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Annual Report 2013

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About NAITThe National Animal Identification and Tracing (NAIT) scheme’s mission is to protect New Zealand’s

agricultural export market by linking people, property and livestock. Under the scheme, animals are

traced using NAIT approved radio frequency identification device (RFID) tags.

Once tagged, animals are registered in a national database. Details recorded include:

• theanimal’slocation

• movementsintheanimal’slife,and

• contactdetailsforthepersoninchargeofthatanimal.

This provides traceability for individual animals to enhance New Zealand’s ability to respond quickly if there is a biosecurity incursion or a food safety concern.

This year NAIT Limited was officially designated the NAIT organisation by the Minister for Primary Industries. This empowers NAIT to continue to perform the functions and duties and exercise the powers required of it by the NAIT Act. This designation is permanent and demonstrates the Government’s full confidence in NAIT to continue to deliver the NAIT scheme.

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ContentsAbout NAIT .............................................................................................................................................. 1

From the Chairman .................................................................................................................................2

Business Report ...................................................................................................................................... 4

Highlights ................................................................................................................................................7

Financial Statements ..............................................................................................................................8

Statement of Accounting Policies ........................................................................................................... 9

Statement of Comprehensive Income .................................................................................................... 12

Statement of Financial Position ............................................................................................................. 13

Statement of Changes in Equity ............................................................................................................. 14

Statement of Cashflows......................................................................................................................... 15

Independent Auditor’s Report ................................................................................................................ 21

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From the Chairman

As I wrote last year, designing a scheme to trace every movement of 10 million

animals from birth to death is no small feat. The first year of NAIT’s operation

has been about informing the sector, which we have done through a series of

nationwide road shows, presentations, events and education campaigns.

At its heart, NAIT is a biosecurity and food safety insurance policy to protect New Zealand’s agricultural exports in the event of a disease outbreak or food safety concern. It is about retaining market access and demonstrating our ability to provide accurate data on animal movements faster than has previously been possible.

One year on I am confident that we are making good progress along the path of NAIT’s three year transition. The achievements of the first year include:

• 65,000peopleinchargeofanimalsregistered with NAIT

• Over100accreditedinformationprovidersand entities working with NAIT on behalf of farmers

• DeerjoiningtheNAITschemeon1March2013

• 25percentreductionintheNAITcattleslaughterlevy

• 18percentreductionintheNAITcattletaglevy

• DesignationastheNAITorganisationbythe Minister for Primary Industries.

The decision to reduce both the tag and slaughter levies within the first year reflects the earlier and

greater adoption of NAIT tagging than originally predicted. NAIT was established with a deliberately conservative revenue model. Levies collected were higher than expected and allowed us to reduce costs to farmers much earlier than initially estimated.

We never lose sight of the fact that NAIT is substantially fundedbyourindustrypartners.Ourlongtermobjectiveistorecoverjustenoughmoneytooperateeffectively. This means finding the right balance - being financially prudent while retaining some ability to make improvements where needed. In the meantime we will continue to forecast conservatively to manage future extremes.

Giving farmers the option not to tag large and dangerous stock has been an essential part of NAIT’s transition. Animals that are too big to NAIT tag, are going directly to slaughter and have an existing Animal Health Board tag can be processed under the Impractical to Tag option. Theseanimalsattracta$13levy.Revenuecollectedthrough this levy has enhanced NAIT’s finances and an overall solid financial position has enabled NAIT to buy the NAIT IT system, or ‘asset’, from the Ministry for Primary Industries. Ownership of this asset gives NAIT greater flexibility and control over the animal traceability system.

The NAIT IT system, you might recall, was financed by the Crown, essentially by way of a loan to NAIT that has now been repaid. We thank the Ministry for Primary Industries for its approach to partnering with NAIT.

We were able to test the usefulness of NAIT data during a desktop biosecurity exercise conducted by the Ministry for Primary Industries this year. By all accounts, the ability to trace animal movement records and to contact the people in day to day charge of those animals means we are much closer to being battle ready than ever before.

That we have come this far in twelve months is a testament to the dedication and hard work of many people. I would like to thank out-going NAIT Directors Lindsay Burton and Steve Wakefield, both of whom made very significant contributions to the establishment of NAIT and its first year of operation. I also acknowledge the team who contributed to setting NAIT up. We were fortunate to have a group of people who brought both passion and talent to their work, which is a rare and valuable combination. We would not be where we are today without them.

