Annual Report 2005 - Environmental Science & Research

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ESR Annual Report 2005

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

Highlights
Financial result
ESR increased annual revenue to $40.6m, an
increase from last year. The net surplus after
taxation was $2.2m.
Some of this revenue increase is a result of
increased services provided to key clients. A
new three-year contract with the police was
signed during the year.
ESR also continued to grow its clients in key
areas, particularly in the workplace drug and
alcohol testing programme and in the water
management area.
Developing new capabilities
and science platforms
ESR is investing in enhancing its core
capabilities and developing associated new
capabilities in key areas: biosecurity/disease
surveillance/zoonoses, envirogenomics,
proteomics and chemical genetics, microbial
forensics and risk management.
The company was pleased to gain additional
capability funding for the coming 2005/06
financial year through the Ministry of Research,
Science and Technology.
Science delivery and outputs
ESR again significantly increased the number
of scientific and technical reports produced,
reflecting increased work and science delivery.
ESR scientists and technical staff also served on
a large number of international and national
organisations and advisory groups.
Scientific and
commercial collaborations
Collaborations and alliances with a variety of
international and national partners came to
fruition in commercial and research areas.
A collaboration with AUSTHOS led to the
purchase by the Malaysian police of an ESRdeveloped
DNA databank system (see page
11 for details). More sales in the region are
expected to follow. ESR is also accessing new
forensic technologies through an alliance with
the UK Forensic Science Service.
At home, partnerships with iwi have led to
some exciting science research projects being
undertaken which will provide major health
benefits for New Zealanders in the future (see
pages 26 – 29).
National Centre of Biosecurity and
Infectious Disease – Wallaceville
ESR is delighted that the centre has come to
fruition, with government funding allocated
through the budget. ESR is a key partner in the
centre alongside MAF, Agriquality and AgResearch.
The multi-agency Wallaceville initiative is a
significant step for New Zealand’s emergency
and preparedness planning to meet global
threats from pandemic disease, bioterrorism and
biosecurity breaches.
Public good and international aid
Much of ESR’s core work is in the public good
area and underpins the health and justice
sectors. Our work contributes to the health
and well-being of New Zealanders, providing
significant social and economic benefits.
Our expertise in forensic science and health is
also contributing increasingly to international
projects. This year the company was particularly
proud to be able to respond to an international
crisis, the Boxing Day tsunami. Information on
ESR’s contribution is on page 9.
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ESR Annual Report 2005

CONTENTS
1
Highlights
14
What’s nitrate doing to drinking water?
24
Partnership with communities
34
Scientific Output Performance Indicators
2
3
4
ESR During the Year
Strategic direction
15
16
Quality water
Smoking
24
24
Back to the future
Healthy marae
35
35
Key Financial Performance Measures
Corporate Governance
6
Chairman’s review
16
Fresh approach to health
25
State of the takiwa
36
Statement of Responsibility
7
Chief Executive Officer’s review
17
A smoking gene?
25
Shellfish health study drives awareness
36
General Disclosures
8
World
18
Nicotine know-how
26
Education
38
Audit Report
8
World view
19
Beyond nicotine
26
Knowledge gains
40
Statement of Financial Performance
9
Tsunami aid
19
Testing the air
27
Meeting Awanuiarangi
40
Statement of Movements in Equity
10
Huge “P” bust in Fiji
20
Commercialisation
27
Wide-reaching benefits from student research
41
Statement of Financial Position
10
Aboriginal genetics milestone
20
Opening the commercialisation pipeline
28
Science degree next goal for teen mum
42
Statement of Cash Flows
11
Malaysia buys ESR forensic system
21
Glow sensor finds toxic killers
29
Tikanga respect
44
Notes to the Financial Statements
12
Food
22
Health
29
ESR has new Maori logo
52
Directory
12
Food safe
22
Fighting the flu
30
Human resources
13
Survey reveals contaminated baby food
22
Wellington flu
30
ESR attracts world’s best
13
Keeping chill
23
Dioxin study – Paritutu
31
PSA and ESR – working together
14
Water
32
Science and Research Highlights

ESR During the Year
Undertook more than 20,000 analyses
on drink-drive blood samples.
Undertook the annual review of the
quality of New Zealand’s drinking water.
Analysed about 1,500 drug cases for
Managed and maintained four websites:
Analysed 34,000 workplace drug
Analysed more than 4,000 bottles of wine
3
police and customs. Some of the odder cases
included identifying methamphetamine in
lava lamps, pseudoephedrine in candles and
dimethylamphetamine in moon cakes.
Delivered forensic training to approximately
1,000 New Zealand police officers.
Provided police with a DNA profile
in a 12-year-old murder case.
www.esr.cri.nz; www.esrcareers.cri.nz;
www.surv.esr.cri.nz (public health
surveillance); and www.drinkingwater.org.nz
(drinking water supplies).
Received more than 3,600 exhibits in
relation to homicides.
Produced 111 scientific and
technical reports.
testing samples.
Found 30 per cent of workplace drug
tests undertaken post-accident or under
reasonable cause tested positive for drugs.
Linked one individual to 14 different crimes
through the DNA databank.
Collected and analysed surveillance data for
23,000 cases of notifiable disease.
for export certification.
Investigated about 500 food samples for
contamination, spoilage and adulteration.
Produced 199,100 individual analysed
pesticide residue results as part of the total
diet survey.
Tested 30,000 condoms.
ESR Annual Report 2005
Attended and gathered evidence at more
than 210 general crime scenes.
Processed nearly 24,000 forensic
DNA samples.
Identified more than 300 outbreaks
of disease.
Dealt with 230 new “P lab” cases.
Answered more than 500 media inquiries.
Undertook more than 5,000 toxicological
tests on criminal and coronial blood samples.
Repaired, maintained and calibrated 3,600
breath alcohol testing devices.
Produced weekly, monthly, quarterly and
annual reports for a range of diseases.

4
Strategic Direction
ESR is committed to being the leading
provider of specialist science solutions
which contribute to innovation in
New Zealand and protect people in their
Asia/Pacific environment.
ESR is a research organisation that discovers new knowledge and
develops new products and services for key government clients in the
environmental health and justice sectors. In accordance with ESR’s
stated purpose and statutory role the organisation maintains and
develops core capabilities of national benefits in these areas.
Key objectives are:
• Retaining the scientific cutting edge in the environmental
health field
• Continuing to provide the New Zealand justice system with
a first-class forensic service
To meet this vision ESR’s
long-term goals are:
• Increasing ESR’s contribution to the
New Zealand science system
• Diversifying to include the provision of
new and enhanced products and services
to existing and new clients
• Attracting, retaining and rewarding
high-quality staff.
• Ongoing enhancement of ESR’s national and international
scientific reputation.
Over the next five years, ESR will consolidate its unique strengths
by investing in the scientific disciplines and activities pertinent
to the rapidly developing field of environmental health and some
key interdisciplinary fields of envirogenomics, microbial forensics,
biosecurity and surveillance.
We recognise that achieving these is
dependent on a set of organisational
values, which underpin all our work:
• Science excellence
• Trust, objectivity, independence
and integrity
• Valuing staff
• Quality
• Client primacy
• Cultural respect and responsiveness.

Corporate citizenship
ESR is committed to being part of, and
maintaining a positive profile in, its
local communities.
It will continue to build on partnerships
with Maori to increase their participation
in the science system and in ESR’s research.
A clear goal is to continue to improve Maori
responsiveness capability while contributing to
Maori development and advancement in the
wider community.
ESR will also seek to achieve greater understanding
of other cultures within New Zealand including
Pacific Island cultures. This will be undertaken
through a range of mutually agreed initiatives
including scholarship programmes and science
promotion projects in schools.
Research and investment
Infrastructure
Cross-programme groups
Commercialisation
and sales
Internationally the company will continue
its successful approach of selling products
originally developed for the New Zealand
market. ESR is well placed to provide “total
solutions” to other science organisations
and particularly for jurisdictions wishing to
implement DNA sampling regimes.
The workplace drug and alcohol testing and
pharmaceutical programmes have identified a
number of opportunities in the private sector
and continued expansion of these is planned.
The board and management will ensure that
the investment required for progress and the
associated risks are balanced.
ESR has an investment strategy to actively pursue
new opportunities with new and existing clients.
It includes the development of enhanced and
new capabilities. Investment options include
mergers and acquisitions, collaborations and
alliances. The major requirement for any new
opportunity is that it adds to the overall value of
ESR within a reasonable time frame and with a
reasonable risk profile.
The organisation is continuing to grow its
research base, aiding innovative science delivery
and seeding commercial initiatives. The new
capability fund has opened up new investment
opportunities to further build a molecular
technology platform.
ESR also continues to build a successful and
responsible reinvestment programme. The
programme supports projects that benefit
staff and advance ESR in priority areas. It also
provides a tool for rewarding staff who have
contributed significantly to the organisation.
To sustain growth as a business, ESR has made
considerable investment in its infrastructure. A
major part of this is in human capital, the other
major component being in capital development,
buildings, specialised equipment and IT.
ESR will grow the intellectual capability of staff
through a programme of targeted recruitment
and partnerships with other organisations.
The capability of existing staff will also be
grown through a variety of competency
development initiatives.
Partnerships and
collaborations
Strategic partnerships and relationships, with
both existing and new clients and partners, are
the key to achieving goals.
ESR will continue to work on establishing a
number of new collaborative relationships.
These will be a mix of research and
development, commercialisation and route-tomarket
collaborations, primarily with leading
international organisations. It is anticipated
that some of these will provide opportunities to
access overseas funding mechanisms.
Cross-programme groups draw on scientists
from across ESR’s various scientific programmes
and disciplines (water, food safety, population
and environmental health, communicable
disease and forensic science) to cluster core
competencies. Through these ESR can ensure
sufficient internal critical mass to undertake
research and development, commercialisation
and new business solution projects. The
organisation is unique in having such a mix
of competencies.
Leveraging off this, four cross-programme
groups have been established: enteric
microbiology, pathogens risk and risk
management, surveillance information
management and envirogenomics. They will
target an increasing proportion of reinvestment
funds and will focus on commercialisation
projects and clustering competencies to provide
services to new clients.
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ESR Annual Report 2005

