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GNS Science Annual Report 2010

Reporting and Financial Statements

Reporting and Financial Statements

34 CorporateGovernance36 CRICapabilityFundReport41 ReportoftheDirectors42 IncomeStatement43 StatementofComprehensiveIncome43 StatementofChangesinEquity44 BalanceSheet45 StatementofCashFlows46 NotestotheFinancialStatements61 PerformanceIndicators63 StatementofResponsibility64 AuditReport65 Directory

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Corporate Governance

Overview

TheBoardandmanagementofGNSSciencearecommittedtoensuringtheCompanyanditssubsidiariesmaintainbestpracticegovernanceprinciplesandadheretothehighestethicalstandards.ThebasisfortheseissetoutinaBoardCharterandinpoliciesandproceduresestablishedandmaintainedbytheCompany.

Role of the Board and management

TheBoardisresponsibletotheshareholdingministersfordirectingthemanagementofthebusinessandaffairsofGNSScience,including:

• establishingtheCompany’sobjectives

• developingmajorstrategies

• managingrisks

• determiningthekeypolicies

• monitoringmanagement’sperformance.

TheBoarddelegatesmanagementoftheday-to-dayaffairsandresponsibilitiesoftheCompanytotheChiefExecutive.TheChiefExecutiveleadstheExecutiveManagementteamwhoseroleistoimplementthestrategiesforachievingtheCompany’sobjectives.AformaldelegatedauthoritiespolicysetstheoperationalandexpendituredelegationswithinwhichtheChiefExecutiveandmanagementoperate.

Appointment of Directors and composition of the Board

UndertheCompany’sConstitution,theBoardcancompriseuptoninenon-executiveDirectors.Directorsareappointedbytheshareholdingministers–theMinisterofFinanceandtheMinisterofResearch,Science,andTechnology.Thetermisgenerallythreeyearswithreappointmentforfurthertermsatthediscretionoftheshareholdingministers.TheChairmanandDeputyChairmanareappointedbytheshareholdingministers.

DuringtheyeartheBoardconsistedofaChairman,DeputyChairmanandfiveDirectors.Profilesofthecurrentmembersaresetoutonpage30.

Onappointment,DirectorsreceiveguidelinesontheGovernment’sexpectations,whichareinadditiontothoserequiredbytheCompaniesAct1993.TheyalsoreceiveaDirectors’ManualwhichcontainskeyinformationontheCompanyanditssubsidiaries,theBoardCharter,TermsofReferenceforthesubcommitteesoftheBoard,detailsofDirectors’andOfficers’insurance,theDeedofIndemnityandcopiesofrelevantActs.NewDirectorsalsohavethebenefitofaninductionprogrammetoprovidethemwithanunderstandingoftheCompany’soperations,businessandthemarketsinwhichitoperates.

Operation of the Board

TheBoardChartersetsouttheframeworkfortheBoard’soperation.

TheBoardhastwostandingcommittees–theAuditandRiskCommitteeandtheRemunerationCommittee.BothcommitteesoperateinaccordancewithagreedTermsofReference.

Directors’ meetings

ThefullBoardhad10formalmeetingsduringtheyearended30June2010.AnadditionalseparatemeetingwasheldduringtheyearwithseniormanagementtodiscusstheCompany’sstrategicdirectionandlong-termgoals,aspartofthedevelopmentoftheCompany’sStrategicPlanandStatementofCorporateIntentforthe2011financialyear.Telephoneconferencecallswerealsoheldduringtheyeartodiscussparticularissues.

TherewasanongoingprogrammeofsitevisitsandpresentationstotheBoardbymanagementandsciencestafftoenableDirectorstokeepabreastofkeyaspectsoftheCompany’sactivities.

Audit and Risk Committee

TheAuditandRiskCommitteeassiststheBoardincarryingoutitsresponsibilitiesundertheCompaniesAct1993,PublicFinanceAct1989,CrownResearchInstitutesAct1992,FinancialReportingAct1993andCrownEntitiesAct2004.MembersofthecommitteeinthelastfinancialyearwereRossButler(Chair),ConAnastasiou,JaneTaylorandJohnWalters.TomCampbellreplacedConAnastasiouasamemberofthecommitteeonCon’sretirementfromtheBoard.AllDirectorsareentitledtoattendthemeetings.TheChiefExecutive,theChiefFinancialOfficer,theInternalAuditorandrepresentativesofDeloitte,theexternalauditors,arenormallyinattendance.

Thecommitteemetthreetimesduringthepastfinancialyear.Itreviewedanddiscussedtheexternalauditplanandtheexternalauditreport,theriskassessmentdocument,theinternalauditplanandinternalauditreports,andthesix-monthlystatutorycompliancereports.ItalsoreviewedandrecommendedtothefullBoardtheapprovalofthehalf-yearlyandannualfinancialstatements,amendmentstothedelegatedauthoritiesandcapitalexpenditurepolicies,andamendmentstotheInternalAuditCharter.Thecommitteemetseparatelywiththeexternalauditorforapartofeverymeetingwithoutmanagementpresent.MinutesofthecommitteemeetingsweretabledatthesubsequentBoardmeetingsandkeyitemswerediscussedandresolvedbythefullBoard.

Remuneration Committee

TheRemunerationCommitteereviewsandmakesrecommendationstotheBoardontherecruitmentoftheChiefExecutive,thereviewandsettingoftheChiefExecutive’sremuneration,andtheframeworkfortheremunerationoftheExecutiveManagersandthereviewoftheirperformance.MembersofthecommitteeinthelastfinancialyearwereConAnastasiou,EllenFörchandJohnHercus.TomCampbellandKenShirleyreplacedConAnastasiouandEllenFörchasmembersofthiscommitteeontheirretirementfromtheBoard.ThecommitteetakesadvicefromtheChiefExecutiveandtheGeneralManager,HumanResources,asappropriate.

Thecommitteemetonceduringtheyear.MattersdiscussedbythecommitteewerereportedbackatthesubsequentBoardmeetingandkeyitemswerediscussedandresolvedbythefullBoard.


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Meetings in the year to 30 June 2010

Board Audit and Risk Committee Remuneration Committee

Held Attended Held Attended Held Attended

ConAnastasiou 10 10 3 3 1 1

RossButler 10 9 3 3

TomCampbell 10 10 1*

EllenFörch 10 8 2* 1 1

JohnHercus 10 9 1 1

JaneTaylor 10 10 3 3

JohnWalters 10 10 3 3

*AllDirectorsareentitledtoattendAuditandRiskCommitteemeetings.

Conflicts of interest

EachDirectormakesafulldeclarationoftheirinterests.ThisisupdatedateachBoardmeeting.Whereaconflictofinterestexists,Directorsexcusethemselvesfromdiscussionanddonotreceivetherelevantpaperinrespectofthoseinterests.

Provision of professional services

Exceptinexceptionalcircumstances,BoardmemberswillnotprovideprofessionalservicestotheCompany.Thisistoavoidaconflictofinterest–actualorperceived.

NoDirectorsprovidedprofessionalservicestotheCompanyduringtheyear.

Independent professional advice

Directorsareentitled,withapprovalfromtheChairman,toobtainindependentprofessionaladvicerelatingtotheaffairsoftheCompanyortotheirduties,attheCompany’sexpense.

Noindependentprofessionaladvicewassoughtorobtainedduringtheyear.

Board evaluation

TheBoardevaluatesitsownperformanceandprovidestheresultsoftheevaluationtotheCrownOwnershipMonitoringUnit.


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CRI Capability Fund Report Fortheyearended30June2010

AsrequiredbyouragreementwiththeMinisterofResearch,Science,andTechnologywereportachievementsfromactivitiesweundertookwithCRICapabilityFunding.Ourshareofthisfundingforthefinancialyear,asspecifiedintheGovernment’sEstimatesofAppropriations,was$5.3million.

Capability and organisational performance

ThefundingsupportedfurtherdevelopmentoftheCompanythroughmaintenanceandenhancementofexistingcapabilities,andexplorationanddevelopmentofover-the-horizonpossibilities.Thesefallunderfivebroadcategories:(1)underpinningandbasicscience,(2)technologytransfer,(3)naturalhazards,(4)geologicalresources,and(5)environmentalresearch.Weachievedorover-achieved74ofthe88plannedindicators.

Thelargerpartoftheworkwastoinstallthenewacceleratormassspectrometer,andtomaintainandenhanceat-riskcapabilitiesingeologicalhazards,isotopescience,andgroundwater.Inaddition,weexploredover-the-horizonopportunitiesin3Dmapping,scientificdrilling,marineenergy,gashydrates,andgeothermalenergy.

Thefundinghasallowedustoimprove:(a)ourunderpinningscienceinearthquakes,volcanoes,tsunami,landslides,pastenvironmentsandisotopemethods,(b)ourapplicationsofscienceinhazardsassessment,energyandgroundwaterresourceassessment,climatechange,industrialmeasurementsystems,technologytransfer,andoutreach,and(c)ourdiscoveryscienceindeep-oceanexplorationandgeomicrobiology.WeoutlinetheseachievementswithshortillustrationscorrespondingtotheindicatorsgiveninourStatementofCorporateIntent2009-2010.

1 Underpinning and basic science

Economics (2 of 2 indicators achieved)

• Werecruitedaresearcheconomist.

• WedemonstratedlinksbetweenNewZealandeconomicdataanddynamicland-vegetationmodelsbyusingandmakingdecisionsaboutMotu’sLandUseinRuralNewZealandmodeloutto2050.Anothernewrecruitissupportingthedevelopmentofthebiogeophysicalmodellingrequiredtounderpintheeconomicanalyses.

3D geology mapping (3 of 3 indicators achieved)

• Weincreasedthenumbersandskillsofstaffusing3Dmodellingsoftwarethroughinternaltrainingcoursesandworkshopsonrelevantsoftwarepackages.Thishasallowedhydrocarbonsresearcherstoreplacemoreexpensiveoptions.WehaveevaluatedtheBritishGeologicalSurvey’sGSI3DsoftwareandimplementeditfortheHuttValleyaspartoftheIt’s Our Faultproject.WealsocontinuedourpartnershipwithaNewZealandsoftwareprovider.

• Weincorporated3DmappingmethodologyintotheGeologicalMapofNewZealandobjectiveofourNationallySignificantDatabaseprogramme.

• Weimprovedourdrill-holedatabasesbyintegratingIt’s Our FaultandDEVORAdrill-holedataintoPETLAB,followingminordesignchangestobothdatabasesandpreparationofatestdataset.WeverifiedthatimplementationofaGeoSciML‘gluer’servicetolinkstandalonedrill-holedatabasesisaviablesolutionforNewZealand.

Remotely sensed imagery (½ of 3 indicators achieved)

• Adesignforadigitalimagecataloguewaspartlydevelopedandcommercialoff-the-shelfoptionsarestillbeingevaluated.

• Duetotheresignationofakeystaffmember,nocross-traininginanalysisofopticalandsyntheticapertureradardatacouldbecompleted.TheseactivitieswillberesumedwhenanewlyappointedstaffmemberarrivesinOctober2010.

• Forthesamereason,imagerycouldnotbeappliedtoanynewapplicationsandnorwasanycapturepossibleoftheinfra-structurefootprintinanyurbanarearelatedtoRiskScapeneeds.

International scientific drilling (4 of 4 indicators achieved)

• WeexploredandenhancedtheoptionsformultinationaldrillingconsortiabyestablishingtheDrillNZconsortiumtomanageandcoordinateNewZealandparticipationinIODPandICDP.ThisinvolveddevelopinginternationallinkagesandoutreachlinkedtoIODPexpeditionsinourregion.WehostedtheJOIDES ResolutionportcallinWellington,withhigh-visibilitymediacoverage,goodattendancebyVIPs,andahighlysuccessfulholidayprogrammeforschoolpupils.WealsosuccessfullyhostedtheIODPSiteSurveyPanel.

• Weparticipatedindrilling-basedmultidisciplinaryresearchthroughtheIODPCanterburyShelfexpedition,makingamajorcontributionbycoordinatingmuchofthepaleontologicalwork.

• WeadvancedactiveICDPandIODPproposalsthroughworkshopsfordrillingtheAlpineFaultandtheHikurangimargin.PilotcorescollectedfortheLAKENZprojectareawaitinggeochemicalanalyses.

