Download pdf - MURRAY GOULBURN CO-OPERATIVE CO.LIMITED · Chairperson Goulburn Murray Water - Murray Systems Water Service Committee Kenneth J. Bruhn Dairyfarmer Director since 1982 ... John C

MURRAY GOULBURN CO-OPERATIVE CO. LIMITED

51ST ANNUAL REPORT 2001

MURRAY GOULBURN ANNUAL REPORT 2001

DIRECTORS

Mr I W MacAulay Mr S J O’Rourke Dr W B Sanderson Mr L A Jarvis Mr K J Bruhn Mr T J Ennals

Ian W. MacAulay ChairmanDairyfarmerDirector since 1991Chairman Finance CommitteeB.Agr.Sc. Fellow Australian Institute of Company DirectorsDirector Geoffrey Gardiner Foundation

Stephen J. O’Rourke Managing DirectorB.Comm, ACADirector since 1993Director, Australian Dairy Corporation

Wayne B. Sanderson PhDExecutive DirectorDirector since 1994 Member Australian Dairy Product FederationResearch & Development Committee

Lindsay A. Jarvis Deputy ChairmanDairyfarmerDirector since 1985Chairman Audit Committee Grad Dip System AgricultureFellow Australian Institute of Company Directors Board Member North East Catchment -Management AuthorityChairperson Goulburn Murray Water - MurraySystems Water Service Committee

Kenneth J. BruhnDairyfarmerDirector since 1982Dip. Agr. Sc.Dip. Company Directors (UNE)

Trevor J. EnnalsDairyfarmerDirector since 1992Chairman Zone Committee Dip. Australian Institute of Company DirectorsPast District Council President UDV

Donald F. Howard DairyfarmerDirector since 1997Dip. Company Directors (ANU)Dip. Company Directors (Monash)

Trevor D. KeeleDairyfarmerDirector since 1993Fellow Australian Institute of Company Directors

John VardyDairyfarmerDirector since 1998Dip. Company Directors (ANU)

Alan L. MillarDairyfarmerDirector since 1986Dip. Company Directors (UNE)Fellow Australian Institute of Company Directors

John C. MasonDairyfarmerDirector since 1987Chairman Supplier Relations Committee Dip. Agr. Sc. Dip. Company Directors (UNE) Fellow Australian Institute of Company Directors

William M. BrownDairyfarmerDirector since 1994Cert. Company Directors (ANU)Fellow Australian Institute of Company DirectorsDirector Dairy Technical Services Ltd.

Ian C. BirdCompany SecretaryB.Bus. ASA.


Mr I C BirdCompany Secretary

Mr D F Howard Mr T D Keele Mr J C MasonMr A L MillarMr J Vardy Mr W M Brown

Facts at a glance ($ Millions) 2001 2000 1999 1998 1997

Sales Revenue 1,613 1,420 1,320 1,115 1,114

Operating Profit (Before Tax) 50 30 26 16 17

Total Shareholders’ Equity 404 345 304 262 247

Issued Ordinary Capital 84 66 43 38 33

Reserves and Retained Profits 238 206 195 173 168

Total Assests 1,065 887 828 770 665

Milk Intake ex Suppliers (Million Litres) 3,393 3,134 2,776 2,425 2,269

Total Export Revenue 1,103 863 807 611 619

ContentsChairman’s Report 2Operations Review 4Financial Statements 9

The Annual General Meeting of Murray Goulburn Co-Operative Co. Limited will be held at 1.30pm on Thursday 29th November 2001 in the Members’ Lounge Moonee Valley Racecourse McPherson Street Moonee Ponds

Registered Office & Principal Place of Business140 Dawson StreetBrunswick Victoria 3056ACN 004 277 089ABN 23 004 277 089

BankersABN - AMRO Bank N.V.ANZ Banking Group LimitedBNP ParibasCommonwealth Bank of AustraliaRabo Australia LimitedRural Finance Corporation of VictoriaWestpac Banking Corporation

SolicitorsPiper Alderman LawyersDH von Bibra (LL.B)

AuditorDeloitte Touche Tohmatsu

2MURRAY GOULBURN ANNUAL REPORT 2001

Mr Ian MacAulayChairman

CHAIRMAN’S REPORT

2000/2001 has been a memorable year forMurray Goulburn Co-operative. The Co-operativefinished the year with a record milk intake,turnover, milk price and profit.

Murray Goulburn’s milk intake increased bymore than 8% to another record of 3.4 billionlitres which means we are now processingapproximately one third of Australia’s milk. Thisgrowth occurred against the trend of theAustralian industry which contracted by almost3%. Improved farm productivity and additionalsuppliers contributed to this growth. The totalnumber of suppliers consolidated at 3,319. Theaverage Murray Goulburn farm now supplies onemillion litres of milk annually.

Operating revenue for the year was a record $1.6 billion, an increase of almost 14% or $193 million over the previous year withoperating profit before tax and dividends risingby $21 million to $50 million. Shareholders’equity again increased this year rising by $59 million to $404 million and retained profitsand reserves gained $32 million to $238million.

Murray Goulburn’s milk price again led theAustralian dairy industry, maximising returns toour farmer/shareholders whilst declaring arecord profit of $50 million. To be able to retainprofit and increase equity is fundamental toproducing a strong balance sheet. The Co-operative’s focus on financial strength andretaining profits at appropriate levels has led tothe continued improvement of key financialindicators which all improved again during theyear.

While the current low value of the Australiandollar has been a major factor in improved farmreturns, a low point for some farmers was thatpoor seasonal conditions across the supply areameant farmers were not able to take fulladvantage of the excellent milk price.

Exports now account for 70% of the Co-operative’s turnover. With product exportedto more than 100 countries we are truly at theinternational forefront of the Australian foodbusiness. Long standing relationships with ourcustomers and our ability to “customise”

Murray Goulburn’s milk price againled the Australian dairy industry,maximising returns to ourfarmer/shareholders whilstdeclaring a record profit of $50 million.

3 MURRAY GOULBURN ANNUAL REPORT 2001

500

1000

1500

2000

2500

3000

3500

Milk Supply (million litres)

91/9

292

/93

93/9

494

/95

95/9

696

/97

97/9

898

/99

99/0

000

/01

100

200

300

400

500

Shareholders' Equity ($ millions)

91/9

292

/93

93/9

494

/95

95/9

696

/97

97/9

898

/99

99/0

000

/01

products to their needs has enabled MurrayGoulburn to record strong export growth andreturns.

Murray Goulburn’s commitment to the localmarket remained firm throughout the year, withall domestic divisions performing strongly. Highcustomer loyalty for a wide range of local dairyproducts from Devondale, Housebrand, Industrialand Foodservice divisions amplify the Co-operative’s allegiance to the Australiancommunity.

Our proposal to acquire Bonlac Foods put to theboard of Bonlac on 28 February 2001 wassubsequently withdrawn on 4 April 2001. Ourdetailed review process concluded that theacquisition would not improve returns for MurrayGoulburn supplier/shareholders.

Our purchase of the Kraft factory at Leitchvilleand the resulting welcome of more than 200 newsuppliers created some exciting growthopportunities. The acquisition allowed forincreased milk processing capacity, additionalcheese and whey products manufacture to meetgrowing demand, operating cost savings and animportant commercial alliance with Kraft. We areconfident that this will generate improved returnsto supplier/shareholders.

Field Services expanded during the year not onlyin response to spirited growth in milk supply butalso as specialised programs such as MGf@rm,the suppliers’ internet site, CalfCare andMilkCare entered important phases in theirdevelopment. Murray Goulburn Trading againprovided valuable support in the form of vitaland relevant farm requisites convenientlyavailable at competitive prices in our 26 ruralstores.

Much of Murray Goulburn’s success has comefrom visionary and innovative programs to meetcustomer requirements. To improve milk price,to continue the growth of the company and toprovide for the growth of our suppliers’businesses, it is imperative that we continue toinvest in new projects, research anddevelopment. $100 million was spent on capitalprojects during the year. The major development

of a milk powder plant at Koroit came onstreamfor the 2001 peak, while the expanded proteinproduction facilities at Leongatha added to theCo-operative’s manufacturing flexibility andability to make higher value product.

Meeting our continuing and expandingenvironmental commitments and obligations tothe community has meant spending substantialsums on environmental improvements,especially in manufacturing plants. The Co-operative’s achievements and commitmentto a sustainable dairy industry are highlighted inthe Co-operative’s highly commended“Environmental Report 2001” which waspublished and distributed during the year.

The Co-operative’s commitment to corporategovernance embraced an independent auditduring the year of the board’s structure andreadiness to lead the organisation into the future.This extensive program confirmed the robustnessof the Co-operative’s governance principles andis expected to conclude during the new year.

One year on from deregulation of the Australiandairy industry we see that Murray Goulburnsuppliers have benefited through more efficientutilisation of milk, taking advantage of a fairerdomestic market environment, and the positiveeffect of the dairy structural adjustment package.The final phase will see a review of the structureof the dairy industry and we support such areview. It is essential that the new industrybodies created are simple in structure and servethe industry’s contemporary needs in a costeffective manner.

Murray Goulburn has consistently achievedstrong growth over the past decade and if we areto remain a co-operative determined to bring thevalue of the market place back to oursupplier/shareholders, we need the continuedsupport of our customers, service providers,bankers and advisors. In the past year thissupport has been exceptional. My appreciationgoes to suppliers, directors, management andstaff for an excellent performance in a very busyyear. Together we can look forward to a strongand exciting future.


Mr Stephen O’RourkeManaging Director

OPERATIONS REVIEW

Murray Goulburn’s results for 2000/2001demonstrate the Co-operative’s commitment tomaximise the returns to supplier/shareholderswhilst ensuring sufficient investment occurs andreasonable profits are maintained to allow futuresustainability of returns to supplier/shareholders.

As outlined in the Chairman’s report, all keyfinancial indicators improved, underscoring thestrength of the result.

The Co-operative’s total assets increased $178million to $1.1 billion funded partly by growth inshareholder equity of $59 million. Sales revenueincreased by $193 million to $1.6 billion andoperating profit before tax was $50.4 millioncompared with $29.7 million the previous year.Milk intake increased by 259 million litres to 3.4billion litres while the milk price paid for theyear was approximately $7.50 per kilogrambutterfat on a weighted average basis. A 10%annual dividend was paid on “D” Class ordinaryshares held by supplier/shareholders.

The milk price was the highest ever paid by theCo-operative driven by improved world marketprices and the lower Australian dollar, as well asexcellent demand for MG product.