Chairman,
Ian Wilson
6
Again I am delighted
to report that ESR has
delivered more work, done
more science, had more
international exposure and
increased revenue.
Since 2000/01 ESR’s revenue has grown by
more than 50 per cent from $27m to $40.6m in
2004/05. The organisation has strengthened its
balance sheet and in particular consolidated its
asset base to provide a foundation for growth from
both core capabilities and new potential.
As the financial reports show, ESR ended the
2004/05 year with a net surplus after taxation
of $2.2m.
ESR is committed to achieving its shareholding
Ministers’ expectation in relation to both return
and capital structure, while at the same time
continuing to enhance the “public good”. The
board acknowledges that the provision of these
services often provides a less than adequate
commercial return.
The company operates in an environment of
increasing globalisation of science. This affects
the competition for science resource and
the supply of both funding and staff in New
Zealand. Purchasing and funding strategies
for science in New Zealand are changing, as is
society’s expectations of science.
There is a growing emphasis on the contribution
to the New Zealand economy by CRIs
developing their intellectual property resources
and an increased focus on collaboration and the
development of research partnerships. ESR is
no exception.
The company has been working hard at
establishing both domestic and international
research partnerships and collaborations.
This has led to new research areas, notably
in envirogenomics. Research begun this year
related to Maori, genetics, smoking and disease
has the potential to deliver huge health savings
and benefits to New Zealand.
Increased revenue this year from the Foundation
for Research, Science and Technology’s
capability fund has enabled ESR to acquire
more expert capabilities in science platforms,
underpinning our core science delivery.
The board is delighted that the extensive work
undertaken by ESR, MAF and other agencies
has come to fruition, with the government
providing full support for the establishment of
a National Centre, Biosecurity and Disease at
Wallaceville. The establishment of infrastructure
and an organisation to meet the changing global
threats is a huge step forward for New Zealand.
The company’s international reputation
continues to grow, through both sale of products
and promotion of our capabilities. This year the
company was chosen by the Malaysian police to
provide a DNA laboratory system and associated
training. We expect further sales to eventuate in
the region over the next few years.
To conclude I would like to acknowledge
the superb efforts of all board members,
management and staff. CEO Dr John Hay has
again met all the challenges presented to him
with integrity, fortitude and inspiration.
Once again ESR has delivered excellent science
that makes a difference to the lives of New
Zealanders and is also increasingly reaching out
beyond New Zealand.
Ian Wilson

Chief Executive Officer,
Dr John Hay
We have seen another year
of strong performance
financially, scientifically
and in our service delivery.
Our ability to undertake vital science and
research work to help people and the
environment has been extended again this
year – reaching into the many communities
of New Zealand and further afield.
I am particularly proud of ESR’s ability to assist
Thailand following the Boxing Day tsunami.
The relationship established between ESR and
the Central Institute of Forensic Science in
Bangkok following last year’s sale of a DNA
sample management system meant we were able
to provide a tailored response to the disaster
aftermath. (You can find an article about this
on page 9.)
At home, the organisation achieved a crimefighting
milestone in April when the 50,000th
DNA profile was loaded onto the national
DNA database. In addition, an internationally
unprecedented crime-to-person-matching rate
of 55 per cent was achieved. Both of these events
demonstrate the place forensic science has in
underpinning the New Zealand justice system.
ESR organises its activities to ensure excellence
in delivering contracted outcomes to its clients.
Growth through new clients and revenue is
very important. Equally we assign great value
and resources to ensuring that the needs of our
current clients are met beyond expectation.
Independent surveys of the New Zealand
police and our workplace drug and alcohol
programme clients indicate overall success.
The police survey confirmed that ESR is
regarded as a highly reliable supplier of goods
and services. A new three-year agreement
established with police will provide greater
clarity for service delivery between ESR
and police.
The survey of workplace drug and alcohol
programme clients also delivered very positive
results. That’s a testament to staff dedication
and commitment to ensuring continual quality
– and working with numerous clients to meet
their needs.
We will undertake surveys of our other major
clients in the coming year.
On a sombre note, I take this opportunity to
reiterate on behalf of all staff our best wishes to
the Chiron scientist who was diagnosed with
meningococcal disease while in New Zealand.
It is a tragedy that a scientist dedicated to
finding ways to combat the disease was herself
struck down with it. The subsequent inquiries,
which included reports by an independent
overseas expert and OSH, found that the
standard operating procedures and practices
reflected safe laboratory practice requirements,
that the scientist appeared to be a competent
and careful worker and that there was no
evidence to suggest that any laboratory accident
or incident had occurred.
Finally I salute all our staff, who never cease
to go the extra mile that the workload and
our clients demand of them. Every one of our
staff is committed to improving the health and
well-being of New Zealanders and increasingly
people in the Asia/Pacific region. People work
for ESR because they want to work in a team
that makes a difference. I say with immense
respect – together, you most certainly do.
Dr John Hay
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ESR Annual Report 2005

WORLD
World View
8
Whether it’s an emergency, a special investigation or
an ongoing assignment, ESR plays an active role in
providing forensic expertise around the world.

Tsunami aid
Soon after the Boxing Day 2004 tsunami,
ESR staff were providing Thailand with
forensic expertise to help identify victims.
The partnership began long before the wave.
Early in 2004, ESR helped Thailand to set
up a national DNA laboratory and criminal
databank system. This saw the Central
Institute of Forensic Science in Bangkok
purchase ESR-developed systems, software
and training.
Following a request by the Thai authorities
to Foreign Affairs Minister Phil Goff, the
New Zealand Government agreed to provide
an ESR-developed disaster victim identification
(DVI) software package and other assistance.
In the following weeks, ESR staff helped
to integrate the new DVI software with the
laboratory’s sample management systems. ESR staff
installed the software, trained local staff and helped
the laboratory consolidate its DVI processes.
ESR forensic scientists and staff also worked
for several months in Bangkok to help process
difficult samples (tissue and bone) and assist
with DNA profile data for kinship matching and
reporting. DNA identification was carried out
by “pedigree analysis”, matching victims’ DNA
with the DNA of living relatives. Dr Sally Ann
Harbison, ESR’s forensic biology science leader,
travelled to Thailand to initiate this work.
In all work, the focus was to provide support of
lasting benefit as well as address the immediate
issues. The new victim identification system
included Thai language interfaces, and will
eventually evolve into a national missing
persons system.
Every emergency is an opportunity to move
forward. The scale of the disaster and the high
temperatures meant there were problems with
obtaining and linking DNA profiles because
biological samples had deteriorated. ESR has
initiated research to develop new statistical
methods, and improve identification outcomes
in future DVI situations.
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ESR Annual Report 2005

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

The New Zealand DNA databank has the highest
“hit rate” in the world – with 55 per cent of crime
scene profiles linked to individuals
Malaysia buys ESR forensic system
A partnership with AUSTHOS saw an ESR team launch
the first phase of a new forensic database system in
Malaysia in early 2005.
DNA gives a precise genetic fingerprint.
Matching DNA samples from crime scenes with
samples from individuals is a powerful tool to
solve cases.
To do that, of course, authorities need an
effective and dependable DNA management and
matching system – which opens a new area of
opportunity. ESR is increasingly developing and
implementing DNA systems overseas.
The first half of 2005 saw the launch of phase
one of a new system in Malaysia. Signs are
also good for a contract in Oman and for
further work on the Thai forensic database
system which ESR implemented in 2004. The
Malaysian contract saw several ESR staff travel
to Malaysia. Malay scientists also visited the ESR
lab in New Zealand for training.
through AUSTHOS enables us to focus on the
areas of forensics we know, while they manage
all other aspects of the project.”
The value of ESR’s work in developing forensic
systems overseas has increased in the last year,
and is expected to keep on rising, he said.
• New Zealand’s forensic database system,
developed and managed by ESR, is
considered a world leader. By the end of
June 2005 the database held over 53,000
individual DNA profiles.
• Prominent crime cases which the system
helped to solve in the last year included
William Katipa, jailed for a 1994 rape.
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ESR Annual Report 2005
The Malaysian and Thai contracts were both
arranged through AUSTHOS, a not-for-profit
organisation which entered into a strategic
alliance for international business development
with ESR.
“It’s a true business relationship that works,”
said Jacob de Feijter of ESR. “We’re part of
their team, they’re part of ours. Doing projects

FOOD
Food Safe
12
While unexpected food safety crises needing
immediate management will always occur, it’s
important that a structured approach is taken to
long-term food safety issues – such as food-borne
infectious diseases, Campylobacteriosis being
particularly important in New Zealand. That’s why
the New Zealand Food Safety Authority (NZFSA)
is working to a risk management framework –
and calling on ESR for help in making it a reality.
Part of the framework involves risk management
options assessment: of all the ways of attacking
a problem, which one provides the best
improvement in food safety? A valuable tool for
making that decision is to construct a model of
the food chain, and use it to try out different
options and predict what their effects might be.
Models are a computer-based representation
of the food chain, where the inputs and effects
of each step can be altered to derive outputs
about food safety and human health. The initial
effort is to develop a model that represents the
current New Zealand situation as closely as
possible, and which captures all the influences
on that situation. The ESR Food Group
began a two-year contract with NZFSA
in 2003, focusing on quantitative risk
assessments involving microbial food safety
for Campylobacter and Salmonella.
“A key part of the mix is collaboration
with the food industry – which is asked
to provide data and details of processing,
and has the opportunity to review the
models in progress.”

Fridge wise:
Survey reveals contaminated baby food
A survey of New Zealanders’ diets in 2004 found baby food
contaminated with lead and culminated in an investigation into
cornflour in three countries.
The New Zealand Total Diet Survey (NZTDS)
estimates the dietary exposure of the New
Zealand population to pesticide residues,
contaminants and selected nutrients, and
assesses whether they pose a significant
health risk.
“We estimate the dose from chemical hazards
across a typical New Zealand diet, and compare
this with international health standards to see
if there is any potential health risk,” said survey
leader Dr Richard Vannoort.
As part of the sampling plan a range of baby
foods was assessed. One brand, Robinson’s Egg
Custard, showed elevated levels of lead. The
regulatory limit for lead in cereal-based foods is
-0.2 mg/kg, whereas this custard had 0.8 mg/kg.
ESR promptly informed the NZFSA and the
manufacturer, Nutricia NZ Ltd, initiated a
product recall. Further investigative work by Dr
Vannoort and his team showed that only specific
batches were contaminated. The manufacturer
identified the source as imported cornflour.
Traceback found around 135 tonnes of cornflour
had been contaminated with up to 100 times
the regulatory limit for cereal products. Later,
the source was identified as corn imported from
China in a ship that had previously carried lead
concentrate around Australia.
The tracebacks led to 37 tonnes of cornflour
being recalled in New Zealand. Contaminated
cornflour had also been exported to Australia
and Fiji so both countries’ government
authorities were informed, resulting in extensive
follow-up.
• The 1997/98 NZTDS showed the typical
New Zealand diet has among the lowest lead
levels in the world, attributed to both the
elimination of lead solder in canned foods
and the removal of leaded petrol in the 1990s.
• Ensure hot foods are cooled slightly
before putting in the fridge, to avoid
warming other foods
• Store raw meats at the bottom to
prevent juices, often containing live
bacteria, dripping onto other foods
• Wipe up spills immediately and clean
your fridge every week or two
• To check the temperature put a
thermometer in a glass of water, leave
in your fridge overnight, and take a
reading first thing in the morning (fridge
thermometers are available from some
hardware and kitchenware stores).
Keeping chill
How healthy is the average Kiwi
fridge? Survey results suggest some
fridges need attention.
When it comes to fridges, cold is good. The ideal
temperature is 1°C – 5°C. Warmer levels can
contribute to the risk of food-poisoning bacteria.
But the survey carried out by ESR for the NZFSA
has found many fridges aren’t that cold.
The ESR food safety scientists tested 127
randomly chosen domestic fridges. Internal
air temperatures were taken from the top and
bottom shelves every 10 minutes over three
days. Forty-four per cent had an average
temperature of 5°C – 7°C while only 35 per cent
were in the ideal temperature range. Of most
concern were the 21 per cent of fridges over
7°C. Almost three-quarters of the fridges were
warmer on the top shelf than on the bottom.
The unwanted warmth is significant. “Most
pathogenic bacteria causing food poisoning
cannot grow at the recommended refrigeration
temperatures,” said ESR microbiologist
Rosemary Whyte.
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ESR Annual Report 2005

