DIRECTORS' REPORT (CONTINUED) CORPORATE STRUCTURE Dairy Australia Limited is a public company limited by guarantee which is incorporated and domiciled in Australia. In addition to the reporting requirements of the Corporations Act, Dairy Australia Limited is required to report particular financial and related information in accordance with the requirements of the Dairy Produce Act 1986 and the Deed entered into with the Commonwealth of Australia (the Statutory Funding Deed) regarding the funding and operations of the Company, and the administration of the DSAF. REVIEW OF OPERATIONS AND RESULTS 2007 $’000 2006 $’000 Revenue 51,252 52,324 (Deficit) (3,575) (5,642) The primary sources of income for the Company are the Dairy Service Levy and Government matching payments in respect of qualifying research and development expenditure. The Primary Industries (Excise) Levies Act 1999 provides the legislative basis for the collection of the levy. The Statutory Funding Deed provides for the payment of the levy and matching payments for research and development expenditure to the Company. The total amount of levies received during the year of $30,016,323 is relatively consistent with the prior year (2006: $31,692,945). Matching payments of $15,998,333 (2006: $15,358,583) were $639,750 (4.2%) higher than the prior year, due mainly to the impact of higher farmgate milk prices in 2005/06 and 2006/07. The amount of matching payments each year is the lesser of the following: o 0.5% of the amount determined by the Minister in accordance with the Dairy Produce Regulations 1986 (Cth) to be the gross value of whole milk produced in Australia in that year. This calculation is based on a three year average, to smooth the effects of year on year fluctuations in price and volume, and o 50% of the amount that is spent by the Company on qualifying research and development activities in that year. The gross value of production for the determination of matching payments for dairy for 2006/07 was $3,199,666,667 (2006: $3,071,716,667) as determined by the Minister. Accordingly, 0.5% of the gross value of production for dairy was the lesser of the two determinants described above. Dairy Australia Limited implements its strategies through a series of programs managed by the following business groups: o Farm Productivity & Development o Value Chain Innovation o Technical Issues o National Marketing o Trade & Strategy o Corporate Affairs Corporate Services and Human Resources also manage various stakeholder relationships as well as providing essential corporate development, governance and support services. SIGNIFICANT CHANGES IN STATE OF AFFAIRS DAIRY INNOVATION AUSTRALIA LIMITED The opening of the nation’s premier centre for dairy manufacturing innovation in January 2007 began a new era of research for the industry. Dairy Innovation Australia will invest more than $15 million over the next three years to generate new innovations targeted at bulk processing and bulk ingredients, functional foods and ingredients and cheese starters and fermented products. Dairy Australia took a lead role in the establishment of the new centre, which was formed from the merger of five other research centres: Dairy Process Engineering Centre, Australian Starter Culture Research Centre, UHT Centre, Australian Cheese Technology Program and Dairy Ingredients Group of Australia. The unique collaborative model will assist the Australian dairy manufacturing industry to conduct pre-competitive research. Dairy Australia is the most significant investor in Dairy Innovation Australia, has a seat on the Board and will help guide the direction of the centre’s research strategy. There have been no other significant changes in state of affairs.
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