Murray Goulburn exports totalled more than $1.1billion, with 363,000 tonnes of product shippedto more than 100 countries worldwide ranking

the Co-operative again as the nation’s no. 1exporter of processed food.

Murray Goulburn increased its international marketshare during the year to approximately 8% of worlddairy exports. Although not large in productionterms on an international scale, Murray Goulburnis now a major player in world trade of dairy basedproducts.

The Co-operative’s strategy of developing highquality specific purpose food and nutritionalingredients has been very successful as thenumber of customers demanding Murray Goulburnproduct continues to rise.

Total domestic sales for the Co-operative for theyear were $510 million.

Although Murray Goulburn is committed to furtherdevelopment of the international market and seesgrowing production targeted there, increasingdomestic market share and improving domesticbusiness profits are an important component ofMurray Goulburn’s market strategy.

Capital expenditure during the year topped $100million and was funded out of cash flow – a veryreal testament to the strength of the Co-operative’sbalance sheet illustrating the value of MurrayGoulburn’s long standing policy of retaining profitsand building equity.

Murray Goulburn exports totalledmore than $1.1 billion, with363,000 tonnes of productshipped to more than 100 countries worldwide rankingthe Co-operative again as thenation’s no. 1 exporter ofprocessed food.


50

100

150

200

250

Retained Profits & Reserves ($ millions)

91/9

292

/93

93/9

494

/95

95/9

696

/97

97/9

898

/99

99/0

000

/01

500

1000

1500

2000

Sales Revenue ($ millions)

91/9

292

/93

93/9

494

/95

95/9

696

/97

97/9

898

/99

99/0

000

/01

Investment in technology, process improvementand product and market development was a majorfocus. The Co-operative’s future internationalcompetitiveness depends on successful researchand development delivering lower operating costsand higher value products.

The Co-operative’s success will continue to bemeasured by its ability to deliver the best returnspossible to its members whilst ensuring itmaintains a strong underlying financial base.

Manufacturing

Production for the year increased by more than11% to 564,000 tonnes with higher milk volumesand the commercialisation of new and improvedproducts driving the increase.

The new twin driers at Rochester built at a cost of$50 million came on-line during September 2000adding to manufacturing capacity and enhancingproduction flexibility both with existing specialitylines and newly developed products.

This world class factory upgrade wascomplimented by the $55 million expansion atKoroit which commissioned just after year-endadding further to Murray Goulburn’s stable of‘world’s best’ processing technology andaugmenting the Co-operative’s ability to respondquickly to the demands of the international foodingredients market.

The substantial investment in processtechnology and uncompromising commitment toproduct security and quality has enabled us tofulfil and in many cases exceed our obligationsto our customers during the year.

Accompanying the increase in manufacturingwere enhancements to environmental andoccupational health and safety compliance.

Lost time injuries and accident rates felldramatically as safety initiatives and additionalsafety training implemented during the yeartogether with an increase in the activities ofsafety committees took positive effect.

Branch KPI’s in relation to OH&S assisted indriving safety outcomes and maintaining a focuson Murray Goulburn’s commitment to providinga safe workplace.

Equally as vital in manufacturing isenvironmental compliance and the Co-operative’s cleaner production ethic was againevident with initiatives such as the developmentof active noise suppression not previously viablein the dairy industry; installation andcommissioning of multi million dollar filteringequipment in milk powder plants at Leongatha,Rochester and Koroit and the construction of acutting edge biological effluent treatment facility– an Australian first – in Maffra.


Dr Wayne SandersonExecutive Director - Research Development/Technical Services

Technical

Cheese production which topped 100,000tonnes for the year, provided a major focus inthe area of product development as additionalvarieties of cream cheese, mozzarella, hardcheese and brine salted variants were developed.

Murray Goulburn owns two of the largest cheesefactories in Australia and this enabled the Co-operative to minimise commercialisationtimes for a number of these new varieties anddeliver them into relevant markets at the earliestpossible opportunity.

Protein products were the focus for additionaldevelopment activity as demand for theseproducts continued to increase, particularly fromthe nutritional market.

Whey biofraction and colostrum productdevelopment activities continued together withan expansion in the commercial manufacture ofwhey protein isolates and casein/caseinates.

Quality

The Quality Management Program saw thefurther development of MG MilkCare, the on-farmquality assurance program; the continuation ofHACCP (Hazard Analysis Critical Control Point)accreditation throughout the company’smanufacturing sites; and the refinement of ISO9002.

Murray Goulburn’s reputation for high qualityproduct is essential to our ongoing success.Existing and new customers’ demands andexpectations of quality are at the highest levelsthey have ever been. The effects of the outbreakof BSE and Foot and Mouth disease in Europeand a number of recent food safety scares inother parts of the world emphasise that anuncompromising food safety and quality regimeis paramount in the international food ingredientbusiness.

HACCP is recognised internationally as the toolfor achieving the necessary standards in FoodSafety. During the year the Co-operative’smanufacturing sites at Cobram, Kiewa and Koroitachieved full retail HACCP accreditation, with thetarget being completion of full accreditation forall sites by the end of 2001.

The year saw numerous and regular audits bydomestic and overseas customers at higherstandards and frequency than ever before. Anunambiguous measure of the value ofmaintaining a world standard food safety qualityregime can be measured by our ability to secureduring the year additional major internationalfood and nutritional organisations to thecustomer base.

ANZFA legislation was gazetted in December2000, with an emphasis on labelling law and inparticular the impact of GMO’s on the foodindustry. In light of this, the Co-operativecompleted its largest ever review of labellingcompliance across all markets, both domesticand international. This has had a positive impacton Murray Goulburn enhancing our ability toemphasise the natural character of all MurrayGoulburn product.

Information Technology

The Co-operative’s information technologycontinued to successfully support all facets ofthe operation. This rapidly evolvingtechnological area met the demands of theorganisation’s strong growth and the diversity oftransactions necessary for the business.

The Leitchville acquisition necessitated a rapidinstallation of hardware and software to providethe branch with access to the Murray GoulburnIT network without interruption to factoryoperations. The company Intranet now providespeople with ready access to the widest range ofcompany information from management policiesand procedures to food safety and operationalprocesses. It also provides a forum for branchesto exchange critical operational and financialinformation.


50000

100000

150000

200000

250000

300000

350000

400000

Export Volume (tonnes)

91/9

292

/93

93/9

494

/95

95/9

696

/97

97/9

898

/99

99/0

000

/01

200

400

600

800

1000

1200

Export Sales Value ($ millions)

91/9

292

/93

93/9

494

/95

95/9

696

/97

97/9

898

/99

99/0

000

/01

In a world first, Murray Goulburn commissionedthe Electronic ERA (Export Receival Advice)system which automates and simplifies the vastamount of information and documentationrequired in export transactions.

This cutting edge technology was theculmination of a 9 year commitment by the Co-operative collaborating with key players inlogistics and the Victorian Government. Itsimplementation has enabled Murray Goulburn togenerate efficiencies in shipping and enhancedthe transactional outcomes for export customers.

The Co-operative is considered a leader in itsimplementation of e-commerce from electronicpreparation of export documentation to the multitransactional use of the internet for settlementand payment confirmations.

Other activities during the year included thecompletion of the GST functions,implementation across the organisation ofdynamic milk monitoring systems and computersecurity. These initiatives continue to yieldimprovements in the operational efficiency of theorganisation.

Following an extensive review of computer andIT systems within Murray Goulburn, a majorupgrade of facilities was commenced just afteryear-end. This project will involve theintroduction of the newest technological andsoftware developments and will provide the Co-operative with the IT resources necessary tomeet the rigours of future requirements.

Export

Export revenue increased $240 million for theyear to a record $1.1 billion with the Co-operative completing shipments of 363,000tonnes, 36,000 tonnes or 11% more than theprevious year.

This was in part influenced by a fall in thevolume of subsidised exports from the EU, USAand Canada caused by the implementationduring the year of the final phase of GATTreductions from the Uraguay Round. Withinternational demand generally buoyant and atighter supply scenario worldwide, pricesclimbed rapidly in the first half of the financialyear.

Rising wholesale prices resulted in several cutsin the level of EU export subsidies paid, withrefunds falling by about $US500/tonne on skim

milk powder, $US300/tonne on whole milkpowder and butter, and $US200/tonne oncheeses throughout the course of the year.

The unfortunate outbreak of Foot and Mouthdisease halfway through the year together withcontinuing difficulties eradicating BSE, furthercomplicated supply as many countries eitherrefused or were reluctant to purchase productfrom the affected and potentially risky sourcecountries. A resultant decrease in the demandfor meat and an increase in cheese consumptionwithin the EU followed, which sparked highercheese pricing and more milk being directedaway from powder production.

Towards the end of the year, the USDA, under theUSA’s milk price support program, cut itsgovernment price for skim milk powdertriggering a price reduction of $US228/tonne,effectively lowering the price for unsubsidisedproduct to enter the international market .

The resultant downward pressure this exerted oncommodity prices at year-end again emphasisedthe value of Murray Goulburn’s strategy ofdeveloping products for the premium end of theworld dairy market.

Domestic

Retail

The year saw a strong result from retail with allthree divisions returning improved salescompared to last year. Total sales across thedivision reached $277 million, a 9.7% increaseon last year.

Devondale: 2000/2001 saw a steady result forthe Devondale brand. Growth was achieved inboth volume and value and ex-factory salesexceeded $100 million for the first time. Thisperformance was achieved in the face of heavycompetitive marketing activity and significantmarket changes in the drinking milk market andclearly demonstrates the value of the Devondalebrand to the Co-operative.

The continued success of the “Never run out ofmilk with Devondale” television campaign,combined with strong consumer promotionalactivity, helped the Long Life Milk categoryachieve sales above last year, both in volumeand value. Given the substantial change inmarket milk conditions during the year which ledto a decline across the market, this was a verypleasing result.


200

400

600

800

1000

1200

Total Assets ($ millions)

91/9

292

/93

93/9

494

/95

95/9

696

/97

97/9

898

/99

99/0

000

/01

100000

200000

300000

400000

500000

600000

Primary Production (tonnes)

91/9

292

/93

93/9

494

/95

95/9

696

/97

97/9

898

/99

99/0

000

/01

The launch of Devondale Light during the yearrevitalised Devondale’s sales within the DairySpreads category leading to an increased brandshare from 32.4% to 32.9% of total marketvolume. A strong advertising campaign inwomen’s magazines reinforced the productbenefits across the range and helped sales growby 3.2% in volume.

