DIRECTORS' REPORT (CONTINUED) SIGNIFICANT EVENTS AFTER THE BALANCE DATE There have been no significant events occurring after balance date which may affect either the Company’s operations or results of those operations or the Company’s state of affairs. LIKELY DEVELOPMENTS AND EXPECTED RESULTS The Company’s total reserves at 30 June 2007 are $23,572,083 (2006: $26,664,315). The decrease in reserves during the year is consistent with the Company’s strategic planning. Traditionally the impact of inflation on Dairy Service Levy income and spending capacity has been offset by growth in national milk production. However, production has been stable or falling for the last five years and this situation is not expected to change significantly over the next five years. Dairy Service Levy payments overall have not kept pace with the negative impact of inflation. Therefore the Company’s planned expenditure is supported by a wind down in reserves to a prudent minimum level of $10 million over the next two years. Reserves will then be maintained at that level indexed by CPI. The reserves are intended to provide a first line of defence against extraordinary and unplanned issues such as animal disease, climatic and other natural disasters and breaches of biosecurity. The current situation and outlook for the Australian dairy industry is finely balanced. World dairy demand remains positive with both local and international markets showing great strength and world prices reaching record levels. But the outlook at the farm level is less certain as farmers face tough decisions about their future due to the effects of the drought, uncertainty about future water access and rising feed costs affecting their confidence. A changed outlook and, at the same time, reduced funding from falling milk production calls for a re-positioning of Dairy Australia’s priorities to respond to changing industry need. The overall aims of Dairy Australia’s Strategic Plan 2008-12 are to best position the industry to recover from the drought and help dairy farmers: build resilience to climate variability and adapt to and mitigate the effects of climate change; increase farm productivity and take advantage of the strong domestic and world prices; and strive for continuous productivity improvements, while providing a sustainable contribution to the Australian community. At the same time, the Company’s priorities are also closely aligned to the Australian Government’s National Research Priorities and the new Rural Research and Development Priorities, which seek to ensure profitable and sustainable growth and profitability of Australia’s rural industries. Further details in relation to these likely developments are contained in the Company’s recently published Strategic Plan 2008-2012 which is available on the website www.dairyaustralia.com.au. ENVIRONMENTAL REGULATION AND PERFORMANCE The Company is not subject to any particular or significant environmental regulation. INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS During the financial year, the Company paid an insurance premium to insure Directors, executive officers and the company secretary against liabilities arising as a result of work performed in their respective capacities, to the extent permitted by law. Disclosure of the amount of the insurance premium payable and the nature of the liabilities covered by the insurance contract is prohibited by the insurance policy. STATEMENT OF CORPORATE GOVERNANCE A statement of corporate governance is set out in pages 71 to 76 of this Annual Report. REGISTERED OFFICE Level 5, IBM Tower 60 City Road Southbank Victoria 3006 ROUNDING The amounts in the financial report have been rounded to the nearest thousand dollars ($'000) unless otherwise stated under the option available to the Company under ASIC Class Order 98/0100. The Company is an entity to which the Class Order applies. AUDITOR INDEPENDENCE The Auditor’s Independence Declaration in relation to the audit for the year ended 30 June 2007 has been received by the Company. A copy follows the audit opinion. NON-AUDIT SERVICES The Company may decide to appoint the auditor to perform assignments additional to their statutory audit duties where the auditor’s experience with the Company is important. The directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The nature and scope of each type of non-audit service provided means that auditor independence was not compromised. In the current year, Ernst & Young was engaged to perform agreed-upon procedures in respect of the Dairy Service Levy Poll, the Dairy Service Levy process and the Annual General Meeting (total fees $64,852). Note that Ernst & Young is also engaged as the auditor of the Dairy Structural Adjustment Fund and is contracted by the Australia National Audit Office to audit the Dairy Adjustment Authority on its behalf.
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