• Weexploredopportunitiesforexternalfundingofscientificdrillinginfrastructure(membership,administration,advisorypanels,workshops,databases,corestoragefacility)securinginterimfundingasacontributiontotheNewZealandmembershipfeetoIODP.ApreliminarycaseforDrillNZwassubmittedtotheMoRSTteamreviewingprioritiesforinvestmentinlarge-scaleresearchinfrastructure.

Crustal modelling (3 of 3 indicators achieved)

• Weheldaseminaroncurrentresearchonvolcano-faultinteractionstoidentifyoutstandingproblems.

• Weassessedmodelsofprocessesgoverningsubductionearthquakepotentialbydevelopingourprimarymodellingcode(PyLith)toenablesimulationsofsubductionzonestressanddeformation.Anumberofnewfeatureswereaddedtothecode,mostimportantlyfaultfriction.Initialinvestigationsintotheeffectsofmaterialpropertiesonslow-slipinversionshavebeenperformedandnewmesheshavebeencreated.Theseformthegroundworkforfuturestudiesofslowslip.

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• Wemadeprogressonintegratedvolcano-tectonicmodelsdemonstratingtheamplitudeanddistancetermsofstressperturbationsbytestingsolutionsformagmachamberdeformationusingthreedifferentmethodsthatallshowverygoodagreementforatestproblem.Themethodology,developedpreviouslyforvolcanomodellingtoincludetheeffectsoftopography,gravity,andplasticdeformation,isnowbeingusedtoinvestigatestressanddeformationatMt.Ruapehu,incollaborationwithVictoriaUniversityofWellington.

National Isotope Centre facility (9½ of 14 indicators achieved)

• Thehighlightachievementwasthesuccessfulinstallationandtestingofournewacceleratoranditsperipherals.Allworkhasnowbeentransferredtoit.Thismajorefforttookmoretimethanexpectedandresourcesweretransferredtothistaskfromthefollowingtwoprojects.

• Wemadeonlylimitedprogressinplanningimprovementstoradiocarbonsampleprocessing.VisitstotwoUSlaboratorieshelpedustofocusonusingnewmethodsofconvertingCO2tographite,takingintoaccountthedifferentcharge-stateandon-linecorrectionswewillusewithournewaccelerator.

• Wealsodeferredstepcombustionforradiocarbonmeasurementinordertofocusoninstallingthenewaccelerator.

• Theautomatedcombustionsystemisnowfullyoperationalforthed13C/CO2collectionmethodfor14Csamples,withverygoodtestresults.Thenextstepswillbetotesttheapplicabilityofthismethodforverysmallsamples,soilsandsediments,andveryoldsamples.

• WecompletedtestingseveralmethodsforimprovingNandOisotopemeasurementfornitrates.Noneproducedimprovementoverourcurrentmethodandtheprecisionisstilllessthanweoriginallydesired.Overseaslaboratorieshavehadasimilarexperience.

• WesuccessfullydevelopedandimplementedamethodformeasuringSisotopesinorganicmaterial.

• WedevelopedCompoundSpecificIsotopeAnalysisofHisotopesforhydrocarbonliquidsandgases.Ongoingfine-tuningwillensureHisotopecomparabilitybetweensamples,withaparticularfocusoncomparabilitybetweenoilsandcondensates.

• Wedevelopedhalfoftheisotopereferencematerialweplannedto,withcompletionofreferencematerialsforNO3,aswellasHandOinsolidsamples.Anewemployeehascompletedworkonstatisticalscriptstobetterinterpretresultsofunknownsagainstreferencematerials.

• Afterscanningthemarketwedeterminedthatforthecomingperiod,ratherthanpurchasinganexpensivesystem,anin-housedatabasewouldsufficeforthestableisotopes,waterdating,andthenewAMSsystem.

• The7thQuaternaryTechniquesshort-coursewasconductedhighlysuccessfully,with27studentparticipants.

• WepreparedsomesamplesforC,N,andSisotopesforairparticulateanalysisbuttheprojectwassetasidetofocusontheothertaskslistedhere.

• SupportwasprovidedtotheFRST-fundedLand-to-WaterNitrogenTransfersprogrammetoup-skillstaffinunderstandinggroundwater-surfacewaterinteractionsasappliedtoisotopemethodsfortrackingthesourcesandfateofnitrate.

• Wesupportedresearchonisoscapesandunderstandingofgroundwater-surfacewaterinteractionsatthenationalscale,throughregularmonthlyanalysesofwaterfromtheNIWArivermonitoringprogramme.Preliminaryisoscapemapsandinterpretationshavealsobeenmade.

• Wedeterminedthatweshouldprogressourfoodresearchcapability.Thisdecisionwasunderpinnedbyprogressoneggverification,adulterationofhoney,andidentificationofthesourcesofnitratecontaminationofmilk.ThisdecisionwasstronglysupportedbytheJuly2010FRSTpanelwhoreviewedourNationalIsotopeCentre.

2 Technology transfer

Intelligent measurement systems for industry (4 of 4 indicators achieved)

• Wemaintainedourservicelevelsforcustomersandreceivedpositivecustomerfeedback.

• Theneedforanadditionalion-beamanalysisspecialistoperatorwasmetintheinterimbytraininganexistingstaffmemberuntilanewappointeearrivesduring2010/11.

• Wehavedevelopedtheproof-of-conceptforthreenewideasthatcouldbecapableofcommercialapplication,includinghumidityandlightsensors,fieldemitterprototypes,andaminiaturisedscintillationdetector.

• Twonewresearchprogrammes/commercialproductswereestablished:(1)anairsamplingconceptforroadtunnels;and(2)acontinuoussystemformicrowavepyrolysisofwasteproducts.Inaddition,anotherprojectundertheumbrellaoftheMaterialsAccelerator(hostedbyTheUniversityofAuckland)isinthefinalstageofapproval.

Pre-seed portfolio supplement (1 of 1 indicator achieved)

• Aportfolioofeightprojectsisinprogress:basinmodellingsoftwareBASSIM,non-invasivescanningdevicePortaScan,anX-raysource,ZnOlightemittingdiode,AlScalloy,air-particulatetracking,nanotechnologygassensors,andaGISpolygonmerger.

Ma-ori research (2 of 2 indicators achieved)

• TheMa-taurangaMa-oriAdvisoryGroupheldfourhuifocusingonidentifyingfundingandinvestmentopportunities.

• OneworkshopforstaffwasheldatAvalonandoneatWairakei,andafocusedsessionwasheldwiththeAdvisoryGroupduringthedevelopmentofproposals;inaddition,tworefreshercoursesonproposaldevelopmentandinitialthinkingwereheldwithkeystaff.

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Outreach (5 of 5 indicators achieved)

• Oureducationaloutreachpositionisnowfull-timeandpermanent.

• Weenhancedoureducationalandpublicoutreachwebsitecontent,initiallyfocusingonvolcanoesandfossils.

• TheGNSScienceYouTubechannelnowhosts23educationalvideos.VideofootageofdinosaurfootprintswasusedbyNelsonMuseumandTePapaintheNZ Fossils: Dead Precious! exhibitionaswellasonTVnewsbroadcasts.FootageoftheoceandrillingshipJOIDES ResolutionwasalsousedonTVnews.

• WeestablishedsuccessfulrelationshipswithMuseumofCityandSeaforaschoolholidayprogramme,aswellascontinuedworkwithTePapaandRivertonMuseum.

• WehostedthreeRoyalSocietyofNewZealandteacherfellows.

3 Natural hazards

Volcanology (4 of 5 indicators achieved)

• TheneedformorepetrologycapabilityisbeingaddressedbysupportingoneofourstafftoundertakePhDstudiesattheUniversityofBristol,UK;intheinterim,theneedwasfilledbyotherstaffmemberswhodeferredotherwork.

• AcontinuousgravitymeterisnowoperatingonWhiteIsland,afterverysuccessfultestingatWaimangu.

• TwonewoverseasrecruitswithvolcanicgasmonitoringandgeodeticskillsarenowattunedtoNewZealandconditions.Thegeochemistisdevelopingnewprogrammesusingradongasanalysis.ThegeodesistisnowwellintegratedandhaswonEQCfunding.

• AfeasibilitystudyonslopefailuremodelsforTaranakivolcanoisessentiallycomplete,withkeyfactorscontrollingthegenerationoflargescaleslipsbeingidentified.AsamplesectionthroughtheconeatTaranakihasbeenusedtostartmodellingthecurrentstateofthecone.Themodellingworkwillfinishearlyin2010/11.

• Aninitialreviewofinformationontheuseofdeformationandboreholegroundwatertoassessafactorofsafetyfortheconehasbeencompleted,butresultsfromtheslope-stabilitymodellingarerequiredbeforeareasofinterestcanbeidentified.Thiswillbecompletedin2010/11.

Geotechnical research (2 of 3 indicators achieved)

• Therecruitmentofanengineeringgeologistiswell-advanced,aftertwoextensiveinternationalsearches.

• Supportwassecuredfromuniversitiesforthelandslidedatabaseprojectandasuccessfulresearchforumwasheld.Inaddition,wehavealreadyachievedsomeofthecomingyear’sworkinleadingthecoordinationofuniversityandotherCRIresearchingeotechnical,engineeringgeology,andlandslideareasundertheumbrellaoftheNaturalHazardsResearchPlatform.

• Thespecificationsforthelandslidedatabaseweredetermined,andthedatabasebuildingisscheduledforthecomingyear.

Tsunami modelling (2 of 2 indicators achieved)

• Wemaintainedtheskillstocollect,processandinterpretdataonpasttsunami,viafieldsurveys,tidegaugemeasurements,andhistoricalobservations.Specificworkincluded(a)fieldinvestigationoftracesofthe1947Gisbornetsunami,(b)improvementtomethodsofinputtingsea-floordeformationtoenablefasterreal-timemodellingafterourexperiencewiththe2009Samoatsunami,and(c)presentationofmodellingresultstotheAsiaOceaniaGeosciencesSocietymeetinginSingapore.

• WecontinueddevelopmentandvalidationoftheComcotcodeinorderforitremainoneoftheforemosttsunamipropagationandinundationcodesintheworld.Enhancementsweremadeto(a)thenonlinear-nonlinearcouplingscheme,(b)thefrequencydispersioncalculation,(c)theoutputfunctions,(d)themovingboundaryscheme,(e)thelandslidemodel,(f)thecalculationofnestedgrids,and(g)theevaluationofforcesonstructures.Wealsoincorporatedvariableslipcapabilityandparallelisedthecode.Thesemodificationswereextensivelytestedandappliedtoregionalstudies.Wealsomadeseveralconferencepresentationsandpreparedseveralpublications,includingonesubmittedtoNatureontherecentSamoanearthquakesandtsunami.

Time varying hazard and risk (2 of 2 indicators achieved)

• Werecruitedastatisticalseismologist.

• Weenhancedtherangeofforecastmodelsbeingdevelopedandtested.Inparticular:(a)wedevelopedanewshort-termforecastingmodelandhavepartiallyinstalleditinthetestingcentre;(b)wecontinuedworkonnewmodelsderivedfromtheEEPASmedium-termforecastingmodel,namely(i)ERDEEP,whichadjuststhemodelforthelocalseismicityrate;(ii)EAS,whichallowsforaftershocksofpredictedevents;and(iii)amodelwhichtakesaccountofdifferentearthquaketypesinsubductionzones;and(c)amodel(STEP-EEPAS),whichcombinesEEPASwiththeshort-termforecastingmodelSTEP,wassubmittedtothetestingcentreasanothernewshort-termmodel.

Disaster risk reduction (1 of 1 indicator achieved)

• OuractiveparticipationinaGlobalEarthModelworkinggroupincluded:(a)attendinginternationalmeetings;(b)devisinginternationalfundingstrategies;and(c)collaboratingwiththedatacollectionprocessforthePadangpost-earthquakelossesinordertoassessthemeritsofobservingstreet-frontdamage.

4 Geological resources

Marine energy (2½ of 4 indicators achieved)

• WeassessedthetidalenergyresourceofCookStrait,withtheresultsforminganMScthesis.

• WeestablishedcontactsandcollaborationswithgroupsinNewZealandwhoareinterestedinmarineenergyingeneral,andinCookStraitparticularly.