Corporate Brands: This division achievedstrong sales growth over the full year achievingsales of $153 million, 13.6% more than lastyear. In a highly competitive market the Co-operative was able to successfully gain newbusiness and maintain close tradingrelationships with all retailers.

Food Service: The Food Service divisionachieved an excellent result, with growth acrossall categories and volume sales up 35.1%. Totalsales for the division reached $23.7 million.Changes to the sales structure during the yearproved to be successful allowing an increase inour customer base and allowing improvedservice levels to existing customers.

Ingredients

The Domestic Ingredients division grew stronglyduring the year with sales increasing by $38million to $139 million achieving its best everresults in both volume and value.

Activity was focussed on developing specificpurpose industrial food ingredients forAustralia’s major food processing companies.

The division’s performance ranks MurrayGoulburn as the nation’s premier domesticsupplier of quality food ingredients.

Trading

The Trading Company posted record sales for theyear of just over $87 million. This was anexcellent result in a very competitive ruralretailing environment.

Higher milk prices paid to MG supplierscertainly assisted turnover. Trade with MG’s milksuppliers was at record levels representing morethan 60% of the trading company’s turnover. Agood harvest season resulted in record sales inharvest related products and fertilizers.

The year began slowly with many farms deferringspending influenced by a number of factors

including GST compliance, however, businesspicked up once farmers became familiar with thenew tax requirements. More than $250,000 wasinvested in computer software, specialityimplementation expenses and associated coststo ensure GST compliance.

The Trading Company continues to focus on ruralmerchandise. The Orbost store was fitted-out withnew shop fixtures and stock layout to provide amore specific better quality service. An existingbusiness and freehold was purchased in Koroitas part of the upgrade and refurbishmentprogram to give customers better choice andservice in a contemporary retail environment.

Field Services

The Field Services division provided a variety ofhigh quality services for suppliers andsuccessfully met the challenges of another yearof strong milk growth and major changes withinthe industry.

Although activities varied considerablythroughout the year, there remained a continuedstrong focus on quality, particularly the on-farmquality assurance program MG MilkCare.

MG suppliers received more than $13 million inMG MilkCare premiums. The auditing programimplemented during the year confirmed thepositive results achieved to date with thisimportant initiative. On-farm quality continued tobe high, with more than 87% of milk supplyattracting a quality premium.

MGf@rm was successfully launched and wellreceived. This is the Co-operative’s internet sitefor suppliers providing general farm information,quality results, production data, income data andperformance comparisons.

The collection and processing of colostrum forMG Nutritional, a wholly owned subsidiary,began during the year. MG CalfCare waslaunched to assist suppliers in raising healthydairy calves and to assist the collection andsupply of high quality colostrum.

Field Services continued to provide advice andassistance to suppliers in farm management,productivity, finance and branch liaison. Thedivision’s professional knowledge base wasboosted during the year with the recruitment ofadditional tertiary qualified staff.


FINANCIAL REPORT MURRAY GOULBURN CO-OPERATIVE CO. LIMITED

Directors’ Report 10

Directors in Office 11

Statement of Financial Performance 12

Statement of Financial Position 13

Statement of Cash Flows 14

Notes 15

Directors’ Declaration 31

Independent Audit Report 32

for the financial year ended 30 June 2001

The financial report covers both

Murray Goulburn Co-Operative Co. Limited as

an individual entity and the consolidated entity consisting

of Murray Goulburn Co-Operative Co. Limited and its

controlled entities.

Murray Goulburn Co-Operative Co. Limited is a company

limited by shares and domiciled in Australia.

DIRECTORS’ REPORT


Your Directors present the following report for the financial year ended 30thJune, 2001.

DirectorsThe names of, and information on directors in office at the date of this report arelisted on page 11. The directors listed on page 11 each held office as a directorof the Company throughout the year ended 30 June 2001.

Principal ActivitiesThe principal activities of the economic entity constituted by the company andthe entities it controlled during the year have been:

- The processing of the whole milk of its shareholder suppliers and themanufacture, marketing and distribution of dairy products.

- The operation of retail stores as a service to the suppliers in the areas of themanufacturing plants.

No significant change in the nature of these activities occurred during the year:

Dividends Paid Or RecommendedThe following dividends were paid or recommended during the year :

a) In respect of the financial year ended 30th June 2000 as detailed in thedirectors’ report for that financial year :

$’000

Final dividend paid on 1 November 2000

On ordinary and A class preference shares at 4.0% unfranked 1,272

On D and DX class ordinary shares at 5.0% unfranked 2,750

4,022

b) In respect of the financial year ended 30th June 2001 :

i) Dividends on ordinary and non redeemable preference shares

Interim dividend paid on 1 May 2001On ordinary and A class preference shares at 4.0% unfranked 1,325


Final dividend paid on 30 June 2001

On A class cumulative preference shares at 6% franked to 100% at a 36% corporate income tax rate. This dividend was paid by a controlled entity to outsideequity interests. 4,201

Final dividend recommended for payment on 1 November 2001On ordinary and A class preference shares at 4.0% unfranked 1,369


14,131

ii) Dividends on redeemable preference shares

Interim dividend paid on 31 December 2000On AX class 6.5% redeemable cumulative preference shares at 3.25% unfranked 258

Final dividend paid on 30 June 2001On AX class 6.5% redeemable cumulative preference shares at 3.25% unfranked 178

436

The dividends on redeemable preference shares of $436,150 have beenincluded as interest expense in the Statement of Financial Performance.

Review Of OperationsPlease refer to the Chairman’s Report and the Review of Operations comments.

Significant Changes in the State of Affairs No significant change in the state of affairs of the economic entity occurredduring the financial year.

Events Subsequent To Balance DateSince 30 June 2001 Murray Goulburn Co-operative Co Limited has acquired theassets of a milk processing plant located in Victoria for a cash consideration of$32.47m. The acquisition was funded by borrowings.

With the exception of this acquisition, no matters or circumstances have arisensince the end of the financial year which significantly affected or may significantlyaffect the operations of the economic entity, the results of those operations, or thestate of affairs of the economic entity in financial years subsequent to the financialyear ended 30th June 2001.

Future DevelopmentsDisclosure of information regarding likely developments in the operations of theconsolidated entity in future financial years and the expected results of thoseoperations is likely to result in unreasonable prejudice to the consolidated entity.Accordingly, this information has not been disclosed in this report.

Environmental RegulationThe company is a licensee in relation to the operation of its six manufacturingsites pursuant to the Environmental Protection Act (1970). Environmentalprograms are maintained across all management sites. These systems impactpositively on the reduction of environmental emissions and product losses. Theprograms’ objectives are for outcomes to exceed the conventional licenseoutcomes.

During the 2000/01 year the company published its inaugural environmentalreport. The report was widely distributed with a focus to ensure that shareholders,employees and the community are informed of Murray Goulburn’s commitment toits environmental policy and rigorous compliance regime. The report emphasisesthe company’s innovations and achievements, supplemented by case studies fromdifferent factory locations.

During 1999 a risk assessment assignment was conducted across all sites withthe objective of highlighting specific corporate environmental risks. This work ledto Murray Goulburn together with the EPA to develop an arrangement in the formof a Strategic Environmental Improvement Plan (SEIP). This SEIP commits thecompany to ensure that improved environmental controls are implemented andprioritised in a sustainable commercial manner. An important objective of theSEIP is to ensure that the past success of the company in its environmentalachievements will continue into the future, and that such programs and outcomeswill continue to exceed legislative and licence requirements.

Murray Goulburn is a signatory to the National Packaging Covenant. This is avoluntary system designed for industry to develop cleaner and efficient solutionsto problems associated with packaging. The organisation has developed strategieswith packaging suppliers to achieve measured outcomes, which are guided by theCovenant principles of product stewardship and life cycle management.

During the financial year the company experienced some events of non-compliance with licence requirements. These events were reported to the EPA andresolved in accordance with operational and legislative requirements.

Insurance of OfficersDuring the financial year the company paid a premium of $138,861 to insure thedirectors and senior managers of the company.

The liabilities insured include costs and expenses that may be incurred indefending civil or criminal proceedings that may be brought against the officers intheir capacity as officers of the consolidated entity.

Rounding of Amounts to the Nearest Thousand DollarsThe company is of the kind referred to in ASIC Class Order 98/0100 dated 10 July1998, and in accordance with that Class Order amounts in the directors’ reportand the financial report have been rounded off to the nearest thousand dollars.

Half-Yearly AccountsThe Australian Securities Commission has exempted the Company, its directorsand auditor from compliance with any requirement in Part 3.6 or Part 3.7 of theCorporations Law, the nature of which relates to the preparation, audit or review, orlodgement of the half-year accounts of the Company in relation to the half-yearending on 31 December 2000. The effect of this exemption is that the Companyhas not lodged consolidated accounts for the half-year ending 31 December 2000with the ASC and these accounts have not been audited or subject to an auditreview.

Signed in accordance with a resolution of the Board of Directors.