WATER
What’s nitrate doing to
drinking water?
14
A collaborative research group is investigating
nitrate in groundwater.
Nitrate can be transported long distances in groundwater systems.
That means it can potentially contaminate drinking water – a
health issue because around half of New Zealand’s drinking
supplies call on groundwater supplies.
To address the problem, a research group was formed in 2004.
Called Integrated Research for Aquifer Protection (IRAP),
the group is a collaborative venture involving ESR, Crop and
Food, Environment Canterbury, AgResearch, Dexcel, Landcare
Research and Lincoln Ventures. Ultimately the aim is to create a
farm scale model to find out the effect of changing land uses on
groundwater quality, and to identify which farm management
decisions can lower nitrate levels without lowering production.
ESR’s main role is investigating nitrate within the vadose zone
– the area between soil and groundwater table. Little is known
about this stage of groundwater nitrate contamination. ESR is
assessing and modelling how nitrate, which is applied as fertiliser,
can leach through the vadose zone, and how much of the nitrate
is affected by transformations in this zone. A field site has been
set up near Lincoln on the Canterbury Plains and the data is now
being analysed.

Quality Water
Good-quality water is vital to human health. But just
because water is free of faecal coliforms doesn’t mean it’s
free of waterborne viruses capable of causing disease.
Until recently, very little has been known about those viruses – because
detecting the organisms in water is a significant technical challenge. But
today’s sophisticated molecular biology techniques are opening the way to
monitoring water quality in unprecedented depth.
During 2004/05 the ESR Water Group has been determining which viruses
have been identified internationally as important for assessing water quality,
and which may be important in New Zealand. The Group has begun
researching ways to monitor viral contaminants in water. This project will
lead to determining whether specific human viral pathogens are present.
These are early days. But with ongoing advances in technology, there’s
real potential for sensitive and accurate real-time analysis of water in the
foreseeable future. That will undoubtedly improve management of water
quality of groundwater, streams, rivers, lakes and marine reserves.
15
ESR Annual Report 2005
“It is only in the last 30 years that scientists around the world have
recognised the importance of parasites like cryptosporidium and giardia in
drinking and recreational water. Today, we know little of the significance
of viruses in water – it’s the next major step forward in quality water,” said
Marion Savill of the ESR Water Group.

SMOKING
Fresh approach
to health
16
Working with many partners, ESR is applying a
multidisciplinary suite of research skills to attack one of
New Zealand’s most serious health problems.

“Maori metabolise nicotine more slowly” – Dr Rod Lea.
A smoking gene?
We all know that cigarettes are highly addictive.
Far more surprisingly – as a collaborative study is
finding – not all people face the same
risks of addiction.
The hard fact is that, for some people,
cigarettes are more addictive. That’s because the
neurological effects of nicotine and tobacco vary
– and there are significant ethnic differences.
This has profound implications for public health.
So during 2004/05 ESR has been building on
recent international studies, researching the
effect of genetics on smoking addiction among
Maori. It is a totally new area of smoking
addiction research: there have been no prior
studies into Maori or Pacific Island populations.
The research, run in collaboration with the
northern Hawke’s Bay iwi of Ngati Rakaipaaka
and Dr Neil Benowitz from the University of
California, has found that Maori metabolise
nicotine more slowly than Caucasians. That
means the nicotine is in the body longer
– possibly making smoking easy to take up and
harder to give up. This genetic fact supports
the reality that the percentage of smokers is far
higher in Maori than Caucasian populations.
“As you would also expect, Maori smokers
generally smoke fewer cigarettes,” said research
team leader Dr Rod Lea. “Studies show that
Maori smoke an average of maybe 10 cigarettes
a day whereas Caucasians average 15. But their
slower metabolism of nicotine does not mean
that the risks of disease are less.”
The ESR research supports the fact that,
over the years, health promotions to counter
smoking have been markedly less successful
among Maori than among Caucasians.
“Health promotion is important, but we need
to ask, can we help more Maori quit with more
effective therapy?” said Dr Lea. “It’s great that
New Zealand is one of the few countries in the
world with subsidised nicotine replacement
therapy. But the dose may not be appropriate
for the way Maori metabolise the nicotine.” This
will be a key focus for the ESR research team in
the year ahead.
The end results are a few years down the
track. “There’s no magic bullet,” said Dr Lea.
“But by looking at the biological as well as
societal influences, we’re gaining a far greater
understanding of the factors in addiction, and
how to tackle them.”
17
ESR Annual Report 2005

SMOKING
What’s
envirogenomics?
ESR may ultimately be able to determine if different
tobacco products are more or less addictive
18
• Envirogenomics aims to understand the
interaction between our unique genetic
make-up and environmental agents such
as drugs, toxins and microbes – and the
implications these interactions have on the
development and prevention of disease.
• Envirogenomics has emerged in the wake
of the sequencing of the human genome
and the development of cutting-edge
biotechnologies. The ESR smoking addiction
research involves saliva samples being
analysed to see how fast the nicotine
is metabolised.
• For ESR, envirogenomics is a major focus. As
well as smoking, alcohol and other drugs are
being studied – smoking leads the way because
it’s such a preventable cause of disease.
Nicotine know-how
ESR is undertaking an envirogenomics pilot
study with smokers on the national “Quitline”.
“Quitline” is a government-funded programme available to anyone who
wants to give up smoking. It offers subsidies on aids designed to help people
stop smoking.
The project is looking at how nicotine replacement therapy works and what
mix of factors makes it successful for some smokers and not for others.
“We are investigating to what degree personalising nicotine replacement
therapy makes it easier for someone to stop smoking,” Dr Lea said.

Beyond nicotine
With thousands of chemicals in tobacco smoke,
there’s more to addiction than nicotine alone.
Testing the air
ESR environmental research for the Ministry of Health (MoH) will give a clear
picture of the change in the air quality of bars now they’re smoke-free.
Smoking tobacco-derived nicotine is more
addictive than taking nicotine in other ways.
What causes that extra addictive power is
a complex question. Of the thousands of
chemicals in cigarette smoke, some are capable
of binding to the brain’s nicotinic receptors,
which are important in the formation of
nicotine addiction; while others are known to
inhibit monoamine oxidase, an enzyme related
to mood.
Currently, nicotine is the only part of cigarette
smoke that is routinely measured as an
indicator of propensity to addiction. The role
of the other chemicals is unknown and, aside
from carbon monoxide, there is no regulation
or monitoring on any of them.
That could soon change. Over the last three
years, ESR has been researching a new method
to assess the biological activity of cigarette
smoke particulate matter. The method involves
laboratory-based in vitro research (bioassays)
into how nerve cell receptors react to the
different chemicals.
“The ultimate aim is to be able to precisely
measure the total addictive activity of cigarette
smoke,” said Dr Lea. “With this ability, we may
ultimately be able to determine if different
tobacco products are more or less addictive,
and provide this information to regulators.”
The research is groundbreaking, and with
clear potential for understanding addiction
it has already attracted considerable interest
from around the world. ESR patented the new
method in July 2004.
In addition to the tobacco smoke research, ESR
uses bioassays for research into communicable
disease, food safety, population and
environmental health, and pharmaceutical areas.
December 10, 2004 was a landmark in
New Zealand health. That’s the day indoor
areas of bars and other public places became
smoke-free by law.
The law’s effect on air quality in bars, and
the benefit for non-smokers, won’t just be
guesswork. Before the law came into effect, the
MoH contracted ESR to run a comprehensive
“before and after” study. The first half of the
study was run over the winter/spring of 2004,
including a total of 30 bars in Auckland,
Wellington and Invercargill, with each bar
tested twice.
Non-smokers spent three hours in a bar on a
Friday or Saturday night, after which the level of
cotinine in their saliva was measured. Cotinine
is the body’s main metabolite of nicotine: it’s
an accurate measure of nicotine exposure. The
non-smokers also made a subjective analysis of
the bar’s air quality and counted the number of
lit cigarettes over three 10-minute periods.
“In every bar there was clear evidence of
exposure to second-hand tobacco smoke.
Even when subjects believed that the air was
‘seemingly smoke-free’, they were exposed to
it,” said Dr Jeff Fowles. The highest levels of
cotinine were recorded in Invercargill, where as
many as 60 lit cigarettes from 100 total patrons
were counted at one time.
The follow-up study will take place in the same
bars, over the same months of 2005. In theory,
the follow-up will show no exposure to smoke.
How high were the cotinine levels in 2004?
“About the same as in someone who lives with
a smoker. People were clearly breathing in
carcinogens and cardiovascular toxins. Over
time there would definitely be health risks,”
said Dr Fowles.
19
ESR Annual Report 2005

COMMERCIALISATION
Opening the commercialisation pipeline
“Increasingly ESR is involved in distinct
20
As both a deliverer and a user of science and
biotechnology products and services, ESR is
ideally placed to get involved in commercialising
new products, software and processes. Working
in collaboration with national and international
partners, ESR has seen some major advances.
“We have many of the pieces of the
commercialisation jigsaw puzzle,” says David
Talbot, Manager Business Development &
Marketing. He’s talking about ESR’s ability to
turn research knowledge and processes into
saleable products or services.
“We see a role in a number of stages along the
commercialisation pipeline for new scientific
solutions relevant to the health, justice and food
safety sectors.
“The company is making significant investments
relevant to this, particularly in building new
technology platforms.”
As a major user of specific scientific products,
David Talbot says ESR is ideally placed to take
some new technologies into commercial reality.
“We can be involved in proof-of-concept and
prototype developments, through to validation,
testing and implementation of new products or
services for operational use.”
He cites current work on a prototype soil
DNA fingerprinting solution as an example
of taking research and crossing the “valley
of death” to develop a prototype for forensic
science applications.

stages of the commercialisation process.”
21
Glow sensor finds
toxic killers
In a future series of “CSI” you might
just see the investigators using a
technology developed by
New Zealand microbiologists.
ESR is developing “glowing” bacterial
biosensors to detect toxic chemicals in forensic
toxicology cases.
Biosensors are a bacterial canary. Just like the
traditional canary in a mine, biosensors can detect
the presence of toxic substances rapidly and safely.
Bacterial biosensors are organisms that show stress
symptoms in the presence of a toxic compound.
While they have application in numerous fields
including medicine, environmental and food
quality testing, this is the first time their use in
forensic toxicology has been investigated.
biosensor “glows” if there are no toxic chemicals
present but dims if there are. The decline in
light is in direct proportion to the concentration
of toxic compound present.
“Forensic toxicology laboratories are frequently
asked to exclude chemical poisoning as a factor
in an unexplained death. However, despite
the increasing range and sophistication of
modern instrumental techniques such screens
are not very cost-effective and generally only
limited screening dictated by individual case
circumstances will be performed,” says Dr Stuart
Dickson, Science Leader, Forensic Toxicology.
Initial investigations have shown that the
biosensor can indicate the presence of a variety
of pesticides such as glyphosate, 2,4-D and
2,4,5-T, and inorganic poisons such as arsenic,
mercury and cyanide.
ESR aims to develop a fast, cheap toxicological
screening test that can recognise within minutes
whether a toxic substance is present, enabling
more focused chemical testing to be undertaken.
ESR Annual Report 2005
In collaboration with Aberdeen University,
UK, researchers Jacqui Horswell and Natalie
Redshaw have developed a particular biosensor
that contains a “light”-producing gene. The
“The application of lux or light marked
biosensors to indicate the presence of a variety
of chemical poisons in both urine and stomach
contents is new.”

