annual report 2010 - Marine Produce Australia Annual Report Year Ended J… · annual report 2010. ... Technology, Fremantle WA as a hatchery source of fingerlings with a reliable

annual report 2010

Chairman’s Address 2

Shareholder Information 4

Annual Financial Report 6

Corporate Governance Statement 53

Corporate Directory Inside Back Cover

1

contents

Dear Investor,

A number of significant developments took place during the year under review, including:

• raising through the issue of equity $18.4 million of which $9.9 million was for cash, $8.3million in debt and creditor repayment and $120,000 for services;

• ending the financial year with a working capital surplus of slightly over $15 millionrepresented significantly by the value of Barramundi in our ocean sea cages amounting to$9.5 million;

• establishing Cone Bay Ocean Barramundi as a premium grade fish;

• repayment of all debt;

• concluding a 3 year plus 3 year renewal option agreement with Challenger Institute ofTechnology, Fremantle WA as a hatchery source of fingerlings with a reliable andcontinuous supply chain;

• recognition under the Sustainable Australian Seafood Assessment Criteria (SASAC) andAustralian Conservation Foundation Healthy Oceans Program.

By the end of September 2010:

• farm biomass (essentially the weight of fish in the water) was 1,364,900 kg being 50,000 kgahead of forecast biomass;

• the harvest average weight was 3.47 kg per fish;

• 14 active 80 metre sea cages were fully stocked, with a further 80 metre sea cage, 1 x 60metre sea cage and 2 x 40 metre sea cages ready for stocking;

• 750,000 fish (0.25 grams) had been successfully grown in the Fremantle Hatchery facilityand transferred to the fish farm site at Cone Bay with virtually no mortalities.

After ensuring all Company debt was repaid, the Company embarked on a capital works program whichincluded new sea cages and nets, the purchase of a 180 tonne vessel in New Zealand, called the Innovator, toreplace the 35 tonne Merindah Pearl currently in operation, 80 x 1,000 litre harvest bins, 60 x 650 litre productdelivery bins, an oxygen generator, replacement motors for the dive boat, 12 fish feeding cameras and a hostof other equipment all needed to increase efficiencies and reduce operating costs especially needed as farmgrowth will more than double in biomass size within the next year or so.

Whilst only 385,000 kg of fish was sold during the year, this reduced sales program was necessary in order toachieve the Company’s objective over the next two years of increasing farm biomass to over 3,000,000 kg andto reach a sustainable harvest level of 2,000,000 kg a year within that two year period. The Company hasforecast that fish sales will rise to 1,000,000 kg during the current financial year and to that extent has, inAugust 2010, appointed Mr Steven Gill as Manager of Post Harvest Development. Whilst the Company hasthus far mainly sold whole fish, it is intended that processing and packaging trials will commence during thecourse of the year.

chairman’s address

2

We fell slightly short in our capital raising program – by about $1.5 million, and we will look to complete thisraising when the opportunity is available in order to meet our budgets for the next two years. By this time weshould have a sustainable and profitable enterprise which should be achieved once harvest rates reach2,000,000 kg a year.

As a part of the cost containment program, your directors have taken the decision to approach shareholders atthe forthcoming Annual General Meeting with a resolution to delist from the Australian Securities Exchange(ASX), which if passed, will see the Company delist prior to 31 December 2010. A market will still existthrough the share registry to trade shares, but of course trading in securities will continue until, and if, delistingoccurs in late December 2010. We estimate the direct and indirect cost saving will be in the order of $400,000a year, funds better directed to fish growth at this stage in the Company’s development.

It would be remiss of me to not mention a few disappointments we have also encountered during the year andsubsequent period. Many of you may know that the 700 hectare aquaculture license under which we operateonly has a tenure of one year. Although this license has been renewed for each of the six past years we haveoperated our farming operations, and we have no reason to believe this will not continue to be the case, thefact of the matter is that – outside of pearling – we now comprise 80% of the aquaculture industry in WesternAustralia and it is untenable to commit to large amounts of capital unless tenure is secured by a 21 year plus21 year renewable Lease. Approaches have been made to successive State Governments to address thisproblem and whilst numerous assurances have been provided, this has not been matched by the grant of therelevant and necessary State Government Leases at this stage. The cost to our Company of dealing withvarious Government Agencies to achieve a simple result, is almost beyond credibility and I sincerely hope thatinitiatives now before Government will finally meet with the desired outcome. As the accompanying accountsshow, this Company has now invested some $46 million in this development and if we don’t succeed, I cannotsee that this sector, so vital for the future, will have any better chance. It requires real action from the highestlevels of State Government.

Of slightly lesser significance were the mixed results we achieved from a three month trial using a High Energydiet. The result of this trial, run in parallel with a normal diet, was that the High Energy diet failed to result inany significant improvement in fish growth but achieved an 18% improvement in Feed Conversion ratios,amounting to a saving of some $0.35 per kg of fish grown. So some benefit, but not quite to the scale weexpected.

I remain convinced that aquaculture is the way of the future and with many years and substantial investmentnow behind us in pioneering ocean grown Barramundi, that we are well on the path to achieving commercialsuccess.

Yours faithfullyMARINE PRODUCE AUSTRALIA LTD

Miles KennedyChairman

20 October 2010

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Shareholder Number of securities Percentage

Lasborough Investments Ltd 184,602,000 28.65%

Denise Hutton & Associated Entities 170,515,025 26.46%%

Allen Group 123,927,449 19.23%

1. Capital Structure

Ordinary share capital

644,337,276 ordinary fully paid shares held by

873 shareholders

All issued ordinary shares carry one vote per

Share and carry the right to receive dividends

when declared.

Options

15,000,000 unlisted options held by 2 holders

Unlisted options expiring 28 September 2012 exercisable at $0.20

2. Substantial Holder

shareholder information

4

3. Distribution of Shareholders as at 14 October 2010

Distribution analysis Ordinary fully paid share holders

1 - 1,000 113

1,001 - 5,000 253

5,001 - 10,000 138

10,001 - 100,000 262

100,001 - and over 107

Total holders 873

As at 14 October 2010, there are 528 fully paid ordinary shareholders holding less than a marketable parcel.

holder name number held percentage

Lasborough Investments Ltd

Denise Hutton

T & E Allen Investments Pty Ltd

Weybridge Pty Ltd

Illovo 2009 Ltd Partnership

AWB Nominees Pty Ltd

Mathry Pty Ltd

Faustus Nominees Pty Ltd

Nutsville Pty Ltd

Sunden Pty Ltd

Maxima Pearling Company Pty Ltd

MAK Super WA Pty Ltd

Kennedy Holdings WA Pty Ltd

Norvest Projects Pty Ltd

HSBC Custody Nominees Australia Ltd

K C S Super Pty Ltd

JP Morgan Nominees Australia Ltd

I E Props Pty Ltd

Jennifer F Westbrook

JP Super Pty Ltd

184,602,000

125,578,296

87,999,999

35,927,450

33,333,333

23,634,240

20,000,000

19,421,713

17,119,137

7,862,891

5,515,016

5,224,358

4,200,012

4,000,000

3,533,334

3,021,580

2,387,888

2,169,265

2,083,333

2,000,000

28.65%

19.49%

13.66%

5.58%

5.17%

3.67%

3.10%

3.01%

2.662%

1.22%

0.86%

0.81%

0.65%

0.62%

0.55%

0.47%

0.37%

0.34%

0.32%

0.31%

4. Twenty largest holders of ordinary fully paid shares as at 14 October 2010

589,613,845 91.51%

5

5. On-Market Buy-Back

The company does not have a current buy-back plan.

Option holder Number of options Percentage

Wu Investments Pty Ltd 5,000,000 33.33%

Lasborough Investments Limited 10,000,000 66.66%

5. Holders of unlisted options expiring 28 September 2012 exercisable at $0.20

Annual Financial Report

Year Ended 30 June 2010 Marine Produce Australia Limited

(ASX: MPA)

ABN 70 091 805 480

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CONTENTS PAGE

DIRECTORS’ REPORT 2

LEAD AUDITOR’S INDEPENDENCE DECLARATION 12

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 13

CONSOLIDATED STATEMENT OF FINANCIAL POSITION 14

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 15

CONSOLIDATED STATEMENT OF CASH FLOWS 16

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 17

DIRECTORS’ DECLARATION 43

AUDITOR’S INDEPENDENT AUDIT REPORT 44

MARINE PRODUCE AUSTRALIA LIMITED A.B.N. 70 091 805 480

DIRECTORS REPORT

FOR THE YEAR ENDED 30 JUNE 2010

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DIRECTORS’ REPORT

For the year ended 30 June 2010 The directors present their report together with the consolidated financial report of Marine Produce Australia Limited (the Company or MPA), and its subsidiaries (the Group), for the financial year ended 30 June 2010 and the auditor’s report thereon.

1 Directors

The directors of the Company at any time during or since the end of the financial year are:

Mr Miles Kennedy Chairman Appointed 11 June 2008

Mr Kennedy was a lawyer. He has held directorships of Australian listed resource companies for the past 27 years. He was the founding Chairman of Macraes Mining Company Ltd and has extensive experience in the management of public companies. He lives in Perth, Western Australia. He is also Chief Executive Director of Lonhro Mining Limited (since September 2008). He was a Non-Executive Chairman of Sandfire Resources NL (August 2007 to December 2009), Executive Chairman of Kimberley Diamond Company NL (September 1993 to November 2007), Non-executive Chairman of Blina Diamonds NL (November 2002 to December 2007), Non-executive Chairman of Indago Resources Limited (August 2009 to September 2009) and Non-executive director of Pangea Diamondfields Plc (2005 to 2009).

Mr John Hutton Non-Executive Director Appointed 14 August 2006

Mr Hutton was a professional AFL footballer and has spent many years successfully prospecting in Western Australia. He is a director of a number of successful private companies involved in the resources and pearling industries and is closely involved in the management of a highly successful pearl farm, producing Australian South Sea Pearls. He was also a Non-executive Director of Sandfire Resources NL (July 2007 to April 2010).

Dr Tor Theunissen Independent Non-Executive Director Appointed 17 December 2007

Dr Theunissen is the principal of a management consulting company that specialises in the strategic planning and resourcing of new projects. He is an experienced public company director and a former Chairman of Marine Produce Australia Limited.

2 Company secretary

Ms Jean Mathie Company Secretary Appointed 14 August 2006

Ms Jean Mathie holds the position of Company Secretary and was appointed to the position in August 2006. Ms Mathie also holds the position of Company Secretary for other listed entities, including Lonrho Mining Limited and Resource & Investment NL.

3 Directors’ meetings

The number of directors’ meetings and number of meetings attended by each of the directors of the Company during the financial year are:

Board Meetings

Director Attended Held while a director

Mr M Kennedy 2 2

Mr J R Hutton 2 2

Dr T Theunissen 2 2


DIRECTORS REPORT


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4 Remuneration report - audited

4.1 Principles of compensation - audited

Remuneration is referred to as compensation throughout this report. Key management personnel have authority and responsibility for planning, directing and controlling the activities of the Group, including directors of the Company and other executives. Key management personnel comprise the directors of the Company and senior executives for the Group including the five most highly remunerated Company and Group executives. Compensation levels for key management personnel and the Company Secretary, and key management personnel of the Group are competitively set to attract and retain appropriately qualified and experienced directors and executives. The Board obtains independent advice on the appropriateness of compensation packages of the Group given trends in comparative companies both locally and internationally and the objectives of the Group’s compensation strategy. The compensation structures explained below are designed to attract suitably qualified candidates, reward the achievement of strategic objectives, and achieve the broader outcome of creation of value for shareholders. The compensation structures take into account: • The capability and experience of the key management personnel • The key management personnel’s ability to influence and control performance of the business • The Group’s performance including the Group’s earnings, growth in share price and returns on shareholder wealth

and amount of incentives within each key management person’s compensation. Compensation packages may include a mix of fixed and variable compensation, short and long term performance based incentives as well as employer contributions to superannuation funds. Shares and options may only be issued to directors subject to approval by shareholders in general meeting. The Board has no established retirement or redundancy schemes.