I.W. MacAulay DirectorMelbourne26 September 2001

DIRECTORS IN OFFICE


at 26th September 2001

Meetings Attended

Full Meetings Meetings of Committees

Director of Directors Audit Finance Zone SupplierRelations

13 held 2 held 4 held 1 held 6 held

IW MacAulay, Yarram 13 * 4 * 6 Chairman

LA Jarvis, Kergunyah 13 2 4 * *Deputy Chairman

TJ Ennals, Cobram 12 2 * 1 *

WM Brown, Kongwak 13 * 4 * *

KJ Bruhn, Mirboo North 11 * * * 6

TD Keele, Bamawm 12 0 2 * *

JC Mason, Gorae West 13 * * * 6

AL Millar, Koondrook 12 * * 1 6

DF Howard, Camperdown 12 * * 1 *

JT Vardy, Maffra 13 1 * * 6

SJ O’Rourke, Gisborne 13 * 4 * *Managing Director

WB Sanderson, Brunswick 13 * * * *Executive Director,Research & Development/Technical Services

* Not a member of the relevant committeeFor qualifications and experience refer to inside front cover

STATEMENT OF FINANCIAL PERFORMANCE


Note Consolidated Company

2001 2000 2001 2000

$000 $000 $000 $000

Sales revenue 1,613,868 1,420,208 1,527,615 1,346,555

Cost of sales (1,371,290) (1,226,913) (1,299,760) (1,165,146)

Gross profit 242,578 193,295 227,855 181,409

Other revenue from ordinary activities 2 1,598 1,189 5,914 4,903

Share of net profit of associated company accounted for using the equity method 14 318 574 - -

Distribution expenses (76,545) (65,351) (75,808) (64,794)

Marketing expenses (30,905) (28,654) (29,623) (27,501)

Administration expenses (54,725) (46,398) (47,005) (39,086)

Borrowing costs expense 3 (28,588) (22,609) (35,040) (27,937)

Other expenses from ordinary activities (3,317) (2,385) (4,312) (3,961)

Profit from ordinary activities before income tax expense 3 50,414 29,661 41,981 23,033

Income tax expense 4 (5,336) (2,314) (2,451) (496)

Net profit attributable to members of the parent entity 45,078 27,347 39,530 22,537

Total revenues, expenses and valuation adjustments attributable tomembers of the parent entity and recognised directly in equity - - - -

Total changes in equity other than those resulting fromtransactions with owners as owners 45,078 27,347 39,530 22,537

The accompanying Notes form part of these Financial Statements

for the Financial Year ended 30 June 2001

STATEMENT OF FINANCIAL POSITION



2001 2000 2001 2000

$000 $000 $000 $000

Current Assets

Cash 7,103 10,754 4,874 9,252 Receivables 9 268,790 215,959 262,826 211,012 Inventories 10 269,889 201,965 257,891 191,502 Other 11 12,595 592 12,595 592

Total Current Assets 558,377 429,270 538,186 412,358

Non Current Assets

Receivables 9 38,091 35,054 44,091 41,054 Investment accounted for using the Equity Method 14 2,112 1,794 - - Other Financial Assets 12 556 535 17,571 17,550 Property, Plant & Equipment 15 457,427 414,097 403,736 359,633 Deferred Tax Assets 16 8,919 6,903 8,537 6,527

Total Non Current Assets 507,105 458,383 473,935 424,764

Total Assets 1,065,482 887,653 1,012,121 837,122

Current Liabilities

Payables 17 208,424 149,904 201,106 143,640 Interest Bearing Liabilities 18 227,506 237,048 227,506 237,048 Current Tax Liability 19 3,521 1,976 2,944 973 Provisions 20 15,609 13,033 14,885 12,354

Total Current Liabilities 455,060 401,961 446,441 394,015

Non Current Liabilities

Payables 17 1,000 1,000 1,000 1,000 Interest Bearing Liabilities 18 180,680 119,081 235,823 167,965 Provisions 20 8,710 7,253 8,368 6,961 Deferred Tax Liabilities 22 15,792 13,318 15,775 13,286

Total Non Current Liabilities 206,182 140,652 260,966 189,212

Total Liabilities 661,242 542,613 707,407 583,227

Net Assets 404,240 345,040 304,714 253,895

Equity

Share Capital 24 109,310 89,115 109,611 89,416 Reserves 25 101,400 100,352 56,635 55,587 Retained Profits 26 136,816 105,869 138,468 108,892

Shareholders’ Equity attributable to Members of the Parent Entity 347,526 295,336 304,714 253,895

Outside Equity Interests in Controlled Entities 27 56,714 49,704 - -

Total Equity 404,240 345,040 304,714 253,895


as at 30 June 2001

STATEMENT OF CASH FLOWS



2001 2000 2001 2000

$000 $000 $000 $000

Cash flows from operating activities

Receipts from customers 1,562,246 1,287,518 1,467,506 1,213,600

Payments to suppliers and employees (1,475,442) (1,151,840) (1,386,621) (1,082,413)

86,804 135,678 80,885 131,187

Dividends received 7 6 6 5

Interest received 1,261 762 1,186 677

Interest paid (28,445) (21,756) (28,445) (21,756)

Dividends paid on redeemable preference shares (436) (764) (436) (764)

Income taxes paid (4,284) (1,933) - -

Net cash inflow from operating activities 35 54,907 111,993 53,196 109,349

Cash flows from investing activities

Payments for plant, equipment and vehicles (96,260) (95,541) (95,251) (93,555)

Proceeds from the sale of property, plant, equipment and vehicles 370 419 369 415

Net cash (outflow) from investing activities (95,890) (95,122) (94,882) (93,140)

Cash flows from financing activities

Dividends paid (8,007) (6,284) (8,031) (6,308)

Proceeds from the issue of ordinary and non-redeemable preference shares 19,306 23,204 19,306 23,204

Repayment of lease liabilities (613) (599) (613) (599)

Redemption of redeemable preference shares (2,382) (5,903) (2,382) (5,903)

Repayment of borrowings (10,733) (28,285) (10,733) (28,285)

Net cash (outflow) from financing activities (2,429) (17,867) (2,453) (17,891)

Net decrease in cash (43,412) (996) (44,139) (1,682)

Cash at the beginning of the year 10,754 11,593 9,252 10,777

Effect of exchange rate changes on cash 255 157 255 157

(Overdraft)/ cash at the end of the year 35 (32,403) 10,754 (34,632) 9,252


for the year ended 30 June 2001


NOTESNote 1 Summary of Significant Accounting PoliciesThis general purpose financial report has been prepared on an accrual basis in accordance with the Corporations Act 2001, applicable Accounting Standards andUrgent Issues Group Consensus Views, and complies with other requirements of the law.

It is prepared in accordance with the historical cost convention, except for certain assets which, as noted, are at valuation. Unless otherwise stated, the accountingpolicies adopted are consistent with those of the previous year.

a) Principles of ConsolidationThe consolidated financial statements incorporate the assets and liabilities of all entities controlled by Murray Goulburn Co-Operative Company Limited(“company”) as at 30 June 2001 and the results of all controlled entities for the year then ended. Murray Goulburn Co-Operative Company Limited and itscontrolled entities together are referred to in this financial report as the consolidated entity. The effects of all transactions between entities in the consolidatedentity are eliminated in full. Outside equity interests in the equity of controlled entities are shown separately in the consolidated balance sheet.

The investment in an associated company is accounted for under the equity method in the consolidated financial statements and the cost method in the companyfinancial statements.

b) Comparative AmountsThe economic entity has adopted the presentation and disclosure requirements of Accounting Standards AASB 1018 “Statement of Financial Performance”, AASB1034 “Financial Report Presentation and Disclosure” and AASB 1040 “Statement of Financial Position” for the first time in the preparation of this financial report.In accordance with the requirements of these new or revised standards, comparative amounts have been reclassified in order to comply with the new presentationformat. The reclassification of comparative amounts has not resulted in a change to the aggregate amounts of current assets, non-current assets, currentliabilities, non-current liabilities or equity, or the net profit of the company or economic entity as reported in the prior year financial report.

c) Income TaxThe economic entity adopts the liability method of tax effect accounting whereby the income tax expense shown in the profit and loss account is based on theoperating profit before tax adjusted for any permanent differences.

Timing differences which arise due to the different accounting periods in which items of revenue and expense are included in the determination of operating profitand taxable income are brought to account as either provision for deferred income tax or an asset described as future income tax benefit at the rate of income taxapplicable to the period in which the benefit will be received or the liability will become payable.

Future income tax benefits arising from timing differences are not brought to account unless realisation of the asset is assured beyond reasonable doubt. Futureincome tax benefits in relation to tax losses are not brought to account.

d) Foreign CurrenciesForeign currency transactions covered by specific hedges in the form of forward exchange contracts are recorded in Australian currency at the forward exchangecontract rate.

Other forward currency transactions during the year are converted to Australian currency at the rate of exchange ruling at the date of the transaction. Foreigncurrency monetary items at reporting date are translated at the exchange rate ruling at that date.

e) Property, Plant and EquipmentLand and buildings are included at fair value. Plant and equipment are included at cost. The cost of fixed assets constructed within the group includes the cost ofmaterials and direct labour. All fixed assets including buildings and capitalised leasehold assets, but excluding freehold land, are depreciated over their estimateduseful lives commencing from the time the asset is held ready for use.

The gain or loss on disposal of all fixed assets, including revalued assets, is determined as the difference between the carrying amount of the asset at the time ofdisposal and the proceeds of disposal, and is included in the results of the group in the year of disposal. Any realised revaluation increment relating to thedisposed asset which is included in the asset revaluation reserve, is transferred to the capital reserve.

The valuation of land and buildings has not taken account of the potential capital gains tax on assets acquired after the introduction of capital gains tax.

f) ReceivablesTrade receivables and other receivables are recorded at amounts due less any provision for doubtful debts.

g) InvestmentsControlled entities and associates are accounted for in the consolidated financial statements as set out in note 1(a). Other investments are recorded at cost.Dividend revenue is recognised on a receivable basis.

h) Goods and Services TaxRevenues, expenses and assets are recognised net of the amount of goods and services tax (GST), except:

i) where the amount of GST incurred is not recoverable from the taxation authority. In this case the GST is recognised as an asset or as part of an item of expense; or

ii) for receivables and payables which are recognised inclusive of GST.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables.

i) Recoverable Amount of Non-Current AssetsNon-current assets are written down to recoverable amount where the carrying value of any non-current asset exceeds recoverable amount. In assessing therecoverable amount of non-current assets the relevant cash flows have not been discounted to their present value.

to and forming part of the accounts for the year ended 30 June 2001

MURRAY GOULBURN ANNUAL REPORT 2001 16

NOTESto and forming part of the accounts for the year ended 30 June 2001

Note 1 Summary of Significant Accounting Policies (continued)j) Depreciation of Property, Plant and Equipment

Depreciation is calculated on a reducing balance basis to write off the net cost or revalued amount of each item of property, plant and equipment (excludingland) over its expected useful life to the economic entity.

The expected useful lives are as follows:

Buildings 30 to 40 years

Plant and Equipment 5 to 15 years

Vehicles 3 to 15 years

Tankers 10 to 20 years

k) Leased AssetsLeased assets classified as finance leases are capitalised as fixed assets. A finance lease effectively transfers from the lessor to the lessee substantially all therisks and benefits incidental to the ownership of the leased asset. The amount initially brought to account is the present value of minimum lease payments.Capitalised leased assets are amortised on a reducing balance basis over the estimated useful life of the asset. Finance lease payments are allocated betweeninterest expense and reduction of lease liability over the term of the lease. The interest expense is determined by applying the interest rate implicit in the lease tothe outstanding lease liability at the beginning of each lease payment period.

Operating lease payments are recognised as an expense in the periods in which they are incurred, as this represents the pattern of benefits derived from the leased assets.

l) InventoriesDairy produce stocks have been valued at the lower of cost and net realisable value. Cost comprises direct materials, direct labour and an allocation of fixed fac-tory overheads.