• Weformedourinternalresearchteamoffourparticipatingscientists,andinthecomingyearwewilllooktoincludingscientistsfromotherinstitutions.

• Thefieldexperimentalprogrammeisyettocommence,asessentialequipmentisnotyetavailable.

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Airborne geophysics (1 of 1 indicator achieved)

• Wedevelopedandappliednewinversiontechniquesforon-shoreaeromagneticdatafromtheTaupoVolcanicZone.BothCurie-depthandapparentmagnetisationmapswereproducedfromcommercialsurveydata.

Seabed and subsurface mapping and resource characterisation (4 of 4 indicators achieved)

• Wedevelopednewgeophysicalhardware/softwareforoffshoremineralexploration,bywritingandtestingsoftwareforbothCurie-depthandapparentmagnetisation.WeareabouttocommenceanupgradeofthemarinegravitymeterprovidedtousbytheRoyalNewZealandNavy.

• Wecontinuedupgradingmarinedatabases,completingthegeophysicalmetadatacompilation.

• Weinterpretednewhighresolutionmarinegeophysicaldata,presentingresultsataconferenceandpreparingareportforLINZ.

• WepresentedtwopapersdescribingtheforwardmodellingmethodologyofcharacterisingtheseafloorattheGeohabitatsconference.

Marine geochemistry (0 of 1 indicator achieved)

• Wecouldnotdeveloprobusttechniquesforunderseaventfluidandplumeanalysisbecauseofinstrumentfailure.However,weidentifiedthesourceoftheproblemandthesupplierisworkingontheissue.

Interpretation of subsurface geophysics and geology (3 of 3 indicators achieved)

• Sixstaffmembersreceivedtraininginavarietyofnewsoftwarepackagesusedbythepetroleumindustry.

• OnestaffmemberreceivedtrainingininversionandAVOanalysis,andwecompletedoneprojectforindustry.

• Tenstaffreceivedtraininginimage-loganalysis,andwesubmittedforpublicationamanuscriptontrackingmethane.

Geothermal sector research skills (2 of 2 indicators achieved)

• Wereviewedremotesensingtechniques.Previouslyusedinfraredtechniques,needingon-groundcalibration,arenowbeingsupersededbyradiometricimagingthatrecordsabsolutetemperaturedata.Wehavealsolearnttheimportanceofrecognisingsourceemissivityandatmosphericabsorptioneffectsonthedata.Thetechnologyhasthepotentialforveryhighresolutionwitha20cmpixelsize.

• Weachievedrefineddatahandling,fasterprocessing,andfasterresultvisualisation.Wecompletedanexampleofauser-selectablemap-imagelocator,anddevelopedthermalinfraredimagemosaickingmethods.Wedevelopedcodingtoidentifyimagesthatrevealtemperaturesindicativeofthermalfeatures.Usingthesemethods,wesuccessfullycreatedmapsoftemperatureforfourgeothermalfieldsintheTaupoVolcanicZone.

Gas hydrates characterisation (1 of 1 indicator achieved)

• WesecuredadditionalfundingfromFRSTforgashydrateresearch.Inaddition,wemadeprogressinestablishingournewresearchprogrammeonNewZealand’sgashydrateresources,withtheconfirmationofamarinesurveytobeconductedin2011,byhostingtheinternationalFieryIceconference,bypreparingareportforanoptionsanalysisforMED,andbysubmittingaresearchpaperforpublication.

Geomicrobiology (5 of 6 indicators achieved)

• Werecruitedanewmemberofourteam.

• Weaddedtoourteam’spublicationrecordwithtwopublishedpapers,onemanuscriptinpress,andtwoothermanuscriptshavingbeensubmitted.

• Wecouldnotstrengthenlinkstobiotechnologyindustrytotheextentwehopedbecausethecompaniesinquestionhavestatedtheyhavenocurrentrequirementsinourspecialistresearcharea.However,wearemaintainingcontactwiththemtotakeadvantageoffutureopportunities.

• Weinvestigatedandinitiatednewscreeningmethodsforpotentialtargetmoleculesviagenomicandbiochemicaltechniques.

• Weidentifiedseveralpotentialtargetmoleculesforindustrialdevelopment.

• Wedidnotidentifyanytargetspeciesinourculturecollectiontoscreenforbioactivecompoundsofinteresttobiotechnologypartners.Instead,wefocusedonworkingwithtwootherCRIstofacilitatecommercialuptakeofbioactivemolecules.Thesecollaborationshaveenabledtheidentificationofsixpreliminarytargetsforbioactivityscreeningforfuturecommercialinterest.

Bioproxies: proxies for determining biological and environmental changes (2 of 2 indicators achieved)

• Weestablishedtheappropriateleveloffilteringforthecost-effectiveanalysisofthequalityofhoneyusingpalynology.

• Wemadesignificantprogressinintegratingpaleodepthestimatesfrompaleontologywithseismicfaciesanalysis.Ourpublicationonsea-levelchangesassociatedwithdepositionofaformationintheGreatSouthBasinshowsthatitswellsarebettersuitedforthisprojectthanTaranakiBasinwells.Wehavenowselectedsuitablewellsandourmicropaleontologyindicatesthatthereisgoodpotentialtorefinepaleodepthestimatesbasedonthefirstdown-holeoccurrencesofkeyindicatorspecies.


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5 Environmental research

Groundwater (1½ of 2 indicators achieved)

• Wemaintainedourabilitytoprovidegroundwatersciencetolocalgovernmentend-users.Thesearespecifically:(a)groundwatermodelling,includingassessingtheeffectofshiftingurbanwatersupplywelllocationsontheWaimeaPlains,anddevelopingasteady-stategroundwater-streammodeltodeterminetheeffectofgroundwaterabstractiononspring-fedstream-flowintheLakePoukawacatchment;(b)3DgeologicalmodellingoftheWairauPlainandoftheHorowhenuaarea;(c)groundwater-surfacewaterinteractionsincludingafieldinvestigationofgroundwater-surfacewaterinteractionsinRuataniwhaPlain,andhydrochemicalclassificationofgroundwaterandriverstateoftheWellingtonRegionalCouncilenvironmentmonitoringsites.

• Weachievedonlyabouthalfourplannedprogressinreplacingourtritiumenrichmentandanalysissystem.Thenewelectrolysiscontrolunitisinplaceandwearenowfixingsoftwarebugs.Wecommissionedthenewlasersystemforanalysingdeuteriumconcentrationsinenrichedsamplesanditisworkingverywell.OurnewQuantuluscounterhasnotyetbeendelivered,butthemanufacturerhascompletedperformancetestingforus.Wearestillseekingappropriateimpurity-freematerialfortheconstructionofreplacementelectrolysiscells.

Predicting climate change (5 of 6 indicators achieved)

• Wewereunabletotransferradiometricdatingskillstojuniorstaffduetohighworkloads.

• Inordertoraisepublicawarenessofclimatechangeissues,weintegratedresearchresultsintotheNewZealandClimateChangeCentreprogrammethroughparticipationinconferences,workshopsandseminars.Wealsocompletedanoverviewofthekeyevidenceforhuman-inducedclimatechange,arebuttalofthemaincriticismsofthetheory,andadiscussionofsomeoftheuncertainties.Thisreportisbeingadaptedforuploadingtoourpublicwebsite.

• WeintegratedglacialgeomorphicmappingintoFRST-fundedresearchontheimpactsofclimatechangeonthehydrologyofalpineregionsthroughaseriesofmapspreparedincollaborationwithanoverseasexpert.

• WecollectedpilotsedimentcoresfromMcKenzieBasinglaciallakes.TheywerescannedattheUniversityofOtago.IntegratedstratigraphicandpaleoclimateanalysiswascompletedatourAvalonlaboratory.

• Weimprovedandcalibratedthecontinuousmelterforobtainingandsplittingsamplesintheicecorelaboratory.Throughputtodateis6000samples.Inaddition,weimplementedandtrainedstaffinDEXAice-scanning,withTasmanGlaciericecorebeingscannedandAntarcticcoresbeingrescannedtoimproveresults.

• Webuiltandcalibratedtheminiaturetritiumenrichmentsystem,designedforicecoresamples.

Carbon capture and storage (2 of 2 indicators achieved)

• WecontinuedtoreceiveworkthroughtheAustralianCO2CRC,whichsupportsourworkonNewZealandprojects.Theprojectsundertakenthisyearinclude:riskassessment,apetrographicstudyofKapuniGroupsediments,faultingandgeomechanics,highCO2naturalanalogues,andimageanalysisofthenewOtwayBasinwellCRC2.

• OursocialscienceteamhasdesigneditsworkprogrammeonpublicperceptionsandknowledgeofcarboncaptureandstorageinpartnershipwithMEDtoensurethatitsneedsaremet.WegainedsignificantknowledgethroughattendingmeetingsinFranceandAustralia.Wealsohostedcommunityfocusgroupstobetterunderstandpublicperceptionsofcarboncaptureandstorage.

Inaddition,wehaveincreasedouroverallstaffskills–13staffattendedtheCO2CRCSymposiumin2009inordertobecomefamiliarwiththebroadrangeoftopicscoveredbyresearchinAustraliaandNewZealand,andtoenhanceresearchcontactsinthoseareas.


41


Report of the Directors Fortheyearended30June2010

TheDirectorshavepleasureinpresentingtheAnnualReportandauditedaccountsofGNSSciencefortheyearended30June2010.ThefinancialstatementshavebeenpreparedinaccordancewithgenerallyacceptedaccountingpracticeinNewZealandandtheFinancialReportingAct1993.

TheAuditor-Generalisthestatutoryauditorpursuanttosection21oftheCrownResearchInstitutesAct1992.TheAuditor-GeneralhasappointedDeloittetoauditthefinancialstatementsandtoexpressanopiniononthem.Theirreportissetoutonpage64.

Principal activity

GNSScience’sprincipalactivityistoconductscientificresearch,consultancyservicesandproductdevelopmentinearthsciencesandisotopetechnologiesinaccordancewiththeprinciplesfortheoperationofCrownResearchInstitutessetoutinsections4and5oftheCrownResearchInstitutesAct1992.

Dividend

Subsequentto30June2010,adividendof$100,000wasdeclaredinrelationtothelastfinancialyear(2009:$240,000).

Remuneration of Directors

Directors’feesaresetbytheshareholdingministersannually.FeespaidtoDirectorsduringtheyearwere:

2010 $

2009 $

ConAnastasiou 46,000 46,000

RossButler 28,750 28,750

TomCampbell 23,000 -

EllenFörch 23,000 23,000

JohnHercus 23,000 23,000

SarahSchiess - 23,000

JaneTaylor 23,000 23,000

JohnWalters 23,000 23,000

MikeWilliams - 11,500

Employee remuneration

Inaccordancewithsection211(1)(g)oftheCompaniesAct1993,thenumbersofemployeeswhoreceivedremunerationandotherbenefitstotalling$100,000ormore,in$10,000bands,duringtheyearwere:

$000 2010 2009

100-110 28 24

110-120 25 13

120-130 9 10

130-140 9 6

140-150 5 5

150-160 1 1

160-170 5 -

$000 2010 2009

170-180 2 -

180-190 - 1

190-200 2 1

200-210 1 1

210-220 - 2

230-240 1 1

240-250 2 -

380-390* - 1

410-420* 1 -

*ChiefExecutive

Board composition

ConAnastasiouandEllenFörchretiredfromtheBoardon30June2010.ClaireMcGowan,KenShirleyandSteveWeaverwereappointedtotheBoardon1July2010.

Subsidiaries

TheCompanyhasfivesubsidiarycompanies:IsoscanLimitedGeologicalSurveys(NZ)LimitedIsoscanFoodLimitedGeologicalRiskLimitedGNSScienceInternationalLimited

ConAnastasiouandAlexanderMalahoffweretheDirectorsofeachofthesubsidiarycompaniesforthefinancialyear.TomCampbellreplacedConAnastasiouasDirectorofthecompaniesfrom1July2010.

Donations

TheCompanydonated$2,000totheLifeFlightTrustduringtheyear(2009:$2,000).

