting records of
     ESR and the results of ESR (Malaysia) Sdn Bhd have not been
     equity accounted, as they are insignificant.

     11. Commitments
     The following amounts have been committed to by ESR, but are
     not recognised in the financial statements.

                                                                                                          2005 Actual     2004 Actual
                                                                                                               $’000s          $’000s

      Capital Commitments:
      Not later than one year                                                                                  2,360              886
      Operating Lease Commitments:
      Not later than one year                                                                                    296               58
      Later than one, not later than two years                                                                   262               50
      Later than two, not later than five years                                                                    33               16
      Later than five years                                                                                         –                 –

     ESR leases IT equipment and vehicles. There are no renewal
     options or options to purchase in respect of vehicles and
     equipment held under operating leases.
12. Related Party Transactions                                           Currency Risk                                                        17. Adoption of New Zealand Equivalents to
The ultimate shareholder of ESR is the Crown. ESR undertakes             ESR manages its exposure to currency risk through the use of         International Financial Reporting Standards
many transactions with other Crown entities and government               forward exchange contracts.                                          In December 2002 the New Zealand Accounting Standards
departments. These transactions are carried out on a commercial                                                                               Review Board (ASRB) announced that all New Zealand reporting
arm’s length basis.                                                      There were no forward exchange contracts outstanding at balance
                                                                                                                                              entities will be required to comply with International Financial
                                                                         date and as at 30 June 2004.
                                                                                                                                              Reporting Standards (IFRS) for periods commencing on or after
13. Segmental Information                                                Interest Rate Risk                                                   1 January 2007. ESR will adopt New Zealand equivalents to IFRS
ESR operates primarily in one industry sector: the provision of                                                                               (NZIFRS) for the year ending 30 June 2008.
                                                                         The interest rate risk on funds held is managed through the use of
scientific services. All activities are carried out from New Zealand.     short-term investments in accordance with ESR’s Treasury Policy.     Upon adoption of NZIFRS, comparative information will be
                                                                                                                                              restated in the NZIFRS compliant financial statements. Details of
                                                                         ESR has a term debt facility, however, this was undrawn at
14. Financial Instruments                                                                                                                     the impact of the adoption to comparative information will be set
                                                                         balance date and as at 30 June 2004.
ESR is subject to a number of financial risks which arise as part                                                                              out in the financial statements.
of its normal operations. To manage and limit the effects of these                                                                            ESR is in the process of establishing a conversion project to
                                                                         15. Contingent Assets
financial risks, the Directors have approved policy guidelines and                                                                             achieve transition to NZIFRS reporting. The project will involve
authorised the use of various financial instruments. The policies         ESR has previously undertaken a review of assets and as a result
                                                                                                                                              assessing the impacts of NZIFRS to ESR, then designing and
approved and financial instruments being utilised at balance date         has identified a Culture Collection database. The Directors have
                                                                                                                                              implementing changes required to current accounting policies
are outlined below.                                                      determined that the value of this database cannot be measured
                                                                                                                                              and procedures, as well as systems and processes, in order to
                                                                         reliably. Consequently no value has been recognised in the                                                                                51
Credit Risk                                                                                                                                   successfully transition to NZIFRS. The project is currently in the
                                                                         financial statements as at 30 June 2005 (2004 nil).

                                                                                                                                                                                                                   ESR Annual Report 2005
                                                                                                                                              development stage and as such the quantitative impacts of any
The financial instruments, which expose ESR to credit risk, are                                                                                changes have not been determined.
principally bank balances, short-term investments and accounts           16. Contingent Liabilities
receivable. ESR monitors credit risk on an ongoing basis. Bank                                                                                All the financial information in these financial statements has
                                                                         The Directors are satisfied that there are no claims outstanding
balances and short-term investments are held with New Zealand                                                                                 been prepared in accordance with current New Zealand Generally
                                                                         as at 30 June 2005 which would have a material impact on ESR’s
registered banks in accordance with ESR’s Treasury Policy. A                                                                                  Accepted Accounting Practice (NZ GAAP). The differences
                                                                         financial position. There were no claims outstanding as at
provision for doubtful debts is maintained in respect of accounts                                                                             between current NZ GAAP and NZIFRS may have a significant
                                                                         30 June 2004.
receivable and this is reassessed on a regular basis. No collateral is                                                                        effect on ESR’s financial position and performance depending on
held by ESR in respect of bank balances, short-term investments                                                                               the final format of standards or changes in the business. None
or accounts receivable.                                                                                                                       of the potential impacts of the adoption of NZIFRS on ESR’s
                                                                                                                                              financial performance and financial position, including systems
Concentrations of Credit Risk                                                                                                                 upgrades and other implementation costs, have been
Accounts receivable include $2,460,000 owed by entities within,                                                                               quantified yet.
or owned by, the New Zealand Government. At 30 June 2004,
$2,684,000 was included in accounts receivable. It is not believed
that there is any material risk of loss in this area.

Fair Values

The carrying value of financial instruments is equivalent to their
fair value.
     Directory                                                                                                                                                                   Directors

     Ian Wilson (Chairman)                    Sharon Opai      Dr Roderick Ellis-Pegler             Professor Kathryn Crosier           Dr Mere Roberts                       Keith Oliver

     CEO                       Senior Managers


     Dr John Hay               Wayne Chisnall        Jocelyn Grainger         Jacob de Feijter         Dr Valerie Orchard   Peter O’Shea         Dr Fiona               David Talbot
                               General Manager,      Strategic Manager,       Manager,                 Strategic Manager,   General Manager,     Thomson-Carter         Manager,
                               Forensic              Human Resources          Science Information      Science & Research   Finance              General Manager,       Business Development
                                                                              Management Services                                                Environmental Health   & Marketing

     Registered Office                                Auditor
     Kenepuru Science Centre                         Karen Shires of PricewaterhouseCoopers
     34 Kenepuru Drive                               on behalf of the
     PO Box 50-348                                   Auditor-General
     New Zealand
                                                     The National Bank of
     Telephone: +64 4 914 0700
                                                     New Zealand Limited
     Fax:       +64 4 914 0769
                                                     Kensington Swan
ESR Annual Report 2005

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