NAIT’s progress is also a credit to the commitment of our shareholders and stakeholders and to farmers’ ability to

absorb change. The rate that New Zealand has been able to implement its national traceability scheme is the envy of many countries.

In the next phase of its development the NAIT scheme will continue as part of OSPRI New Zealand, a new combined entity formed through the upcoming merger of NAIT and the Animal Health Board.

As a country, New Zealand must follow international market trends in food safety and traceability. The NAIT scheme reinforces this country’s reputation as a world class food producer. We have achieved a lot in our first year of operation, but the challenge ahead remains to bed in a system that is one of the biggest changes to affectthefarmingindustryindecades.

Ted Coats

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Contact CentreThe Contact Centre has continued to provide a first line of support to help farmers with their NAIT obligations and provide assistance with the NAIT system. As noted last year, a focus on recruiting highly motivated personnel has provided outstanding results, with close to 100 percent of queries resolved in one call.

March2013sawtheintroductionofdeerintotheNAITscheme. This was a very smooth transition with minimal impact on the Contact Centre.

The Contact Centre works closely with other parts of the business, providing support to the Field Operations team at A&P shows and the National Fieldays and helping the communications team with monthly newsletters to all registered PICAs (persons in charge of animals) and providing phone support after direct mail campaigns.

Ofthe31,000plusPICAsregisteredsince1July2012,over40percenthavebeenregisteredbyContactCentrestaff.

Business Report

PolicyNAIT has worked closely with the Ministry for Primary Industries to complete the remaining regulations that guide and empower the running of the NAIT scheme. Theseincluderegulationsforinfringementoffences,whichwill enhance the already high compliance with the scheme, and the information access panel, which safeguards access to NAIT data. Some small amendments were made to existing regulations to improve the scheme ahead of the deerindustry’sentryinMarch2013.

NAITlevieswerereviewedearlyin2013andthisresultedina significant reduction to both tag and slaughter levies for cattle. The tag levy reduced from $1.10 per tag to 90 cents, andtheslaughterlevydroppedfrom$1.30to$1percarcass(GST exclusive). As a non-profit company owned by farmers, NAIT is obligated to only recover what it needs to operate the scheme. Farmers were quick to get on board with the scheme, meaning we received higher than anticipated revenue. This benefit was then able to be passed on early to farmers through reduced levies.

NAIT Limited was officially designated as the NAIT organisation by the Minister for Primary Industries in June2013.ThisempowersNAITtocontinuetoperformthe functions and duties and exercise the powers required of it by the NAIT Act. This designation is permanent and demonstrates the Government’s full confidence in NAIT to continue to deliver the NAIT scheme.

IT TeamIn the year since NAIT went live, the IT team has worked to ensure that the NAIT system continues to be robust and easy to use. Significant emphasis has been placed on listening to feedback from actual users of the system, including farmers and accredited entities, and using this feedback to deliver meaningful changes in order to encourage a high level of compliance.

Considerable work has gone into ensuring the smooth integrationofdeerintotheNAITsystemfrom1March2013,particularly with the addition of capabilities for recording fallow and trophy deer that are exempt from NAIT tagging requirements.

Another important piece of work has been enhancing NAIT’s reporting abilities to ensure that data provided from the NAIT system is accurate and relevant. This includes the ability to accurately track the movements of an animal and pinpoint its current location at a point in time. NAIT has gained increasing control over the running of the NAIT system, including setting up our own test environments to allow greater oversight for testing and releasing enhancements. By physically accommodating the Fronde developers in the NAIT office, a successful in-house development team has been created. These changes have allowed the IT team to implement a more structured approach to delivering new functionality, with continuous enhancements being implemented regularly into the production environment.

Our focus for the next year continues to be on improving the NAIT system to ensure it is easy to use and that the data captured in the system is accessible and fit for purpose.

Data Access PanelThe NAIT Data Access Panel received four applications andheldtwomeetingsintheyeartoJune2013. Three applications were of an industry good nature and one was a police production order. Three applications were granted and one was declined. The applications were for the following purposes:

1. National livestock freight study1 (Granted) Request: Aggregate livestock movements between

regions by origin and destination type.