Fixed compensation

Fixed compensation consists of base compensation as well as employer contributions to superannuation funds. Compensation levels are reviewed annually by the Board through a process that considers individual and overall performance of the Group. In addition, external consultants provide analysis and advice to ensure the directors’ and senior executives’ compensation is competitive in the market place. A senior executives’ compensation is also reviewed on promotion.

Performance-linked compensation

Performance linked compensation includes both short term and long term incentives, and is designed to reward key management personnel for meeting or exceeding their financial and personal objectives. Currently there are performance linked short term incentives (STIs) for certain key management personnel that are tied directly to the success of capital raisings, and the application of these funds to the Group to achieve the businesses growth objectives and achieve specific objectives such as the repayment of loans and borrowings. Details of the nature and amount of each major element of remuneration of each director of the Company and each of the key management personnel (including most highly remunerated executives) are outlined in section 4.2. The long term incentive (LTIs) provide for the issue of escrowed shares of the Company based on performance of key management personnel.

Non-executive directors

Total compensation for all non-executive directors is not to exceed $250,000 per annum and is set based on advice from external advisors with reference to fees paid to other non-executive directors of comparable companies. Non-executive directors may receive performance related compensation for particular board approved objectives.

Service contracts

The Group enters into service contracts with key management personnel through either employment contract or consulting arrangements. The Group retains the right to terminate a contract immediately by making payments not exceeding three months compensation in lieu of notice. Where contracted under employment contract, key management personnel are also entitled to receive on termination of employment their statutory entitlements of accrued annual leave and long service leave, together with any superannuation benefits.


DIRECTORS REPORT


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4.2 Director’s and executive officers’ remuneration – audited

All the directors and relevant executives of the Group receive their remuneration from the Company.

Details of the nature and amount of each major element of remuneration of each director of the Group and relevant Group executives who receive the highest remuneration and other key management personnel are:

Short-term Post-

employment

Termination Benefits

$

Share-based

payments

Total

$

Proportion of remuneration performance

related

%

Value of options as

proportion of remuneration

%

Salary & fees

$

STI cash

bonus

$

Non- monetary benefits

$

Total

$

Superannuation benefits

$

Other long term

$

Shares and

options

$

Directors

Executive directors

Mr M A Kennedy (Chairman) (appointed 11 June 2008)

2010 259,802 - - 259,802 5,400 - - - 265,202 75% -

2009 63,681 - - 63,681 5,731 - - - 69,412 - -

Non-executive directors

Mr J R Hutton (appointed 14 August 2006)

2010 30,000 - - 30,000 2,700 - - - 32,700 - -

2009 30,769 - - 30,769 2,769 - - - 33,538 - -

Dr Tor Theunissen (appointed 17 December 2007)

2010 30,000 - - 30,000 - - - - 30,000 - -

2009 30,000 - - 30,000 - - - - 30,000 - -

Prof Mehdi Doroudi (appointed 18 Dec 2007) (resigned 24 June 2009)

2010 - - - - - - - - - - -

2009 30,000 - - 30,000 - - - - 30,000 - -


DIRECTORS REPORT


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4.2 Director’s and executives remuneration – audited

Short-term Post-

employment

Termination Benefits

$

Share-based

payments

Total

$

Proportion of remuneration performance

related

%

Value of options as

proportion of remuneration

%

Salary & fees

$

STI cash

bonus

$

Non- monetary benefits

$

Total

$

Superannuation benefits

$

Other long term

$

Shares and options

$

Executives

J Mathie COMPANY SECRETARY (appointed 14 August 2006)

2010 41,566 - - 41,566 3,741 - - - 45,307 - -

2009 30,769 - - 30,769 2,769 - - - 33,538 - -

G Westbrook GENERAL MANAGER - OPERATIONS

2010 241,992 - - 241,992 21,779 - - 60,000 323,772 35% -

2009 153,846 - - 153,846 13,846 - - - 167,692 - -

M Fitzgerald * CHIEF FINANCIAL OFFICER (resigned 14 February 2010)

2010 222,150 - - 222,150 - - - 60,000 282,150 40% -

2009 256,304 - - 256,304 - - - - 256,304 - -

* Fees were paid under consulting arrangements for services provided – see note 29 to the financial accounts.


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4.3 Equity instruments - audited

(i) Shares granted as compensation

During August 2009, a total of 2,000,000 shares at $0.06 per share were issued to Guy Westbrook and Millstream Management Pty Ltd, an entity associated with Matthew Fitzgerald, as key management personnel and consultants, in payment of services rendered to the value of $120,000, $60,000 each, representing the fair value of services provided and the market price of shares at that time.

(ii) Options and rights over equity instruments granted as compensation

No options were granted to directors, executives or key management personnel during the reporting period or previous reporting period. No options have been granted since the end of the financial year.

(iii) Exercise of options granted as compensation

No options were exercised during the reporting period or the prior period. No options lapsed in the current or prior period.

5 Principal activities

The principal activities of the Group during the course of the financial year were the growth and sale of Barramundi by aquaculture means. This required further investment in aquaculture assets and continuing research of technologies and market developments to cultivate fish. The Group’s objectives are stated within the operating and financial review.

6 Operating and financial review

(i) Operating Review

Review of 2010

• Continued improvement in fish growth and feed conversion

• Maintenance of strong price premium and orders continue to exceed available supply

• Continued reduction in farm unit operating costs with increasing operating scale

• Pleasing results from new feed trials, further trials to continue in the second half of 2010

• First batches of Barramundi sourced from the Challenger Institute, Fremantle WA • Growth of 1.0 million kilograms (kg) for the year, increasing farm biomass to 1.3 million kg after harvesting

• Planned expansion of Cone Bay operations to targeted farm biomass of 2.0 million kg

• Secured 1.0 million kg licence (further applications in progress)

• Ongoing investment in new feeding technology and more efficient logistics

• Additional farm service vessel purchased to further improve cost and growth efficiencies

• Key items of expansion infrastructure deployed and stocked

• Cone Bay Barramundi granted recognition under the Sustainable Australian Seafood Assessment Criteria (SASAC) and Australian Conservation Foundation Healthy Oceans Program

• Securing of funding to drive further biomass growth and profitability - $12.5 million raised in equity

• Repayment of loans and borrowings – now debt free

• 10 year Development Plan implemented


DIRECTORS REPORT


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REVIEW OF OPERATIONS Marine Produce Australia has reported further strong operational results for its Cone Bay Ocean Barramundi Operations in the Kimberley region of Western Australia, with recent fish growth and production supporting forecasts for a significant increase in sales for the 2011 financial year. Production has been in line with forecasts, with recent innovations including the introduction of new grading equipment expected to deliver a more consistent product size and premium grade fish. Increased biomass Biomass (including harvest volume) as at 30 June 2010 was 1,267,000 kg, representing an average increase of over 100,000 kg per month over the three months to June 2010. With strong support from the Group’s feed supplier, MPA has been able to ensure adequate supply of feed at all times, which has been an important factor in achieving the excellent growth results. Feed trials Feed trial based on the high-energy diets re-commenced during May with two groups of fish selected for these trials – each held in two cages with similar populations for control purposes. After three months, grown and FCR will be assessed for each group to establish the production gains and cost efficiency of each diet. Samples will be assessed to ensure no loss of product quality. Sales forecasts Farm production is in line with forecasts and is expected to support a major increase in sales from September 2010. Increased farm stocks will allow MPA to better support existing customers with quality product and also to target new sales, particularly in major east coast markets. The forecast harvest of fish in the year to June 2011 is expected to increase to 1 million kg (up from 385,000 kg in the year ended 30 June 2010). New 80m Cage Installation All cage conversions are now complete with nets being installed as required for cage splits and grades. All cages are expected to be deployed and stocked by October. An order will be placed in November 2010 for four new 80 metre cages to allow for delivery and construction by the end of the current financial year. Two brass nets have been deployed and stocked with fish with construction of the two remaining nets currently being completed subject to consultation with the Japanese supplier on modifications to the base frames to suit the tidal conditions. The first brass net deployed has been in the water for over three months and has remained free of predator damage and shows no signs of bio-fouling. Accordingly, the Group now has 16 operating sea cages, 2 sea cages presently being commissioned, plus 8 nursery cages for a total of 26 cages, rising to 30 cages by financial year end. Production Licences The Group has continued its efforts to increase its portfolio of Production Licences in the Kimberley region by:

• Lodging and application with the WA Department of Fisheries to transfer the Cone Bay Aquaculture Licence from Maxima Pearling Company to MPA;

• Preparing an application with the assistance of the Aquaculture Council of WA to amend Cone Bay’s Office of the Environment Protection Authority (OEPA) Licence with the aim of increasing the production capacity of the site;


DIRECTORS REPORT


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• Reviewing documents to support a Public Environmental Review (PER) to establish a fish farming lease at Crawford Bay so that they are consistent with new EPA licensing guidelines – with the application to be submitted to the Department of Fisheries in September;

• Developing a major environmental assessment and modelling project, with the assistance of the WA Department of Fisheries and the Australian Institute of Marine Sciences, to establish a clear understanding of the characteristics of the marine environment in the area and to develop a model to predict the fate of nutrients produced by fish farming. This will underpin an application to develop an aquaculture zone for expansion of finfish production.

Challenger Institute

MPA has entered into an agreement with the Australian Centre for Applied Aquaculture Research (ACAAR) at Challenger Institute, Fremantle for Barramundi broodstock management and juvenile supply. Under this arrangement, MPA will purchase 100% of its juvenile fish from the Fremantle facility on a three year plus three year renewable contract.

ACAAR has an excellent production and research team with a track record in the production of a number of marine finfish species such as Dhufish, Yellowtail Kingfish, Snapper, Black Brim and Mulloway. Barramundi production will take place in a separate section of the facility set up specifically for this purpose.

The first group of broodstock has been collected from MPA’s Cone Bay marine farm and transported to Fremantle by boat and road – a trip of over 2,300km – without mortalities. The fish were then held in quarantine until veterinary inspection cleared them for transfer into the main facility. Further broodstock transfers are planned for September and November 2010. To support the facility, MPA has purchased essential items such as biological filters, heat pumps and tank covers.

To date, two batches of 250,000 juveniles of 0.25 grams have been road freighted from the ACAAR facility by road to Derby and boat to Cone Bay. The quality of these fish has been high with subsequent strong performance at the farm.

