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					M U R R AY G O U L B U R N C O - O P E R AT I V E L I M I T E D




       5 7 T H   A N N U A L    R E P O R T     2 0 0 7
M U R R AY G O U L B U R N O V E R V I E W 2 0 0 7




SALES REVENUE                  $ millions             MILK INTAKE                 million litres

2250                                                 4200



1950                                                 3750



1650                                                 3300



1350                                                 2850



       98   99 00 01 02 03 04 05 06 07                      98   99 00 01 02 03 04 05 06 07




 DOMESTIC REVENUE              $ millions             EXPORT REVENUE                 $ millions

980                                                  1350



855                                                  1150



730                                                   950



605                                                   750



       98   99 00 01 02 03 04 05 06 07                      98   99 00 01 02 03 04 05 06 07




Contents
Directors 2 • Chairman’s Report 4 • Operations Review 8 • Financial Report 27

The Annual General Meeting of Murray Goulburn Co-Operative Co. Limited will be held
at 1.30pm on Wednesday 28th November 2007 in the Members’ Lounge, Moonee Valley
Racecourse, McPherson Street, Moonee Ponds.

Registered Office & Principal Place of Business
140 Dawson Street, Brunswick Victoria 3056, ACN 004 277 089, ABN 23 004 277 089

Bankers
ABN AMRO Bank N.V., ANZ Banking Group Limited, BNP Paribas, Commonwealth Bank of
Australia, Rabo Australia Limited, Rural Finance Corporation of Victoria,
Westpac Banking Corporation

Solicitors
Gadens Lawyers, Barbour Arnold & Cousins

Auditor
Deloitte Touche Tohmatsu
                                                                                                           MURRAY GOULBURN ANNUAL REPORT 2007
 TOTAL ASSESTS                    $ millions               EQUITY                         $ millions

1600                                                      680



1375                                                      560



1150                                                      440



 925                                                      320



       98   99 00 01 02 03 04 05 06 07                          98   99 00 01 02 03 04 05 06 07




 PRIMARY PRODUCTION 000’s metric tonnes                    EXPORT VOLUME         000’s metric tonnes

700                                                       420



625                                                       370



550                                                       320



475                                                       270



       98   99 00 01 02 03 04 05 06 07                          98   99 00 01 02 03 04 05 06 07




FACTS AT A GLANCE ($ Millions)                 2007    2006          2005       2004          2003

Sales Revenue                                  2,173   2,027         1,867      1,631         1,663

Profit before Income Tax                         26      20             60         13                  5

Total Equity                                    657     615            575        517            507

Issued Ordinary Capital                         161     151            137        130            123

Reserves and Retained Earnings                  353     328            317        275            275

Total Assets                                   1,483   1,586         1,405      1,293         1,188

Milk Intake ex Suppliers (Million Litres)      3,335   3,599         3,548      3,506         3,635

Total Export Revenue                           1,206   1,228         1,118      1,013         1,003
DIRECTORS




Ian W. MacAulay                           Stephen J. O’Rourke                 Lindsay A. Jarvis OAM                 Stephen T. Mills
Chairman                                  Managing Director                   Deputy Chairman                       Dairyfarmer
Dairyfarmer                               B.Comm, ACA                         Dairyfarmer                           Director since 2001
Director since 1991                       Director since 1993                 Director since 1985                   FAICD
B. Agr. Sc. FAICD                         Director, Dairy Australia Ltd       Chairman, Finance Committee           Chairman, Goulburn - Murray
Director, Geoffrey Gardiner                                                   Grad. Dip. System Agriculture         Water Corporation
Foundation                                                                    FAICD
                                                                              Chairperson, Goulburn
                                                                              Murray Water - Murray Systems Water
                                                                              Service Committee




William M. Brown                          Grant J. Davies                     Donald F. Howard                      Warren H. Miles
Dairyfarmer                               Dairyfarmer                         Dairyfarmer                           Dairyfarmer
Director since 1994                       Director since 2004                 Director since 1997                   Director since 2007
Chairman, Audit Committee                 Chairman, Zone Committee            Dip. Company Directors (ANU)          MOFAC Dip. Farm Management 71
Cert. Company Directors (ANU)                                                 FAICD
FAICD                                                                         Chairman, Compliance Committee
Director, Dairy Technical Services Ltd.