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

Dioxin study – Paritutu
Years after the production of 2,4,5-T ceased at New Plymouth‘s Ivon Watkins-Dow
(IWD) plant a major study undertaken by ESR for the Ministry of Health provided
some answers on dioxin exposure among residents of the local suburb of Paritutu.
The study was initially undertaken in response
to the local community’s concerns about
whether they were exposed to dioxin as a
result of past emissions from IWD (now Dow
AgroSciences), and whether health effects had
occurred as a result of that exposure.
By investigating the levels of serum dioxin
in blood ESR set out to determine whether
residents who lived close to the agrichemical
plant while the herbicide 2,4,5-T was being
made 18 years ago had dioxin levels higher than
other New Zealanders.
One particular type of dioxin, 2,3,7,8
tetrachlorodibenzo-p-dioxin (or TCDD), is a byproduct
of the manufacture of 2,4,5-T, which was
used extensively throughout New Zealand for gorse
control. Production of 2,4,5-T stopped in 1987.
Both the interim and final reports confirmed
that residents who had lived very near to the
plant for at least 15 years between 1962 and
1987 were more likely to have higher levels of
this dioxin (TCDD) than other New Zealanders.
This was thought to be from breathing fumes
from IWD. The 52 participants of the study had
blood levels of TCDD ranging from 0.85 to 33.3
parts per trillion (ppt). The average TCDD level
of this group was 6.5 ppt. The expected level
was 1.7 ppt. (1 ppt = 0.000000000001 gram.)
The study deliberately concentrated on people
calculated to be the most exposed to dioxins. It
did not try to determine whether health effects
had occurred in this group of people.
ESR’s Dr Jeff Fowles said the project was
challenging to undertake. “Even before the
study began we had to undertake significant
community consultation to ensure there was
agreement that blood serum testing was
the appropriate mechanism for assessing
this exposure.”
The study was undertaken in two phases, with
an interim report on 24 residents produced in
September 2004 and a final report released in
May 2005.
Key points:
• Residents tested had to have lived within
two kilometres east or one kilometre south
of the former plant for at least one year
between 1962 and 1987 and not have
worked at the plant. The average age of
the 52 participants (30 women, 22 men)
was 58 years
• Blood testing was undertaken in two
rounds so that the results from the first
round could assist in the selection of
participants for the second round. Results
were compared with those obtained in a
national serum study carried out by the
Ministry for the Environment (MfE) in
1996/97
• Duration of residence from 1962 to 1987
was an important factor in the level
of elevation
• Eating home-grown leafy vegetables
and “exposed” fruits also contributed
to the dioxin levels found. No link was
found between dioxin levels and eating
home-grown root vegetables, “protected”
fruit such as citrus, poultry/eggs or local
kaimoana (seafood)
• Spatial analysis of soil data is consistent
with a plume of TCDD extending about
1,000 metres east and 400 metres south
of the plant. The highest modelled soil
concentrations are immediately east of the
boundary. It is not possible to determine
from the study whether these emissions
were regular or episodic
• Results suggest the serum TCDD levels
found are due to historical aerial emissions
from the IWD plant throughout
production years.
23
ESR Annual Report 2005

PARTNERSHIP WITH COMMUNITIES
Partnership
24
Back to the future
Te Iwi o Rakaipaaka of northern Hawke’s Bay have a known family tree
stretching back over many generations. But why does the community
have high rates of serious disease? Together, medical science and ancestral
information are being used to seek answers.
2
Te Iwi o Rakaipaaka are descendants of the
paramount chief Rakaipaaka, grandson of the
chief Kahungunu from the Nuhaka (Wairoa)
region. Today’s 10,000 or so living relatives
stretch into the 15th generation.
But the community faces ongoing challenges.
While current health status has not been
formally investigated, observational evidence
suggests very high rates of diabetes, gout,
cancer, heart disease and cigarette smoking.
Inheritance – or lineage – studies of very large
extended families are a powerful strategy for
uncovering genetic factors which influence
medical characteristics. Because Rakaipaaka
have excellent historical knowledge and records
of their whakapapa (ancestry), they’re an ideal
focus for such research.
In 2004, ESR and the iwi began ongoing
research, led by Dr Rod Lea. The study
involves the entire iwi and utilises extensive
family tree knowledge.
The combination of ancestral information and
medical science and technology may help reveal
the genetic and related medical reasons why
the Rakaipaaka community – and perhaps the
broader Maori population – suffers from
serious diseases.
“The ancestral knowledge that’s been shared with
us is hugely detailed. It gives us vital clues about
why individuals and the community suffer from
diseases that have a genetic basis.
“When that knowledge is partnered with
scientific techniques from today, you get a very
clear indication of propensity for disease. It’s
really exciting to be in a position to gain an
understanding that could be of huge benefit to
people today and into the future,” said Dr Lea.
Rakaipaaka Tipuna Ihaka Whaanga

with communities
Local commitment: by forging
close partnerships and
collaborating with local
communities, ESR is bringing
science to the real world –
to solve real-world
problems.
24
Healthy marae
A partnership between ESR and Northland’s
Hauora Hokianga will lead to the
development of Maori solutions to health
problems from sewage treatment and disposal
in rural areas.
A failing septic tank system is a critical health
issue for many rural marae. Problems with
sewage lead to water and soil contamination,
and that’s a likely route for infectious disease.
But for solutions to be effective they need to
answer the specific needs of marae, and be
culturally appropriate.
In 2004 ESR and Hauora Hokianga began a
three-year research study into water and soil
contamination caused by a failing septic tank.
The research is funded by the Health Research
Council and will become a case study for
Maori community development in managing
environmental health issues.
“Current solutions often don’t take into
account unique wastewater needs,” said
project leader Dr Jeff Foote of ESR.
“Inappropriate assumptions are made about
the needs and resources of whanau, hapu
and iwi.
“You need to consider issues such as the shock
loading of septic tanks when large numbers
attend hui, tangi or weddings. A septic tank is
also less effective in handling traditional high-fat
kai. Skills and maintenance requirements also
need to be factored in.”

25
With such issues in mind, the research is using
a variety of methods to evolve locally relevant
knowledge about community development
and the regulatory, institutional, cultural
and community contexts surrounding marae
wastewater needs.
The study builds on the joint project “Learning
from the stories of Nga Puna Wai o Hokianga”,
which examined the role tino rangatiratanga and
kaitiakitanga played in the success of the Nga
Puna Wai o Hokianga (safe drinking water) pilot
project, which was funded by the Ministry
of Health.
“Septic tanks and wastewater are a major
concern to marae in the Hokianga and the whole
motu,” said Hone Taimona, Hauora Hokianga
community development researcher. “This will
give us a working model of Maori community
environmental health action, which we can
apply to other environmental health issues and
with adaptation may be used more widely for
issues such as economic development.”

State of the Takiwa
ESR has partnered with Ngai Tahu to develop a
system to help record, assess and report on the
health of the environment.
Maori have historically collected a range of
valuable environmental information. This
continues today – however, due to its largely
oral nature, it is often not recorded in a form
that is readily accessible, usable or defensible in
a scientific context.
With this in mind, ESR is collaborating with
Ngai Tahu whanui on the State of the Takiwa
(environment) project. The aim is to develop a
culturally-based environmental monitoring and
reporting database system. This will enable Ngai
Tahu to assess and report on the cultural health
of the natural resources and environment in the
Ngai Tahu takiwa.
By systematically collecting, recording, collating
and reporting ongoing information on the
takiwa, Ngai Tahu and other iwi will be able to
better manage resources now and in the future.
• The concept has been tested at various sites
within Southland’s Waiau River catchment
• Data has been loaded into a site evaluation
database. This includes digital reference
photos, site visits, questionnaire and
historical information. The database features
a bilingual interface
• The system will assist local runanga and
hapu with issues such as monitoring resource
consents, as well as helping local authorities
to provide for cultural values
• Funding is from the Ministry for
the Environment.
Shellfish health study drives awareness
A collaborative study into shellfish health at Waitangi is delivering widespread
community and environmental benefits.
Over the last year, an ESR team headed by Dr
Gail Greening has identified norovirus and
adenovirus in some shellfish harvested by
Ngapuhi iwi from historically important beds
around Waitangi in Northland.
The tests provided the community with
scientific evidence that the local shellfish beds
are occasionally contaminated with human
viruses and that the shellfish are at times unsafe
to eat. Large signs, installed by Northland
Health, alert locals and visitors to the potential
danger of shellfish contamination.
The two-year study involves Ngapuhi regularly
collecting shellfish samples for testing by ESR.
“Whenever there’s a sewage spill or people get
sore tummies we will send additional samples,”
says Emma Gibbs of Ngapuhi.
“Initial results from the study gave us the
scientific evidence that there were problems
with sewage in the Waitangi area and that
shellfish were making our people sick.
“People now have the confidence to talk and to
report health issues,” she says.
Ms Gibbs says the study is providing a
foundation to build community awareness
about looking after the environment. She is now
lecturing to colleges, science groups, childcare
students and other groups about the study, and
its importance.
“People want to know about what we are
doing and they want to know why. They
want to see the shellfish beds, see how the
shellfish live. This is not about Maori saving
shellfish. It’s about all of us keeping the water
clean, protecting our kaimoana, saving our
environment. People are becoming more aware,
they are taking responsibility,” she says.
• This testing is part of a two-year project
involving commercial and recreational
harvesting sites around New Zealand.
• The study is helping ESR to develop
a faster and reliable way to detect
noroviruses.
25
ESR Annual Report 2005

EDUCATION
Knowledge Gains
Encouraging scientists of the future
is essential. So too is encouraging
understanding and interaction between
scientists and the wider community. ESR is
committed to supporting science education.
26