2. Farmerhealthandsafetyassessments(Declined) Request: Farmer contact details.

3. Investigationintostocktheft(Granted) Request: Tag usage and animal movement

information.

4. CliffordBayproject(Granted) Request: Aggregate inter-island livestock

movements for the year.

No conditions were placed on the applications for which data was granted and no complaints were received by the panel in the time period covered.

1 Regional livestock movement was released without identifying the origin and destination types.

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HighlightsFoR THe yeAR eNDeD 30 JuNe 2013

65,000people in charge of animals registered with NAIT

100%of farmers and 92% of lifestylers aware of the NAIT scheme in survey results

Designated the NAIT Organisation by the Minister for Primary Industries

132NAIT accredited information providers and entities able to provide information to NAIT on behalf of farmers

25%reduction in the cattle slaughter levy

Field operationsIn the year since NAIT became mandatory for cattle, field staffinteractionswithfarmershavebeenlargelyabouthow to use the online NAIT system.

At this stage in NAIT’s three year transition sale yards and meat processors have reached a good level of compliance with movement reporting. Checking for NAIT tags and recording movements is now second nature to these businesses.

The NAIT tag standards that must be achieved by manufacturers wanting to supply NAIT approved RFID tags have been reviewed along with the process to ensure high levels of retention and readability of tags. NAIT’s goal is to ensure New Zealand farmers have access to a range of competitively priced high quality ear tags.

Looking ahead, the field team are preparing to move beyond educationandassistanceprogrammes.NAITstaff,warrantedunder the NAIT Act, will firmly encourage people in charge of animals with farm to farm movements to meet their NAIT obligations. Assistance for anyone wanting to learn how to comply will still be available through the NAIT Contact Centre.

The Field Operations team recruited a new member in the lowerSouthIslandinDecember2012,bringingtheteamtofive. Field coverage and resources to satisfy demand from farmers for education is continually being reviewed.

CommunicationsOne year into the NAIT scheme’s transition our communication campaigns are predominantly education based. Campaign topics have included the need to confirm that cattle have arrived on your property from a sale yard and the core NAIT requirements to tag, register, record and confirm animal movements.

Sector research informs the channels we use to communicate with farmers, who have expressed a strong preference to receive information about NAIT through rural newspapers, magazines and direct mail. Other initiatives have included distributing posters to all registered sale yards, a broadcast media partnership and an ongoing placement on the Trade Mebuyer’schecklistfarmingpages,inconjunctionwithTBfreeNew Zealand.

ThemonthsleadinguptodeerjoiningtheNAITscheme saw a need for increased communication to deer farmers. A strong relationship with Deer Industry New Zealand enabled NAIT to reach these farmers through the Deer Industry News publication and by supporting the Deer Industry Conference.

Research has also shown that the NAIT website is becoming an increasingly valuable source of information. A review of the website is currently underway, with a refreshed layout and updatedcontenttobereleasedlaterin2013.

18%reduction in the cattle tag levy

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Financial Statements

FoR THe yeAR eNDeD 30 JuNe 2013

APPROVAL BY THE DIRECTORSThe directors have approved the Financial Statements of National Animal Identification and Tracing (NAIT) Ltd fortheyearended30June2013

For and on behalf of the Board of Directors

J.J.Grant K.G.Sutton

Chairman of the Board Chairman of the Audit Committee

Statement of Accounting Policies

FoR THe yeAR eNDeD 30 JuNe 2013

A. GENERAL INFORMATION The National Animal Identification and Tracing (NAIT) Limited (“NAIT”) is a non-profit company incorporated

anddomiciledinNewZealandandregisteredundertheCompaniesAct1993.TheregisteredofficeofNAITislocatedatLevel9,GuardianTrustHouse,15WillestonStreet,Wellington.

NAIT is the company responsible for implementing New Zealand’s National Animal Identification and Tracing scheme.