(ii) REVIEW OF FINANCIAL RESULTS

RESULTS FROM OPERATING ACTIVITIES AND LOSS FOR THE PERIOD

The Group’s result from operating activities for the reporting period was a loss of $2,496,000 (2009: $5,634,000). The loss for the period was $3,896,000 (2009: $8,143,000) including impairment of property, plant and equipment and intangible assets of $1,622,000 (2009: $3,123,000) and depreciation and amortisation of $129,000 (2009: $459,000). The results from operating activities included:

In thousands of AUD 12 months

ended 6 months

ended 6 months

ended

Jun 2010 Jun 2010 Dec 2009

Profit (Loss) from farming operations (688) 781 (1,469)

Administration and marketing expenses (1,808) (885) (923)

Results from operating activities (2,496) (104) (2,392)

In thousands of AUD and kg 12 months

ended 6 months

ended 6 months

ended

Jun 2010 Jun 2010 Dec 2009

Farm cash operating costs (AUD) 9,218 5,229 3,989

Fish biomass growth before harvest (kg) 1,036 686 350

Farm cash operating cost per kg 8.90 7.62 11.40


DIRECTORS REPORT


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The second half of the reporting period delivered improved financial and operational results from increasing scale of operations and continued improvement in feeding, growth and conversion ratios. This had an immediate positive impact on farm cash operating cost per kg, reducing below $8 per kg in the six months to June 2010. Further improvements have been seen in monthly results as unit costs continue to reduce in line with increased farm size and improved feeding and logistics. On 31 August 2010 the Group released its Appendix 4E Preliminary Final Report under ASX Listing Rule 4.3A for the 12 months ended 30 June 2010 reporting a loss for the period of $3,828,000. This Financial Report reports a loss of $3,896,000, following adjustments made following conclusion of the audit of the financial statements. LOSS PER SHARE Basic loss per share for the reporting period was $0.015 (2009: $0.091 per share). Basic loss per share from continuing operations for the reporting period was $0.015 (2009: $0.091 per share). REVENUE Revenue from sales Revenue from the sale of fish was $3,753,000 for the period from the sale of 385,000 kg, with fish growth increasing farm biomass in preference to short term sales growth. Total 398,000 kg of fish harvested for the period, representing less than 40% of farm biomass growth. IMPAIRMENT The Group has undertaken a review of the carrying value of its assets and recognised impairment charges for property, plant and equipment of $1,571,000 and intangible assets of $51,000, resulting in those assets being carried at their estimated net fair value.

(iii) REVIEW OF FINANCIAL CONDITION At 30 June 2010, the Group had a working capital surplus of $15,064,000, represented significantly by biological assets of $9,496,000. During the reporting period all loans and borrowings were repaid through the issue of ordinary shares and cash repayment. The Group’s working capital will be utilised to fund operating and capital expenditure to continue to develop the Cone Bay farm site and increase profitability with scale. The Group’s Development Plan dictates that the business needs to harvest and sell less than the projected total fish biomass growth to continue to expand the biomass of the farm. This planned biomass expansion is subject to further licensing approvals and required working capital. Recent cash flow forecasts indicate that MPA has sufficient funds to fund the necessary inventory increases until the Company becomes cash flow positive, which is forecast to occur during the 2012 financial year. The Group has the ability to slow its expansion strategy and/or harvest fish at less than the targeted harvest size to maintain sufficient cash reserves, with a resulting delay in the growth of the scale of the operations. The financial statements have been prepared on a going concern basis which the directors believe to be appropriate. The directors are confident that the Group will be able to maintain sufficient levels of working capital to continue as a going concern and continue to pay its debts as and when they fall due. If the Group is unable to continue as a going concern, it will be required to realise its assets and extinguish its liabilities other than in the ordinary course of business and at amounts that may be different to those stated in the financial statements.


DIRECTORS REPORT


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(iv) SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

EQUITY FUNDING During the reporting period 527,784,183 ordinary shares were issued, representing $18,422,000 of issued capital (before

issue costs). Of this amount, $9,954,000 was issued for cash consideration, $120,000 for services rendered, $7,548,000 to repay loans and borrowings and $800,000 in payment of creditor balances. DEBT FUNDING

As at 30 June 2009 the Group had loans and borrowings totalling $2,712,000. During the reporting period additional loans and borrowings were drawn totalling $5,061,000, with the full balance repaid through the issue of shares under entitlements issues for $7,548,000 and cash repayment of $225,000. PROPOSED DELISTING FROM ASX

On 25 February 2010 the Group announced that in order to reduce administration and other overhead costs, allow greater flexibility in future developments and to restore the underlying value of the Group, the Board had resolved subject to all approvals from ASX and other regulatory authorities, to put to shareholders a motion to remove the Company from the official list of the ASX. SUBSEQUENT EVENTS During July 2010 the Group announced: • Expiry of 309,055 unlisted options with an exercise price of $3.00 on 30 June 2010; and

• Issue of 7,166,666 ordinary fully paid shares at $0.03 per share as part of an entitlements issue shortfall, raising $215,000.

During August 2010 the Group announced: • Release from voluntary escrow of 2,000,000 fully paid ordinary shares on 6 August 2010;

• Change in its registered office, principal place of business and contact numbers, effective 26 August 2010; and

• Appointment of Mr Steven Gill as Manager – Post Harvest Development to spearhead an expansion of its marketing program.

SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES As at 1 July 2008, the Group acquired and gained control of Maxima Fish Farms Pty Ltd. This entity did not contribute materially to the results for the current or prior period. No member of the Group held an interest in, or participated in the results of an associate or joint venture.

7 Dividends

No dividends were paid or declared during the current or prior financial years.

8 Directors’ interests

The relevant interest of each director in the shares, debentures, interests in registered schemes and rights or options over such instruments issued by the companies within the consolidated entity and other related bodies corporate, as notified by the directors to the Australian Stock Exchange in accordance with S205G(1) of the Corporations Act 2001, at the date of this report is as follows: Marine Produce Australia Limited Ordinary shares Options over ordinary shares

Mr J Hutton 75,891,735 -

Mr M Kennedy 9,301,461 -

Dr T Theunissen 614,917 -


DIRECTORS REPORT


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9 Indemnification and insurance of officers and auditors

Indemnification

The Group has agreed to indemnify the current and former directors of the Company against all liabilities to another person (other than the Company or related body corporate) that may arise from their position as directors of the Company and its controlled entities, except where the liability arises out of conduct involving a lack of good faith. The agreement stipulates that the Company will meet the full amount of any such liabilities, including costs and expenses. The Group has also agreed to indemnify the current directors of its controlled entities for all liabilities to another person (other than the Company or related body corporate) that may arise from their position, except where the liability arises out of conduct involving a lack of good faith. The agreement stipulates that the Company will meet the full amount of any such liabilities, including costs and expenses. Insurance premiums

Since the end of the previous financial year the Group has paid insurance premiums in respect of directors’ and officers’ liability and legal expenses’ insurance contracts, for current and former directors and officers, including senior executives of the Company and directors, senior executives of and secretaries of its controlled entities. The insurance premiums relate to:

- Costs and expenses incurred by the relevant officers in defending proceedings, whether civil or criminal and whatever their outcome; and

- Other liabilities that may arise from their position, with the exception of conduct involving a wilful breach of duty or improper use of information or position to gain personal advantage.

The value of the premium paid is not disclosed subject to an existing confidentiality agreement between the insurer and the directors of the Group.

10 Lead auditor’s independence declaration

The lead auditor’s independence declaration is set out on page 12 and forms part of the directors’ report for the financial year ended 30 June 2010.

11 Rounding off

The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that Class Order, amounts in the financial report and directors’ report have been rounded off to the nearest thousand dollars, unless otherwise stated. Signed in accordance with a resolution of the directors:

Miles Kennedy Chairman Dated at Perth this 29th day of September 2010.


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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME


In thousands of AUD Note 2010 2009

Revenue from sales 3,753 4,234

Cost of sales (3,753) (4,234)

Profit on sales - -

Net gain from acquisitions and growth 8,525 3,510

Production costs:

Raw materials and consumables (6,601) (5,581)

Farm personnel expenses 9 (2,617) (2,037)

Impairment of property, plant and equipment 8 (1,571) (2,666)

Impairment of intangible assets 8 (51) (457)

Depreciation and amortisation (129) (459)

Fair value of loss on biological assets (2,444) (7,690)

Administrative and marketing expenses (1,808) (1,658)

Other income 5 132

Results from operating activities (4,247) (9,216)

Finance income 41 7

Finance costs 7 (308) (226)

Net finance costs (267) (219)

Loss before income tax (4,514) (9,435)

Income tax benefit 11 618 1,292

Loss for the period: attributable to owners of the company (3,896) (8,143)

Other comprehensive income for the period, net of tax - -

Total comprehensive income for the period: attributable to owners of the company

(3,896) (8,143)

Loss per share

Basic and diluted loss per share (cents) 12 (1.5) (9.1)

The notes to the consolidated financial statements are an integral part of these consolidated financial statements.


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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 30 JUNE 2010


Assets

Cash and cash equivalents 13 4,325 89

Trade and other receivables 14 794 575

Current tax assets 11 600 661

Inventories 15 377 267

Biological assets 16 9,496 4,724

Other assets 109 18

Total current assets 15,701 6,334

Property, plant and equipment 8/18 2,072 1,150

Intangible assets 8/19 - -

Total non-current assets 2,072 1,150

Total assets 17,773 7,484

Liabilities

Trade and other payables 20 490 1,593

Loans and borrowings 21 - 2,712

Employee benefits 22 146 83

Total current liabilities 636 4,388

Net assets 17,137 3,096

Equity

Share capital 23 46,765 28,828

Reserves 23 1,014 1,014

Accumulated losses (30,642) (26,746)

Total equity 17,137 3,096



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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY


In thousands of AUD Note Share capital

Share based payments

reserve Accumulated

losses Total equity

Balance at 1 July 2008 26,255 488 (18,603) 8,140

Loss for the period - - (8,143) (8,143)

Other comprehensive income - - - -

Total comprehensive loss for the period - - (8,143) (8,143)

Transactions with owners in their capacity as owners:

Issue of options 24 (526) 526 - -

Share issues 23 3,187 - - 3,187

Share issue costs (88) - - (88)

Balance at 30 June 2009 28,828 1,014 (26,746) 3,096

Balance at 1 July 2009 28,828 1,014 (26,746) 3,096

Loss for the period - - (3,896) (3,896)

Other comprehensive income - - - -

Total comprehensive loss for the period - - (3,896) (3,896)

Transactions with owners in their capacity as owners:

Share issues 23 18,422 - - 18,422

Share issue costs (485) - - (485)

Balance at 30 June 2010 46,765 1,014 (30,642) 17,137



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CONSOLIDATED STATEMENT OF CASH FLOWS



Cash flows from operating activities

Cash receipts from customers 3,492 4,491

Cash paid to suppliers and employees (11,421) (8,978)

Cash used in operations (7,929) (4,487)

Interest received 41 7

Income tax receipts 679 1,029

Other income received 5 124

Net cash used in operating activities 28 (7,204) (3,327)

Cash flows from investing activities

Acquisition of intangible assets (51) (15)

Acquisition of property, plant and equipment (2,625) (801)

Net cash used in investing activities (2,676) (816)

Cash flows from financing activities

Proceeds from issue of share capital 23 9,954 2,208

Payment of transaction costs (365) (88)

Proceeds from borrowings 21 2,400 -

Repayment of borrowings – related parties 21 (225) -

Proceeds from borrowings – related parties 21 2,661 2,125

Repayment of borrowings – related parties 21 - (150)

Interest paid on borrowings – related parties (308) (173)

Net cash from financing activities 14,117 3,922

Net increase (decrease) in cash and cash equivalents

4,236 (221)

Cash and cash equivalents at 1 July 89 310

Cash and cash equivalents at 30 June 13 4,325 89



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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. Reporting entity

Marine Produce Australia Limited (the Company) is a company domiciled in Australia. The address of the Company’s registered office is 34 Bagot Road, Subiaco WA 6008. The consolidated financial statements of the Group as at and for the year ended 30 June 2010 comprise the Company and its subsidiaries (together referred to as the ‘Group’ and individually as ‘Group entities’). The Group is involved in the aquaculture industry, specifically the farming of Barramundi fish in sea cages.

2. Basis of preparation

(a) Statement of compliance

The financial statements are general purpose financial statements which have been prepared in accordance with Australian Accounting Standards (AASBs) (including Australian Interpretations) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001. The consolidated financial statements of the Group comply with International Financial Reporting Standards (IFRSs) and interpretations adopted by the International Accounting Standards Board (IASB). The consolidated financial statements were approved and authorised for issue by the Board of Directors on 30 September 2010.