Meeting Awanuiarangi
In February 2005, key ESR
management visited Te Whare
Wananga o Awanuiarangi to explore
opportunities for future collaboration.
Recognising that the wananga and ESR both
have interests in environmental science, the
wananga extended a formal invitation and
senior ESR representatives visited Whakatane
in early 2005. It was a success, with both parties
making presentations on latest projects
and goals.
“We talked about how ESR can help them
and also the opportunities for research
collaboration,” said Maui Hudson, ESR
Maori Development Manager. “We’re trying
to develop relationships that are mutually
beneficial,“ he said.
Wide-reaching benefits
from student research
ESR is co-supervising 10 postgraduate students, in
association with Victoria, Lincoln, Auckland and
Canterbury Universities.
Seven of the 10 students are working towards
PhDs. Their research spans ESR’s operations,
including forensic, food safety, envirogenomics
and communicable disease. Several of the
students also benefit from joint ESR/
university scholarships.
In another effective partnership, ESR’s Science
Information Systems Group continues to
host students from the Victoria University
of Wellington (VUW) School of Information
Management. Students’ projects this year have
included developing GCMS library-checking
software for fibre analysis, and software for
counting bacterial colonies in Petri dishes.
Jacob de Feijter, Manager of ESR’s Science
Information Systems, said the collaboration
was hugely successful for both ESR and
students. “As well as getting innovative product
development, some of the students have ended
up working permanently for ESR after
their studies.”
• Two earlier VUW student projects helped
ESR to respond quickly to the Boxing Day
tsunami, Mr de Feijter said. “A DVI system
and a parentage-matching module were the
starting point for the web-based DVI system
and kinship analysis (pedigree) module
provided to Thailand as part of the tsunami
aid package. So the students’ work had
international benefits.”
• ESR and Technology New Zealand
hosted a group of US students from the
Massachusetts Institute of Technology
entrepreneurship programme. The students
analysed the commercial viability and
potential of international forensic
training packages.
• ESR is supporting the joint Sport and
Recreation New Zealand (SPARC) Sport
Wellington Coachcorps initiative. Six staff
members of Kenepuru’s Science Centre
receive paid time off work to coach junior
sports teams.
27
ESR Annual Report 2005
• Students at Titahi Bay Intermediate and
Mana College continue to be enthused
about science, with programmes in
association with ESR’s scientific staff.

EDUCATION
Science degree next goal for teen mum
A young Porirua woman has her sights
set on becoming a forensic scientist –
and ESR is right behind her.
Support into science
28
Helen Woolner of Porirua became a mum at 16. Four years later she
has finished her education at Huarahi Tamariki, Wellington’s school
for teenage parents – and launched into a science degree.
Ms Woolner, of Cook Islands descent, said having a child provided
motivation to carry on with her education. She lives with her mother,
paying $120 a week board.
While at Huarahi Tamariki, Ms Woolner gained work experience in
a laboratory at ESR’s Kenepuru Science Centre. Talking with forensic
scientists, she decided that is what she wants to do. When Ms
Woolner’s story was reported in the newspaper in early 2005, ESR
stepped in, providing her with a $5,000 scholarship.
“It’s a fantastic example of putting real commitment to get
into a science career,” said ESR Strategic Manager Science and
Research Val Orchard. “Science offers superb opportunities, but
it takes effort – at ESR we want to support people who have the
focus to achieve.”
ESR provides a range of scholarships and
support to encourage young people into a
science career. A new opportunity to do just
that was Christchurch’s 2005 Spacifically
Pacific Expo, for secondary school students of
Pacific Island descent.
ESR’s stand at the Expo featured vivid
displays such as blood splatter patterns, and
gave students the opportunity to analyse
bacteria cultures. Four ESR scientists were
on the spot to encourage and enthuse the
students. The whole idea was to get students
to take a scientific questioning approach to
discover answers – and they loved it. ESR also
sponsored a new award for the region’s top
Pacific science students.

Tikanga respect
As well as meeting legal and scientific
demands, it’s important that ESR
forensic crime scene investigations
show respect for the victim and family.
When ESR forensic scientists attend a crime
scene and the victim is Maori, how should
the body be handled? What if the grieving
family wants to do karakia? How should the
investigators respect protocol?
Over the last year, important steps have been
taken to ensure ESR offers the right training and
information in how to respect tikanga.
A new brochure clarifies the issues and how best
to show respect. ESR worked with police, iwi
and ESR forensic representatives to develop the
brochure – and a training programme which is
due to be launched in late 2005.
“It’s all about helping people know what to
expect and how to deal with it, and to help
encourage good communication all round,”
said Maui Hudson, ESR Maori
Development Manager.
ESR has new
Maori logo
D’signNation, a Maori design group
in Porirua, took elements from the
“Manaaki Tangata” carved panel at
ESR’s Kenepuru Science Centre to
create this graphic. The design will
be used in material particularly for
Maori audiences.
Following the tradition of Maori art, each
design element forms part of a story. The central
koru (three spirals based on the fern frond)
incorporates air, water and earth, as well as the
mother, father and child – the tangata or people
our Maori name and mission statement commit
us to care for. On each side are manaia, guardian
figures, whose three-fingered hands also
represent values such as faith, hope and love.
29
ESR Annual Report 2005

HUMAN RESOURCES
www.esrcareers.cri.nz
Martin Turver: Pharmaceuticals Scientist
“We came to New Zealand because we feel it gave us a better lifestyle
and a safer environment for our family to grow up in. The kids
are enjoying school, the class sizes are smaller and there is lots of
outdoor space for the many sports they enjoy. The climate is much
more clement than our native Yorkshire – we were still having BBQs
well into autumn.”
ESR attracts world’s best
30
With a worldwide shortage
of specialist scientists
ESR is actively recruiting
overseas to fill key
positions.
“In the last year we have had specialist staff join the organisation from
several different countries including Zimbabwe, Britain and Canada,” says
Human Resources Manager Jocelyn Grainger.
“The diversity of skills and culture makes for a vibrant and interesting
workplace. I call it the United Nations of ESR. It adds to the attraction of
working here,” she said.
While the organisation’s first preference is to recruit New Zealanders the
reality is that for some specialist positions the right mix of skills is not
always available here.
“Science is an international career and skills are very transferable between
countries. Some specialist skills are highly sought after both here
and overseas.”
Generally ESR doesn’t have too much trouble attracting people. Some
general forensic positions have recently attracted upwards of 100
applicants. The organisation runs an extremely cost-effective and
comprehensive international recruitment system through a dedicated
website, www.esrcareers.cri.nz.
“We work closely with New Zealand Immigration, joining their recruitment
fairs and utilising their recruitment publications. We also undertake our
own advertising in specialist scientific journals and websites.
“One of our most important and successful recruitment methods is word
of mouth by our own staff. They are meeting and talking with colleagues
here and overseas and are excellent ambassadors, both for ESR and for
New Zealand.”
HR initiatives this year
• The ESR climate survey was undertaken this year. Seventy-eight per
cent of staff responded to the independent survey that questioned
staff on a range of issues including work/life balance issues,
management, and performance reviews. Results from the survey will
be used to refine human resources policy and practices. The survey
also provides a benchmark against other CRIs.
• ESR has been working towards tertiary status in the ACC workplace
safety management programme. There has been an increased focus
on the health and safety culture throughout the year following the
appointment of a full-time health and safety coordinator.
• Profit share scheme – this sets aside 10 per cent of ESR’s previous
year’s net profit after tax as a contestable training fund. The scheme
is aimed at junior scientific and support staff. This year 54 staff were
granted project funds through the scheme.

PSA and ESR -
working together
ESR and the PSA continue to work together successfully
under the Partnership for Quality (PfQ) strategy.
Molly Ziki: Virology Technician
“The main reasons for coming to New Zealand
were the lifestyle, opportunities and the
kids’ future.”
Molly says that the family is fitting in very
well to life in New Zealand, “although the
first winter here was a bit cold!” She said her
daughters, aged 11 and 9, didn’t take long to
acclimatise. “They just can’t get enough of the
beach! Coming from a landlocked country like
Zimbabwe the beach is a real novelty.”
50 per cent of all
applicants are from
people registered on
ESR’s career website
PfQ is all about PSA representatives and ESR
decision-makers working together, taking an
open and consultative approach to address
issues which affect staff and their workplaces.
Through PSA representatives, members are
directly involved in decision-making – and
share ownership of results with ESR.
Latest successes through PfQ include:
• The 2004 development and introduction
of a new remuneration system for all
employees. Through the consultative
approach, concerns of both ESR
management and employees were heard
and addressed. This led to a very smooth
process of implementation.
• A new “health benefit” for staff who are
covered by the collective employment
agreement. ESR management and PSA
delegates developed the new benefit together.
It meets ESR needs and is greatly valued by
members. In fact, the benefit has since been
adopted by several other CRIs.
The Public Service Association (PSA) is the only trade
union representing ESR staff. Around 70 per cent
of staff are members. PSA members within ESR are
supported through their five site delegates and a
professional PSA organiser.
• Further development of the ESR work/life
balance policy. A recent staff survey suggests
that, for many, workload significantly impacts
on work/life balance. It is envisaged that a
successful policy would enhance ESR’s profile
as an employer of choice. Employees would
benefit from, and participate in developing,
innovative employment conditions.
When PfQ was signed in 2001, it was agreed
the strategy be fully reviewed every two years.
This will next take place in 2006. “We intend
to continue the same partnership approach.
We are confident that it is the best mechanism
for addressing both employer and employee
concerns,” said PSA delegate Paula Scholes.
“The last year has seen many positive
achievements for everyone,” she said. “We look
forward to working with ESR decision-makers
on important issues impacting on members’
working lives.”
31
ESR Annual Report 2005

Science and Research
Highlights
32
PAPERS, CONFERENCES AND
SCIENTIFIC REPORTS
Staff presented 122 conference papers and
abstracts and had more than 100 papers accepted
for publication in national and international
referenced journals, series and books.
BOOKS
Two ESR staff published books during the year.
Dr John Buckleton co-authored a definitive
international DNA guide for forensic scientists,
“Forensic DNA Evidence Interpretation”.
Dr Gerald Midgley co-authored a book on
operational research and systems thinking
for community development, “Community
Operational Research”.
SENIOR FELLOW
Senior Scientist Dr Penny Truman was awarded
the ESR Senior Fellowship for 2004. Dr Truman
used the award to develop her work in the
proteomics area.
INTERNATIONAL FELLOW
Smoking addiction expert Dr Neil Benowitz
from the United States was ESR’s International
Fellow for 2004. During his New Zealand
visit he discussed potential collaborative
envirogenomic research with ESR and gave
presentations to a number of organisations
including ASH and the Wellington School
of Medicine.
DRUG-DRIVING STUDY
Preliminary results of a long-term study into
drug-driving showed that up to a third of
drivers killed on roads and later tested had
cannabis in their blood. The study, undertaken
in collaboration with the police, should provide
a conclusive picture on how many drivers
are using drugs and whether they are putting
themselves and other road users at risk.
PCE PRAISES ESR/MoH
PARTNERSHIP
In a major report connecting science with
environmental policy, the Parliamentary
Commissioner for the Environment praised the
ESR/Ministry of Health partnership which led to
guidelines for drinking water standards.