These financial statements have been prepared in accordance with Generally Accepted Accounting Practice in New Zealand (NZ GAAP). They comply with NZ IFRS and other applicable Financial Reporting Standards, as appropriate for public benefit entities that qualify for and apply reduced disclosure reporting concessions. The Company qualifies for Reduced Disclosure Reporting exemptions as it has no public accountability and the Company is not considered large under the Public Benefit Entity IPSAS Framework. All available reporting exemptions allowed under the Framework have been adopted.

ThesefinancialstatementshavebeenapprovedforissuebytheBoardofDirectorson30September2013.

B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Basis of preparation The principal accounting policies adopted in the preparation of the financial statements are set out

below. These policies have been consistently applied to all the periods presented, unless otherwise stated.

Historical cost convention These financial statements have been prepared under the historical cost convention.

b. Functional and presentation currency Items included in the financial statements are presented in New Zealand dollars, which is NAIT’s

functional and presentational currency.

c. Revenue recognition Revenue comprises revenue from Slaughter and Tag Levies and Funding Agreements with the Ministry

for Primary Industries (MPI), DairyNZ Incorporated, Beef + Lamb New Zealand Limited and Deer Industry New Zealand. Revenue is recognised when received or receivable; it is recognised exclusive of GST.

Interest income Interestincomeisrecognisedonatimeproportionbasisusingtheeffectiveinterestmethod.

d. Funders’ revenue advances Fundingreceivedfromfundingprovidersandnotfullyexpendedinthe2011/12financialyearhasbeen

recognised as a liability and held to reduce future levies over the subsequent three years.

Tag levy revenue received includes revenue for services yet to be provided by NAIT based on the average estimated farm life of a tagged animal. A portion of the tag levy revenue is held as revenue in advance to offsetfutureanimaltracingexpenditure.

e. Income tax NAITwasregisteredasacharitableentityon29May2012withtheCharitiesCommissionandistherefore

exempt from income tax on its normal operations from this date.

f. Goods and services tax The Statement of Income has been prepared so that all components are stated exclusive of GST.

All items in the Statement of Financial Position are stated net of GST, with the exception of receivables and payables, which include GST invoiced.

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g. Financial instruments NAIT is a party to financial instruments as part of its operation. Financial instruments carried in the Statement

of Financial Position include cash and cash equivalents, receivables and payables. All financial assets are classified as loans and receivables and are initially recorded at fair value and subsequently measured at amortisedcostusingtheeffectiveinterestratemethod.Financialassetsarederecognisedwhentherightstoreceive cash flows have been transferred and the company has transferred substantially all risks and rewards of ownership. All financial liabilities are initially recorded at fair value and subsequently measured at amortised costusingtheeffectiveinterestmethod.

i. Cash and cash equivalents Cash and cash equivalents include cash on hand, deposits with financial institutions with an original

maturity of less than 90 days and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the Statement of Financial Position.

ii. Accounts receivable Accounts receivable are carried at estimated realisable value after providing for debts where collection

is doubtful. Collectability of accounts receivable is reviewed on an ongoing basis. Debts which are known tobeuncollectiblearewrittenoff.Aprovisionfordoubtfuldebtsisestablishedwhenthereisobjectiveevidence that NAIT will not be able to collect all amounts due according to their original terms. The amount of the provision is recognised in the Statement of Comprehensive Income.

iii. Accounts payable These amounts represent liabilities for goods and services provided to NAIT prior to the end of the

financialyearwhichareunpaid.Theamountsareunsecuredandareusuallypaidwithin30daysofrecognition.

h. Intangible assets Software has a finite useful life. Software costs are capitalised and amortised over an economic life between

3-5years.Costsassociatedwithmaintainingcomputersoftwareprogramsarerecognisedasanexpenseasincurred. Costs that are directly associated with the production of identifiable and unique software products controlled by NAIT, and that will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets.

i. Impairment of non-financial assets Property plant and equipment and other non-current assets are reviewed for impairment whenever events

or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the greater of an asset’s net selling price and value in use. For the purpose of assessing impairment assets are grouped at the lowest levels for which there are separately identified cash flows. Where NAIT would, if deprived of the asset, replace its remaining future benefits, value in use is determined as the depreciated replacement cost.

j. Employee benefits Liabilities for wages and salaries, and annual leave are recognised in the provision for employee benefits in

respect of employees’ services up to the reporting date and measured at the amounts expected to be paid when the liabilities are settled.

k. Operating leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are

classified as operating leases. Operating lease payments are expensed on a straight line basis over the period of the lease.

l. Share capital Share Capital represents the nominal value of shares that have been issued. Any transaction costs associated

with the issuing of shares are deducted from share premium, net of any related income tax benefits.