Stores, packing materials and Murray Goulburn Trading stocks, have been valued at the lower of cost and net realisable value. Costs have been allocated on thefirst in first out basis.

m)Accounts PayableTrade payables and other accounts payable are recognised when the economic entity becomes obliged to make future payments resulting from the purchase ofgoods and services.

n) Employee EntitlementsSuperannuationContributions are made by the economic entity to employee superannuation funds and are charged as expenses when incurred. The difference between the pres-ent value of accrued benefits and the net market value of the plan assets has not been recognised in the consolidated accounts. The economic entity has nolegal obligation to cover any shortfall, should there be any, in the funds’ obligation to provide benefits to employees on death, disablement or retirement.

o) Revenue RecognitionSale of Goods and Disposal of AssetsRevenue from the sale of goods and disposal of assets is recognised when the economic entity has passed control of the goods or assets to the buyer.

p) Interest Bearing LiabilitiesLoans are recorded at an amount equal to the net proceeds received. Interest expense is recognised on an accrual basis.

q) Adoption of a Revised Accounting Standard before its Application DateThe directors have decided under s 334(5) of the Corporations Act 2001 to apply Accounting Standard AASB 1041 “Revaluation of Non-Current Assets” eventhough the revised standard is not required to be applied until annual reporting periods ending on or after 30 September 2001.


2001 2000 2001 2000

$000 $000 $000 $000

Note 2 RevenueOperating Revenue

Sales revenue 1,613,868 1,420,208 1,527,615 1,346,555

1,613,868 1,420,208 1,527,615 1,346,555

Non-Operating Revenue

Interest received or receivable 1,221 764 1,484 1,081 Dividends received 7 6 6 5 Proceeds on disposal of vehicles, plant and equipment 370 419 369 415 Service and management fees receivable 34 - - 4,055 3,402

1,598 1,189 5,914 4,903

Revenue from ordinary activities (excluding the equity accounted net profit of an associated company) 1,615,466 1,421,397 1,533,529 1,351,458



2001 2000 2001 2000

$000 $000 $000 $000

Note 3 Profit from Ordinary Activities before Income Tax expense has been determined after:

a) Charging as Expenses :

Borrowing Costs

Interest paid or payable to- controlled entities - - 6,452 5,328 - other persons 27,953 21,687 27,953 21,687 - finance charges on finance leases 199 158 199 158

28,152 21,845 34,604 27,173

Dividends on redeemable preference shares- on AX class 6.5% redeemable cumulative preference shares 436 511 436 511 - On BA class 8.5% redeemable cumulative preference shares - 253 - 253

436 764 436 764

Total borrowing costs expensed 28,588 22,609 35,040 27,937

Depreciation of :- buildings 3,330 2,837 1,833 1,332 - plant and equipment 48,985 39,336 48,715 39,088

52,315 42,173 50,548 40,420

Amortisation of:- leasehold improvements 3 4 - - - capitalised leases 606 516 606 516

609 520 606 516

Loss on sale and scrapping of non-current assets 230 172 219 141

Write down of inventories to net realisable value 3,274 4,729 3,274 4,729

Rental expense on operating leases 1,244 820 2,391 1,981

Research and development expenditure 2,597 2,389 2,597 2,389

Contributions to defined benefit superannuation funds 202 193 202 193

Transfers to (from) provisions for :- annual leave 1,224 394 1,188 336 - long service leave 1,358 321 1,299 319 - sick leave 293 154 293 154 - directors retirement allowance 124 151 124 151 - doubtful debts 3,094 1,034 3,094 1,034

b) Crediting as Income :

Dividends received from other corporations 7 6 6 5

Interest received or receivable from :- controlled entities - - 338 402 - other persons 1,221 764 1,146 679

Profit on sale of vehicles, plant and equipment 142 96 142 96



2001 2000 2001 2000

$000 $000 $000 $000

Note 4 Income Tax Expense

a) The prima facie income tax expense on pre-tax accounting profit reconciles to the income tax expense in the financial statements as follows:

Profit from ordinary activities before income tax expense 50,414 29,661 41,981 23,033

Income tax calculated at 34% (2000: 36%) 17,141 10,678 14,274 8,292

Tax effect of permanent differences :

Non-deductible depreciation of buildings 1,132 1,021 623 480

Dividends as a co-operative (3,376) (2,837) (3,384) (2,846)

Repayment of Rural Finance and State Government loans (8,466) (3,240) (8,466) (3,240)

Special write-off of income producing buildings (969) (736) (629) (394)

Sundry items (369) 325 (183) 622

Income tax adjusted for permanent differences 5,093 5,211 2,235 2,914

Assessed losses utilised in respect of current year taxation - (1,183) - (661)

Overprovision for income tax in prior year (2,056) - (2,056) -

Significant income tax items:

Adjustment to the provision for deferred income tax arisingfrom a timing related deduction claimed with respect to the prior year. 1,953 - 1,953 -

Restatement of deferred tax balances due to thedecrease in the company tax rate from 34% to 30% on 1 July 2001. Prior year from 36% to 34% (1 July 2000) and 30% (1 July 2001). 346 (1,714) 319 (1,757)

Income tax expense 5,336 2,314 2,451 496

b) No part of the future income tax benefit shown in note 16 is attributable to tax losses. There are no tax losses remaining at 30 June 2001. Tax losses at 30 June 2000 were estimated to be nil.

Note 5 Remuneration of Directors

a) Directors’ Remuneration

Income received or due and receivable, including amounts paid to superannuationand retirement funds, by all directors of each entity in the consolidated entity from all companies in the consolidatedentity and any related party. 1,507 1,137

Income received or due and receivable, including amounts paid to superannuation and retirement funds, by all directors of the company from the company and any related party. 1,507 1,137

b) Number of directors of the parent entity whose remuneration, including amounts paid to superannuation and retirement funds, from the parent entity and anyrelated party was within the following bands:

Number Number

$30,000 - $39,999 8 8

$50,000 - $59,999 1 1

$60,000 - $69,999 - 1

$80,000 - $89,999 1 -

$230,000 - $239,999 - 1

$250,000 - $259,999 1 -

$500,000 - $509,999 - 1

$810,000 - $819,999 1 -




2001 2000 2001 2000

$000 $000 $000 $000

Note 5 Remuneration of Directors (continued)c) Amounts are paid to director-related entities for services of employment provided to the company during the financial year under normal employee terms and

conditions.

d) The directors listed on page 11 each held office as a director of the company throughout the year ended 30 June 2001.

Note 6 Remuneration of Executives

a) Executives’ RemunerationRemuneration received or due and receivable, including amounts paid to superannuation and retirement funds, by Australian based executive officers (including directors) of each entity in the consolidated entity, receiving $100,000 or more from the entity for which they are executive officers, or from any related party. 3,299 1,996

Remuneration received or due and receivable, including amounts paid to superannuation and retirement funds, by Australian based executive officers (including directors) of the company, receiving $100,000 or more from the company or from any related party. 3,299 1,996

b) The number of executive officers (including directors) whose remuneration, including amounts paid to superannuation and retirement funds, falls within the specified bands, commencing at $100,000:

Number Number Number Number

$100,000 - $109,999 8 3 8 3

$110,000 - $119,999 3 1 3 1

$120,000 - $129,999 1 - 1 -

$130,000 - $139,999 - 1 - 1

$140,000 - $149,999 - 2 - 2

$150,000 - $159,999 2 - 2 -

$160,000 - $169,999 1 - 1 -

$180,000 - $189,999 - 1 - 1

$190,000 - $199,999 1 - 1 -

$200,000 - $209,999 - 1 - 1

$230,000 - $239,999 - 1 - 1

$240,000 - $249,999 1 - 1 -

$250,000 - $259,999 1 - 1 -

$500,000 - $509,999 - 1 - 1

$810,000 - $819,999 1 - 1 -

Note 7 Remuneration of AuditorsRemuneration received by the auditor of the parent entity:- auditing the financial report 145 132 145 132 - other services 259 70 259 70

404 202 404 202



2001 2000 2001 2000

$000 $000 $000 $000

Note 8 Dividends Paid or Proposed

Fully Paid Ordinary SharesInterim dividend of 4 cents (2000: 4 cents) per share unfranked 604 590 604 590 Final dividend of 4 cents (2000: 4 cents) per share unfranked 605 601 605 601

Fully Paid D Class Ordinary SharesInterim dividend of 5 cents (2000: 5 cents) per share unfranked 3,467 2,517 3,467 2,517 Final dividend of 5 cents (2000: 5 cents) per share unfranked 3,613 2,667 3,613 2,667

Fully Paid DX Class Ordinary SharesInterim dividend of 5 cents (2000: 5 cents) per share unfranked 78 84 78 84 Final dividend of 5 cents (2000: 5 cents) per share unfranked 78 83 78 83

Fully Paid A Class Cumulative Non-Redeemable Preference SharesInterim dividend of 4 cents (2000: 4 cents) per share unfranked 721 668 721 668 Final dividend of 4 cents (2000: 4 cents) per share unfranked 764 671 764 671

Partly Paid Ordinary SharesInterim dividend of 0.4 cents (2000: 0.4 cents) per share unfranked - - 12 12 Final dividend of 0.4 cents (2000: 0.4 cents) per share unfranked - - 12 12

Fully Paid A Class Cumulative Preference SharesFinal dividend of 8 cents (2000: 6 cents) per share franked to 100% at a 34% (2000: 36%) corporate income tax rate. This dividend was paid by a controlled entity to outside equity interests. 4,201 2,813 - -

14,131 10,694 9,954 7,905

Redeemable preference share dividends of $436,150 (2000: 763,671) have been included as interest expense in the Statement of Financial Performance. These dividends were unfranked.