(b) Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis except for the following material items in the consolidated statement of financial position: - Biological assets are measured at fair value less costs to sell - Property plant and equipment is measured at the lower of cost and fair value - Share based payments are measured at fair value of services provided The methods used to determine fair values are discussed further in Note (p).

(c) Functional and presentation currency

These consolidated financial statements are presented in Australian Dollars, which is the Group’s functional currency. The Company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that Class Order, all financial information presented in Australian Dollars has been rounded to the nearest thousand dollars, unless otherwise stated.

(d) Use of estimates and judgements

The preparation of financial statements in conformity with AASBs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. Information about critical assumptions and estimates in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the following notes:

- Note 16 - Biological assets - Note 24 - Share-based payments - Note 8 - Impairment of assets

(e) Changes in accounting policy

Starting as of 1 July 2009, the Group has changed its accounting policies in the following areas:

- Determination and presentation of operating segments - Presentation of financial statements


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(f) Going concern

At 30 June 2010, the Group had a working capital surplus of $15,064,000, represented significantly by biological assets of $9,496,000. During the reporting period all loans and borrowings were repaid through the issue of ordinary shares and cash repayment. The Group’s working capital will be utilised to fund operating and capital expenditure to continue to develop the Cone Bay farm site and increase profitability with scale. The Group’s Development Plan dictates that the business needs to harvest and sell less than the projected total fish biomass growth to continue to expand the biomass of the farm. This planned biomass expansion is subject to further licensing approvals and required working capital. Recent cash flow forecasts indicate that MPA has sufficient funds to fund the necessary inventory increases until the Company becomes cash flow positive, which is forecast to occur during the 2012 financial year. The Group has the ability to slow its expansion strategy and/or harvest fish at less than the targeted harvest size to maintain sufficient cash reserves, with a resulting delay in the growth of the scale of the operations. The financial statements have been prepared on a going concern basis which the directors believe to be appropriate. The directors are confident that the Group will be able to maintain sufficient levels of working capital to continue as a going concern and continue to pay its debts as and when they fall due. If the Group is unable to continue as a going concern, it will be required to realise its assets and extinguish its liabilities other than in the ordinary course of business and at amounts that may be different to those stated in the financial statements.

3. Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by Group entities, except as explained in notes 2 (e), 3 (k) and 3 (p), which address changes in accounting polices

(a) Basis of consolidation

Subsidiaries

Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group.

Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

(b) Property, plant and equipment

Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials, direct labour, the initial estimate, where relevant, of the costs of dismantling and removing the items and restoring the site on which they are located, and an appropriate proportion of production overheads. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net within other income in profit or loss.


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Subsequent costs

The cost of replacing a part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group, and its cost can be measured reliably. The carrying amount of the replacement part is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.

Depreciation

Depreciation is calculated over the depreciable amount, which is the cost of an asset, less its residual value. Depreciation is recognised in profit or loss on an adjusted reducing balance basis over the estimated useful lives of each part of an item of property, plant and equipment, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. . The estimated useful lives for the current and comparative periods are as follows:

Plant and equipment Fixtures and fittings 5 - 10 years Major components 3 – 5 years Boats 15 years

Depreciation methods, useful lives and residual values are reviewed at each financial year end and adjusted if appropriate.

(c) Intangible assets

Research and development

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in the profit or loss as incurred. Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete development and to use or sell the asset. The expenditure capitalised includes the cost of materials, direct labour and overhead costs that are directly attributable to preparing the asset for its intended use. Other development expenditure is recognised in profit or loss as incurred. Capitalised development expenditure is stated at cost less accumulated amortisation and accumulated impairment losses.

Amortisation

Amortisation is calculated over the costs of the asset, less its residual value. Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, from the date that they are available for use, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. The estimated useful lives for the current and comparative periods is 10 years. Amortisation methods, useful lives and residual values are reviewed at each financial year end and adjusted if appropriate.

(d) Biological assets

Biological assets are measured at fair value less costs to sell, with any change therein recognised in profit or loss. Fair value is determined based on estimated market sales price. Costs to sell include all costs that would be necessary to sell the assets, including costs necessary to get the assets to market. As the fair value of the assets is based on its present location and condition, the company applies the cost to date as an approximation to fair value of fish in cages where they have not yet reached a saleable size (less than 5% of the total biomass). Costs involved in developing biological assets are expensed as incurred.


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(e) Inventories

Inventories are measured at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and costs to sell. The cost attributed to harvested fish is equal to the fair value less estimated selling costs previously recorded in biological assets at the date of harvest, determined in accordance with the accounting policy for biological assets. Any change in value at the date of harvest is recognised in the income statement. Once harvested, fish inventories are accounted for as normal inventories. The cost of other inventories is based on the first-in first-out principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. Cost includes an appropriate share of overheads based on normal operating capacity.

(f) Impairment

Non financial assets The carrying amounts of the Group’s non-financial assets, other than biological assets (see accounting policy (d)), inventories (see accounting policy (e)) and deferred tax assets (see accounting policy (j)) are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement, unless an asset has previously been revalued, in which case the impairment loss is recognised as a reversal to the extent of that previous revaluation with any excess recognised through profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units (group of units) and then, to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis. The recoverable amount is the greater of the assets fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Impairment losses are reversed when there is an indication that the impairment loss has decreased or no longer exists and there has been a change in the estimate used to determine the recoverable amount. Financial Assets The recoverable amount of the Group’s receivables carried at amortised cost is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate (ie the effective interest rate computed at initial recognition of these financial assets). Receivables with a short duration are not discounted. Impairment of receivables is not recognised until objective evidence is available that a loss event has occurred. Significant receivables are individually assessed for impairment. Impairment testing of receivables that are not impaired individually is performed by placing them into portfolios of receivables with similar risk profiles and undertaking a collective assessment of impairment. Non-significant receivables are not individually assessed. Instead, impairment testing is performed by placing non-significant receivables in portfolios of similar risk profiles based on objective evidence from historical experience adjusted to for any effects of conditions existing at each balance sheet date. An impairment loss in respect of a receivable carried at amortised cost is reversed when a subsequent event causes the amount of the impairment loss to decrease. The decrease in impairment loss is recognised via profit and loss.

(g) Employee benefits

Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution superannuation funds are recognised as an employee benefit expense in profit or loss in the periods during which services are rendered by employees.


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Short-term benefits

Liabilities for employee benefits for wages, salaries and annual leave that are expected to be settled within 12 months of the reporting date represent present obligations resulting from employees’ services provided to reporting date, are calculated at undiscounted amounts based on remuneration wage and salary rates that the Group expects to pay as at the reporting date including related on-costs, such as workers compensation, insurance and payroll tax. Non-monetary benefits, such as medical care, housing, cars and free or subsidised goods and services, are expensed based on the net marginal cost to the Group as the benefits are taken by the employees.

Share-based payment transactions

The fair value of shares or options granted is recognised as an expense with a corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become unconditionally entitled to options. The fair value of the options granted is measured using a Black Scholes model, taking into account the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that do not meet the related service and non-market performance conditions at the vesting date. For share based payment awards with non-vesting conditions, the grant date fair value of the share based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes. Share-based payment arrangements in which the Group receives goods or services as consideration for its own equity instruments are accounted for as equity-settled share-based payment transactions, regardless of how the equity instruments are obtained by the Group. Any goods or services that are settled by way of issue of the Group's own equity instruments are measured at the fair value of the goods and services provided.

(h) Revenue

Sale of goods

Revenue from the sale of goods is recognised in profit or loss when persuasive evidence exists that the significant risks and rewards of ownership have been transferred to the buyer. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due, the costs incurred or to be incurred cannot be measured reliably, there is a risk of return of goods or there is continuing management involvement with the goods. Transfers of risks and rewards vary depending on the individual terms of the contract of sale. For sales of Barramundi, transfer usually occurs when the product is received by the customer.

(i) Expenses

Financing income and expenses

Net financing costs comprise interest payable on borrowings (calculated using the effective interest method), fair value of share-based payments attributable to financing facilities and interest receivable on funds invested that are recognised in the income statement. Interest income is recognised in the income statement as it accrues, using the effective interest method.

(j) Income tax

Income tax on profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Research and development assistance is recognised as an income tax benefit in the year in which it is earned. The corresponding receivable is held within current tax assets.


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Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: initial recognition of goodwill, the initial recognition of assets or liabilities that affect neither accounting or taxable profit, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that the future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Tax consolidation The Company and its wholly-owned Australian resident entities have formed a tax-consolidated group with effect from 1 July 2004 and are therefore taxed as a single entity from that date. The head entity within the tax-consolidated group is Marine Produce Australia Limited.

(k) Segment reporting

Determination and presentation of operating segments

As of 1 July 2009 the Group determines and presents operating segments based on the information that internally is provided to the Board of Directors, who is the Group’s chief operating decision maker. This change in accounting policy is due to the adoption of AASB 8 Operating Segments. Previously operating segments were determined and presented in accordance with AASB 114 Segment Reporting. The new accounting policy in respect of segment operating disclosures has not resulted in any change to the previous disclosures. Since the change in accounting policy only impacts presentation and disclosure aspects, there is no impact on earnings per share. An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components.

(l) Goods and services tax

Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the balance sheet. Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows.

(m) Earnings per share

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees.

(n) Determination of fair values

A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values of assets and liabilities are disclosed in the notes specific to that asset or liability.

Biological assets

The fair value of fish is set out in Note 3(d) and not 16.


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Trade and other receivables

The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. This fair value is determined for disclosure purposes.

Share based payment transactions

The fair value of employee and director share options is measured using the Black-Scholes formula. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historical volatility adjusted for changes expected due to publically available information), weighted average expected life of the instruments (based on historical experience and general option holder behaviour), expected dividends, and the risk-free interest rate (based on government bonds). Service and non-market performance conditions attaching to the transactions are not taken into account in determining fair value.

(o) Financial instruments

Non-derivative financial assets

The Group initially recognises loans and receivables on the date that they are originated.

The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset of liability. The Group has the following non-derivative financial assets: trade and other receivables, and cash and cash equivalents. Trade and other receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.

Cash and cash equivalents comprise cash balances.

Non-derivative financial liabilities

The Group recognises its non derivative financial liabilities on the date that they are originated. The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire. .

The Group has the following non-derivative financial liabilities: loans and borrowings, and trade and other payables.

Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortised cost using the effective interest rate method.

Financial assets and liabilities are offset and then net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Share capital

Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.

Dividends

Dividends are recognised as a liability in the period in which they are declared.

(p) Presentation of financial statements

The Group applies revised AASB 101 Presentation of Financial Statements (2007), which became effective as of 1 January 2009. As a result, the Group presents in the consolidated statement of changes in equity all owner changes in equity, whereas all non-owner changes in equity are presented in the consolidated statement of comprehensive income. Comparative information has been re-presented so that it also is in conformity with the revised standard. Since the change in accounting policy only impacts presentation aspects, there is no impact on earnings per share.


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4 New standards and interpretations not yet adopted

The following standards, amendments to standards and interpretations have been identified as those which may impact the entity in the period of initial application. They are available for early adoption at 30 June 2010, but have not been applied in preparing these consolidated financial statements.

• AASB 9 Financial Instruments includes requirements for the classification and measurement of financial assets resulting from the first part of Phase 1 of the project to replace AASB 139 Financial Instruments: Recognition and Measurement. AASB 9 will become mandatory for the Group’s 30 June 2014 financial statements. Retrospective application in generally required, although there are exceptions, particularly if the entity adopts the standard for the year ended 30 June 2012 or earlier. The Group has not yet determined the potential effect of the standard.