Equal rights, no preferences and no restrictions are attached to the shares. No dividends were payable during the year.

m. Changes in accounting policies Uniform accounting policies have been applied by NAIT on a consistent basis throughout the period.

n. New and amended standards adopted by NAIT TherewerenoneworamendedstandardsadoptedbyNAITintheyearended30June2013.

o. Standards, amendments and interpretations to existing standards that are not yet effective and have not been adopted early

NZ IFRS 9 – Financial Instruments – Classification and Measurement. This standard replaces the multiple classificationandmeasurementmodelsforfinancialassetsinNZIAS39withamodelthathasonlytwoclassificationscategories:amortisedcostandfairvalue.Itiseffectiveforaccountingperiodsbeginningonorafter1January2015.

NZIFRS13-FairValueMeasurement.Thenewstandardreplacesexistingguidanceonfairvaluemeasurementin several standards with a single, unified definition of fair value and a framework for measuring and disclosing fairvalues.NZIFRS13appliestoallassetsandliabilitiesmeasuredatfairvalue,notjustfinancialinstruments.NZIFRS13isapplicableforfinancialperiodbeginningonorafter1January2013.

p. Critical accounting estimates and judgements The Board makes estimates and assumptions regarding the future. The resulting accounting estimates will, by

definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk ofcausingmaterialadjustmenttothecarryingamountsofassetsandliabilitieswithinthenextfinancialperiodare outlined below.

q. Useful lives of intangible assets In determining the amortisation charge for the year NAIT estimates the economic life of intangible assets based

ontheBoard’sjudgement.

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Statement of Financial Position

AS AT 30 JuNe 2013Note 2013

$0002012

$000Current AssetsCash and cash equivalents 2,724 2,398Receivables 4 2,507 2,153GST receivable 327 0Deferred Tax 2 7Total current assets 5,560 4,558

Non-current AssetsProperty, Plant and Equipment 5 15 0Intangible assets 6 4,445 6Total non-current assets 4,460 6

Total assets 10,020 4,564

Current LiabilitiesPayables 690 1,015Employee entitlements 44 108Revenue in advance 7 1,806 1,147Total current liabilities 2,540 2,270

Non-current LiabilitiesRevenue in advance 7 4,442 2,294Total non-current liabilities 4,442 2,294

Total Liabilities 6,982 4,564

Equity1,000 shares @ $1 (unpaid) 1 1Accumulatedsurpluses/(losses) (1) (3)Surplus/(Loss)fortheyear 3,038 2Total equity 3,038 0

Total equity and liabilities 10,020 4,564

Statement of Comprehensive Income

FoR THe yeAR eNDeD 30 JuNe 2013Note 2013

$0002012

$000Revenue 1 10,510 4,679Finance Income 117 21

Total Income 10,627 4,700

ExpenditurePersonnel and consultancy costs 2 3,555 3,405Operating expenditure 3 4,034 1,295Total expenditure 7,589 4,700

Surplus for the year 3,038 0

Tax expense 0 (2)

Other Comprehensive Income 0 0

Total Comprehensive Income 3,038 2

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Statement of Changes in equity

FoR THe yeAR eNDeD 30 JuNe 2013

Share Capital$000

AccumulatedSurplus/ (Loss)

$000Total equity

$000Balanceat30June2011 1 (3) (2)Surplus/(Deficit)fortheyear 0 2 2Other income 0 0 0Balance at 30 June 2012 1 (1) 0

Balanceat30June2012 1 (1) 0Surplus/(Deficit)fortheyear 0 3,038 3,038Other income 0 0 0Balance at 30 June 2013 1 3,037 3,038

Statement of Cashflows

AS AT 30 JuNe 20132013

$0002012

$000Operating ActivitiesCash was received from:-Crown 1,413 1,128TagLevy(royaltyproxy2012) 6,553 1,248Slaughter levy (Cattle) 1,619 0Impracticable to Tag Levy - Cattle 2,831 0 Impracticable to Tag Levy - Deer 116 0 Deer Industry NZ 75 1Beef + Lamb 0 18Dairy NZ 0 22Cost recoveries and other 297 949Interest 117 20Net GST 451 328