Directors’ indemnity

TheCompanyhasinsurancecoverforDirectorsinrespectofanyactoromissionintheircapacityasaDirectoroftheCompany.DirectorshavedeclaredtheirinterestsinaDeedofIndemnitydated17October1996,wherebytheCompanyindemnifiesDirectorsagainstanyliabilityforanyactoromissionsincurredintheircapacityasaDirector.

Events subsequent to balance date

TheDirectorsarenotawareofanymatterorcircumstancesincetheendofthefinancialyearnototherwisedealtwithinthisreportthathas,ormayhave,asignificanteffectontheoperationoftheCompany.

Certification

TheDirectorsconfirmthattheCompanyhasoperatedinaccordancewiththeCrownResearchInstitutesAct1992andtheCompaniesAct1993duringtheyear.

Note: Directors’ disclosures can be found on page 30.

OnbehalfoftheDirectors

Tom CampbellChairman18August2010

Report of the Directors

42


Income Statement Fortheyearended30June2010

inthousandsofNewZealanddollars Note

GroupActual

2010

GroupBudget

2010

GroupActual

2009

CompanyActual

2010

CompanyActual

2009

Revenue

Researchcontracts 18 34,532 32,803 29,792 34,532 29,792

Consultancy,servicesandproducts 21,688 21,740 21,938 21,470 21,558

GeoNet 18 8,742 8,770 8,789 8,742 8,789

Otherincome 161 104 187 161 187

Total revenue 3 65,123 63,417 60,706 64,905 60,326

Expenses

Employeebenefitexpense 31,584 32,530 30,506 31,581 30,432

Operatingexpenses 4 22,615 19,504 19,369 22,547 19,110

GeoNetdirectexpenses 18 4,119 4,274 4,395 4,119 4,395

Depreciation 8 3,473 3,452 3,272 3,473 3,272

Amortisation 9 753 700 627 679 550

Total expenses 62,544 60,460 58,169 62,399 57,759

Profit before finance costs and tax 2,579 2,957 2,537 2,506 2,567

Financeincome 12 25 128 7 126

Financeexpense (207) (360) (423) (207) (423)

Net finance costs (195) (335) (295) (200) (297)

Profit before tax 2,384 2,622 2,242 2,306 2,270

Incometaxexpense (661) (787) (702) (635) (702)

Taxeffectofremovaloftaxdepreciationonbuildings (675) - - (675) -

Total income tax expense 5 (1,336) (787) (702) (1,310) (702)

Profit after tax 1,048 1,835 1,540 996 1,568

Financial Statements

43


Statement of Comprehensive Income Fortheyearended30June2010


GroupActual

2010

GroupBudget

2010

GroupActual

2009

CompanyActual

2010

CompanyActual

2009

Profit after tax 1,048 1,835 1,540 996 1,568

Other comprehensive income

Cashflowhedges(netoftax) 7 483 - (483) 483 (483)

Total comprehensive income attributable to owners 1,531 1,835 1,057 1,479 1,085

Statement of Changes in Equity Fortheyearended30June2010


GroupActual

2010

GroupBudget

2010

GroupActual

2009

CompanyActual

2010

CompanyActual

2009

Balanceat1July 20,386 20,973 19,569 20,150 19,305

Profitaftertaxation 1,048 1,835 1,540 996 1,568

Hedgingreserve 7 483 - (483) 483 (483)

Total comprehensive income 1,531 1,835 1,057 1,479 1,085

Lessdividend 16 - (225) (240) - (240)

Balance at 30 June 21,917 22,583 20,386 21,629 20,150


44


Balance Sheet Asat30June2010


GroupActual

2010

GroupBudget

2010

GroupActual

2009

CompanyActual

2010

CompanyActual

2009

Equity

Sharecapital 6 6,167 6,167 6,167 6,167 6,167

Hedgingreserve 7 - - (483) - (483)

Retainedearnings 15,750 16,416 14,702 15,462 14,466

Total equity 21,917 22,583 20,386 21,629 20,150

Represented by:

Non-current assets

Property,plantandequipment 8 29,114 29,629 24,670 29,114 24,670

Intangibleassets 9 3,865 2,250 3,347 3,702 3,111

Investments 10 194 76 194 204 204

Assetsheldforsale 1,209 1,319 1,282 1,209 1,282

Total non-current assets 34,382 33,274 29,493 34,229 29,267

Current assets

Cashandcashequivalents 632 1,074 1,183 438 995

Tradereceivables 11 5,600 4,640 6,607 5,502 6,567

Prepayments 1,200 - 1,010 1,200 1,010

Currenttax 132 - - 180 -

Intercompanyadvances 19 - - - 453 183

Workinprogress 3,102 4,600 3,158 2,724 3,133

Total current assets 10,666 10,314 11,958 10,497 11,888

Total assets 45,048 43,588 41,451 44,726 41,155

Non-current liabilities

Borrowings 12 5,013 7,600 4,150 5,013 4,150

Deferredtax 13 1,168 319 366 1,153 318

Non-currentprovisions 14 1,703 1,360 1,406 1,703 1,406

Total non-current liabilities 7,884 9,279 5,922 7,869 5,874

Current liabilities

Tradeandotherpayables 15 4,938 3,561 5,007 4,919 4,955

Currentprovisions 14 1,856 2,240 1,944 1,856 1,944

Revenueinadvance 8,453 5,700 7,796 8,453 7,796

Provisionforincometax - - 156 - 196

Provisionfordividend 16 - 225 240 - 240

Total current liabilities 15,247 11,726 15,143 15,228 15,131

Total liabilities 23,131 21,005 21,065 23,097 21,005

Net assets 21,917 22,583 20,386 21,629 20,150ForandonbehalfoftheBoard:

Tom Campbell Ross Butler Chairman Deputy Chairman 18August2010


45


Statement of Cash Flows Fortheyearended30June2010


GroupActual

2010

GroupBudget

2010

GroupActual

2009

CompanyActual

2010

CompanyActual

2009

Cash flows from operating activities

Cash was provided from:

Receiptsfromcustomers 66,843 63,227 62,019 67,036 61,506

Interestreceived 12 25 128 7 126

66,855 63,252 62,147 67,043 61,632

Cash was applied to:

Paymentstosuppliersandemployees (57,891) (56,059) (54,223) (57,787) (53,916)

Interestpaid (207) (360) (423) (207) (423)

Incometaxpaid (822) (787) (199) (851) (177)

(58,920) (57,206) (54,845) (58,845) (54,516)

Net cash flows from operating activities 17 7,935 6,046 7,302 8,198 7,116

Cash flows from investing activities


Saleofproperty,plantandequipment 6 - 53 6 53

Repaymentofadvancesbysubsidiaries - - - - 78

6 - 53 6 131


Increaseininvestments - - (118) - (118)

Advancestosubsidiaries - - - (270) -

Purchaseofproperty,plant,equipmentandintangibleassets

(9,115) (8,700) (4,695) (9,114) (4,663)

(9,115) (8,700) (4,813) (9,384) (4,781)

Net cash flows from investing activities (9,109) (8,700) (4,760) (9,378) (4,650)

Cash flows from financing activities


Bankborrowings 863 2,900 - 863 -


Repaymentofbankloans - - (2,550) - (2,550)

Dividendspaid (240) (240) (175) (240) (175)

(240) (240) (2,725) (240) (2,725)

Net cash flows from financing activities 623 2,660 (2,725) 623 (2,725)

Net (decrease)/increase in cash and cash equivalents

(551) 6 (183) (557) (259)

Opening cash and cash equivalents 1,183 1,068 1,366 995 1,254

Closing cash and cash equivalents 632 1,074 1,183 438 995


46


Notes to the Financial Statements Fortheyearended30June2010

1. Statement of Accounting Policies

1.1 Reporting entity and activities

TheInstituteofGeologicalandNuclearSciencesLimitedisestablishedundertheCrownResearchInstitutesAct1992andtheCompaniesAct1993.Itssubsidiarycompanies,IsoscanLimited,IsoscanFoodLimited,GeologicalSurveys(NewZealand)Limited,GNSScienceInternationalLimitedandGeologicalRiskLimitedareestablishedundertheCompaniesAct1993.Thefinancialstatementshavebeenpreparedinaccordancewithsection17oftheCrownResearchInstitutesAct1992,thePublicFinanceAct1989,theCompaniesAct1993andtheCrownEntitiesAct2004.

FinancialstatementsfortheInstituteofGeologicalandNuclearSciencesLimited(the“Company”)andconsolidatedfinancialstatements(the“Group”)arepresented.TheconsolidatedfinancialstatementscomprisetheCompanyanditssubsidiaries(setoutinnote10).

TheprincipalactivitiesoftheCompanyaretoundertakegeoscienceandisotopescienceresearch,developmentandconsultancy,predominantlyinNewZealand.

1.2 Statement of compliance

ThesefinancialstatementshavebeenpreparedinaccordancewithNewZealandgenerallyacceptedaccountingpractice.TheycomplywithNewZealandequivalentstoInternationalFinancialReportingStandards(NZIFRS)andotherapplicableFinancialReportingStandards,asappropriateforprofit-orientedentities.ThefinancialstatementsalsocomplywithInternationalFinancialReportingStandards(IFRS).

Theaccountingpoliciessetoutbelowhavebeenappliedconsistentlytoallperiodspresentedinthefinancialstatements.

1.3 Significant Accounting Policies

1.3.1 Measurement basis

ThefinancialstatementsoftheGroupandCompanyhavebeenpreparedonanhistoricalcostbasis,exceptthatderivativefinancialinstrumentsarerecognisedbothinitiallyandsubsequentlyattheirfairvalue.

ThefinancialstatementsarepresentedinNewZealanddollarsandallvaluesareroundedtothenearestthousanddollars.ThefunctionalcurrencyoftheGroupisNewZealanddollars.

1.3.2 Subsidiaries – basis of consolidation

SubsidiariesarethoseentitiescontrolledbytheCompany.ControlisachievedwheretheCompanyhasthepowertogovernthefinancialandoperatingpoliciesofanentitytoobtainbenefitsfromitsactivities.

Thefinancialstatementsofsubsidiariesareincludedintheconsolidatedfinancialstatementsusingthepurchasemethodofconsolidation.Theeffectsofintra-grouptransactionsareeliminatedintheconsolidatedfinancialstatements.

InvestmentsinsubsidiariesarerecordedatcostintheCompany’sfinancialstatements.

1.3.3 Interest in joint ventures

Jointventuresarecontractualarrangementswithotherparties,inwhichtheCompanyoritssubsidiarieshavejointandseveralliabilityinrespectofcostsandliabilitiesandsharesinanyresultingoutput.TheCompany’sshareoftheassets,liabilities,revenuesandexpensesofjointventuresisincorporatedintotheconsolidatedfinancialstatementsonaline-by-linebasisusingtheproportionatemethod.

1.3.4 Critical accounting estimates and judgements

InapplyingtheCompany’saccountingpolicies,thereistherequirementforjudgements,estimatesandassumptionstobemadeaboutthecarryingamountsofsomeassetsandliabilities.Theestimatesandassumptionsarebasedonhistoricalexperienceandotherrelevantfactors.Actualresultsmaydifferfromtheseestimates.

Theaccountingpolicieswherecriticalestimatesandjudgementshavebeenmadeincludeproperty,plantandequipment,intangibleassets,impairmentofassetsandliabilities,employeebenefits,andthevaluationofworkinprogress.Refertoparticularaccountingpoliciesnote.

2. Particular Accounting Policies

2.1 Revenue recognition

2.1.1 Revenue from goods and services

Revenueearnedfromthesupplyofgoodsandservicesismeasuredatthefairvalueofconsiderationreceived.Revenuefromservicesisrecognisedbasedonthepercentageofworkcompleted.Anyamountsreceivedinrelationtoworknotyetcommencedarerecordedasrevenueinadvance.

Revenuefromthesupplyofgoodsisrecognisedwhenthesignificantrisksandrewardsofownershipofthegoodshavebeentransferredtothebuyer.

2.1.2 Royalties

Royaltyrevenueisrecognisedonanaccrualbasisinaccordancewiththesubstanceoftherelevantagreement.Royaltiesdeterminedonatimebasisarerecognisedonastraight-linebasisovertheperiodoftheagreement.

2.1.3 Interest revenue

Interestrevenueisaccruedonatimebasisattheeffectiveinterestrate.