WORKPLACE DRUG AND ALCOHOL
PROGRAMME
ESR undertakes drug and alcohol testing
programmes for more than 500 clients, ranging
from major clients with multinational sites
to small businesses and contractors with less
than 10 employees. Overall 10 per cent of all
workplace drug tests test positive for drugs, and
30 per cent of workplace drug tests undertaken
post-accident or under reasonable cause test
positive for drugs.
ANTIBIOTIC RESISTANCE
WORSENING
ESR surveillance and analysis demonstrate that
penicillin resistance among pneumococci has
increased from 0.8 per cent to 28 per cent in
10 years. Pneumococci are a common cause of
infections like sinusitis, middle ear infections
and pneumonia. Resistance to erythromycin
among pneumococci has also increased
dramatically and is now 21 per cent. ESR data
also indicates that amoxicillin resistance has
nearly tripled to 23 per cent in Haemophilus
influenzae, which is also a common cause of
chest and ear infections
SURVEILLANCE IDENTIFIES
WHOOPING COUGH EPIDEMIC
ESR’s core surveillance work continues to track
incidence and burden of disease in New Zealand
providing vital data for health professionals. A
re-emergence of a pertussis (whooping cough)
epidemic was identified in mid-2004.
PACKING POULTRY
The poultry industry and major supermarkets
have changed the way fresh poultry is packaged
in response to the findings of an ESR study.
Food Safety scientists tested a range of poultry
packs commonly purchased in supermarkets
and found a quarter of them had Campylobacter
on the exterior surface, creating a risk of crosscontamination
to other food products that came
either directly in contact with them or indirectly
from common surfaces such as supermarket
checkouts. The industry and many supermarkets
are now ensuring poultry is packed in leakproof
bags and packaging.
ESR SCIENCE CONFERENCE
The 4th biannual ESR Science Conference
provided an opportunity for a range of ESR’s
young scientists to present their work and
to hear from senior scientists across all the
organisation’s scientific disciplines.
THESIS SUPPORT
ESR began support for 6 MSc and PhD students.
ADVISORY ROLES AND BOARDS
Forty-four ESR staff were invited or
elected this year to serve on national and
international scientific agencies, boards and
advisory committees.
DNA DATABANK MILESTONE
In April a “crime-fighting milestone” was
reached with the 50,000th DNA profile loaded
onto the national DNA database. The rate of
matching crime samples with suspects is at a
record (and world) high of 55 per cent.
33
ESR Annual Report 2005

Scientific Output Performance Indicators
Actual
Target
Science Output
1. Papers accepted for publication in international externally refereed journals, series or books 100 60
2. Papers in local internally or editor-refereed journals, series or books 5 25
3. Conference papers and abstracts 122 120
4. Research monographs or books 1 1
5. Scientific and technical reports 111 100
6. Submissions for Research & Development funding 33 35
Benefit to New Zealand
1. Invitations or elections to serve on national or international scientific agencies, boards or
advisory committees 44 45
2. Value of public good services provided in New Zealand ($m) 35 35
34
Application and Promotion of Science
1. Involvement in conferences, workshops, hui and seminars
Number of events 460 250
Number of attendees 730 600
2. Availability and use of ESR culture collection; number of cultures issued 2,222 2,100
3. Number of Technology Business Growth contracts 1 2
4. Number of science promoting media events 147 80
Good Employer
1. Staff turnover as a percentage of total staff (excluding redundancies and fixed term contracts) 10.5 10 – 15
2. Number of work days lost through workplace accidents (as a percentage of total days)

Key Financial
Performance Measures
Year ended
30/6/05 Target
Year ended
30/6/04
Revenue, $m 40.6 41.9 36.9
EBIT Margin, % 7.9 5.0 7.5
Return on equity, % 11.0 12.4 9.8
Return on assets, % 11.2 7.9 10.8
Acid Test 1.4 0.9 1.2
Equity Ratio, % 71.1 77.7 71.2
Gearing, % – – –
Interest Cover – – –
Revenue/FTE, $000 114.5 117.0 108.6
Corporate Governance
ESR is one of the nine CRIs created in mid-1992 with the reform
of New Zealand’s state-funded science services.
As a CRI the company’s principal activity is to conduct scientific
research in accordance with the purpose and principles for CRIs as set
out in sections 4 and 5 of the Crown Research Institutes Act 1992.
ESR is wholly owned by the New Zealand Government, and
has an independent Board of Directors that is responsible for its
strategic direction and operational performance. ESR has a Board
of six directors including the chair.
Responsibility for the operation and administration of the
company is delegated to the Chief Executive Officer who is
accountable to the Board.
Role of the Board of Directors
The Board acts on behalf of, and is accountable to, the
Shareholding Ministers (the Minister of Finance and the Minister
of Crown Research Institutes).
It must also fulfil any regulatory expectations laid down in the
Companies Act 1993, the Crown Research Institutes Act 1992
and the Public Finance Act 1989.
The Board’s responsibility includes establishing strategic policy
and guiding and monitoring the business and affairs of the
company on behalf of shareholders. It is committed to a high
standard of corporate governance by identifying business risks,
reporting to shareholders and overseeing the management of
the organisation.
The Board also produces Half-Yearly and Annual Reports which
detail the performance against SCI targets. These documents are
tabled in Parliament and thereafter made available to the public.
The directors are required by the Companies Act 1993 to prepare
financial statements for each financial year. These statements are
presented in the Annual Report.
The Strategic Leadership Team
The responsibility for the operation and administration of the
organisation is delegated to the Chief Executive Officer who
in turn heads the Strategic Leadership Team (SLT). This team
develops and implements strategies that keep ESR focused on
achieving its goals and strategic business objectives.
The SLT includes the senior managers from the three business
groups (Forensic, Environmental Health, Science Information
Management Services) and the four functional areas (Finance,
Science & Research, Business Development & Marketing, Human
Resources) represented in the organisational structure.
Crown Company Monitoring and Advisory Unit
(CCMAU)
CCMAU performs the role of protecting the shareholders’
interests and investment in the company. In addition to agreeing
the SCI and receiving the Half-Yearly and Annual Reports, the
Board submits quarterly reports on performance against the
Strategic Plan objectives and targets.
35
35
ESR Annual Report 2005
In consultation with management, the Board determines a
Statement of Corporate Intent (SCI) and a Strategic Plan for the
coming year.
These two documents encompass the vision, mission and strategy
statements for ESR as well as its business policies. The SCI
focuses on core business areas, as well as financial and nonfinancial
performance measures and targets. The Strategic Plan
details the organisation’s planned business initiatives.

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

Keith Oliver – Director
(e) Indemnity and Insurance
On behalf of the Board: 26 July 2005
Chairman
Director
Director
Director
Chairman
Chairman
Kathy Crosier – Director
Actronic Holdings Ltd
ALTO Capital Ltd
ALTO Capital Investments Ltd
KOLT Investments Ltd
Mastip Technology Ltd
Truescape Ltd
Director New Zealand Blood Service
Director Biofinz Limited
Professor The University of Auckland
Committee Member Royal College of Pathologists
of Australasia
Dr Rod Ellis-Pegler – Director
Consultant Physician
Consultant Microbiologist
Consultant Physician
Clinical Associate Professor
Sharon Opai – Director
Auckland City Hospital
Diagnostic Medlab Auckland
Medical Specialists Group, Auckland
The University of Auckland
Director Waiariki Polytechnic
(b) Specific Disclosures
There are no specific disclosure notices given pursuant to
section 140 (1) of the Companies Act 1993.
(c) Share Dealings
During the year no directors acquired or disposed of any
equity securities in the parent company.
In accordance with section 162 of the Companies Act 1993
and the constitution of the company, the company has given
indemnities to, and has effected insurance for, directors and
executives of the company and its related companies which,
except for specific matters which are expressly excluded,
indemnify and insure directors and executives against
monetary losses as a result of actions undertaken by them in
the course of their duties. Specifically excluded are certain
matters, such as incurring of penalties and fines, which may
be imposed for breaches of the law.
Directors’ interests
No director held any interest in the shares of the Institute. No
material contracts involving directors’ interests were entered into
during, or subsequent to, the period covered by this report.
Remuneration of employees
Total remuneration in respect of employees paid above $100,000
was as follows:
Remuneration range
No of staff
$100,000 – $109,999 3
$110,000 – $119,999 3
$120,000 – $129,000 1
$130,000 – $139,999 2
$140,000 – $149,999 4
$180,000 – $189,999 1
$290,000 – $299,999* 1
* Chief Executive Officer
Ian Wilson
Chairman
Keith Oliver
Director
Dr John Hay
Chief Executive Officer
37
ESR Annual Report 2005
(d) Use of Company Information
Pursuant to section 145 of the Companies Act 1993 the Board
recorded no notices from directors requesting to use company
information received in their capacity as directors which
would not otherwise have been available to them.
Events subsequent to balance date
The directors are not aware of any matter or circumstance since
the end of the financial year that has significantly affected, or may
significantly affect, the operation of the Institute.

Audit Report
To the readers of Institute of Environmental Science and Research Limited’s Financial
Statements for the year ended 30 June 2005
The Auditor-General is the auditor of Institute of Environmental Science and Research Limited (the
Company). The Auditor-General has appointed me, Karen Shires, using the staff and resources of
PricewaterhouseCoopers, to carry out the audit of the financial statements of the Company, on his
behalf, for the year ended 30 June 2005.
Unqualified opinion
38
In our opinion:
• The financial statements of the Company on pages 40 to 51:
• comply with generally accepted accounting practice in New Zealand; and
• give a true and fair view of:
- the Company’s financial position as at 30 June 2005;
- the results of its operations and cash flows for the year ended on that date.
- Based on our examination the Company kept proper accounting records.
The audit was completed on 26 July 2005, and is the date at which our opinion is expressed.
The basis of the opinion is explained below. In addition, we outline the responsibilities of the Board of
Directors and the Auditor, and explain our independence.
Basis of opinion
We carried out the audit in accordance with the Auditor-General’s Auditing Standards, which
incorporate the New Zealand Auditing Standards.
We planned and performed our audit to obtain all the information and explanations we considered
necessary in order to obtain reasonable assurance that the financial statements did not have material
misstatements, whether caused by fraud or error.
Material misstatements are differences or omissions of amounts and disclosures that would affect a
reader’s overall understanding of the financial statements. If we had found material misstatements that
were not corrected, we would have referred to them in the opinion.