13,472 3,714Cash was applied to:-Payments to employees 2,030 1,031Payments to suppliers and for other operations 6,147 862Net Cash Flow from Operating Activities 5,295 1,821

Investing Activities

Cash was applied to:-Purchases of Office Equipment 15 0 Purchase of NAIT system 4,954 6Net Cash Flow from Investing Activities 4,969 6

Net Increase (Decrease) in Cash 326 1,815Opening Cash Balance 2,398 583Cash 2,724 2,398

Comprising:Cash 2,724 2,398

RECONCILIATION OF NET SURPLUS TO NET CASH FLOW FROM OPERATING ACTIVITIES

Net Surplus (Deficit) for the year 3,038 2

Items not involving cash flows:Software Impairment 500 0

Impact of changes in working capital items(Increase) in Receivables (350) (1,737)(Decrease) in Creditors (751) 899(Decrease) in Employee Entitlements (64) 72Increase in Accruals 115 (322)Increase in Deferred Revenue 2,807 2,907

Net Cash Flow from Operating Activities 5,295 1,821

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1. Revenue Tag Levy PriortothemandatoryimplementationoftheNationalAnimalIdentificationandTracingAct2012on1July2012,tag

manufacturers who were granted the right to sell NAIT approved RFID devices endorsed with the NAIT logo agreed to payaroyaltytoNAIT.RoyaltiesonthesaleofwhiteNAITtagsceasedon1July2012.

From1July2012alevywaschargedonthesaleofcattletagsinaccordancewiththeprovisionsofSection62oftheNationalAnimalIdentificationandTracingAct2012theNationalAnimalIdentificationandTracing(Levies)Regulations2012;from1July2012to7March2013$1.10,forthebalanceoftheyearunderreview$0.90;(2012nil).

Tag levy revenue received includes revenue for services yet to be provided by NAIT based on the average estimated farmlifeofataggedanimal.Aportionofthetaglevyrevenueisheldasrevenueinadvancetooffsetfutureanimaltransactionandtracingexpenditure.(Note7)

Deer Industry NZ Deer Industry funding is received in accordance with an annual funding agreement between NAIT and Deer Industry

NZ which avoids levies on deer tag sales or animal slaughter except in the case of impractical to tag levies.

Slaughter Levy Aslaughterlevywaschargedonalltaggedcattlekilledduringtheyear;from1July2012to7March2013$1.35,for

thebalanceoftheyearunderreview$1.00;(2012nil).

A slaughter levy penalty was charged on all untagged cattle and deer (deemed an impracticable to tag levy) at a rate $13.00,(2012:nil).

Both slaughter levies were made in accordance with the provisions of the National Animal Identification and Tracing Act2012andtheNationalAnimalIdentificationandTracing(Levies)Regulations2012.

Crown CrownfundingwasreceivedatthediscretionoftheCrownunderSection57oftheNationalAnimalIdentification

andTracingAct2012.

2013$000

2012$000

TagLevies(royalitesproxy2012) 5,950 2,978Slaughter Levies 5,371 0Industry Sector Contributions 1,872 3,619Fees and recoveries 124 989

Total revenue received 13,317 7,586

Revenue in Advance amortised 1,147 534TransfertoRevenueinadvance–Note7 3,954 3,441

Total recognised revenue 10,510 4,679

2. Personnel and Consultancy Costs

2013$000

2012$000

Salaries and wages 1,746 1,184Contractors and consultants 1,481 1,965Directors’ fees 165 165Stakeholder Reference Groups fees 2 5Other employee related costs 122 66KiwiSaveremployercontribution 39 20

Total personnel and consultancy costs 3,555 3,405

3. Operating Expenditure Operating expenditure is administration and other expenditure that supports the implementation of NAIT.