• AASB 124 Related Party Disclosures (revised December 2009) simplifies and clarifies the intended meaning of the definition of a related party and provides a partial exemption from the disclosure requirements for government-related entities. The amendments, which will become mandatory for the Group’s 30 June 2012 financial statements, are not expected to have any impact on the financial statements.

• AASB 2009-5 Further amendments to Australian Accounting Standards arising from the Annual Improvements Process affect various AASBs resulting in minor changes for presentation, disclosure, recognition and measurement purposes. The amendments, which became mandatory for the Group’s 30 June 2011 financial statements are not expected to have a significant impact on the financial statements.

• AASB 2009-8 Amendments to Australian Accounting Standards – Group Cash-settled Share-based Payment Transactions resolves diversity in practice regarding the attribution of cash-settled share-based payments between different entities within a group. As a result of the amendments AI 8 Scope of AASB2 And AI 11 AASB 2 – Group and Treasury Share Transactions will become withdrawn from the application date. The amendments, which become mandatory for the Group’s 30 June 2011 financial statements, are not expected to have a significant impact on the financial statements.

• AASB 2009-10 Amendments to Australian Accounting Standards – Classification of Rights Issue [AASB 132] (October 2010) clarify that rights, options or warrants to acquire a fixed number of an entity’s own equity instruments for a fixed amount in any currency are equity instruments if the entity offers the rights, options or warrants pro-rata to all existing owners of the same class of its own non-derivative equity instruments. The amendments, which will become mandatory for the Group’s 30 June 2011 financial statements, are not expected to have any impact on the financial statements.

• AASB 2009-14 Amendments to Australian Interpretation – Prepayments of a Minimum Funding Requirement – AASB 14 make amendments to Interpretation 14 AASB 119 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements removing an unintended consequence arising from the treatment of the prepayments of future contributions in some circumstances where there is a minimum funding requirement. The amendments will become mandatory for the Group’s 30 June 2012 financial statements, with retrospective application required. The amendments are not expected to have any impact on the financial statements.

• IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments addresses the accounting by an entity issuing equity instruments to a creditor of the entity to extinguish all or part of the financial liability. IFRIC 19 will become mandatory for the Group’s 30 June 2011 financial statements, with retrospective application required. The Group has not yet determined the potential effect of the interpretation.

• AASB 2010-4 Further amendments to Australian Accounting Standards arising from the Annual Improvements Process affect various AASBs resulting in changes for presentation, disclosure, recognition and measurement purposes. The amendments, which became mandatory for the Group’s 30 June 2012 financial statements are not expected to have a significant impact on the financial statements.

5 Segment reporting

For the years ended 30 June 2009 and 30 June 2010 the Group has undertaken one activity being the farming of Barramundi at Cone Bay in the Buccaneer Archipelago, North West of Western Australia. All operations are directly allocated and reported to the chief operating decision maker as part of the barramundi farming. As a result, the Group has one reportable segment. The Group has three external customers who each purchased between 10 and 20 per cent of total sales and collectively these customers represent approximately 43 per cent of sales. All the sales of the Group are made in the Australian market.


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The internal report to the Chief Operating Decision Maker (Board of Directors) is prepared on the same basis as these financial statements, and there are no material reconciling items of segment revenues, profit or loss, assets and liabilities. However, the performance of the result from operating activities of the segment is measured by the Chief Operating Decision Maker (CODM) as follows:

2010 2009



Farm personnel expenses (2,617) (2,037)

Fair value of loss on biological assets (693) (4,108)


Other income 5 132

Results from operating activities of the segment (2,496) (5,634) The reconciliation of the above operating results as measured by the CODM to the statutory results from operating activities per the Consolidated Statement of Comprehensive Income is as follows:

2010 2009



Farm personnel expenses (2,617) (2,037)

Fair value of loss on biological assets (693) (4,108)


Other income 5 132

Results from operating activities of the segment (2,496) (5,634)

Impairment of property, plant and equipment (1,571) (2,666)

Impairment of intangible assets (51) (457)

Depreciation and amortisation (129) (459)

Results of the operating activities (4,247) (9,216)

Net finance cost (267) (219)

Income tax benefit 618 1,292

Loss for the period (3,896) (8,143)


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6 Parent company disclosure As at, and throughout, the financial year ending 30 June 2010 the parent company of the Group was Marine Produce Australia Limited.

In thousands of AUD 2010 2009

Result of the parent entity


Other comprehensive income - -

Total comprehensive loss for the period (3,896) (8,143)

Financial position of parent entity at year end

Current assets 4,904 779

Total assets 17,404 5,983

Current liabilities (75) (2,887)

Total liabilities (268) (2,887)

Total equity of the parent entity comprising of:

Share capital 46,765 28,828

Reserves 1,014 1,014

Accumulated losses (30,642) (26,746)

Total equity 17,137 3,096

7 Finance expenses


Interest expense 308 226

308 226

Interest expense

Interest charges paid and accrued to Denise Hutton and Mathry Pty Ltd, all related to director John Hutton, for the provision of secured working capital facilities – Refer to Note 21 for further details of movements, terms and conditions of these facilities.


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8 Impairment of property, plant and equipment and intangible assets


Carried values prior to impairment:

Property, plant and equipment 3,643 3,816

Intangible assets 51 457

3,694 4,273

Impairment charges:

Property, plant and equipment (1,571) (2,666)

Intangible assets (51) (457)

(1,622) (3,123)

Carried value following impairment:

Property, plant and equipment 2,072 1,150

Intangible assets - -

2,072 1,150

The Group has undertaken a review of the carrying value of its property, plant and equipment and intangible assets to assess whether any impairment charges were required.

This review found that an impairment trigger existed, being the operating losses and negative cash flows for the reporting period while the farm is building to commercial and profitable scale, which then required an assessment of the recoverable amount of the assets.

As a result of this review, the directors have considered assessed the need to impair intangible assets and property, plant and equipment to nil, with the exception of the Group’s boats. The carrying value of the boats is supported with reference to market fair values.

The majority of remaining carrying values of property, plant and equipment assets are represented by the Group’s fleet of saleable boats, which have been valued in line with their respective estimated arm’s length market sales price.

The impairments recorded may be reversed in whole or in part in the future in line with the Group’s accounting policy (refer Note 3(f)).

9 Farm personnel expenses


Wages and salaries 2,039 1,603

Other associated personnel expenses 317 267

Superannuation costs 142 108

Increase in liability for annual leave 119 59

2,617 2,037

10 Auditors’ remuneration

In AUD 2010 2009

Audit services

Audit and review of financial reports 77,160 73,500

Audit and review of financial reports 77,160 73,500


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11 Income tax expense recognised in the income statement


Current tax expense

Current period - -

Research and development tax benefit realised (i) 618 1,292

618 1,292

Deferred tax expense

Origination and reversal of temporary differences - -

Total income tax benefit 618 1,292

(i) Of this amount $600,000 (2009: $661,000) remains receivable at the end of the period.

Numerical reconciliation between tax-expense and pre-tax net profit




Loss excluding income tax (4,514) (9,435)

Income tax using the Company’s domestic tax rate of 30% (2009:30%) (1,354) (2,830)

Research and development tax grant 618 1,292

Gain on sale of discontinued operation - -

Non-deductible expenses 491 582

Impairment assets 486 937

Capital raising costs (9) (36)

Provisions for non-recoverability - -

Current year losses for which no deferred tax asset was recognised 386 1,347


Income tax recognised directly in equity


Capital raising costs (64) (44)

Tax losses not brought to account 64 44

Total income tax recognised directly in equity - -

12 Loss per share

Basic and diluted loss per share

2010 2009

Loss per share (1.5) (9.1)


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The calculation of basic loss per share at 30 June 2010 was based on the loss attributable to ordinary shareholders of $3,896,000 (2009: $8,143,000) and weighted average number of ordinary shares during the financial year ended 30 June 2010 of 254,452,272 (2009: 89,736,141). The Group is in a loss making position and it is unlikely that the conversion to, calling of, or subscription for, ordinary share capital in respect of potential ordinary shares would lead to a diluted earnings per share that shows an inferior view of the earnings per share. For this reason, the diluted loss per share is the same as the basic loss per share.

13 Cash and cash equivalents


Cash at bank 4,325 89

Cash in the statement of cash flows 4,325 89

The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note 25.

14 Trade and other receivables


Trade receivables 554 535

Other receivables 3 3

GST receivable 237 37

794 575

The Group’s exposure to credit and currency risks and impairment losses related to trade and other receivables are disclosed in Note 25.

15 Inventories


Stock of feed - at cost 178 151

Consumable stock - at cost 16 15

Harvested fish stock - at net realisable value 183 101

377 267

16 Biological assets

In thousands

Barramundi (kg)

Barramundi ($)

2010 2009 2010 2009

Balance at 1 July 626 645 4,724 5,448

Increase due to growth 1,039 421 8,219 3,207

Increase due to acquisitions - - 306 303

Decrease due to harvest and sale (398) (440) (3,753) (4,234)

Balance at 30 June 1,267 626 9,496 4,724

Loss from changes in fair value - - (8,525) (3,510)


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(i) Group exposure to risk

Aquaculture contains elements of significant risk. The ultimate success of aquaculture depends, amongst other things, on the ability to obtain a sufficient yield of juveniles from hatcheries and harvesting an economic yield from a marketable size, the possibility of high mortality rates due to a variety of factors, maintenance of the necessary licences, adhering to other government regulations, conditions and approvals, obtaining and servicing suitable funding arrangements.

The performance of the Group’s aquaculture operations, and the value of the Group’s biological assets, could be impacted by a number of factors, including:

- Weather conditions - Possibility of disease and high mortality rates - Price of and market for its products - Exchange rates affecting international market pricing - Unexpected developments in aquaculture development and operating costs - General economic and stock market conditions in Australia and worldwide, particularly relating to the

availability of capital - Access to sufficient funding to allow grow-out to marketable size

The Group is exposed to a number of risks related to its Barramundi farming operations, which can be summarised into the following key areas:

Regulatory and environmental risks

The Group is subject to laws and regulations of Australia, and specifically Western Australia. The Group has established environmental policies and procedures aimed at compliance with local environmental and other laws. Management performs regular reviews to identify environmental risks and to ensure that the systems in place are adequate to manage those risks.

Supply and demand risks

The Group is exposed to risks arising from fluctuations in the price and sales volume of fish. Where possible the Group manages this risk by aligning its harvest volume to market supply and demand. Management performs regular industry trend analysis to ensure that the Group’s pricing structure is in line with the market and to ensure that projected harvest volumes are consistent with the expected demand.

Climate and other risks

The Group’s fish farm is exposed to the risk of damage from climatic conditions, diseases, and other forces. The Group has processes in place aimed at monitoring and mitigating those risks, including regular inspections of the fish and associated infrastructure assets. The Group also insures itself against damage to its assets caused by natural disasters such as cyclones.

Basis of estimation and valuation

The measurement of the number, weight and value of fish stock involves:

- Sample counting of fish in cages during splitting and harvesting operations - Sample weighing of fish in cages and extrapolation of results to total holding in sampled cage - Current market values and selling costs

In line with industry practice there is a degree of estimation in these processes which requires management and staff to make judgments, estimates and assumptions that affect the reported quantities and value of the Group’s biological assets. Fish numbers are estimated allowing for cannibalism, stock losses and under delivery of small fish at time of purchase. Actual results, for example at later harvest, may differ positively or negatively from those estimates. The estimates and assumptions applied are reviewed on an ongoing basis.