Adjusted franking account balance 21,064 12,383 18,659 9,807

Note 9 Receivables

CurrentTrade debtors 225,209 174,981 220,352 170,626 Less : provision for doubtful debts 6,286 3,209 6,077 3,000

218,923 171,772 214,275 167,626 Other debtors 49,867 44,187 48,551 43,386

268,790 215,959 262,826 211,012

Non CurrentAmounts receivable from a controlled entity - - 6,000 6,000 Other amounts receivable 38,091 35,054 38,091 35,054

38,091 35,054 44,091 41,054

Note 10 Inventories

Finished goods - at cost 232,576 146,493 220,578 136,030 - at net realisable value 19,203 40,120 19,203 40,120 Raw materials and stores - at cost 18,110 15,352 18,110 15,352

269,889 201,965 257,891 191,502

Note 11 Other Current Assets

Prepayments 12,595 592 12,595 592




2001 2000 2001 2000

$000 $000 $000 $000

Note 12 Other Non Current Financial Assets

InvestmentsShares in controlled entities at cost - - 12,225 12,225 Shares in other corporations at cost 556 535 546 525 Shares in an associate at cost 14 - - 4,800 4,800

556 535 17,571 17,550

Note 13 Controlled EntitiesAll controlled entities, except for Murray Goulburn Investment Ltd, are wholly owned. Control of all voting shares in Murray Goulburn Investment Ltd vests in MurrayGoulburn Co-operative Co Ltd. All controlled entities are incorporated in Victoria, except for Berriquin Dairy Co. Pty Ltd which is incorporated in New South Wales.Murray Goulburn Nominees Pty Ltd and Murray Goulburn Superannuation Pty Ltd are beneficially owned. No controlled entities have been acquired or disposed ofduring the year.

Entity Class of Share Company’s Investment at Book Value

2001 2000

$000 $000

Parent Entity:

Murray Goulburn Co-operative Co. Limited - -

Controlled Entities of Murray Goulburn Co-operative Co. Limited:Murray Goulburn Trading Pty Ltd Ordinary 2,100 2,100

MG Nutritionals Pty Ltd * Ordinary - -

Berriquin Dairy Co. Pty Ltd * Ordinary 112 112

The Grasmere Butter Co. Pty Ltd * Ordinary 88 88

Mid-Murray Dairy Co. Pty Ltd * Ordinary 907 907

The Portland Co-operative Dairy Co. Pty Ltd * Ordinary 348 348

The Rochester Co-operative Butter and Canning Co.Pty Ltd * Ordinary 235 235

South Gippsland Milk Industries Pty Ltd * Ordinary 3,204 3,204

Murray Goulburn Investment Limited Ordinary 2,000 2,000

Ardare Dairy Foods Pty Ltd * Ordinary 786 786

B Ordinary 208 208

Controlled entity of Ardare Dairy Foods Pty Ltd:

Ardare Hardware Pty Ltd * - -

Gippsland Amalgamated Milk Products Pty Ltd * Ordinary 2,237 2,237

Controlled entity of Gippsland Amalgamated Milk Products Pty Ltd:

The Maffra Co-operative Milk Products Co. Pty Ltd * - -

12,225 12,225

(*) Entities indicated with an asterix are wholly-owned entities and are small proprietary companies pursuant to the Corporations Law and consequently are relievedfrom the requirement to prepare audited financial statements.




2001 2000 2001 2000

$000 $000 $000 $000

Note 14 Investment Accounted for using the Equity Method

Investment in an Associated Company 2,112 1,794 - -

Murray Goulburn Co-operative Co Limited has a 40% interest in the ordinary share capital of an unlisted company, Meiji-MGC Dairy Co Pty Ltd. The principal activity ofMeiji-MGC Dairy Company is the manufacture of dairy products. The balance date of Meiji-MGC Dairy Co Pty Ltd is June 30th.

The investment in the associated company is accounted for in the consolidated financial statements using the equity method of accounting. The company carryingamount is at cost.

Movement in Investment in Associated Company Consolidated

2001 2000

$000 $000

Equity accounted amount at the beginning of the financial year 1,794 1,220 Share of operating profit after income tax 318 574

Equity accounted amount at the end of the financial year 2,112 1,794

The company’s share of the liabilities of the associated company is disclosed in note 23.

Note 15 Property, Plant and Equipment

Land and BuildingsFreehold land at fair value (i) 14,325 13,980 10,396 10,051

Buildings at fair value (i) 114,155 95,129 62,594 44,420 less accumulated depreciation 6,167 2,837 3,166 1,332

107,988 92,292 59,428 43,088

Leasehold ImprovementsAt cost 226 226 - - less accumulated amortisation 219 216 - -

7 10 - -

Total Land and Buildings 122,320 106,282 69,824 53,139

Plant and EquipmentAt cost 517,781 434,899 515,384 432,482 less accumulated depreciation 264,880 222,965 263,525 221,792

Total Plant and Equipment 252,901 211,934 251,859 210,690

VehiclesAt Cost 51,664 44,008 51,664 44,008 less accumulated depreciation 37,008 32,012 37,008 32,012

14,656 11,996 14,656 11,996

Leased VehiclesCapitalised present value of lease payments 3,069 3,137 3,069 3,137 less accumulated amortisation 1,121 900 1,121 900

1,948 2,237 1,948 2,237

Total Vehicles 16,604 14,233 16,604 14,233

Buildings and Plant in the course of construction 65,602 81,648 65,449 81,571

Total Property, Plant and Equipment 457,427 414,097 403,736 359,633

(i) The fair value has been determined by the directors with regard to an independent valuation and costs incurred in the current year.

Valuations of Land and BuildingsThe basis of valuation of land and buildings is fair value being the market value for existing use of all freehold land and buildings. The latest revaluations as at 30 June1999 were based on independent assessments and were made in accordance with a policy of revaluing property every three years.

No provision for deferred income tax is raised in respect of any potential capital gains tax as the consolidated entity has no plans to dispose of freehold land and buildings.


Note 15 Property, Plant and Equipment (continued)ReconciliationsReconciliations of the carrying amounts of each class of property, plant and equipment at the beginning and end of the current financial year are set out below.

Land and Plant and Vehicles In course of TotalBuildings Equipment construction

$’000 $’000 $’000 $’000 $’000

Consolidated

Carrying amount at 1July 2000 106,282 211,934 14,233 81,648 414,097

Additions 19,371 84,375 9,012 (16,046) 96,712

Disposals - (193) (265) - (458)

Depreciation (3,330) (43,215) (5,770) - (52,315)

Amortisation (3) - (606) - (609)

Carrying amount at 30 June 2001 122,320 252,901 16,604 65,602 457,427

Company

Carrying amount at 1July 2000 53,139 210,690 14,233 81,571 359,633

Additions 18,518 84,296 9,012 (16,122) 95,704

Disposals - (182) (265) - (447)

Depreciation (1,833) (42,945) (5,770) - (50,548)

Amortisation - - (606) - (606)

Carrying amount at 30 June 2001 69,824 251,859 16,604 65,449 403,736


2001 2000 2001 2000

$000 $000 $000 $000

Note 16 Deferred Tax Assets

Future income tax benefit 4 8,919 6,903 8,537 6,527

Note 17 Payables

CurrentTrade creditors 23,035 17,757 17,376 12,527 Suppliers 154,759 90,596 154,759 90,596 Sundry creditors and accrued expenses 30,630 36,651 28,971 35,617 Unsecured loan from the State Government of Victoria - 4,900 - 4,900

208,424 149,904 201,106 143,640

Non CurrentUnsecured loan from the State Government of Victoria 1,000 1,000 1,000 1,000

1,000 1,000 1,000 1,000

Note 18 Interest Bearing Liabilities

CurrentBank overdrafts 39,506 - 39,506 - Lease liability 28 977 885 977 885 Bank loans 181,370 231,405 181,370 231,405 Senior Notes 5,653 4,758 5,653 4,758

227,506 237,048 227,506 237,048



2001 2000 2001 2000

$000 $000 $000 $000

Note 18 Interest Bearing Liabilities (continued)

Non CurrentLease liability 28 1,098 1,351 1,098 1,351 Bank loans 117,500 57,500 117,500 57,500 Payable to controlled entities - - 55,143 48,884 Senior notes 16,960 19,032 16,960 19,032 Senior subordinated notes 39,572 33,306 39,572 33,306 Redeemable preference shares 5,550 7,892 5,550 7,892

180,680 119,081 235,823 167,965

The bank overdrafts, bank loans, senior notes and senior subordinated notes are covered by negative pledge agreements between the parent entity and its financiers.The lease liabilities are effectively secured over the assets leased, the current market value of which exceeds the value of the finance lease liability.

Note 19 Current Tax Liability

Income tax payable 3,521 1,976 2,944 973

Note 20 Provisions

CurrentDividends 5,228 4,194 5,228 4,194 Employee entitlements 21 10,381 8,839 9,657 8,160

15,609 13,033 14,885 12,354

Non CurrentEmployee entitlements 21 8,710 7,253 8,368 6,961

8,710 7,253 8,368 6,961

Note 21 Employee Entitlements

Accrued salaries, wages and benefits (sundry creditors) 17 - 1,175 - 1,051

Provisions for employee entitlementsCurrent 20 10,381 8,839 9,657 8,160 Non current 20 8,710 7,253 8,368 6,961

Aggregate employee entitlement liability 19,091 17,267 18,025 16,172

Number Number Number Number

Number of employees at the reporting date 2,005 1,849 1,860 1,708

Note 22 Deferred Tax Liabilities

Provision for deferred income tax 15,792 13,318 15,775 13,286

Note 23 Contingent Liabilities

Guarantee relating to the borrowings of an associated company 14 20,000 20,000 20,000 20,000

Unsecured guarantees and warranties given in the normal course of business include commitments for the disposal of effluent.




2001 2000 2001 2000

$000 $000 $000 $000

Note 24 Issued Capital

Issued Capital15,121,600 fully paid ordinary shares (2000: 15,032,304) 15,122 15,032 15,122 15,032

67,054,347 fully paid D class ordinary shares..(2000: 49,176,936)Dividend rate is 2% above the ordinary shares 67,054 49,177 67,054 49,177

1,550,803 fully paid DX class ordinary shares. (2000: 1,663,914)Dividend rate is 2% above the ordinary shares. 1,551 1,664 1,551 1,664

19,111,207 fully paid A class 8% cumulative non-redeemable participating preference shares.(2000: 16,770,374) 24(b) 19,111 16,770 19,111 16,770

3,000,000 ordinary shares paid to 10c with 90c outstanding(2000: 3,000,000) 300 300 300 300

103,138 82,943 103,138 82,943 Less Inter-Company Shareholdings808 fully paid A class preference shares (2000: 808) (1) (1) - -

3,000,000 ordinary shares paid to 10c with 90c outstanding(2000: 3,000,000) (300) (300) - -

102,837 82,642 103,138 82,943 Former Reserves included in Share CapitalFormer Share Premium Reserve 24(a) 2,331 2,331 2,331 2,331

Former Capital Redemption Reserve 24(a) 4,142 4,142 4,142 4,142

109,310 89,115 109,611 89,416

a) Changes to the Corporations Law which became effective on 1 July 1998 abolished the par value concept in relation to share capital. As a consequence the amountsstanding to the credit of the share premium reserve and the capital redemption reserve at 1 July 1998 were transferred to issued capital at that date.

b) A class 8% Cumulative Non-redeemable Preference SharesThe company has on issue to non suppliers 19,111,207 A class 8% cumulative preference shares as at 30 June 2001. The shares entitle holders to receive, out ofprofits available for dividend, a cumulative preferential dividend at a rate determined by the directors at the time of issue, being a rate up to but not exceeding 8%per annum. These holders have no voting rights at a general meeting of the company but can convert their shares into ordinary shares, by resolution of the directors,if any holder becomes a supplier to the company.