Our audit involved performing procedures to test the information presented in the financial statements.
We assessed the results of those procedures in forming our opinion.
Audit procedures generally include:
• determining whether significant financial and management controls are working and can be relied on
to produce complete and accurate data;
• verifying samples of transactions and account balances;
• performing analyses to identify anomalies in the reported data;
• reviewing significant estimates and judgements made by the Board of Directors;
• confirming year-end balances;
• determining whether accounting policies are appropriate and consistently applied; and
• determining whether all financial statement disclosures are adequate.
We did not examine every transaction, nor do we guarantee complete accuracy of the financial statements.
We evaluated the overall adequacy of the presentation of information in the financial statements.
We obtained all the information and explanations we required to support the opinion above.
Responsibilities of the Board of Directors and the Auditor
The Board of Directors is responsible for preparing and submitting for audit financial statements in
accordance with generally accepted accounting practice in New Zealand. Those financial statements
must give a true and fair view of the financial position of the Company as at 30 June 2005. They must
also give a true and fair view of the results of its operations and cash flows for the year ended on that
date. This responsibility is specified in the Crown Research Institutes Act 1992 and the Financial
Reporting Act 1993.
We are responsible for expressing an independent opinion on the financial statements and reporting that
opinion to you. This responsibility is specified in section 15 of the Public Audit Act 2001.
Independence
When carrying out the audit we followed the independence requirements of the Auditor-General, which
incorporate the independence requirements of the Institute of Chartered Accountants of New Zealand.
In addition to the audit we have carried out taxation services assignments, which are compatible with
those independence requirements. Other than the audit and these assignments, we have no relationship
with or interests in the Company.
Karen Shires PricewaterhouseCoopers
On behalf of the Auditor-General
Wellington, New Zealand
Matters Relating to the Electronic Presentation
of the Audited Financial Statements
This audit report relates to the financial statements of the
Company for the year ended 30 June 2005 included on the
Company’s web-site. The Company’s Board of Directors is
responsible for the maintenance and integrity of the Company’s
web site. We have not been engaged to report on the integrity
of the Company’s web site. We accept no responsibility for any
changes that may have occurred to the financial statements since
they were initially presented on the web site.
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/from these financial
statements. If readers of this report are concerned with the
inherent risks arising from electronic data communication they
should refer to the published hard copy of the audited financial
statements and related audit report dated 26 July 2005 to confirm
the information included in the audited financial statements
presented on this web site.
Legislation in New Zealand governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
39
ESR Annual Report 2005

Statement of Financial Performance
For the year ended 30 June 2005
Notes
2005 Actual
Audited
$’000s
2005 Budget
Unaudited
$’000s
2004 Actual
Audited
$’000s
Operating Revenue 2 40,640 41,897 36,931
Operating Expenses 3 (37,272) (39,797) (34,036)
Operating Surplus before Taxation 3,368 2,100 2,895
Capital Gains – 1,159 –
Income Tax 4 (1,145) (693) (1,106)
Net Surplus after Taxation 2,223 2,566 1,789
40
Statement of Movements in Equity
For the year ended 30 June 2005
2005 Actual
Audited
$’000s
2005 Budget
Unaudited
$’000s
2004 Actual
Audited
$’000s
Equity at the Beginning of the Year 19,177 19,361 17,388
Net Surplus after Taxation 2,223 2,566 1,789
Total Recognised Revenue and Expenses 2,223 2,566 1,789
Equity at the End of the Year 21,400 21,927 19,177
The accompanying notes form an integral part of these financial statements.

Statement of Financial Position
As at 30 June 2005
Notes
2005
Actual
Audited
$’000s
2005
Budget
Unaudited
$’000s
2004
Actual
Audited
$’000s
Non Current Assets
Fixed Assets 5 19,892 21,586 18,954
Future Income Tax Benefit 4 (15) 164 63
Investments – 1,700 –
19,877 23,450 19,017
The Board of Directors of the Institute of Environmental
Science & Research Limited authorised these financial
statements for issue on 26 July 2005.
On behalf of the Board:
Current Assets
Cash and Bank Balances 3,461 1,000 2,423
Accounts Receivable & Prepayments 6 5,349 3,556 4,612
Income Tax Receivable – – 278
Stock and Work in Progress 7 688 461 708
Property intended for sale 643 – –
10,141 5,017 8,021
Current Liabilities
Accounts Payable & Accruals 6,705 4,530 6,129
Income Tax Payable 45 302 –
Leave Liabilities 1,446 1,230 1,256
Ian Wilson
Chairman
Keith Oliver
Director
41
ESR Annual Report 2005
8,196 6,062 7,385
Net Current Assets (Liabilities) 1,945 (1,045) 636
Non Current Liabilities
Term Debt 8 – – –
Retirement Leave Liabilities 422 478 476
422 478 476
Net Assets 21,400 21,927 19,177
Equity
Share Capital 9 8,494 8,494 8,494
Retained Earnings 12,906 13,433 10,683
Total Equity 21,400 21,927 19,177
The accompanying notes form an integral part of these financial statements.

Statement of Cash Flows
For the year ended 30 June 2005
2005 Actual
Audited
$’000s
2005 Budget
Unaudited
$’000s
2004 Actual
Audited
$’000s
Cash Flows from/(used in) Operating Activities
Cash was provided from:
Customers 40,364 46,885 35,531
Interest Received 179 14 132
40,543 46,899 35,663
Cash was applied to:
Suppliers and Employees (35,300) (38,235) (30,641)
Interest Paid (12) (3) (3)
Net GST (Paid)/Received (30) (3,207) 20
Income Tax Paid (744) (881) (1,112)
42
(36,086) (42,326) (31,736)
Net Cash Inflow from Operating Activities 4,457 4,573 3,927
Cash Flows from/(used in) Investing Activities
Cash was provided from:
Proceeds from Sale of Fixed Assets 10 1,500 107
Crown Contribution 750 – –
760 1,500 107
Cash was applied to:
Purchase of Fixed Assets (4,179) (5,204) (2,770)
Other Investments – (1,700) –
(4,179) (6,904) (2,770)
Net Cash Outflow from Investing Activities (3,419) (5,404) (2,663)
Cash Flows from/(used in) Financing Activities
Cash was provided from/(applied to):
Proceeds from / Repayment of Term Debt – – –
Net Cash Inflow/(Outflows) from Financing Activities – – –
Net Increase/(Decrease) in Cash Held 1,038 (831) 1,264
Cash and Bank Balances at the Beginning of the Year 2,423 1,831 1,159
Cash and Bank Balances at the End of the Year 3,461 1,000 2,423
The accompanying notes form an integral part of these financial statements.

Statement of Cash Flows (continued)
For the year ended 30 June 2005
2005 Actual
$’000s
2004 Actual
$’000s
RECONCILIATION OF OPERATING SURPLUS TO NET CASH FLOW FROM OPERATING ACTIVITIES
Net Surplus after Taxation 2,223 1,789
Add non-cash items:
Depreciation 1,830 2,027
Future Income Tax Benefit 78 101
Bad Debt Expense 1 7
Change in Provision for Doubtful Debts – 10
Increase/(Decrease) in Retirement Leave Provision (54) 14
1,855 2,159
Add items classified as Investing Activities:
Loss on Sale of Assets 7 9
7 9
Movements in Working Capital Items:
(Increase)/Decrease in Receivables and Prepayments (737) 496
Increase/(Decrease) in Tax Payable/Receivable 323 (109)
Decrease in Stock and Work in Progress 20 117
Increase/(Decrease) in Operating Payables 576 (651)
Increase in Leave Provisions 190 117
43
ESR Annual Report 2005
372 (30)
Net Cash Inflow from Operating Activities 4,457 3,927
The accompanying notes form an integral part of these financial statements.

Notes to the Financial Statements
For the year ended 30 June 2005
1. Statement of Accounting Policies
Reporting Entity
(iii) Depreciation
(vii) Statement of Cash Flows
The reporting entity to which these financial statements relate
is the Institute of Environmental Science and Research Limited
(ESR).
Depreciation is charged on a straight-line basis so as to
write off the cost of the fixed assets over their expected
economic lives.
• Cash means coins and notes, demand deposits and
other highly liquid investments in which ESR has
invested as part of its day-to-day cash management.
44
The financial statements have been prepared in accordance with
the Crown Research Institutes Act 1992, the Companies Act
1993 and the Financial Reporting Act 1993.
Budgeted figures are included in the financial statements
pursuant to the Crown Research Institutes Act 1992. These
budgeted numbers are not subject to audit.
The financial statements are parent and group financial
statements. The three subsidiaries and associate of ESR are
dormant non-trading entities, consequently there is no difference
between the financial statements of the group and parent.
Measurement Base
The financial statements are prepared on the basis of historical
cost with the exception of certain items for which accounting
policies are stated below.
Accounting Policies
(i) Operating Revenue
Operating Revenue shown in the Statement of
Financial Performance comprises the amounts
received and receivable by ESR for services supplied to
customers in the ordinary course of business.
(ii) Fixed Assets
The cost of fixed assets includes the value of
consideration given to acquire the assets and the value
of other directly attributable costs, which have been
incurred in bringing the assets to the location and
condition necessary for their intended use.
Major economic lives are:
Freehold Buildings
Leasehold Improvements
Plant, Equipment & Vehicles
IT Equipment & Software
(iv) Accounts Receivable
25 – 50 years
10 years
3 – 10 years
3 years
Accounts Receivable are stated at their estimated
realisable value after providing against debts where
collection is doubtful. An estimate of the value of
doubtful debts is made based on a review of debts at
year end. Bad debts are written off in the period in
which they are identified.
(v) Stock and Work in Progress
Stocks of consumables and work in progress are
stated at the lower of cost or net realisable value. Cost
is determined on a first in, first out basis. Work in
progress includes a portion of the costs appropriate to
the stage of completion reached.
(vi) Taxation
The taxation charge against the accounting surplus
for the year is the estimated liability in respect of that
surplus after allowance for permanent differences
between accounting and tax rules.
ESR accounts for deferred taxation using the partial
basis under the liability method. Future tax benefits
attributable to tax losses or timing differences are only
recognised when there is virtual certainty of realisation.
• Investing Activities are those activities relating to
the acquisition, holding and disposal of fixed assets
and investments.
• Financing Activities are those activities which result
in changes in the size and composition of the capital
structure of ESR.
• Operating Activities include all other transactions
and events.
(viii) Foreign Currency Transactions
Transactions in foreign currency are translated to
New Zealand dollars at the rate applying at the date of
the transaction.
Foreign currency monetary assets and liabilities are
translated at the rate applying at balance date.
Where foreign exchange risk at balance date is covered
by forward contracts, the translation is carried out at
the rate contained in the applicable contract.
(ix) Research and Development
A portion of ESR’s normal operations relate to research
activities. Such operating activities are externally
funded and are accounted for as ordinary operating
expenses and revenues as the activities are performed.
Other research costs are expensed in the period in
which they arise.