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17 Deferred tax assets and liabilities

Movement in temporary differences during the year

In thousands of AUD Balance 1 July 2008

Recognised in loss

Recognised in equity

Balance 30 June 2009

Recognised in loss

Recognised in equity

Tax losses not carried forward


Property, plant and equipment (19) (866) - (885) (325) - - (1,210)

Receivables (119) 119 - - - - - -

Intangible assets 304 (757) - (453) (15) - - (468)

Available for sale financial assets - - - - - - - -

Payables (25) 15 - (10) (23) - - (33)

Provisions (16) (9) - (25) (23) - - (48)

Capital raising costs 129 - (44) 85 - (214) - (129)

Tax loss carry-forwards (5,638) (1,031) - (6,669) (451) - 1,868 (5,252)

(5,384) (2,529) (44) (7,957) (837) (214) 1,868 (7,140) Deferred tax assets not brought to account

5,384 2,529 44 7,957 837 214 (1,868) 7,140

- - - - - - - -

Movement in unrecognised deferred tax assets and liabilities during the year

In thousands of AUD Balance 1 July 2008

Additions Balance 30 June 2009

Additions Tax losses not carried forward


Taxable temporary differences (433) 348 (85) 85 - -

Deductible temporary differences 178 1,195 1,373 515 - 1,888

Tax income losses 4,855 1,049 5,904 451 (1,868) 4,487

Tax capital losses 784 (19) 765 - - 765

5,384 2,574 7,957 1,051 (1,868) 7,140

As at the date of this report the availability of carry forward losses has not been fully determined. No deferred tax asset balance has been recognised in respect of these losses The deductible temporary differences and tax losses do not expire under current tax legislation. Deferred tax assets have not been recognized in respect of these items because it is not probable that future taxable profit will be available against which the Group can utilise the benefits there from.


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18 Property, plant and equipment

In thousands of AUD Plant and equipment Total

Cost

Balance at 1 July 2008 4,528 4,528

Acquisitions 303 303

Balance at 30 June 2009 4,831 4,831

Balance at 1 July 2009 4,831 4,831

Acquisitions 2,622 2,622

Balance at 30 June 2010 7,453 7,453

In thousands of AUD

Plant and equipment

Total

Depreciation and impairment losses

Balance at 1 July 2008 613 613

Impairment losses (Note 8) 2,666 2,666

Depreciation charge for the year 402 402

Balance at 30 June 2009 3,681 3,682

Balance at 1 July 2009 3,681 3,682

Impairment losses (Note 8) 1,571 1,571

Depreciation charge for the year 129 129

Balance at 30 June 2010 5,381 5,381

Carrying amounts

At 1 July 2008 2,375 2,375

At 30 June 2009 1,150 1,150

At 1 July 2009 1,150 1,150

At 30 June 2010 (Note 8) 2,072 2,072


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19 Intangible assets

Development assets

In thousands of AUD Barramundi Prawn Total

Cost

Balance at 1 July 2008 602 894 1,496

Additions 15 - 15

Balance at 30 June 2009 617 894 1,511

Balance at 1 July 2009 617 894 1,511

Additions 51 - 51

Balance at 30 June 2010 668 894 1,562

Amortisation and impairment losses

Balance at 1 July 2008 120 894 1,014

Amortisation for the year 40 - 40

Impairment loss (Note 8) 457 - 457

Balance at 30 June 2009 617 894 1,511

Balance at 1 July 2009 617 894 1,511

Amortisation for the year - - -

Impairment loss (Note 8) 51 - 51

Balance at 30 June 2010 668 894 1,562

Carrying amounts

At 1 July 2008 - - -

At 30 June 2009 - - -

At 1 July 2009 - - -

At 30 June 2010 (Note 8) - - -

20 Trade and other payables


Trade payables 322 1,445

Other payables and accrued expenses 168 148

490 1,593

The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in Note 25.


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21 Loans and borrowings


Secured interest-bearing loans - 2,712

- 2,712

Movements in loans and borrowings during the period: Facility In thousands of AUD

Opening 1 July 2009

Drawn in cash

Repaid in cash

Repaid in shares

Closing 30 June 2010

Denise Hutton* (i) 2,112 2,250 - (4,362) - Mathry Pty Ltd* (i) 600 - - (600) - Lasborough* (ii) - 2,400 - (2,400) - Guy Westbrook* (ii) - 200 (200) - - Millstream Management Pty Ltd* (ii) - 10 (10) - - Miles Kennedy* (ii) - 201 (15) (186) - Total 2,712 5,061 (225) (7,548) -

* Denotes related parties – refer notes 23 and 29 for further information.

This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings, which are measured at amortised cost. For more information about the Group’s exposure to interest rate and liquidity risk, see Note 25.

(i) Denise Hutton and Mathry Pty Ltd loans

The loans accrued interest at a rate of 12 per cent per annum, were at call and were secured by a charge over the assets of the Group. The repayment of loans in shares was based on the market value of the shares at that time issued under entitlement issues.

(ii) Other loans

The loans were short term and did not accrue interest, were at call and unsecured. The repayment of loans in shares was based on the market value of the shares at that time issued under entitlement issues.

22 Employee benefits

Current


Provision for annual leave 146 83

Defined superannuation contribution funds

The Group makes contributions to defined contribution superannuation funds. The amount recognised as an expense during the period was $190,000 (2009: $108,000).


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23 Share capital

Ordinary

Shares Share based payments reserve

No shares $’000 No options $’000

On issue at 1 July 2008 59,255,704 26,255 6,309,055 488

Issued for cash consideration 49,030,723 2,595 - -

Issued for no cash consideration 1,100,000 66 10,000,000 526

Options lapsed - - - -

Transaction costs - (88) - -

On issue at 30 June 2009 109,386,427 28,828 16,309,055 1,014

On issue at 1 July 2009 109,386,427 28,828 16,309,055 1,014

Issued for cash consideration 327,531,009 9,954 - -

Issued for no cash consideration 200,253,174 8,468 - -

Options lapsed - - (1,309,055) -

Transaction costs - (485) - -

On issue at 30 June 2010 637,170,610 46,765 15,000,000 1,014

During July 2008 the issued capital of the company was consolidated on a 10:1 basis. Shares and options within this report are disclosed on a post-consolidated basis.

No of shares

Cash $’000

Creditor offset $’000

Loan offset $’000

For services

$’000 Placements 26,666,666 800 - - 120 Entitlements issues 501,117,517 9,154 800 7,548 - 527,784,183 9,954 800 7,548 120

Loans offset

- An amount of $1,600,000 payable by the Group to Denise Hutton and Maxima Pearling Pty Ltd, both related parties of the Group, was settled through the issue of 26,666,667 ordinary shares at $0.06 per share under an entitlements issue completed during the reporting period, related to repayment of interest bearing loans.

- Further, an amount of $3,361,566 payable by the Group to Denise Hutton and Mathry Pty Ltd, both related parties

of the Group, was settled through the issue of 112,052,200 ordinary shares at $0.03 per share under an entitlements issue completed during the reporting period, related to repayment of interest bearing loans

- Further, an amount of $186,029 payable by the Group to Miles Kennedy, related party of the Group, was settled

through the issue of 6,200,974 ordinary shares at $0.03 per share under an entitlements issue completed during the reporting period, related to repayment of interest bearing loans

- An amount of $2,400,000 payable by the Group to Lasborough was settled through the issue of 40,000,000 shares at

$0.06 per share under an underwriting agreement for an entitlements issue. As a result of this issue of shares Lasborough became a related party of the Group due to the level of its resulting shareholding in the company.

Creditors offset

- An amount of $800,000 payable by the Group to Maxima Pearling Pty Ltd, related parties of the Group, was settled through the issue of 13,333,333 ordinary shares at $0.06 per share under an entitlements issue completed during the reporting period, related to a trade creditor balance For services

- During August 2009, 2,000,000 shares at $0.06 per share were issued to Guy Westbrook and Millstream Management Pty Ltd, an entity associated with Matthew Fitzgerald, as key management personnel and contractors, in payment of services rendered to the value of $120,000 representing the fair value of services provided and the market price of shares at that time


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Cash

- The Company issued 4,278,217 shares at $0.06 per share for a total cash consideration of $ 256,693 under the entitlements issue completed during the reporting period.

- 323,252,792 shares at $0.03 per share for a total cash consideration of $ 9,697,584 under the shares placement completed during the reporting period.

Dividends

No dividends were proposed or paid during the current or previous financial year.

24 Share-based payments

(i) Issue of shares

During August 2009, 2,000,000 shares at $0.06 per share were issued to Guy Westbrook and Millstream Management Pty Ltd, an entity associated with Matthew Fitzgerald, as key management personnel and contractors, in payment of services rendered to the value of $120,000 representing the fair value of services provided and the market price of shares at that time.

(ii) Issue of options

The number and weighted average exercise prices of share options is as follows:

2010 2009

Weighted average

exercise price

Number of options

Weighted average

exercise price

Number of options

Outstanding at the beginning of the period 0.42 16,309,055 0.78 6,309,055

Issued for no cash consideration - - 0.250 10,000,000

Options lapsed 3.00 (1,309,055) - -

Outstanding at the end of the period 0.20 15,000,000 0.42 16,309,055

The options outstanding at 30 June 2010 have an exercise price of $20 cents (in 2009 the exercise price was in the range of $20 cents and $3.00) and a weight average life of 4.5years (2009: 5.33 years). The fair value of the shares options granted has been determined using the Black Scholes valuation model as $1,014 000 which has been recognised under the share based payments reserve. The model inputs were:

Fair value of share options and assumptions

Number of options 10,000,000 5,000,000

Fair value at grant date 526,000 488,000

Share price 0.14 0.19

Exercise price 0.20 0.20

Expected volatility 50% 50% Grant date 30 July 2008 28 September 2007 Expired date 28 September 2012 28 September 2012 Risk-free interest rate 7.25% 7.25%

During July 2008, the Company issued 10,000,000 options with an exercise price of $0.20 and expiring date 28 September 2012, to acquire ordinary shares following approval at a General Meeting of shareholders on 18 July 2008. These options were issued to Lasborough Investments Limited for no cash consideration in combination with a placement of shares to them. The remaining 5,000,000 options were issued in September 2007 with an exercise price of $0,20 and expiring date 28 September 2012. The options are vested immediately and no service of performance or market conditions exists.


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1,000,000 and 309,055 unlisted options of the company, with an exercise price of $3.00, have expired the 25 August 2009 and 30 June 2010, respectively. No share options were issued during the period.

25 Financial risk management

The Group has exposure to the following risks from their use of financial instruments:

- Credit risk - Liquidity risk

- Market risk - Interest rate risk

- Operational risk Exposure to credit and interest rate risks arises in the normal course of the Group’s businesses. The Group is not exposed to foreign currency risk as sales, purchases and borrowings are made in the functional currency, being AUD. This note presents information about the Group’s exposure to each of the above risks, their objectives, policies and processes for measuring and managing risk, and the management of capital. Further quantitative disclosures are included throughout these consolidated financial statements. The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework. Risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aim to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

(i) Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers and investment securities.

Exposure to credit risk

The carrying amount of the Group’s financial assets represents the maximum credit exposure. The Group’s maximum exposure to credit risk at the reporting date was:

Carrying amount


Trade and other receivables 794 575

Cash and cash equivalents 4,325 89

5,119 664

Trade and other receivables

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the Group’s customer base, including the default risk of the industry. The Group’s revenue is not significantly attributable to sales transactions with a single customer. Goods are sold subject to retention of title clauses, so that in the event of non-payment the Group may have a secured claim. The Group does not require collateral in respect of trade and other receivables. The Group’s maximum exposure to credit risk for trade receivables at the reporting date by geographic region, being within Australia, was $554,000 (2009: $535,000). All sales are made to wholesale customers.