Given the co-operative status of the company and the above terms and conditions, the directors consider these shares are in the nature of equity and are classifiedaccordingly in the balance sheet.

c) Ordinary, D class Ordinary and DX class Ordinary SharesOrdinary, D class ordinary and DX class ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion tothe number of shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote and upon a polleach share is entitled to one vote.

d) Movements in Issued CapitalNumber of Shares

Ordinary D Class DX Class A Class TotalShares Ordinary Shares OrdinaryShares Preference

Shares

Balance at 1 July 1999 16,809,216 27,632,228 1,713,153 15,588,866 61,743,463

Shares isued 1,509,430 21,695,024 - - 23,204,454

Dividend reinvestment plan issues 86,678 412,598 41,772 154,563 695,611

Transfers (373,020) (562,914) (91,011) 1,026,945 -

Balance at 30 June 2000 18,032,304 49,176,936 1,663,914 16,770,374 85,643,528

Shares isued 1,227,267 18,078,331 - - 19,305,598

Dividend reinvestment plan issues 91,185 598,902 37,560 161,184 888,831

Transfers (1,229,156) (799,822) (150,671) 2,179,649 -

Balance at 30 June 2001 18,121,600 67,054,347 1,550,803 19,111,207 105,837,957

All shares were issued at a price of $1.00 and are fully paid. The purpose of these issues was to provide additional working capital.




2001 2000 2001 2000

$000 $000 $000 $000

Note 25 Reserves

Capital reserve 36,916 36,916 24,290 24,290 Asset revaluation reserve 54,332 54,332 24,487 24,487 General reserve 4,942 4,942 2,648 2,648 Share Allotment Reserve 5,210 4,162 5,210 4,162

101,400 100,352 56,635 55,587

Movements in Reserves

Share Allotment ReserveBalance at the beginning of the financial year 4,162 9,416 4,162 9,416 Allotment of shares to suppliers 25(a) (4,162) (9,416) (4,162) (9,416)Shares to be issued in lieu of milk payments 25(a) 5,210 4,162 5,210 4,162

Balance at the end of the financial year 5,210 4,162 5,210 4,162

At 30th June 2001 an amount of $5,209,694 (2000: $4,161,545) was due to suppliers, being deductions made from milk payments during the year. This debt wassatisfied by the allotment of 5,209,694 (2000: 4,161,545) fully paid shares in September 2001 (September 2000).

Nature and Purpose of ReservesCapital ReserveThe capital reserve is used to accumulate realised capital profits.

Asset Revaluation ReserveThe asset revaluation reserve is used to record increments and decrements on the revaluation of non-current assets.

General ReserveThe general reserve is used from time to time to transfer profits from retained earnings. There is no policy of regular transfer.

Share Allotment ReserveThe share allotment reserve reflects the value of shares to be allotted to suppliers. The allotments arise from deductions made from milk payments during the year.

Note 26 Retained Profits

Balance at the beginning of the financial year 105,869 89,216 108,892 94,260 Net profit attributable to members of the parent entity 45,078 27,347 39,530 22,537 Dividends provided for or paid 8 (14,131) (10,694) (9,954) (7,905)

Balance at the end of the financial year 136,816 105,869 138,468 108,892

Note 27 Outside Equity Interests in Controlled Entities

Outside equity interest comprises :

56,713,566 fully paid A class participating cumulative redeemable preference shares (2000: 49,703,518) 31 56,714 49,704 - -

Note 28 Capital and Leasing Commitments

a) Finance Lease Commitments- Due within 1 year 1,110 1,033 1,110 1,033 - Due within 1-2 years 778 907 778 907 - Due within 2-5 years 403 548 403 548

Minimum lease payments 2,291 2,488 2,291 2,488

Less future finance charges 216 252 216 252

Total lease liability 2,075 2,236 2,075 2,236



2001 2000 2001 2000

$000 $000 $000 $000

Note 28 Capital and Leasing Commitments (continued)

Classified as :Current 18 977 885 977 885 Non current 18 1,098 1,351 1,098 1,351

2,075 2,236 2,075 2,236

Finance leases relate to motor vehicles with lease terms of three years. The economic entity has options to purchase the vehicles for a residual amount at theconclusion of the lease agreements.

b) Operating Lease Commitments- Due within 1 year 868 585 746 463 - Due within 1-2 years 615 493 514 436 - Due within 2-5 years 1,611 1,432 1,488 1,310 - Due after 5 years 8,877 9,367 8,486 8,948

11,971 11,877 11,234 11,157

Operating leases relate to Trading stores and warehousing facilities with lease terms of between 3 to 31 years. Some leases have an option to extend the lease term.The economic entity does not have an option to purchase the leased assets at the expiry of the lease period.

c) Capital Expenditure CommitmentsCapital expenditure commitments contracted for and due within one year 48,890 27,739 47,794 27,700

Note 29 Statement of Operations by Segmentsa) Industrial Segments

Dairy Produce Manufacture Retailing Elimination Total

2001 2000 2001 2000 2001 2000 2001 2000

$000 $000 $000 $000 $000 $000 $000 $000

Segment Sales 1,527,615 1,346,555 87,227 75,066 (974) (1,413) 1,613,868 1,420,208

Segment Result 43,579 26,017 1,511 1,342 (12) (12) 45,078 27,347

Segment Assets 1,044,284 869,706 29,070 25,492 (7,872) (7,545) 1,065,482 887,653

b) The economic entity operates solely in Australia and derives income from the following activities :

Dairy produce manufacture - the processing of the whole milk of its shareholder suppliers and the manufacture, marketing and distribution of dairy products.

Retailing - the operation of retail stores as a service to the suppliers in the areas of the manufacturing plants.

Note 30 Superannuation CommitmentsThe Company participates in a defined benefit superannuation plan, The MGC Superannuation Fund, which has been established and sponsored by the Chief Entity.This plan primarily provides a lump sum benefit on retirement, permanent disability or death.

Contributions are made by employees and the Company as percentages of salary. The Company is obliged to make contributions as specified in the rules of the fund.All contributions are enforceable in accordance with the rules.

The last actuarial assessment of the plan was made by Andrew Sach F.I.A.A. of William M. Mercer Pty Ltd and related to the plan at 1 July 2000. The conclusion ofthe actuarial assessment noted that funds were considered adequate to satisfy all benefits payable in the event of termination of each employee. The next actuarialvaluation date should be no later than 1 July 2003.

The most recent financial report of the MGC Superannuation Fund is dated 30th June 2000.

Details of the defined benefit plan are as follows :MGC Superannuation Fund

$’000

Present value of accrued benefits at 1st July 2000 19,526 Net market value of plan assets at 30th June 2000 22,088

Difference 2,562

Vested benefits at 30th June 2000 18,560

The difference between the accrued benefits and net market value of plan assets has not been recognised in the financial statements or consolidated financialstatements.



Note 31 Murray Goulburn Group Employees Profits Participation SchemeIn 1993 Murray Goulburn established an Employees Profits Participation Scheme under which employees of the Murray Goulburn Group with 12 months or more workexperience with the Murray Goulburn Group could choose to invest in Employee Profits Participation Units in MG Employees Equity Limited (MGEE). MGEE invests theemployees’ contributions in A Class participating cumulative redeemable preference shares in Murray Goulburn Investment Limited. Eligible employees must borrow allmonies required to pay for the MGEE shares either from MGEE or Murray Goulburn. The maximum amount each employee is entitled to borrow is equivalent to oneyear’s salary, rounded up to the nearest $10,000. MGEE funds the employee loans by borrowing from Murray Goulburn. All borrowings are interest free and employeesrepay their loans at 3% per annum.

At 30th June 2001 1,377 employees were eligible to participate in the Scheme. Of that number, 1,092 employees had been issued with 56,713,566 $1.00Employees Profits Participation Units. During the year ending 30th June 2001, 12,565,715 Units were issued, including 4,200,715 in satisfaction of dividends paid.The value of the A Class redeemable preference shares issued by Murray Goulburn Investment Ltd to MGEE is recognised as Outside Equity Interests. The loan owingby MGEE, and employee loans from Murray Goulburn, are recognised as receivables.

Amounts recognised are as follows :

Consolidated Company

2001 2000 2001 2000

$000 $000 $000 $000

Outside Equity Interests 56,714 49,704 - -

Loan owing by MGEE 39,075 35,920 39,075 35,920

Employee loans 328 329 328 329

Note 32 Events Subsequent to Balance DateSince 30 June 2001 Murray Goulburn Co-operative Co Limited has acquired the assets of a milk processing plant located in Victoria for a cash consideration of$32.47m. The acquisition was funded by borrowings.

With the exception of this acquisition, no matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affectthe operations of the economic entity, the results of those operations, or the state of affairs of the economic entity in financial years subsequent to the financial yearended 30 June 2001.

Note 33 Financial Instrumentsa) Forward Foreign Exchange Contracts

The economic entity maintains a policy of matching anticipated future cash flows in foreign currencies with forward exchange contracts in the same currency andwith closely corresponding settlement dates. Forward exchange contracts are entered into when committed orders are received for the delivery of goods.

At reporting date, the entity has $US255 million forward exchange contracts outstanding with maturity dates not exceeding one year, of which $US4.3 million relateto receivables at balance date and $US250.7 million relate to future transactions.

Unrealised gains or losses at year end on specific hedges in the form of forward exchange contracts, in respect of unsettled sales transactions, are deferred to matchthe underlying hedge transaction.

b) Currency OptionsDuring the year the economic entity entered into a range of US Dollar currency options with varying maturities and strike rates. As with ‘Forward Foreign ExchangeContracts’ above, these options are not entered into for speculative purposes but strictly as a means of hedging sales denominated in $US.