2.1.4 Rental income

Rentalincomefromoperatingleasesisrecognisedonastraight-linebasisoverthetermofthelease.

2.2 Goods and services tax

ThefinancialstatementsarepresentedexclusiveofGST,exceptforreceivablesandpayables,whicharepresentedonaGSTinclusivebasis.

Notes to the Financial Statements

47


2.3 Work in progress

Workinprogressisvaluedbasedonthepercentageofworkcompleted,lessamountsinvoicedandprovisionsforunrecoverableamounts.Costincludeslabour,directcostsandanallocationofoverhead.Thevalueofworkinprogressisregularlyassessedwithreferencetocontractvaluesorestimatedlikelyfutureincomestreams.

2.4 Assets held for sale

Assetsareclassifiedasheldforsaleiftheassetisavailableforsaleinitspresentcondition.Theywillbeclassifiedaseitheranon-currentorcurrentassetdependingonwhetheritcanbereasonablyexpectedthatasalewillbecompletedwithinoneyear.

Theyarerecordedinthebalancesheetvaluedattheloweroftheircarryingamountandfairvaluelesscoststosell.

2.5 Property, plant and equipment

Property,plantandequipmentarestatedatcostlessaccumulateddepreciationandimpairment.Costincludesexpenditurethatisdirectlyattributabletotheacquisitionoftheitem.Assetshavebeendepreciatedonastraight-linebasisatratescalculatedtoallocatetheassets’costovertheirestimatedremainingusefullives.Freeholdlandisnotdepreciated.

Theestimatedusefullives,residualvaluesanddepreciationmethodsarereviewedannually,withtheeffectofanychangesinestimateaccountedforonaprospectivebasis.

Thegainorlossarisingonthedisposalorretirementofanitemofproperty,plantandequipmentisrecognisedintheincomestatement.

Thefollowingusefullivesareusedinthecalculationofdepreciation:

Buildings–woodenconstruction–concreteconstruction

40years50years

Plant,machineryandlaboratoryequipment 3–15years

Furniture,fittingsandofficeequipment 3–15years

ITequipment 4–8years

Vehicles 5years

Leaseholdimprovements 9–10years

2.6 Intangible assets

Softwareandpatentshaveafinitelifeandareincludedatcostlessaccumulatedamortisationandimpairment.Amortisationischargedonastraight-linebasisatratescalculatedtoallocatetheassets’costovertheirestimatedremainingusefullives.

Theestimatedusefullifeandamortisationmethodarereviewedannually,withtheeffectofanychangesinestimatebeingaccountedforonaprospectivebasis.

Thefollowingusefullivesareusedinthecalculationofamortisation:

Software 4–8years

Patents 4–17years

Intangibleassetsunderconstructionarecapitalisedatcostandarenotamortiseduntiltheassethasbeencompleted.

2.7 Impairment of tangible and intangible assets

Thecarryingamountsoftangibleandintangibleassetsarereviewedateachbalancedatetodeterminewhetherthereisanyindicationthatthoseassetshavesufferedanimpairmentloss.Ifanysuchindicationexists,referenceismadetotheasset’srecoverableamount.Therecoverableamountisthehigherofanasset’sfairvaluelesscoststosell,andvalueinuse.

Iftherecoverableamountofanassetisestimatedtobelessthanitscarryingamount,thecarryingamountoftheassetisreducedtoitsrecoverableamount.Animpairmentlossisrecognisedimmediatelyintheincomestatement.

Whereanimpairmentlosssubsequentlyreverses,thecarryingamountoftheassetisincreasedtotherevisedestimateofitsrecoverableamount,onlytotheextentthattheincreasedcarryingamountdoesnotexceedthecarryingamountthatwouldhavebeendeterminedhadnoimpairmentlossbeenrecognisedfortheassetinprioryears.Areversalofanimpairmentlossisrecognisedintheincomestatement.

2.8 Collections, library and databases

TheCompanyownsvariouscollections,libraryresourcesanddatabasesthatareanintegralpartoftheresearchworkundertakenbytheCompany.Thesecollectionsarehighlyspecialisedandthereisnoreliablebasisforestablishingavaluation.Theyhavethereforenotbeenvaluedforfinancialreportingpurposes.Thetwomajorcollectionsare:

TheNationalPaleontologicalCollection

TheNationalPetrologicalReferenceCollection

2.9 Financial assets

2.9.1 Classification of financial assets

Financialassetsareclassifiedintothefollowingcategories:‘financialassetsatfairvaluethroughprofitorloss’(FVTPL),‘heldtomaturityinvestments’,‘available-for-salefinancialassets’and‘loansandreceivables’.Theclassificationdependsonthenatureandpurposeofthefinancialassetandisdeterminedatthetimeofinitialrecognition.

FVTPLassetsaremeasuredatfairvaluewithanyresultantgainorlossrecognisedintheincomestatement.

TheCompanyholdsloansandreceivables.Thesearemeasuredatcostlessimpairment,orinthecaseoftradereceivables,reducedbyanallowancefordoubtfuldebts.

2.9.2 Impairment of financial assets

Financialassetsareassessedforindicatorsofimpairment.Financialassetsareimpairedwhenthereisobjectiveevidencethattheestimatedfuturecashflowsoftheassethavebeenimpacted.

Whenatradereceivableisconsidereduncollectible,itiswrittenoffagainsttheallowance.Subsequentrecoveriesofamountspreviouslywrittenoffarecreditedagainsttheallowancefordoubtfuldebts.Changesinthecarryingamountofdoubtfuldebtsarerecognisedintheincomestatement.

Notes to the Financial Statements

48


2.10 Financial liabilities

2.10.1 Classification of financial liabilities

Financialliabilities,excludingderivativefinancialinstruments,areclassifiedas‘otherfinancialliabilities’.

Otherfinancialliabilities,includingborrowings,areinitiallymeasuredatfairvalue,netoftransactioncosts.Otherfinancialliabilitiesaresubsequentlymeasuredatamortisedcost,withinterestexpenserecognisedonaneffectiveinterestbasis.

2.10.2 Effective interest rate method

Theeffectiveinterestratemethodcalculatestheamortisedcostofafinancialassetorliabilityandallocatesinterestincomeorexpenseovertherelevantperiod.Theeffectiveinterestrateistheratethatexactlydiscountsestimatedfuturecashreceiptsorpaymentsthroughtheexpectedlifeofthefinancialassetorliabilitytothenetcarryingamountofthefinancialassetorliability.

2.11 Derivative financial instruments

TheCompanyusesderivativefinancialinstruments,mainlyforwardexchangecontracts,tohedgeitsexposuretoforeignexchangeriskarisingfromitsoperations.TheCompanydoesnotholdorissuetheseinstrumentsfortradingpurposes.

Derivativefinancialinstrumentsarerecognisedbothinitiallyandsubsequentlyatfairvaluewithreferencetoobservablemarketinputs.

TheCompanydesignatesallinstrumentshedgingafirmcommitmentascashflowhedges.Attheinceptionofthehedge,theCompanydocumentstherelationshipbetweenthehedginginstrumentandthehedgeditemalongwithitsriskmanagementobjectivesforundertakingthehedge.Itperiodicallyevaluatestheeffectivenessofthehedge.Wherethehedgequalifiesaseffective,changesinthefairvalueoftheinstrumentaredeferredinequity.Theamountsdeferredarerecycledfromequitytotheincomestatementortothebalancesheetontherecognitionofthehedgedtransaction.

Whentheforecasttransactionthatishedgedresultsintherecognitionofanon-financialassetoranon-financialliability,thegainsandlossespreviouslyrecognisedinthehedgingreservearereclassifiedfromequityandincludedintheinitialmeasurementofthecostoftheassetorliability.

HedgeaccountingisdiscontinuedwhentheCompanyrevokesthehedgingrelationship,orthehedginginstrumentexpiresorissold,terminatedorexercised,ornolongerqualifiesforhedgeaccounting.Anycumulativegainorlossrecognisedinthehedgingreserveatthetimeremainsinequityandisrecognisedwhentheforecasttransactionisultimatelyrecognisedinprofitorloss.Whenaforecasttransactionisnolongerexpectedtooccur,thecumulativegainorlossthatwasrecognisedinthehedgingreserveisrecognisedimmediatelyinprofitorloss.

Movementsinthevalueofinstrumentsthatarenotdesignatedascashflowhedgesordonotqualifyaseffectivearerecognisedintheincomestatement.

2.12 Foreign currencies

TransactionsinforeigncurrenciesareconvertedattheNewZealandrateofexchangerulingonthedateofthetransaction.MonetaryassetsandliabilitiesatyearendareconvertedtoNewZealanddollarsattheexchangeraterulingatbalancedate.Allexchangedifferencesarerecordedintheincomestatement,exceptwhendeferredinequitywhenhedgeaccountingisapplied.

2.13 Employee benefits

Liabilitiesforwagesandsalaries,annualleave,longserviceleaveandretirementleavearerecognisedwhenitisprobablethatsettlementwillberequiredandtheyarecapableofbeingreliablymeasured.

Employeebenefitstobesettledwithintwelvemonthsarereportedattheamountexpectedtobepaid.Employeebenefitsnotexpectedtobesettledwithintwelvemonthsarereportedatthepresentvalueoftheestimatedfuturecashoutflows.

Provisionsforlongserviceleaveandretirementleavedependonanumberofassumptionssuchastheexpectedemploymentperiodofemployees,salarylevelsandthetimingofemployeestakingleave.WhenmeasuringemployeebenefitliabilitiesthetenyearNewZealandGovernmentbondrateisusedastheappropriatediscountrate,thesalaryincreasefactorisbasedonforecastinformationandemployeepatternofleaveisdeterminedafterconsideringhistoricaldata.

2.14 Taxation

Incometaxexpenserepresentsthesumofthetaxcurrentlypayableanddeferredtax.

Currenttaxiscalculatedbyreferencetotheamountofincometaxpayableorrecoverableinrespectofthetaxableprofitorlossfortheperiod.Currenttaxforcurrentandpriorperiodsisrecognisedasaliability(orasset)totheextentthatitisunpaid(orrefundable).Taxableprofitdiffersfromprofitasreportedintheconsolidatedincomestatementbecauseitexcludesitemsofincomeorexpensethataretaxableordeductibleinotheryearsanditfurtherexcludesitemsthatarenevertaxableordeductible.TheCompany’sliabilityforcurrenttaxiscalculatedusingtaxratesthathavebeenenactedorsubstantivelyenactedatbalancedate.

Deferredtaxisaccountedforusingthecomprehensivebalancesheetliabilitymethodinrespectoftemporarydifferencesarisingfromdifferencesbetweenthecarryingamountofassetsandliabilitiesinthefinancialstatementsandthecorrespondingtaxbaseofthoseitems.Inprinciple,deferredtaxliabilitiesarerecognisedforalltaxabletemporarydifferences.

Deferredtaxassetsarerecognisedtotheextentthatitisprobablethatsufficienttaxableamountswillbeavailableagainstwhichdeductibletemporarydifferencesorunusedtaxlossesandtaxoffsetscanbeutilised.

Thecarryingamountofdeferredtaxassetsisreviewedateachbalancesheetdateandreducedtotheextentthatitisnolongerprobablethatsufficienttaxableprofitswillbeavailabletoallowallorpartoftheassetstoberecovered.

Deferredtaxassetsandliabilitiesaremeasuredatthetaxratesthatareexpectedtoapplyintheperiodinwhichtheliabilityissettledortheassetrealised.

Notes to the Financial Statements (continued)

49


2.15 Leases

Leasesareclassifiedasfinanceleaseswheneverthetermsoftheleasetransferasignificantportionofalloftherisksandrewardsofownershiptothelessee.Allotherleasesareclassifiedasoperatingleases.

TheGrouphasnoleaseswhichwouldbeclassifiedasfinanceleases.

Operatingleasepaymentsarerecognisedonasystematicbasisrepresentingthepatterninwhicheconomicbenefitsfromtheleasedassetareconsumedovertheleaseterm.

2.16 Statement of cash flows

Forthepurposeofthestatementofcashflows,cashandcashequivalentsincludecashonhandandinbanksandinvestmentsinmoneymarketinstruments,netofoutstandingbankoverdrafts.Thefollowingtermsareusedinthestatementofcashflows:

Operating activities–aretheprincipalrevenue-producingactivitiesoftheCompanyandotheractivitiesthatarenotinvestingorfinancingactivities.