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Impairment losses

The Group’s receivables that are past due are $406,000 (2009: $458,000). The ageing of the Group’s receivables at the reporting date was:

Gross Impairment Gross Impairment

In thousands of AUD 2010 2010 2009 2009

Not past due 163 - 77 -

Past due 0-30 days 208 - 116 -

Past due 31-120 days 99 - 92 -

Past due 121 days 99 15 250 -

569 15 535 -

The Group has reviewed its receivables at period end for impairment and recorded a provision for non recovery (impairment) of $15,000 (2009: nil). The Group believes that no impairment is necessary in respect of the remaining trade receivables not past due or past due as these amounts relate to customers that have a good credit history with the Group.

(ii) Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. The Group projects revenue and costs, which assists it in monitoring cash flow requirements and optimising its cash return on investments. Typically the Group seeks to ensure that it has sufficient cash on demand to meet expected operational expenses for a period of at least 30 days, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements:

2010

In thousands of AUD

Carrying amount

Contractual cash flows

6 months or less

6-12 months 1-2 years 2-5 years

More than 5 years


Secured loans - - - - - - -

Trade and other payables

490 490 490 - - - -

490 490 490 - - - -

2009

In thousands of AUD

Carrying amount

Contractual cash flows

6 months or less

6-12 months 1-2 years 2-5 years

More than 5 years


Secured loans 2,712 2,712 2,712 - - - -

Trade and other payables

1,593 1,593 1,593 - - - -

4,305 4,305 4,305 - - - -


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(iii) Market risk

Market risk is the risk that changes in market prices, such as interest rates will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

Interest rate risk

At the reporting date the interest rate profile of Group’s interest-bearing financial instruments was:

Carrying amount


Fixed rate instruments

Financial assets 4,325 89

Financial liabilities - (2,712)

4,325 (2,623)

Fair value sensitivity analysis for fixed rate instruments

The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore a change in interest rates at the reporting date would not affect profit or loss.

A change of 100 basis points in interest rates would have increased or decreased the Group’s equity by an immaterial amount in the current and prior period.

Fair values

Fair values versus carrying amounts

The fair value of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are as follows:

Consolidated 2010 2009

In thousands of AUD Carrying amount Fair value Carrying amount Fair value

Assets carried at amortised cost

Trade and other receivables 794 794 575 575

Cash and cash equivalents 4,325 4,325 89 89

Liabilities carried at amortised cost

Secured loans - - (2,712) (2,712)

Trade and other payables (490) (490) (1,593) (1,593)

4,629 4,629 (3,641) (3,641)

Interest rates used for determining fair value

Estimated cash flows have not been discounted as all financial assets and liabilities, are expected to be settled within 12 months, therefore the face value is equal to fair value.

(iv) Capital management

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Board of Directors monitors the return on capital employed in operating expenses and capital purchases. The Board seeks to maintain an appropriate balance between cash balances, loans and borrowings, and biological assets to achieve its growth objectives while maintaining solvency. There were no changes in the Group’s approach to working capital management during the year. The Group is not subject to externally imposed capital requirements. Refer Note 2(f) for the directors’ assessment of going concern.


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26 Capital and other commitments

In thousands of AUD

2010 2009

Capital and expenditure commitments

Plant and equipment

Contracted but not provided for and payable within one year

954 601

27 Consolidated entities

Country of Incorporation

Ownership interest

2010 2009

Parent entity

Marine Produce Australia Limited

Subsidiaries

Tiger International Management Pty Ltd Australia 100% 100%

MPA Fish Farms Pty Ltd Australia 100% 100%

MPA Marketing Pty Ltd Australia 100% 100%

Tiger International Hatchery Pty Ltd Australia 100% 100%

Maxima Fish Farms Pty Ltd Australia 100% 100%

28 Reconciliation of cash flows from operating activities



Adjustments for:

Depreciation and amortisation 129 459

Impairment loss 1,622 3,123

Shares issued for services 452 716

Operating loss before changes in working capital and provisions (1,693) (3,845)

(Increase)/decrease in biological assets (4,772) 724

(Increase)/decrease in trade and other receivables (219) 321

(Increase)/decrease in current tax assets 61 (256)

Increase in inventories (110) (40)

(Increase)/decrease in other assets (91) 19

Decrease in trade and other payables (443) (278)

Decrease in provisions and employee benefits 63 28

Net cash used in operating activities (7,204) (3,327)

Refer to Notes 21 and 23 for details of non-cash financing and operating transactions involving the issue of shares.


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29 Related parties

The following were key management personnel of the Group at any time during the reporting period and unless otherwise indicated in the directors’ report were key management personnel for the entire period:

Non-executive directors Executives

Mr M Kennedy (Chairman) Mr G Westbrook (General Manager)

Mr J Hutton Ms J Mathie (Company Secretary)

Dr T Theunissen Mr M Fitzgerald (Chief Financial Officer – resigned 14 February 2010)

Individual directors and executives compensation disclosures

Information regarding individual directors and executives compensation and some equity instruments disclosures as permitted by Corporations Regulation 2M.3.03 is provided in the remuneration report section of the directors’ report.

Other key management personnel transactions

The aggregate amounts recognised during the year relating to key management personnel and their related parties were as follows:

Key management personnel and their related parties

Transaction

In AUD 2010 2009

Mr M Kennedy Resource Development Company Pty Ltd

Lonrho Mining Limited

Accounting and Secretarial Services

Rent and outgoings

-

4,769

256,304

-

Mr J Hutton

Maxima Pearling Co Pty Ltd

Services and materials supplied Coney Bay rental 445,988 534,982

Mr J Hutton Kimberley Palm Factory

Rent and variables 16,364 24,500

Dr T Theunissen Psytec Management Services

Directors Fees 30,000 30,000

Mr M Fitzgerald

Millstream Management Pty Ltd

Accounting Services 222,150 -

Refer to Notes 21 and 23 for details of related party loans and borrowings transactions.

Amounts receivable from and payable to key management personnel and other related parties at reporting date arising from the transactions were as follows:

In AUD 2010 2009

Assets and liabilities arising from the above transactions

Other related parties

Current receivables - 116,663

Key management personnel

Current receivables - -

Other related parties

Current payables - (471,778)

Total payments/total liabilities - (355,115)

From time to time, key management personnel of the Group, or their related entities, may purchase goods from the Group. These purchases are nf the same terms and conditions as those entered into by other employees of the Group or customers and are trivial or domestic in nature.

Shares and options over equity instruments

There are no options over ordinary shares in Marine Produce Australia Limited held, directly, indirectly or beneficially, by key management personnel, including their related parties at balance date or during the period.


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The movement during the reporting period in the number of ordinary shares in Marine Produce Australia Limited held, directly, indirectly or beneficially, by each key management person, including their related parties is as follows: SHARES

Held at 1 July 2009 or date of

appointment

Granted as compensation

Purchases Held at

30 June 2010 or resignation

Directors Mr M Kennedy 2,010,053 - 7,291,408 9,301,461 Mr J R Hutton 14,484,045 - 61,407,690 75,891,735 Dr T Theunissen 614,917 - - 614,917 Officers Mr G Westbrook 2,083,333 1,000,000 - 3,083,333 Mr M Fitzgerald 63,250 1,000,000 67,250 1,130,500 Ms J Mathie - - - -

Held at 1 July 2008 or date of

appointment

Granted as compensation

Purchases/(Sales) Held at

30 June 2009 or resignation

Directors Mr M Kennedy 1,182,070 - 827,983 2,010,053 Mr J R Hutton 13,812,308 - 671,737 14,484,045 Mr N Miller 645,525 - - 645,525 Dr T Theunissen 400,000 - 214,917 614,917 Prof M Doroudi 72,000 - - 72,000 Officers Mr G Westbrook - - 2,083,333 2,083,333 Mr M Fitzgerald - - 63,250 63,250 Ms J Mathie - - - -

30 Subsequent events

During July 2010 the Group announced: • Expiry of 309,055 unlisted options with an exercise price of $3.00 on 30 June 2010; and

• Issue of 7,166,666 ordinary fully paid shares at $0.03 per share as part of an entitlements issue shortfall, raising $215,000.

During August 2010 the Group announced: • Release from voluntary escrow of 2,000,000 fully paid ordinary shares on 6 August 2010;

• Change in its registered office, principal place of business and contact numbers, effective 26 August 2010; and

• Appointment of Mr Steven Gill as Manager – Post Harvest Development to spearhead an expansion of its marketing program.


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DIRECTORS’ DECLARATION

1. In the opinion of the directors of Marine Produce Australia Limited (“the Company”):

(a) the consolidated financial statements and notes that are contained in pages 17 to 42, and the Remuneration

Report in the Directors’ report, set out on pages 3 to 6, are in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the Group’s financial position as at 30 June 2010 and of its performance,

for the financial year ended on that date; and

(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001;

(b) the consolidated statements comply with International Financial Reporting Standards as disclosed in note 2(a) (c) as a result of the matters described in note 2(f) there are reasonable grounds to believe that the Company will

be able to pay its debts as and when they become due and payable.

2. The directors have been given the declarations required by section 295A of the Corporations Act 2001 from the Financial Accountant for the financial year ended 30 June 2010.

Signed in accordance with a resolution of the directors: Dated at Perth this 29th day of September 2010.

Miles Kennedy Chairman

Corporate Governance Statement 2010 The Board is committed to following the ASX Corporate Governance Council Corporate Governance Principles and Recommendations (ASX Recommendations) and the Board and Management regularly review the Company’s policies and practices to ensure that the Company continues to maintain and improve its governance standards. The specific aspects that support the implementation of this approach are described below in accordance with the ASX Recommendations. Details of the main policies of corporate governance adopted by the Company and referred to in its statements are available on the Marine Produce Australia Limited website at www.marineproduce.com. PRINCIPLE 1 Lay Solid Foundations for Management and Oversight The Board operates in accordance with the broad principles set out in its charter which can be downloaded from the corporate governance section of the Company’s website. Role The Board is responsible of the overall operation and stewardship of the Company. The Board’s specific responsibilities include: • input into and approval of the strategic direction of the Company; • approving and monitoring capital expenditure; • monitoring of financial performance including reviewing and ratifying the systems in place that manage the material

risks to the Company; • appointing, removing and setting succession policies for the managing director, directors and seniors executives; • establishing and monitoring the achievement of management’s goals; • encouraging ethical behaviour throughout the organisation.