(x) Goods and Services Tax
Items in the Statements of Financial Performance and
Cash Flows are disclosed net of Goods and Services
Tax. All items in the Statement of Financial Position are
stated net of GST with the exception of Receivables and
Payables, which include GST invoiced.
(xi) Financial Instruments
ESR is a party to financial instruments as part of its
normal operations. Financial instruments carried in
the Statement of Financial Position include cash and
bank balances, short-term investments and account
receivables. Such financial instruments are recognised in
the Statement of Financial Position at net realisable value.
Financial instruments that are designated as hedges of
specific items are recognised on the same basis as the
underlying hedged items.
Financial instruments that do not constitute hedges are
stated at market value and any resultant gain or loss is
recognised in the Statement of Financial Performance.
Forward exchange contracts entered into as hedges of
foreign exchange assets and liabilities are valued at the
exchange rate prevailing at year end. Any unrealised
gains or losses are offset against foreign exchange gains
or losses on the related asset or liability.
(xii) Impairment
Annually, the directors assess the carrying value of
each asset. Where the estimated recoverable amount
of the asset is less than its carrying amount, the asset is
written down. The impairment loss is recognised in the
Statement of Financial Performance.
(xiii)Consolidation Policy
The financial statements consolidate the results of
subsidiaries using the purchase method and the results
of associates using the equity method.
(xiv) Properties Intended for Sale
Properties intended for sale are recorded at the book
value of the property at the date the sale decision was
made, plus any costs incurred in getting the property
into a saleable condition. They are classified in current
assets when the sale is expected within one year of
balance date.
(xv) Changes in Accounting Policies
There have been no changes in accounting policies
during the year. The policies set out above have been
applied on a basis consistent with the previous year.
Certain comparative figures have been restated to ensure
consistency of classification with the current year.
45
ESR Annual Report 2005

2. Operating Revenues
Operating Revenues comprise:
2005 Actual
$’000s
2004 Actual
$’000s
Sales 40,461 36,799
Interest Revenue 179 132
Gains on Sale of Fixed Assets – –
40,640 36,931
3. Operating Expenses
Operating Expenses comprise:
2005 Actual
$’000s
2004 Actual
$’000s
46
Audit Fees 31 31
Fees paid to Auditors for Other Services 10 25
Losses on Sale of Fixed Assets 8 9
Depreciation – Building & Leasehold Improvements 292 277
Depreciation – IT Equipment & Software 347 680
Depreciation – Plant, Equipment & Vehicles 1,191 1,070
Donations 25 19
Directors’ Fees 138 127
Rental and Operating Lease Costs 530 181
Interest Expense 12 3
Bad Debts 1 7
Doubtful Debts Provision Movement – 10
Other 34,687 31,597
37,272 34,036

4. Taxation
2005 Actual
$’000s
2004 Actual
$’000s
The taxation charge has been calculated as follows:
Operating Surplus before Taxation 3,368 2,895
Prima facie taxation at 33% 1,111 955
Plus taxation effect of:
Net Prior Year Under Estimation 5 133
Non-deductible Items 29 18
Tax Expense for the Year 1,145 1,106
The taxation charge is represented by:
Current Taxation 1,067 1,005
Future Income Tax Benefit 78 101
1,145 1,106
Future income tax benefit
Balance at the Beginning of the Year 63 164
On Surplus for Year (78) (101)
Balance at the End of the Year (15) 63
47
ESR Annual Report 2005

5. Fixed Assets
2005 Cost
$’000s
2005 Acc Depn
$’000s
2005 NBV
$’000s
Freehold Land 475 – 475
Buildings & Leasehold Improvements 14,410 2,173 12,237
IT Equipment & Software 6,340 5,839 501
Plant, Equipment & Vehicles 13,206 8,169 5,037
Assets Under Construction 1,642 – 1,642
36,073 16,181 19,892
2004 Cost
$’000s
2004 Acc Depn
$’000s
2004 NBV
$’000s
48
Freehold Land * 601 – 601
Buildings & Leasehold Improvements * 14,395 1,954 12,441
IT Equipment & Software 6,054 5,546 508
Plant, Equipment & Vehicles 12,122 7,194 4,928
Assets Under Construction 476 – 476
33,648 14,694 18,954
6. Accounts Receivable & Prepayments
2005 Actual
$’000s
2004 Actual
$’000s
Trade Debtors 5,006 4,102
Provision for Doubtful Debts (50) (50)
4,956 4,052
Prepayments & Other Receivables 393 560
5,349 4,612
* Included in Freehold Land and Buildings is the Mount Eden
property in Kelly Street, which, as at 30 June 2004, was subject to an
unconditional sale and purchase agreement.

7. Stock and Work in Progress
2005 Actual
$’000s
2004 Actual
$’000s
Scientific Materials and Consumables 676 654
Work in Progress 12 54
688 708
8. Term Debt
ESR has a multi-option floating rate credit facility with Westpac
Banking Corporation for $6,000,000. This is secured by way of
a negative pledge and terminates in March 2007. There was no
term debt at the end of the financial year ended June 2005
(2004 nil).
9. Share Capital
Issued and Paid up Capital:
2005 Actual
$’000s
2004 Actual
$’000s
8,494,000 ordinary shares (issued and fully paid) 8,494 8,494
All ordinary shares rank equally with one vote attached to each
fully paid ordinary share.
49
ESR Annual Report 2005

10. Investments
Subsidiary Companies
The Company has three wholly owned non-trading subsidiary
companies:
Name Balance Date Country of Incorporation Paid up Share Capital
ESR Limited 30 June New Zealand –
ESR Holdings Sdn Bhd 31 December Malaysia $2
ESR Limited 30 June Australia –
None of these companies have traded during the year.
Associate Company
50
The Company has a 30% interest in ESR (Malaysia) Sdn
Bhd, which is dormant and non-trading. At balance date the
investment had no carrying value in the accounting records of
ESR and the results of ESR (Malaysia) Sdn Bhd have not been
equity accounted, as they are insignificant.
11. Commitments
The following amounts have been committed to by ESR, but are
not recognised in the financial statements.
2005 Actual
$’000s
2004 Actual
$’000s
Capital Commitments:
Not later than one year 2,360 886
Operating Lease Commitments:
Not later than one year 296 58
Later than one, not later than two years 262 50
Later than two, not later than five years 33 16
Later than five years – –
ESR leases IT equipment and vehicles. There are no renewal
options or options to purchase in respect of vehicles and
equipment held under operating leases.

12. Related Party Transactions
The ultimate shareholder of ESR is the Crown. ESR undertakes
many transactions with other Crown entities and government
departments. These transactions are carried out on a commercial
arm’s length basis.
13. Segmental Information
ESR operates primarily in one industry sector: the provision of
scientific services. All activities are carried out from New Zealand.
14. Financial Instruments
ESR is subject to a number of financial risks which arise as part
of its normal operations. To manage and limit the effects of these
financial risks, the Directors have approved policy guidelines and
authorised the use of various financial instruments. The policies
approved and financial instruments being utilised at balance date
are outlined below.
Credit Risk
The financial instruments, which expose ESR to credit risk, are
principally bank balances, short-term investments and accounts
receivable. ESR monitors credit risk on an ongoing basis. Bank
balances and short-term investments are held with New Zealand
registered banks in accordance with ESR’s Treasury Policy. A
provision for doubtful debts is maintained in respect of accounts
receivable and this is reassessed on a regular basis. No collateral is
held by ESR in respect of bank balances, short-term investments
or accounts receivable.
Concentrations of Credit Risk
Accounts receivable include $2,460,000 owed by entities within,
or owned by, the New Zealand Government. At 30 June 2004,
$2,684,000 was included in accounts receivable. It is not believed
that there is any material risk of loss in this area.
Currency Risk
ESR manages its exposure to currency risk through the use of
forward exchange contracts.
There were no forward exchange contracts outstanding at balance
date and as at 30 June 2004.
Interest Rate Risk
The interest rate risk on funds held is managed through the use of
short-term investments in accordance with ESR’s Treasury Policy.
ESR has a term debt facility, however, this was undrawn at
balance date and as at 30 June 2004.
15. Contingent Assets
ESR has previously undertaken a review of assets and as a result
has identified a Culture Collection database. The Directors have
determined that the value of this database cannot be measured
reliably. Consequently no value has been recognised in the
financial statements as at 30 June 2005 (2004 nil).
16. Contingent Liabilities
The Directors are satisfied that there are no claims outstanding
as at 30 June 2005 which would have a material impact on ESR’s
financial position. There were no claims outstanding as at
30 June 2004.
17. Adoption of New Zealand Equivalents to
International Financial Reporting Standards
In December 2002 the New Zealand Accounting Standards
Review Board (ASRB) announced that all New Zealand reporting
entities will be required to comply with International Financial
Reporting Standards (IFRS) for periods commencing on or after
1 January 2007. ESR will adopt New Zealand equivalents to IFRS
(NZIFRS) for the year ending 30 June 2008.
Upon adoption of NZIFRS, comparative information will be
restated in the NZIFRS compliant financial statements. Details of
the impact of the adoption to comparative information will be set
out in the financial statements.
ESR is in the process of establishing a conversion project to
achieve transition to NZIFRS reporting. The project will involve
assessing the impacts of NZIFRS to ESR, then designing and
implementing changes required to current accounting policies
and procedures, as well as systems and processes, in order to
successfully transition to NZIFRS. The project is currently in the
development stage and as such the quantitative impacts of any
changes have not been determined.
All the financial information in these financial statements has
been prepared in accordance with current New Zealand Generally
Accepted Accounting Practice (NZ GAAP). The differences
between current NZ GAAP and NZIFRS may have a significant
effect on ESR’s financial position and performance depending on
the final format of standards or changes in the business. None
of the potential impacts of the adoption of NZIFRS on ESR’s
financial performance and financial position, including systems
upgrades and other implementation costs, have been
quantified yet.
51
ESR Annual Report 2005
Fair Values
The carrying value of financial instruments is equivalent to their
fair value.

Directory
Directors
Ian Wilson (Chairman) Sharon Opai Dr Roderick Ellis-Pegler Professor Kathryn Crosier Dr Mere Roberts Keith Oliver
CEO
Senior Managers
52
Dr John Hay
Wayne Chisnall
General Manager,
Forensic
Jocelyn Grainger
Strategic Manager,
Human Resources
Jacob de Feijter
Manager,
Science Information
Management Services
Dr Valerie Orchard
Strategic Manager,
Science & Research
Peter O’Shea
General Manager,
Finance
Dr Fiona
Thomson-Carter
General Manager,
Environmental Health
David Talbot
Manager,
Business Development
& Marketing
Registered Office
Kenepuru Science Centre
34 Kenepuru Drive
PO Box 50-348
Porirua
New Zealand
Telephone: +64 4 914 0700
Fax: +64 4 914 0769
www.esr.cri.nz
Auditor
Karen Shires of PricewaterhouseCoopers
on behalf of the
Auditor-General
Bankers
The National Bank of
New Zealand Limited
Solicitors
Kensington Swan

a
ESR Annual Report 2005