2013$000

2012$000

Communications 340 472IT costs 1,981 96Software impairment (see below) 500 0Printing and postage 178 182Travel and stakeholder management 177 193Insurance 7 7Audit fee 15 13Financial, legal and other fees 16 17Operating leases 170 132Property costs 200 124OSPRI related expenditure 421 0Other operating expenses 29 59

Total operating costs 4,034 1,295

AnindependentreviewinAugust2013evaluatedthedeliveredcapabilityoftheNAITsystemwhichresultedinanimpairmentwrite-downof$500,000beingmade.(2012:nil).

4. Accounts Receivable The carrying value of debtors and other receivables approximates their value.

2013$000

2012$000

These comprise:Crown 411 200Deer Industry NZ 30 0Cattle slaughter levy 807 0Other receivables 1,259 1,953

Total receivables 2,507 2,153

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5. Property, Plant and Equipment

Furniture and Fittings

$000Total$000

CostBalanceat30June2012 0 0Additions 15 15Disposals 0 0Balance at 30 June 2013 15 15

Accumulated DepreciationBalanceat30June2012 0 0Depreciation expense 0 0Derecognition on disposal 0 0Balance at 30 June 2013 0 0

Carrying Value30June2011 0 030June2012 0 030June2013 15 15

6. Intangible Assets

Software$000

WIP$000

Total$000

CostBalanceat30June2011 0 0 0Additions 0 6 6Disposals 0 0 0Balance at 30 June 2012 0 6 6

Balanceat30June2012 0 6 6Additions 4,945 824 5,769Disposals 0 (830) (830)Balance at 30 June 2013 4,945 0 4,945

Accumulated Amortisation / ImpairmentBalanceat30June2011 0 0 0Amortisation/Impairmentexpense 0 0 0Derecognition on disposal 0 0 0Balance at 30 June 2012 0 0 0

Balanceat30June2012 0 0 0Amortisation/Impairmentexpense 500 0 500Derecognition on disposal 0 0 0Balance at 30 June 2013 500 0 500

Carrying Value30June2011 0 0 030June2012 0 6 630June2013 4,445 0 4,445

ComputerSoftwareismadeupoftheNAITITsystem.Ithasanestimatedlifeof5yearsandamortisationwillcommenceinthe2013/14financialyear.

2013$000

2012$000

Not later than one year 147 165Later than one year and not later than five years 111 259Later than five years 0 0

Total commitments 258 424

10. Financial Instruments by Category NAIT’s financial instruments by category are equivalent to the values disclosed in the Statement of Financial Position.

2013$000

2012$000

Loans and receivables

Trade and other receivables 2,507 2,153Cash and cash equivalents 2,724 2,398

Total loans and receivables 5,231 4,551

2013$000

2012$000

Financial liabilities measured at amortised cost

Trade and other payables 690 1,015Employee entitlements 44 108

Total creditors and payables 734 1123

7. Funders Revenue Advances Fortheyearending30June2012NAIThadreceivedset-upfundingthatwasnotfullyexpendedduring2011/12and

was held as revenue in advance for use over the following three years.

FollowingthemandatoryimplementationoftheNationalAnimalIdentificationandTracingAct2012on1July2012,tag levy charges commenced in accordance with the provisions of that Act, and the National Animal Identification andTracing(Levies)Regulations2012.

Tag levy revenue received includes revenue for services yet to be provided by NAIT based on the average estimated farmlifeofataggedanimal.Aportionofthetaglevyrevenueisheldasrevenueinadvancetooffsetfutureanimaltransaction and tracing expenditure.

2013$000

2012$000

Funders revenue in advance 2,294 3,441Tag Revenue 3,954 0

Total revenue in advance 6,248 3,441

8. Statement of Commitments as at 30 June 2013 Capitalcommitmentsat30June2013were$3,000(2012-nil).

9. Non-cancellable Operating Lease Commitments NAIT has entered into a number of non-cancellable operating leases for premises and motor vehicles. Future

commitments at year end in respect of these are as follows:

Independent auditor’s reportTo the shareholders of National Animal Identification and Tracing (NAIT) Limited

Report on the financial statementsWe have audited the accompanying financial statements of National Animal Identification and Tracing (NAIT) Limited (‘’theCompany’’)onpages8to20.Thefinancialstatementscomprisethestatementoffinancialpositionasat30June2013,thestatementsofcomprehensiveincome,changesinequityandcashflowsfortheyearthenended,andasummary of significant accounting policies and other explanatory information.