Delegation Clause 6 of the Board Charter sets out the Board’s delegation of the responsibility to allow senior management being the chief financial officer and the general manager operations, to carry out day-to-day operations and administration of the Company. In carrying out this delegation, senior management reports regularly to the Board on the Company’s progress on achieving the short, medium and long term plans of the Company. Senior management is accountable to the Board for the authority that is delegated by the Board. The Board Charter supports all delegations of responsibility by formally defining the specific functions reserved for the Board of Committees, and those matters delegated to management. Performance Review of Senior Executives In accordance with the clause 5.5 if it’s Charter, each year the Board approves the criteria for assessing the performance of senior management. In addition, performance reviews of the senior management are conducted regularly during the year by the full Board. The performance of senior management is reviewed by comparing performance against agreed measures, examining the effectiveness and quality of the individual, assessing key contributions, identifying areas of potential improvement and assessing whether various expectations of shareholders have been met. Further details of how the Company assesses the performance of senior management are set out in the Remuneration Report of the Annual Report. PRINCIPLE 2 Structure the Board to Add Value Board Composition The Board strives to ensure that it is comprised of strongly performing individuals of the utmost integrity whose complementary skills, experience, qualifications and personal characteristics are suited to the Company’s needs. The Company’s Constitution provides for a minimum of three and a maximum of ten directors. At the commencement of the 2010 financial year, the Board comprised three directors. A profile of each director, including their skills, experience, relevant expertise, special responsibilities and the date each director was appointed to the Board of the Company is set out in the Directors’ Report of the 2010 Annual Report

Independence At present the Board does not comprise a majority of independent directors. The Board defines ‘independence’ in accordance with the ASX Recommendations. In order to ensure that any ‘interests’ of a Director in a matter to be considered by the Board are known by each Director, each Director had contracted with the Company to disclose any relationships, duties or interests held that may give rise to a potential conflict. Directors are required to adhere strictly to constraints on their participation and voting in relation to any matters in which they may have an interest. Each Director is required by the Company to declare on an annual basis the details of any financial or other relevant interests that they may have in the Company. The Chairman Our Chairman is a Non-Executive Director. The Chairman is responsible for the leadership of the Board and to ensure that the Board functions effectively. The Nomination and Remuneration Committee The full Board of the Company carries out the duties of the Nomination and Remuneration Committee. Selection and Appointment of Directors The full Board considers and identifies candidates who may be qualified to become directors. The nomination of all new directors including the Managing Director is considered by the full Board. The Board assesses the nominees against a range of specific criteria including their experience, professional skills, potential conflicts of interest and the requirement for independence. All new appointments to the Board are subject to shareholder approval. Retirement and Re-election of Directors The Company’s constitution requires one-third of the directors (rounded down to the next lowest number) to retire by rotation at each general meeting (AGM). In selecting the directors to retire the Board has regard to a number of factors including the optimal composition of the Board having regard to the on-going needs of the Company, the skills and experience of the directors, their potential conflict of interests, and the length of time the Director has held office. A Director must retire in any event at the third AGM since he or she was last elected or re-elected. Retiring directors may offer themselves for re-election. The Managing Director is not subject to retirement by rotation and is not to be taken into account in determining the number of directors required retiring by rotation. Director Induction and Education The Company has a process to educate new directors about the nature of the business, current issues, the corporate strategy and the expectations of the Company concerning the performance of the directors. Directors are given access to continuing education opportunities to update and enhance their skills and knowledge. It is the practice of directors to visit the Company’s aquaculture sites and meet with management to gain a better understanding of the business on a regular basis. New directors also receive a letter of appointment which outlines their main responsibilities and provides new directors with a broad range of information about the Company. Independent Professional Advice and Access to Company Information Directors have a right of access to all relevant Company information and, subject to prior consultation with the Chairman, may seek independent advice from suitably qualified advisors at the Company’s expense. Evaluating Board Performance The criterion for the evaluation of each Director is their contribution to specific Board objectives, including the following: • Setting corporate strategies; • Identification, analysis and responses to risks and issues; • Monitoring of the Company’s progress against its business objectives; • Understanding and analysing of the Board papers presented by management; • Use of industry, financial and broad knowledge to add value to the deliberations of the Board.

Board Committees The Board considers that the Company is not currently of a size, nor are its affairs of such complexity to justify the formation of separate or special committees at this time. The Board as a whole is able to address the governance aspects of the full scope of the Company’s activities and to ensure that it adherers to appropriate ethical standards. The full Board currently holds meetings at such times as may be necessary to address any general or specific matters as required. When the Company’s activities increase in size, scope and nature, the appointment of separate or special committees will be reviewed by the Board and implemented if appropriate.

PRINCIPLE 3 Promote Ethical and Responsible Decision-Making The Board acknowledges the need for continued maintenance of a professional standard of a corporate governance practice and ethical conduct by all directors and employees of the Company. The Board and the Company’s employees are expected to uphold the highest levels of integrity and professional behaviour in their relationships with all of the Company’s stakeholders. Code of Conduct The code describes standards for appropriate ethical and professional behaviour for all directors, employees and contractors working for the Company. The Code of Conduct requires all directors, employees and contractors to conduct business with the highest ethical standards including compliance with the law and to report any interest that may give rise to a conflict of interest. Breaches of the Code of Conduct are taken seriously by the Company. The Code of Conduct is made available to all employees. Values The Company has also implemented a set of values designed as a guide by the directors and all employees in their day-to-day dealings with each other, competitors, customers and the community. The values established are summarised under the headings Respect, Integrity, Action and Results. Trading in the Company’s Shares To safeguard against insider trading the Company’s Securities Trading policy prohibits directors and employees from trading the Company’s securities if they are aware of any information that would be expected to have a material effect on the price of the Company’s securities. Directors must consult with the Chairman of the Board, or in his absence or conflict, the Deputy Chairman, before dealing in shares or other securities of the Company. Dealings (whether purchases or sales) in the Company’s shares or other securities by related personnel may not be carried out other than in the dealing “window”, being the period commencing 2 days prior to and ending 2 days following the date of announcement of the Company annual or half yearly results or a major announcement leading to a fully informed market. “Major” is defined as an announcement that may as a direct result, affect the share price, or an announcement affecting the operations of the Company. If within that period any further announcement arises that may separately affect the share price, the Chairman or in his absence the Deputy may impose a lock-down period on the ability to trade. All related persons must give details of any acquisitions or disposal of shares or other securities in the Company, within one business day to the Company Secretary of the Company. All related persons must ensure that they at all times observe the insider trading rules of the Corporations Act. The Company discloses to ASX any transaction conducted by the directors in the Company’s securities in accordance with the ASX Listing Rules. PRINCIPLE 4 Safeguard Integrity in Financial Reporting The full Board forms the Company’s Audit Committee. The Board acknowledges that it does not at this stage comply with ASX recommendation 4.1 but having regard to the rapid changes in the Company’s size over the second half of the financial year ended 30 June 2010, steps are in place to rectify this and appoint members to an Audit Committee. PRINCIPLE 5 Make Timely Balanced Disclosure The Company is committed to providing relevant up-to-date information to its shareholders and the broader investment community in accordance with the continuous disclosure requirements under the ASX Listing Rules and the Corporations Act. The Board has authorised the Financial Manager and Company Secretary as the Disclosure Officers, to ensure that information is released by the Company in a timely and accurate fashion. To supplement the Continuous Disclosure Policy the Board has also approved Disclosure Protocols and Procedures to provide further guidance to staff on understanding and complying with the Company’s continuous disclosure obligations.

PRINCIPAL 6 Respect the Right of Shareholders The Board aims to ensure that shareholders are informed of all information necessary to assess the performance of the Company. To achieve this during 2010 the Board Shareholder Communication Policy which outlines the process through which the Company will endeavour to ensure timely and accurate information is provided equally to all shareholders Information is communicated to Shareholders through: • The annual report which is available to all shareholders (in both hardcopy and electronic form); • The release to the ASX and on the Company’s website, of the half yearly financial report, quarterly production and

activities report and other information, including ASX releases in accordance with the Company’s continuous disclosure obligations;

• Providing information on the Company’s website about the Company, including the Charters that govern the Board and Board Committees, the Company’s key policies, statutory reports of the last 2 years and releases to the ASX;

• The release to ASX and the Company’s website of all Company presentations made during briefings conducted with analysts and institutions from time to time.

Shareholders are also encouraged to attend the AGM and use the opportunity to ask questions. Questions can be lodged prior to the meeting by completing the relevant form accompanying the notice of meeting. The Company makes every endeavour to respond to the most commonly asked questions. The external auditor attends the meeting and is available to answer questions in relation to the conduct of audit. PRINCIPLE 7 Recognise and Manage Risk The Company is exposed to numerous risks across its business, most of which are common to the aquaculture industry. The Company’s commitment and approach to managing these risks is outlined in the Company’s Risk Management Policy and is on the Company’s website. The Board receives reporting on the control mechanisms which are designed and implemented by management to ensure that the safety, environment, legal and reputation risks faced by the Company are identified, assessed and managed. The Board also reviews and assesses the adequacy of the Company’s internal control and financial management systems and accounting and business policies. The Board is given further assurance on the Company’s financial management systems through the Company’s independent internal audit function. Senior management are responsible for risk management in their respective areas of accountability. They ensure that procedures exist to monitor risks and, through observation and audit, gain assurance that affective controls are implemented and consistently applied. The Board has recognised the need to implement a common risk management framework across the group. The Company is in the process of developing this framework and it will be rolled out during 2009. This process includes the implementation at all sites of the Company’s Sustainability Standards. These are comprehensive sets of standards that provide a systematic approach to the management of Safety, Health, Environment and Community related risks. Management Reporting and Certifications Management reports to the Board on the material business risks faced by the Company, the effectiveness of the Company’s risk management and internal control system, and the Company’s management of its material business risks. The Chief Financial Officer has declared in writing to the Board that the financial records of the Company for 2009 have been properly maintained and present a true and fair view of the Company’s financial position and financial results, in accordance with the Corporations Act and the relevant accounting standards. The reporting and control mechanisms support the written certifications given by the Chief Financial Officer to the Board annually, that the Company’s financial reports are based on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial reporting risks. PRINCIPLE 8 Remunerate Fairly and Responsibly The Board provides recommendations and directions for the Company’s remuneration practices. The Board, as the Remuneration Committee, ensures that a significant proportion of each Senior Manager’s Remuneration is linked to his or her performance and the Company’s performance. Performance reviews are conducted regularly to assess the performance of Senior Managers and to determine the proportion of remuneration that will be ‘at risk’ for the upcoming year. For further details on this see Remuneration Report within the 2010 Annual Report.

Board Remuneration The total annual remuneration paid to non-executive directors may not exceed the limit set by the shareholders at an AGM. The remuneration of the non-executive directors is fixed rather than variable. Further details in relation to director remuneration are set out in the Remuneration Report within the 2010 Annual Report. During the Company’s 2009/2010 financial year, it has complied with the ASX Principles and Recommendations other than in relation to the matters specified below. Principle Number Best Practice Recommendation Reasons for Non-compliance 2.4 A separate Nomination Committee has not

been formed The Board considers that the Company is not currently of a size to justify the formation of a nomination committee. The Board as a whole undertakes the process of reviewing the skill base and experience of existing directors to enable identification or attributes required in new directors. Where appropriate, independent consultants will be engaged to identify possible new candidates for the Board.

4.1, 4.2, 4.3 A separate Audit Committee has not been formed.

The Board considers that the Company is not currently of a size, nor are its affairs of such complexity to justify the formation of an audit committee. The Board as a whole undertakes the selection and proper application of accounting policies, the identification and management of risk and the review of the operation of the internal control systems.

8.1 There is no separate Remuneration Committee

The Board considers that the Company is not currently of a size, nor are its affairs of such complexity to justify the formation of a Remuneration Committee. The Board as a whole is responsible for the remuneration arrangements for directors and executives of the Company.

australian business number

70 091 805 480

board of directors

miles kennedy – non-executive chairman

john hutton – non-executive director

tor theunissen – non-executive director

company secretary

jean mathie

registered office and principleplace of business

34 bagot road

subiaco 6008

western australia

postal address

po box 1008

west perth 6872

western australia

communication details

telephone: (+61 8 ) 9381 4483

facsimile: (+61 8 ) 9381 5817

email: [email protected]

web: www.marineproduce.com

asx code

mpa ordinary fully paid shares

auditors

KPMG

central park

152 – 158 st georges terrace

perth 6000

western australia

lawyers

drummond law

48 matheson road

applecross 6153

western australia

telephone: (+61 8 ) 9364 9016

facsimile: (+61 8 ) 9364 7973

email: [email protected]

share registry

security transfer registrars pty ltd

770 canning highway

applecross 6153

western australia

telephone: (+61 8 ) 9315 2333

facsimile: (+61) 9315 2233

securities exchange

australian securities exchange

2 the esplanade

Perth 6000

western australia

corporate directory

Documents

annual report 2010 - Marine Produce Australia Annual Report Year Ended J… · annual report 2010. ... Technology, Fremantle WA as a hatchery source of fingerlings with a reliable