Investing activities–aretheacquisitionanddisposaloflong-termassetsandotherinvestmentsnotincludedincashequivalents.

Financing activities–areactivitiesthatresultinchangesinthesizeandcompositionoftheequityandborrowingsoftheCompany.

3. Revenue

inthousandsofNewZealanddollarsGroup

2010Group

2009Company

2010Company

2009

Provisionofservices 63,461 58,446 63,436 58,695

Saleofgoods 127 532 127 145

Royaltiesandlicencerevenue 1,375 1,541 1,182 1,299

Rentalincome 127 184 127 184

Otherincome 33 3 33 3

Total revenue 65,123 60,706 64,905 60,326

4. Operating expenses

Operatingexpensesinclude:

Auditor’sremuneration

–Auditofthefinancialstatements 74 68 63 62

–Otherassuranceservices 7 5 7 5

Baddebts 5 114 5 114

Directors’fees 190 201 190 201

Donations 2 2 2 2

Lossonforeignexchange 302 14 293 45

Rentexpense 208 217 208 217

Developmentcosts 200 176 200 176

Siteandcommunications 2,254 2,102 2,254 2,102

Materialsandsupplies 3,740 2,592 3,729 2,592

Conferencesandtraining 829 972 829 972

Servicesandcontracts 11,440 10,291 11,413 10,405

Otherexpenses 3,364 2,615 3,354 2,217

Total operating expenses 22,615 19,369 22,547 19,110


50


5. Income taxes

Theincometaxexpenseisdeterminedasfollows:


2010Group

2009Company

2010Company

2009

Reconciliation of income tax expense

Profitbeforeincometax 2,384 2,242 2,306 2,270

Taxatcurrentrateof30% 715 673 692 681

Effectofexpensesthatarenotdeductibleindeterminingtaxableprofit 28 29 25 21

Effectondeferredtaxbalancesduetothechangeinincometaxratefrom30%to28%(effective1July2010)

(82) - (82) -

Tax before adjustment for removal of tax depreciation on buildings 661 702 635 702

Effectofremovaloftaxdepreciationonbuildings* 675 - 675 -

Total tax expense 1,336 702 1,310 702

Thetaxationchargeisrepresentedby:

Currenttax 547 671 488 670

Deferredtax 789 31 822 32

Total tax expense 1,336 702 1,310 702

*Inthe2010BudgetStatementtheGovernmentannounced(andsubsequentlyenacted)legislationtoeffectivelyremovedepreciationdeductionsonbuildingswithexpectedlivesof50yearsormorefromthe2012incomeyear.Thischangelowersthetaxbaseforsuchbuildingswhichcreatesa“one-off”increaseinboththedeferredtaxliabilityandtaxexpenseinthecurrentyear.

6. Share capital

Authorisedandissuedcapital:6,167,000ordinaryshares 6,167 6,167 6,167 6,167

Allordinarysharesrankequallywithrespecttodividendsandrepaymentofcapitalandeachcarrytherighttoonevoteatanyannualgeneralmeeting.

7. Hedging reserve

Balanceat1July (483) - (483) -

Lossrecognisedoncashflowhedges (323) (468) (323) (468)

Incometaxrelatedtoamountsrecognisedinequity 242 (5) 242 (5)

Transferredtoinitialcarryingvalueofhedgeditem–cashflowhedges 806 (15) 806 (15)

Taxonamountstransferredtoinitialcarryingvalueofhedgeditem (242) 5 (242) 5

- (483) - (483)

Thehedgingreserverelatestotheaggregateamountofunrealisedlossesunderforwardforeignexchangecontractsdesignatedascashflowhedgesdeferredinequity.Referalsotonote21.5.


51


8.

Pro

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52


9. Intangible assets

Group

inthousandsofNewZealanddollarsSoftware Patents Capitalised

development costsTotal

Cost

Balanceat1July2008 4,303 376 1,006 5,685

Additions 1,300 131 - 1,431

Disposals (371) (36) (300) (707)

Balanceat30June2009 5,232 471 706 6,409

Additions 1,136 86 49 1,271

Disposals (584) - - (584)

Balance at 30 June 2010 5,784 557 755 7,096

Accumulated amortisation and impairment

Balanceat1July2008 2,673 99 - 2,772

Disposals (335) (2) - (337)

Amortisation 600 27 - 627

Balanceat30June2009 2,938 124 - 3,062

Disposals (584) - - (584)

Amortisation 646 33 74 753

Balance at 30 June 2010 3,000 157 74 3,231

Net book value at 30 June 2010 2,784 400 681 3,865

Netbookvalueat30June2009 2,294 347 706 3,347

Company

Cost

Balanceat1July2008 3,813 376 1,006 5,195

Additions 1,256 131 - 1,387

Disposals (351) (36) (300) (687)

Balanceat30June2009 4,718 471 706 5,895

Additions 1,135 86 49 1,270

Disposals (584) - - (584)

Balance at 30 June 2010 5,269 557 755 6,581

Accumulated amortisation and impairment

Balanceat1July2008 2,464 99 - 2,563

Disposals (327) (2) - (329)

Amortisation 523 27 - 550

Balanceat30June2009 2,660 124 - 2,784

Disposals (584) - - (584)


Balance at 30 June 2010 2,648 157 74 2,879

Net book value at 30 June 2010 2,621 400 681 3,702

Netbookvalueat30June2009 2,058 347 706 3,111

AnimpairmentreviewofintangibleassetswasundertakenbytheCompanyatyearend.Thisreviewdeterminedthatnoimpairmentadjustmentwasnecessary.


53


10. Investments


2010Group

2009Company

2010Company

2009

Investmentinsubsidiaries - - 10 10

Otherinvestments 194 194 194 194

Total investments 194 194 204 204

10.1 Investment in subsidiaries

Subsidiary Balance DateOwnership and voting interest Principal Activity

IsoscanLimited 30June 100% Developmentandsaleofnon-invasivescanningtechnologyforindustry.

IsoscanFoodLimited 30June 100% Holdsa50%interestinMeatvisionLimited,ajointventureundertakingthedevelopmentandsaleofnon-invasivescanningtechnologyforthemeatindustry.

GeologicalSurveys(NZ)Limited 30June 100% Holdsa45%interestinPropertyInsight,anunincorporatedjointventurewhichsellspropertydata.

GeologicalRiskLimited 30June 100% Holdsa50%interestinRiskscapeNZ,anunincorporatedjointventureundertakinghazardassessmentresearch.

GNSScienceInternationalLimited 30June 100% Undertakesinternationalresearchconsultancywork.

10.2 Other investments

TheCompanyhasaninvestmentof$194,000(2009:$194,000)inNewZealandSynchrotronGroupLimited,representinga6.75%interest.ThisinvestmentallowstheCompanyrightstobeamtimeontheAustralianSynchrotron(lightandx-raysource).

11. Trade receivables


2010Group

2009Company

2010Company

2009

Tradereceivables 5,605 6,725 5,507 6,685

Allowancefordoubtfuldebts (5) (118) (5) (118)

5,600 6,607 5,502 6,567

Thecarryingvalueofreceivablesapproximatestheirfairvalue.Asat30June2010,alloverduereceivableswereassessedforimpairmentandappropriateprovisionsapplied.

11.1 Ageing profile of past due trade receivables at balance date

Pastdue1-30days 224 850 224 853

Pastdue30-60days 129 584 129 573

Pastdueover61days 535 1,156 461 1,133

888 2,590 814 2,559

11.2 Movement in the provision for doubtful debts

Balanceat1July 118 9 118 9

Accountswrittenoffduringtheyear (118) (5) (118) (5)

Increaseinallowancerecognisedinprofitorloss 5 114 5 114

5 118 5 118

Thecreditqualityoftradereceivablesthatareneitherpastduenorimpairedisconsideredsound.


54


12. Borrowings


2010Group

2009Company

2010Company

2009

LoanfromTheNationalBankofNewZealandLimited 5,013 4,150 5,013 4,150

FacilityThetotalfacilityavailabletotheCompanyat30June2010is$9,250,000(2009:$7,650,000).Thefacilityismadeupofa$3,000,000termloanmaturingon27November2011withtheremaining$6,250,000facilitybeingaflexiblecreditfacility.

InterestThetermloanhasaninterestrateof5.53%fixeduntil27November2010.Theflexiblecreditfacilityincursinterestbasedonthebank’scostoffundsplusamarginof0.85%.Thisrateisreviewedbythebankonaquarterlybasis.

Repayment termsThetermloanmatureson27November2011andinterestispaidmonthly.Interestcostsarepaidmonthlyontheflexiblecreditfacilityandthefacilityhasareviewdateof31July2011.

SecurityThefacilityisprovidedsubjecttoanegativepledgethattheCompanydoesnotencumberanyassetsorprovidesecuritywherebytheaggregateofsuchencumbrancesisgreaterthan5%oftotaltangibleassets.

13. Deferred tax liability

13.1 Temporary differences

Deferred tax liabilities/(assets) arise from the following:

Property,plantandequipment 1,713 1,084 1,713 1,084

Intangibleassets 315 255 325 251

Provisions (851) (927) (876) (971)

Doubtfuldebts (1) (35) (1) (35)

Capitalisedrelocationexpenses (8) (11) (8) (11)

1,168 366 1,153 318

13.2 Movements in deferred tax

Balanceat1July 366 335 318 286

Chargedtoincome 196 31 229 32

Effectofremovaloftaxdepreciationonbuildings 675 - 675 -

Changeintaxrate(30%to28%effective1July2010) (82) - (82) -

789 31 822 32

Adjustmentbetweencurrentanddeferredtax–prioryear 13 - 13 -

1,168 366 1,153 318

UndersectionME1oftheIncomeTaxAct(2004),theCompanyisnotrequiredtomaintainanimputationcreditaccount.


55


14. Provisions

Current Non-current


2010Group

2009Company

2010Company

2009Group

2010Group

2009Company

2010Company

2009

Annualleave 1,612 1,890 1,612 1,890 415 - 415 -

Longserviceleave 99 54 99 54 794 756 794 756

Retirementleave 145 - 145 - 494 650 494 650

1,856 1,944 1,856 1,944 1,703 1,406 1,703 1,406

15. Trade and other payables


2010Group

2009Company

2010Company

2009

Tradepayables 2,700 1,700 2,681 1,648

Accruedexpenses 708 2,409 708 2,409

Otherpayables 1,530 415 1,530 415

Otherfinancialliabilities - 483 - 483

4,938 5,007 4,919 4,955

Tradeandotherpayablesarenon-interestbearingandarenormallysettledonthe20thofthemonthfollowingreceiptofinvoice.Thecarryingvalueofcreditorsandotherpayablesapproximatestheirfairvalue.

16. Provision for dividend

On7August2009adividendof$240,000(2009:$175,000)waspaidtoholdersoffullypaidordinarysharesinrespectofthepreviousfinancialyear.On21July2010theDirectorsapprovedadividendof$100,000inrespectofthe2010year.

17. Reconciliation of profit after tax to statement of cash flows

Profit after tax 1,048 1,540 996 1,568

Adjust non-cash items

Depreciation 3,473 3,272 3,473 3,272


(Increase)/decreaseincurrenttax (288) 472 (376) 493

Increaseindeferredtax 802 31 835 32

(Gain)/lossonsaleofassets (6) 18 (6) 18

Increaseinnon-currentprovisions 297 90 297 90

5,031 4,510 4,902 4,455

Add/(less) movements in working capital items:

Decrease/(Increase)inaccountsreceivableandprepayments 817 (1,226) 875 (1,359)

Increaseincurrentliabilities 260 2,539 293 2,513

Decreaseinworkinprogress 56 487 409 487

1,133 1,800 1,577 1,641

Lessmovementincurrentliabilitiesclassifiedasfinancingactivities 240 (65) 240 (65)

Lessmovementincurrentliabilitiesrelatingtohedgingreserve 483 (483) 483 (483)

723 (548) 723 (548)

Net cash flows from operating activities 7,935 7,302 8,198 7,116


56


18. Related party transactions

TheultimateshareholderoftheCompanyistheCrown.AlltransactionswiththeCrownareundertakenonanarm’slengthbasis.RevenuederivedfromtheCrown,assetoutintheincomestatement,includes:

inthousandsofNewZealanddollars 2010 2009 Source

Researchcontracts 28,109 24,645 FoundationforResearch,ScienceandTechnology

Capabilityfundingcontract 5,317 4,215 MinistryofResearch,ScienceandTechnology

Marsdenfundingcontracts 1,106 932 RoyalSocietyofNewZealand

34,532 29,792

TheCompanyhasanagreementwiththeEarthquakeCommission(EQC)toimplementandoperateaseismicnetworkthroughoutNewZealandontheirbehalf(GeoNet).Amountsfortheyearended30June2010are:

inthousandsofNewZealanddollars 2010 2009

Revenue 8,742 8,789

Directcosts(includingequipmentpurchases) 4,119 4,395

Personnelandoverheadrecoveries 4,623 4,394

8,742 8,789

Workinprogress (173) 84

TheCompanyundertakesmanytransactionswithState-OwnedEnterprises,governmentdepartments,otherCrownentitiesandotherCrownResearchInstitutes.Thesetransactionsarecarriedoutonacommercialandarm’slengthbasisanditisnotconsideredthattheserequirerelatedpartydisclosure.