By simultaneously purchasing call options and selling put options in a barrier structure, the entity has effectively capped an exchange rate should the AUDstrengthen whilst maintaining the flexibility to participate in lower more favourable exchange rates, to a floor level, should the AUD weaken.

At the reporting date, the entity had purchased AUD call options to the equivalent value of $US82.5 million and sold AUD put options to the equivalent value of$US112.5 million with varying maturities and strike rates. These currency options were purchased to hedge future sales and all have expiry dates not exceeding oneyear.

Unrealised gains or losses at year end on currency options are deferred to match the underlying hedged transaction.

c) Interest Rate RiskTrade and other receivables, trade creditors and accruals, loans from the state government of Victoria, and dividends payable, are non-interest bearing. The AUDbank overdraft bears interest at a floating rate based on the bank prime lending rate. The USD bank overdraft bears interest at a floating rate based on the InterbankOffered Rate. USD cash on hand yields interest at the US Interbank Bid Rate. AUD cash on hand bears interest at a floating rate based on the bank prime depositrate.

Bank loans consist of USD and AUD revolving loan facilities, on which interest is payable at floating rates. Rates on US Dollar loans are based on either LIBOR orSIBOR. Rates on AUD loans are based on the 30 day bank bill swap rate.

Finance lease liabilities arise from the leasing of vehicles. Leases are negotiated for a 3-year term at a fixed rate of interest. Interest rates are based on the marketrate ruling at the time of entering into the individual lease agreements.

The senior notes and senior subordinated notes bear interest at fixed rates of 8.01% and 8.46% respectively. Repayment of the senior notes commenced inSeptember 1998 with the notes being finally repaid by September 2004. The senior subordinated notes mature in September 2004.

The redeemable preference shares are redeemable at set redemption dates at either the company’s or the shareholder’s option and bear a fixed cumulative dividendof 6.5%.


Note 33 Financial Instruments (continued)d) Credit Risk Exposures

The economic entity’s maximum exposure to credit risk at balance date in relation to financial assets is the carrying amount, net of any provisions, of those assetsas indicated in the consolidated balance sheet.

The economic entity minimises concentrations of credit risk by undertaking transactions with a large number of customers and counterparties in various countries.The economic entity is not materially exposed to any individual foreign country or individual customer.

e) Hedges of Anticipated Future TransactionsForward exchange contracts are utilised to hedge future committed orders. The difference between these contracts at contract rates and at the rate ruling at balancedate, is $209,845. This amount will be realised during the next financial year when the underlying hedge transactions take place.

f) Net Fair ValueOn-balance sheet financial instrumentsThe carrying amount recorded in the financial statements represents the net fair value of all assets and liabilities, determined in accordance with the accountingpolicies in Note 1 to the financial statements, except for those mentioned below. The net fair value is derived by discounting the expected future cash flows by thecurrent interest rates for assets and liabilities with similar risk profiles.

Redeemable preference shares have a carrying value of $5,550,195 and a net fair value of $5,544,128.Senior notes have a carrying value of $22,612,922 and a net fair value of $24,074,272.Senior subordinated notes have a carrying value of $39,572,616 and a net fair value of $44,151,437.

Off-balance sheet financial instrumentsThe net fair value is the estimated amount which the economic entity expects to (pay) or receive if it were to terminate or replace the contracts at their currentmarket rates as at reporting date. This is determined using standard valuation techniques.

Forward foreign contracts have a net fair value of ($13,996,904).Purchased AUD call options have a net fair value of $3,932,595.Sold AUD put options have a net fair value of ($5,992,475).


2001 2000 2001 2000

$000 $000 $000 $000

Note 34 Related PartiesTransactions between related parties are on normal commercial terms and conditions unless otherwise stated.

Balances and transactions with related parties :

a) Entities in the wholly owned groupProvision of a loan to Murray Goulburn Trading Pty LtdRepayment is variable by Murray Goulburn Co-operative with at least 12 months notice - - 6,000 6,000

Interest received from Murray Goulburn Trading Pty Ltd on loan provided - - 338 402

Interest paid to controlled entities on intercompany loan balances - - 6,452 5,328

Purchase of goods from Murray Goulburn Trading Pty Ltd - - 191 180

Sale of finished product to Murray Goulburn Trading Pty Ltd - - 784 1,233

Rent paid to controlled entities - - 1,278 1,292

Rent received from Murray Goulburn Trading Pty Ltd - - 490 458

Dividends paid to controlled entities - - 24 24

Service fees and management fees charged to controlled entities for general administration duties - - 4,055 3,402

Amounts payable to controlled entities arising through the intercompany accounts - - 73,261 67,341

Amounts receivable from controlled entities arising through the intercompany accounts - - 18,118 18,457

b) Directors of the chief entityAggregate number of shares held by directors of the chief entity at balance date :36,838 ordinary shares (2000: 33,928)534,666 D class ordinary shares (2000: 414,862)80,749 DX class ordinary shares (2000: 74,148)

Aggregate number of shares acquired by directors of the chief entity during the year :2,910 ordinary shares (2000: nil)119,804 D class ordinary shares (2000: 142,687)6,601 DX class ordinary shares (2000: 5,989)

Directors of the economic entity supply milk to the economic entity, are able to purchase goods at Murray Goulburn Trading Pty Ltd stores at commercial prices andcan obtain Bulk Vat loans from the economic entity in the same manner as all other suppliers.


Note 34 Related Parties (continued)Executive directors of the economic entity participate in the employee share acquisition scheme under the same terms and conditions available to all employeesand consequently indirectly hold 1,303,878 A class participating redeemable preference shares in Murray Goulburn Investment Ltd which is a controlled entity ofMurray Goulburn Co-operative Co. Ltd.

c) Associated companyTransactions between the chief entity and its associate include the sale of goods and the provision of technical and consultancy services by the chief entity.Transactions are on normal commercial terms and conditions.


2001 2000 2001 2000

$000 $000 $000 $000

Note 35 Notes to the Statement of Cash Flows

a) Reconciliation of Cash

For the purposes of the statement of cash flows, cash includes cash on hand, deposits on call and investments in money market instruments, net of bank overdrafts.

Cash at the end of the year as shown in the statement of cash flows is reconciled to cash in the balance sheet as follows:

Cash per balance sheet 7,103 10,754 4,874 9,252 Less bank overdraft 18 (39,506) - (39,506) -

Cash per statement of cash flows (32,403) 10,754 (34,632) 9,252

b) Reconciliation of Operating Profit after Income Tax to Net Cash Flow from Operating Activities

Operating profit after income tax 45,078 27,347 39,530 22,537 Depreciation 52,315 42,173 50,548 40,420 Amortisation 609 520 606 516 Loss on sale of fixed assets 88 76 77 45 Increase in income taxes payable 1,545 848 1,971 973 Share of (profit) of associated company (318) (574) - -

Change in operating assets and liabilities(Increase) in trade debtors (32,377) (17,976) (32,467) (17,155)(Increase) in other debtors and prepayments (15,111) (23,914) (8,448) (20,098)(Increase) decrease in inventories (67,924) 47,601 (66,389) 47,436 (Increase) in future income tax benefit (2,016) (28) (2,010) (54)Increase in trade creditors and amounts due to suppliers 64,468 34,501 63,414 32,673 (Decrease) increase in amounts payable to controlled entities - - (2,106) 679 Increase in provisions 6,076 1,859 5,981 1,799 Increase (decrease) in provision for deferred income tax 2,474 (440) 2,489 (422)

Net cash inflow from operating activities 54,907 111,993 53,196 109,349

c) Financing ArrangementsCredit facility 594,767 490,000 594,767 490,000 Amount utilised 332,273 284,051 334,502 285,553

Unused credit facility 262,494 205,949 260,265 204,447

The major facilities consist of a bank overdraft facility repayable at call, and loan facilities which are subject to yearly review to ensure that the required financialratios are met.

d) Non-cash Financing ActivitiesDuring the financial year the economic entity acquired plant and motor vehicles with an aggregate fair value of $807,725 (2000: $1,051,876) by means of financeleases. These acquisitions are not reflected in the statement of cash flows or note 35(b).



The directors declare that:

a) the attached financial statements and notes thereto comply with accounting standards;

b) the attached financial statements and notes thereto give a true and fair view of the company’s and the consolidated entity’s financial position as at 30 June 2001 andof their performance for the financial year ended on that date.

In the directors’ opinion:

a) the attached financial statements and notes thereto are in accordance with the Corporations Act 2001; and

b) there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the directors.

IW MacAulayDirector

Melbourne26 September 2001

DIRECTORS’ DECLARATION

INDEPENDENT AUDIT REPORT


To the Members of Murray Goulburn Co-Operative Co. Limited

Scope We have audited the financial report of Murray Goulburn Co-Operative Co. Limited for the financial year ended 30th June 2001 as set out on pages 12 to 31. Thefinancial report includes the consolidated financial statements of the consolidated entity comprising the company and the entities it controlled at the year’s end or fromtime to time during the financial year. The company’s directors are responsible for the financial report. We have conducted an independent audit of this financial reportin order to express an opinion on it to the members of the company.

Our audit has been conducted in accordance with Australian Auditing Standards to provide reasonable assurance whether the financial report is free of materialmisstatement. Our procedures included examination, on a test basis, of evidence supporting the amounts and other disclosures in the financial report, and theevaluation of accounting policies and significant accounting estimates. These procedures have been undertaken to form an opinion whether, in all material respects, thefinancial report is presented fairly in accordance with Australian Accounting Standards and other mandatory professional reporting requirements and statutoryrequirements so as to present a view which is consistent with our understanding of the company’s and the consolidated entity’s financial position, and performance asrepresented by the results of their operations and their cash flows.

The audit opinion expressed in this report has been formed on the above basis.

Audit Opinion In our opinion, the financial report of Murray Goulburn Co-Operative Co. Limited is in accordance with:

a) the Corporations Act 2001, including

i) giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2001 and of their performance for the year ended on thatdate; and

ii) complying with Accounting Standards and the Corporations Regulations; and

b) other mandatory professional reporting requirements.

Deloitte Touche Tohmatsu

C.C.A. MottersheadPartnerChartered Accountants

Melbourne, 26 September 2001

The liability of Deloitte Touche Tohmatsu is limited by, and to the extent of, the Accountants’ Scheme under the Professional Standards Act 1994 (NSW)

Co-Operation - A way of life...Co-Operation is more than a business, it is a way of life.Carried to its ultimate conclusion, Co-Operation can bring to the world; peace prosperity and contentment.But individuals must play their part in the plan. Co-Operation is based on service. Each for all and all for each.