Directors’ responsibility for the financial statementsThe directors are responsible for the preparation of financial statements in accordance with generally accepted accounting practice in New Zealand that give a true and fair view of the matters to which they relate, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement whether due to fraud or error.

Auditor’s responsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing (New Zealand). Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.Theproceduresselecteddependontheauditor’sjudgement,includingtheassessmentoftherisksofmaterial misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation of the financial statements that give a true and fair view of the matters to which they relate in order to design audit procedures that are appropriate in the circumstances,butnotforthepurposeofexpressinganopinionontheeffectivenessoftheCompany’sinternalcontrol.An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates, as well as evaluating the presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Other than in our capacity as auditor we have no relationship with, or interests in, the Company.

OpinionInouropinionthefinancialstatementsonpages8to20:

• complywithgenerallyacceptedaccountingpracticeinNewZealand;

• giveatrueandfairviewofthefinancialpositionoftheCompanyasat30June2013andofitsfinancialperformanceand cash flows for the year then ended.

Report on other legal and regulatory requirementsInaccordancewiththerequirementsofsections16(1)(d)and16(1)(e)oftheFinancialReportingAct1993,wereportthat:

• wehaveobtainedalltheinformationandexplanationsthatwehaverequired;and

• inouropinion,properaccountingrecordshavebeenkeptbyNationalAnimalIdentificationandTracing(NAIT)Limited as far as appears from our examination of those records.

8October2013

Wellington

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11. Related Parties Directors and employees may deal with the Company in the normal course of its activities. Any transactions are on

standard commercial terms.

Norelatedpartydebtshavebeenwrittenofforforgivenduringtheyear.

Beef+LambNewZealandLimitedpaid$nil(2012:$178,000)towardoperationalcosts.Thereisnooutstandingbalance.

DeerIndustryNewZealandpaid$75,000(2012:$8,000)towardoperationalcosts.Thereisabalanceof$30,000(2012:$Nil)includingGSToutstanding.

DairyNZIncorporatedpaid$Nil(2012:$214,000)towardoperationalcosts.Thereisnooutstandingbalance.

12. Directors’ Remuneration Thetotalsumof$165,000waspaidforDirectors’Feesassetoutinthetablebelow.

Resigned Appointed2013

$0002012

$000ECoats(Chairmanto1June13) 45 45L Burton 1-Jun-13 30 30L Campbell 30 30JGrant(Chairmanfrom1June13) 30 30S Wakefield 1-Jun-13 30 30A Coleman 1-Jun-13 0 0 M Spaans 1-Jun-13 0 0KSutton 1-Jun-13 0 0

Total Directors Fees 165 165

13. Payments to Key Management Personnel

2013$000

2012$000

CE remuneration 248 200DirectorsFees(Note12) 165 165

413 365

14. Contingencies NAITdidnothaveanycontingentliabilitiesasat30June2013(2012:Nil).

15. Subsequent Events After Balance Date NAITbecomesawhollyownedsubsidiaryofOSPRINewZealandLtdonthe1July2013,(2012:nil).

National Animal Identification and Tracing (NAIT) Limited (“NAIT”) and Animal Health Board Incorporated (“AHB”) have worked together to introduce a new corporate structure, designed to deliver a range of outcomes to protect and enhance productivity and sustainability across the primary sector in New Zealand.

Asat1July2013,TBfreeNewZealandLimited(“TBfree”),alimitedliabilitycompanyandcharitableentity,replacedAHB as the designated Management Agency for implementing New Zealand’s National Pest Management Plan under theBiosecurityAct1993,andacquiredAHB’sassetsandliabilities.Additionally,OSPRINewZealandLimited,alimited liability company and charitable entity, was established for the purpose of overseeing the National Pest Management Plan and operations of NAIT, a structure designed to create synergies between TBfree and NAIT.

Furthermore, as part of the new structure, the shareholders of NAIT approved a change in the Board of Directors of NAIT,includingtheresignationofLindsayJohnBurtonandStevenJamesWakefieldandtheappointmentofAndrewMarkColeman,KeithGrahamSuttonandReindertMichaelSpaans.

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NAIT Limited

POBox3412,Wellington6140

Freephone:0800624843

www.nait.co.nz