ThetotalremunerationpaidtoDirectorsandkeymanagementpersonnelduringtheyearwasasfollows:

Short-termbenefits 2,139 2,273

19. Transactions with subsidiaries

DuringtheyeartheCompanyprovidedtechnicalanddevelopmentservicesrelatingtotimberscanningproductstoIsoscanLimitedtotalling$15,000(2009:$347,000).

TheCompanyprovidedconsultancyservicestotalling$901,000(2009:$283,000)toGNSScienceInternationalLimitedforthedeliveryofconsultancyservicestooverseascustomers.TheCompanypaidamanagementfeeof$50,000toGNSScienceInternationalLimitedduringtheyear(2009:$nil).At30June2010atradereceivableof$5,000(2009:$3,080)wasduefromGNSScienceInternationalLimited.

InterestfreetreasuryadvanceswithnospecificrepaymenttermsweremadebytheCompanytoitssubsidiariesduringtheyear.Allothertransactionswithsubsidiarycompaniesaremadeonanarm’slengthbasis.

20. Transactions with joint ventures

IsoscanFoodLimitedhasa50%interestinMeatvisionLimited–ajointventurewithAnzcoFoodsLimited.Alltransactionswerecarriedoutonacommercialandarm’slengthbasis.DuringtheyeartheCompanyprovidedtechnicalanddevelopmentservicestoMeatvisionLimitedfornon-invasivemeatscanningtechnologytotalling$32,000(2009:$125,000).TheCompanyalsoonchargedpatentcoststoMeatvisionLimitedtotalling$1,000(2009:$41,000).Servicefeesof$nil(2009:$9,000)werepaidbyMeatvisionLimitedtoIsoscanFoodLimitedduringtheyear.

GeologicalRiskLimitedhasajointventure,RiskscapeNZ,withtheNationalInstituteforWaterandAtmosphericResearchLimited.Researchservicestotalling$370,000(2009:$889,000)wereprovidedbytheCompanytoRiskscapeNZduringtheyear.Alltransactionswerecarriedoutonacommercialandarm’slengthbasis.

GeologicalSurveys(NZ)Limitedhasa45%interestinPropertyInsight–ajointventurewithQuotableValueLimitedandNiuPacificLimited.TheCompanybilledanamountof$nil(2009:$29,000)toPropertyInsightfortheprovisionofdataandservices.Alltransactionswerecarriedoutonacommercialandarm’slengthbasis.


57


ThefollowingamountshavebeenincludedintheconsolidatedfinancialstatementsastheCompany’sshareofthejointventures:


Revenue 219 295

Expenses 223 319

Operatingprofitbeforetax (4) (24)

Incometax (1) (7)

Operatingprofitaftertax (5) (31)

Currentassets 223 241

Non-currentassets 162 236

Currentliabilities 67 116

Non-currentliabilities 16 48

Therearenocontingentliabilitiesinanyoftheabovejointventures(2009:nil).

21. Financial instruments

21.1 Capital risk management

TheCompanymanagesitscapitaltoensurethatentitiesintheGroupwillbeabletocontinueasgoingconcernswhilemaximisingthereturntoshareholdersthroughtheoptimisationofthedebtandequitybalance.TheCompany’soverallstrategyremainsunchangedfrom2009.

ThecapitalstructureoftheCompanyconsistsofdebt,whichincludestheborrowingsdisclosedinnote12,cashandcashequivalents,andequityattributabletoequityholdersoftheparent,comprisingissuedcapital,reservesandretainedearnings.

TheCompanyisnotsubjecttoanyexternallyimposedcapitalrequirements.

21.2 Categories of financial instruments


2010Group

2009Company

2010Company

2009

Financial assets – loans and receivables

Cashandcashequivalents 632 1,183 438 995

Tradeandotherreceivables 5,600 6,607 5,502 6,567

Total financial assets 6,232 7,790 5,940 7,562

Investments 194 194 204 204

Financial liabilities measured at amortised cost

Tradeandotherpayables (4,938) (4,524) (4,919) (4,472)

Borrowings (5,013) (4,150) (5,013) (4,150)

Total financial liabilities (9,951) (8,674) (9,932) (8,622)

Derivatives designated as fair value hedging instruments - (483) - (483)

21.3 Financial risk management objectives

TheCompanymonitorsandmanagesthefinancialrisksrelatingtoitsoperationsthroughdailymonitoringofitscashpositionandregularboardreporting.

TheCompanyseekstominimisetheeffectsoffinancialrisksbyfollowingprudenttreasurymanagementpoliciesanddelegationsofauthority.Increasesinborrowingsandenteringintointerestrateswaps,floatingrateagreements,optionsandotherfinancialinstrumentsaresubjecttoapprovalbytheBoard.Compliancewithpoliciesandexposurelimitsisreviewedbytheinternalauditor.TheCompanydoesnotenterintofinancialinstrumentsforspeculativepurposes.


58


21.4 Market risk

TheCompany’sactivitiesexposeitprimarilytothefinancialrisksofchangesinforeigncurrencyexchangeratesandinterestrates.TherehasbeennomaterialchangetotheCompany’sexposuretomarketrisksorthemannerinwhichitmanagesandmeasurestherisk.TheCompanyisnotexposedtosubstantialothermarketriskarisingfromfinancialinstruments.

21.5 Currency risk

TheCompanyundertakescertaintransactionsdenominatedinforeigncurrencies.Exchangerateexposuresaremanagedwithinapprovedpolicylimitsusingforwardforeignexchangecontracts.

ThecarryingamountsoftheCompany’sforeigncurrencydenominatedmonetaryassetsandmonetaryliabilitiesatthereportingdateareasfollows:

Liabilities Assets

inthousandsofNewZealanddollars 2010 2009 2010 2009

GPBSterling (2) (6) 31 42

USDollar (8) (890) 857 2,548

NorwegianKrona - - - 23

CanadianDollar - - 12 -

SingaporeDollar (4)

Euro (1) (10) 43 15

AustralianDollar (7) (187) 20 71

TheCompanyhasapolicyofnotholdinglargeamountsofforeigncurrencydenominatedmonetaryassets.Fixedrateforwardforeignexchangecontractsaretakenoutforsignificantforeigncurrencydenominatedcommitments.

Asat30June2010,iftheNewZealanddollar(NZD)hadstrengthenedby5%againstforeigncurrencies,withallothervariablesheldconstant,theprofitfortheyearandequityfortheCompanywouldhavebeenincreased/(decreased)asfollows:


GPBSterling (1) (2)

USDollar (41) (67)

NorwegianKrona - (1)

CanadianDollar (1) -

Euro (2) -

AustralianDollar (1) 6

A5%weakeningoftheNZDwouldhavehadtheequalbutoppositeeffectontheamountshownabove.

Thismovementisattributabletoforeignexchangegains/lossesontranslationofforeigncurrencydenominatedreceivables,payablesandcashandcashequivalentbalances.

A5%strengthening/weakeningintheNZDwouldalsohavedecreased/increasedequitythroughanadjustmentof$20,000(2009:$157,000)tothehedgingreservewithacorrespondingadjustmenttootherfinancialliabilities.

At30June2010theCompanyhasforwardforeigncurrencycontractsforthepurchaseofcurrenciestocoverfirmforeigncurrencydenominatedcommitments.Detailsofforwardforeignexchangecontractsoutstandingatbalancedateare:

Foreign currency Contract value (NZD) Fair value (NZD)

inthousandsofdollars 2010 2009 2010 2009 2010 2009

Outstanding contracts

Lessthanthreemonths(USD) 172 222 250 405 - (63)

Morethanthreemonths(USD) - 1,910 - 3,379 - (420)

Morethanthreemonths(AUD) 46 - 56 - - -

218 2,132 306 3,784 - (483)


59


21.6 Interest rate risk management

TheCompanyincursinterestonborrowingsasdetailedatnote12.TheCompanyisexposedtofloatinginterestratesonitsflexiblecreditfacility.Thefixedtermloanisatafixedinterestrateuntil27November2010afterwhichthebank’sfloatinginterestratewillapplyortheapplicableinterestratecanbefixedthroughtotheloan’smaturityon27November2011.

TheCompanyalsohasacallaccountonwhichinterestisearned.WherepossibletheCompanymanagesexposurestointerestratefluctuationsthroughprudentmanagementofitstreasuryoperations.

InmanaginginterestrateriskstheCompanyaimstoreducetheimpactofshort-termfluctuationsonearnings.Overthelongerterm,however,permanentchangesininterestrateswillhaveanimpactonprofit.

Ifinterestrateshadbeen50basispointshigher/lowerandallothervariableswereheldconstant,theGroup’sprofitfortheyearwoulddecrease/increaseby$17,000(2009:$27,000).

21.7 Credit risk management

CreditriskreferstotheriskthatacounterpartywilldefaultonitscontractualobligationsresultinginfinanciallossfortheCompany.

ThefinancialinstrumentswhichexposetheCompanytocreditriskareprincipallybankbalances,short-terminvestmentsandaccountsreceivable.TheCompanymonitorscreditriskonanongoingbasis.

Bankbalancesandshort-terminvestmentsareheldwithNewZealandregisteredbanksinaccordancewiththeCompany’streasurypolicy.

Anallowancefordoubtfuldebtsismaintainedinrespectofaccountsreceivableandthisisassessedonaregularbasis.TheCompanyisnotusuallyexposedtoanyconcentrationsofcreditriskrelatingtoaccountsreceivableotherthanfromtheCrownandtheEQC.

NocollateralisheldbytheCompanyinrespectofbankbalances,short-terminvestmentsoraccountsreceivable.Themaximumexposuretocreditriskisrepresentedbythecarryingvalueofeachfinancialassetinthebalancesheet.

21.8 Liquidity risk management

TheCompanymanagesliquidityriskbymaintainingadequatereserves,bankingfacilitiesandreserveborrowingfacilities,bymonitoringforecastandactualcashflowsandmatchingthematurityprofilesoffinancialassetsandliabilities.TheCompanyhasaccesstofinancingfacilitiesandexpectstomeetitsotherobligationsfromoperatingcashflows.

Thefollowingtabledetailstheexpectedcontractualmaturity(undiscounted)fortheGroup’snon-derivativefinancialinstruments.

2010

inthousandsofNewZealanddollars6months

orless6-12

months1-5years morethan

5yearsTotal

Cashandcashequivalents 632 - - - 632

Tradeandotherreceivables 5,600 - - - 5,600

Tradeandotherpayables (4,938) - - - (4,938)

Borrowings (138) (138) (5,035) - (5,311)

2009

inthousandsofNewZealanddollars6months

orless6-12

months1-5years morethan

5yearsTotal

Cashandcashequivalents 1,183 - - - 1,183

Tradeandotherreceivables 6,607 - - - 6,607

Tradeandotherpayables (5,007) - - - (5,007)

Borrowings (98) (100) (4,183) - (4,381)


60


21.9 Fair value of financial instruments

FinancialinstrumentsmeasuredsubsequenttoinitialrecognitionatfairvaluearegroupedintoLevels1to3basedonthedegreetowhichthefairvalueisobservable:

• Level1fairvaluemeasurementsarethosederivedfromquotedpricesinactivemarketsforidenticalassetsorliabilities.• Level2fairvaluemeasurementsarethosederivedfrominputsotherthanquotedpricesincludedwithinLevel1thatareobservable

fortheassetorliability,eitherdirectlyorindirectly.• Level3fairvaluemeasurementsarethosederivedfromvaluationtechniquesthatincludeinputsfortheassetorliabilitythatare

notbasedonobservablemarketdata.

TheCompanyhasLevel2financialinstrumentsasdetailedatnote21.2.

Therewerenomaterialdifferencesbetweenthefairvalueandcarryingamountsofthefinancialinstrumentsat30June2010(2009:nomaterialdifferences).

22. Commitments

22.1 Non-cancellable operating lease commitments (Group and Company)


Withinoneyear 183 173

Betweenoneandfiveyears 39 77

Overfiveyears - -

222 250

22.2 Capital commitments (Group and Company)

Contractedcapitalcommitments 1,900 4,192

23. Contingent liabilities

TheGroupandCompanyhavenocontingentliabilities(2009:nil).

24. Events after the balance date

Therewerenosignificanteventsafterthebalancedate(2009:nil).

25. Adoption of new and revised Standards and Interpretations

25.1 Standards and Interpretations effective in the current period

NZ IAS 1 (Revised) Presentation of Financial Statements (effective for accounting periods beginning on or after 1 January 2009)ChangestoNZIAS1haveimpacteddisclosuresrelatingtorecognisedincomeandexpensesfortheCompanyandGroup.Allrecognisedincomeandexpenseshavebeenrecognisedintwostatements(anincomestatementandastatementofcomprehensiveincome),separatelyfromownerchangesinequity.TherevisedStandardalsoincludeschangestopresentationanddisclosurerequirements.

NZ IFRS 7 (Revised) Financial Instruments Disclosures (effective for accounting periods beginning on or after 1 January 2009)UnderamendmentstoNZIFRS7additionaldisclosureshavebeenmadeatnote21.9regardingthefairvalueoffinancialinstrumentsandwhetherfairvaluesaredeterminedbyreferencetopublishedpricequotationsinamarketorareestimatedusingothermethods.

25.2 Early adoption of Standards and Interpretations

NZ IAS 24 (Revised) Related Party Disclosures (effective for accounting periods beginning on or after 1 January 2011TheGrouphaselectedtoearlyadoptNZIAS24.Theamendmentssimplifythedisclosurerequirementsforentitiesthatarecontrolled,jointlycontrolledorsignificantlyinfluencedbyagovernment(referredtoasgovernment-relatedentities)andhavebeenappliedinnote18.

25.3 Standards and Interpretations in issue not yet adopted

Atthedateofauthorisationofthesefinancialstatements,thefollowingStandardsandInterpretationswereissuedbutnotyeteffective.

NZ IFRS 9 Financial InstrumentsTheStandardintroducesnewrequirementsfortheclassificationandmeasurementoffinancialassetsandiseffectivefrom1January2013.AllrecognisedfinancialassetsthatarecurrentlyinthescopeofIAS39willbemeasuredateitheramortisedcostorfairvalue.Inorderforfinancialassetstobemeasuredatamortisedcostcertaincriteriamustbemet.

InitialapplicationofthisStandardisnotexpectedtohaveanymaterialimpactontheamountsreportedordisclosuresmadebytheGrouporCompany.


61


Performance Indicators

GroupActual

2010

GroupBudget

2010

GroupActual

2009

Financial performance measures

Revenue (Excluding interest received) ($000) 65,123 63,417 60,706

ReturnonEquitybeforedevelopmentexpenses 5.6% 9.1% 8.3%

ReturnonEquitybeforeeffectofdeferredtaxrelatingtobuildingdepreciation 8.1% 8.4% 7.7%

ReturnonEquity(Surplus after taxation/average equity) 5.0% 8.4% 7.7%

Equityratio(Equity/Total assets) 48.7% 51.8% 49.2%

Gearing(Term loan/Equity plus term loan) 18.6% 25.2 16.9%

Interestcover (Operating surplus before interest/Interest expense) 12 Times 9Times 6Times

Other performance measures

Research Contracts:

FRST ($000) 27,840 25,912 24,378

CapabilityFunding($000) 5,317 5,316 4,215

Marsden($000) 1,106 1,309 932

PreseedAcceleratorFund ($000) 269 266 267

RevenuefromGeoNet ($000) 8,742 8,770 8,789

Commercial contracts:

RevenuefromcommercialactivitiesfromNewZealand($000) 14,668 15,030 15,695

Revenuefromcommercialactivitiesfromoverseas($000) 7,020 6,710 6,243

Clientsprovidingover$150,000perannum 20 20 31

Research indicators:

Peer-reviewedscientificpapers 228 250 128

Researchmonographsandmaps 32 3 7

Otherscientificpapers 161 60 202

Keynoteandplenarypresentations 51 10 3

NewMarsdenprojects 3 2-3 3

Graduatescholarshipsfunded 26 15 18

Graduatestudentssupervised 124 65 97

ContractsfromTEOs($000) 1,200 800 1,079

ContractstoTEOs($000) 4,421 1,400 2,554

ProjectsinvolvingMa-ori 18 12 21

Research application indicators:

Commissionedreportstousers 285 220 304

Presentationstousers 265 15 34

User-sector/industryarticles 111 12 5

Newandimprovedproducts/processes/services 33 12 7

Jointventures/formalassociations 5 4 5

Patentsgranted–NewZealand - 1 -

Patentsgranted–Overseas - 1 1

Licensingagreementsenteredinto 36 26 24

InternationalforarepresentingNewZealand 5 15 3

NationallySignificantDatabasesandCollectionsheld 8 8 8

Otherdatabasesheld 16 16 16

Performance Indicators

62


GroupActual

2010

GroupBudget

2010

GroupActual

2009

Human resources:

Full-timeequivalents(FTEs) 369 360 354

Researchers 258 263 256

Researchsupport 47 43 44

Generalsupportandmanagement 64 54 54

Averagesalaryincrease 4.7% 3-5% 5.6%

Traininganddevelopment(% salary budget) 2.9% 3.1% 3.7%

Workdaysmissedduetoinjury 3 <10days 16

ACCworkplacesafetyaccreditation Secondary Secondary Secondary

Productivity Measures

RevenueperFTE ($000) 176 176 171

OperatingmarginperFTE($000) 7.0 8.2 7.2

TotalassetsperFTE ($000) 122 121 117

Revenueearnedper$investedinassets 1.4 1.5 1.5

Capitalinvestment($000) 9,100 8,700 4,700

Performance Indicators (continued)

63


Statement of Responsibility

TheBoardisresponsibleforthepreparationoftheannualfinancialstatementsandthejudgementsusedtherein.

TheBoardisresponsibleforestablishingandmaintainingasystemofinternalcontroldesignedtoprovidereasonableassurancesastotheintegrityandreliabilityofthefinancialreporting.

IntheopinionoftheBoard,theannualfinancialstatementsforthefinancialyearfairlyreflectthefinancialpositionandoperationsoftheGroup.

Tom CampbellChairman

Ross ButlerDeputy Chairman

18August2010DateofApproval

Statement of Responsibility

64


Auditproceduresgenerallyinclude:

• determiningwhethersignificantfinancialandmanagementcontrolsareworkingandcanbereliedontoproducecompleteandaccuratedata;

• verifyingsamplesoftransactionsandaccountbalances;

• performinganalysestoidentifyanomaliesinthereporteddata;

• reviewingsignificantestimatesandjudgementsmadebytheBoardofDirectors;

• confirmingyear-endbalances;

• determiningwhetheraccountingpoliciesareappropriateandconsistentlyapplied;and

• determiningwhetherallfinancialstatementdisclosuresareadequate.

Wedidnotexamineeverytransaction,nordoweguaranteecompleteaccuracyofthefinancialstatements.

Weevaluatedtheoveralladequacyofthepresentationofinformationinthefinancialstatements.Weobtainedalltheinformationandexplanationswerequiredtosupportouropinionabove.

Responsibilities of the Board of Directors and the Auditor

TheBoardofDirectorsisresponsibleforpreparingfinancialstatementsinaccordancewithgenerallyacceptedaccountingpracticeinNewZealand.ThosefinancialstatementsmustgiveatrueandfairviewofthefinancialpositionoftheCompanyandGroupasat30June2010.Theymustalsogiveatrueandfairviewoftheresultsofoperationsandcashflowsfortheyearendedonthatdate.TheBoardofDirectors’responsibilitiesarisefromtheCrownResearchInstitutesAct1992andtheFinancialReportingAct1993.

Weareresponsibleforexpressinganindependentopiniononthefinancialstatementsandreportingthatopiniontoyou.Thisresponsibilityarisesfromsection15ofthePublicAuditAct2001andtheCrownResearchInstitutesAct1992.

Independence

WhencarryingouttheauditwefollowedtheindependencerequirementsoftheAuditor-General,whichincorporatetheindependencerequirementsoftheInstituteofCharteredAccountantsofNewZealand.

Inadditiontotheauditwehavecarriedoutassignmentsintheareasofotherassuranceservices,whicharecompatiblewiththoseindependencerequirements.Otherthantheauditandtheseassignments,wehavenorelationshipwithorinterestsintheCompanyandGroup.

J M RobertsonPartnerDeloitteon Behalf of the Auditor-GeneralWellington, New Zealand

Audit Report

To the readers of the Institute of Geological and Nuclear Sciences Limited and Group’s Financial Statements for the year ended 30 June 2010

TheAuditor-GeneralistheauditoroftheInstituteofGeologicalandNuclearSciencesLimited(the“Company”)andGroup.TheAuditor-Generalhasappointedme,JMRobertson,usingthestaffandresourcesofDeloitte,tocarryouttheauditofthefinancialstatementsoftheCompanyandGroupfortheyearended30June2010.

Unqualified Opinion

Inouropinion:

• ThefinancialstatementsoftheCompanyandGrouponpages42to60:

- complywithgenerallyacceptedaccountingpracticeinNewZealand;

- complywithInternationalFinancialReportingStandards;and

- giveatrueandfairviewof:

- theCompanyandGroup’sfinancialpositionasat30June2010;and

- theresultsofoperationsandcashflowsfortheyearendedonthatdate.

• BasedonourexaminationtheCompanyandGroupkeptproperaccountingrecords.

Theauditwascompletedon18August2010,andisthedateatwhichouropinionisexpressed.

Thebasisofouropinionisexplainedbelow.Inaddition,weoutlinetheresponsibilitiesoftheBoardofDirectorsandtheAuditor,andexplainourindependence.

Basis of Opinion

WecarriedouttheauditinaccordancewiththeAuditor-General’sAuditingStandards,whichincorporatetheNewZealandAuditingStandards.

Weplannedandperformedtheaudittoobtainalltheinformationandexplanationsweconsiderednecessaryinordertoobtainreasonableassurancethatthefinancialstatementsdidnothavematerialmisstatements,whethercausedbyfraudorerror.

Materialmisstatementsaredifferencesoromissionsofamountsanddisclosuresthatwouldaffectareader’soverallunderstandingofthefinancialstatements.Ifwehadfoundmaterialmisstatementsthatwerenotcorrected,wewouldhavereferredtotheminouropinion.

Theauditinvolvedperformingprocedurestotesttheinformationpresentedinthefinancialstatements.Weassessedtheresultsofthoseproceduresinformingouropinion.

Audit Report

65


Matters Relating to the Electronic Presentation of the Audited Financial Statements This audit report relates to the financial statements of the Institute of Geological and Nuclear Sciences Limited for the year ended 30 June 2010 included on the Institute of Geological and Nuclear Sciences Limited’s website. The Institute of Geological and Nuclear Sciences Limited’s Board of Directors is responsible for the maintenance and integrity of the Institute of Geological and Nuclear Sciences Limited’s website. We have not been engaged to report on the integrity of the Institute of Geological and Nuclear Sciences Limited’s website. We accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

The audit report refers only to the financial statements named above. It does not provide an opinion on any other information which may have been hyperlinked to or from the 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 statements and related audit report dated 30 June 2010 to confirm the information included in the audited financial statements presented on this website.

Legislation in New Zealand governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions.

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