John P. Pye                               John T. Vardy                       William J. A. Verboon                 Ian C. Bird
Dairyfarmer                               Dairyfarmer                         Dairyfarmer                           Company Secretary
Director since 2005                       Director since 1998                 Director since 2004                   B.Bus. ASA.
Director Southern Rural Water             Dip. Company Directors (ANU)
Advanced Diploma Agr.                     Chairman, Supplier
                                          Relations Committee




                                                                          2
                                                                     MURRAY GOULBURN ANNUAL REPORT 2007




   Murray Goulburn is proud of its customer relationships

and is dedicated to its vision “to be the first choice supplier of

  customised Dairy Based Products to our chosen market”




                                3
CHAIRMAN’S REPORT




                                                                 Mr Ian W. MacAulay, Chairman




Owned by Australian farmers Murray Goulburn is the               With a 20% increase in sales, Devondale continued
leading dairy company in the nation. As an exporter of           to strengthen its position in the highly competitive
dairy products for over 50 years the Co-operative has            domestic retail dairy market. The potential exists for
established a strong network of customers around                 Murray Goulburn to further add value to this domestic
the globe. The Co-operative lays claim to being the              business.
nation’s largest exporter of processed food. The
                                                                 With difficult conditions on farm MG Trading provided
domestic market provides a solid balance to export
                                                                 farmers vital support as indicated by a 41% increase in
markets consuming some 45% of sales in 2006/07.
                                                                 sales. The introduction of the store loyalty rebate has
Murray Goulburn is proud of its customer relationships
                                                                 cemented MG Trading as the major supplier of inputs
and is dedicated to its vision “to be the first choice
                                                                 for member’s farms. Both MG Trading and Devondale
supplier of customised Dairy Based Products to our
                                                                 divisions have become significant businesses in their
chosen market”.
                                                                 own right.
An important part of Murray Goulburn is the
                                                                 In an effort to satisfy customer requirements, farmer
communities in which it and its supplier shareholders
                                                                 returns and support were the most critical issues during
operate. The Company is the backbone of much
                                                                 the year. As well as maximizing milk price and dividend
regional prosperity in the south eastern part of Australia
                                                                 the Co-operative supported its members through
and is a significant contributor to the national economy.
                                                                 finance, grain and hay purchasing, and procurement
Despite the seasonal difficulties Murray Goulburn’s              of Palm Kernel extract. Trading Store, MG Agrilink and
performance was strong. Milk intake was affected                 Field staff advice and assistance to suppliers has been
again by drought after beginning to recover in the               a valuable contribution to members and their ability to
previous year. The Company maintained its share of               maintain milk production.
the Australian milk supply at 36% despite drought,
                                                                 Financial results for the year were pleasing achieving
low water allocations, and high grain and fodder
                                                                 our goal of maximizing farmer returns but also keeping
prices. Sales revenue rose to a record $2.17billion, a
                                                                 the Co-operative financially strong for the future.
satisfactory growth of 7% despite lower commodity
                                                                 The profit before tax increased by $ 5.5m to $25.7m
prices.
                                                                 and equity has risen to a satisfactory 44%. The profit
Export markets remained the dominant volume sales                allowed the Company to declare a strong dividend
of the business albeit at reduced volume. It was                 for supplier members of 12% pa after the end of the
disappointing that the Co-operative was unable to fully          financial year. The Board has also determined to
satisfy all customer’s requirements due to the drought           allocate some of the Company’s un-allocated equity
affected milk supply.                                            to supplier shareholders through a one for ten bonus
                                                                 issue of shares in September 2007.




                                                             4
                                                      MURRAY GOULBURN ANNUAL REPORT 2007




Despite the seasonal difficulties Murray Goulburn’s

            performance was strong.




                        5
CHAIRMAN’S REPORT




To ensure the Co-operative can continue to be                   The Co-operative continues to support the
competitive capital expenditure of $62m was spent               communities in which it operates through sponsorship
during the year. Investments were made in water                 and co-operation. Major sponsorships include the
savings and treatment at Leongatha which has                    South Gippsland Dairy Expo, The Australian Dairy
reduced the reliance on external water sources and              Conference and the United Dairy Farmers of Victoria
provided the communities with greater access to local           Annual Conference.
water supplies.
                                                                The Board operates with six sub-committees
The opening in China of the MG Qingdao factory on               which obtain independent professional advice as
17th May 2007 was an historic and colourful occasion            required. The Audit and Compliance committees
which augers well for the successful introduction of            have permanent advisors. The Board also keeps
Murray Goulburn product in branded retail packs into            informed through briefings with industry bodies,
China.                                                          State and Federal politicians, and special guests.
                                                                During the year director Paul Weller resigned from the
The Co-operative continues to look for other
                                                                Board to enter State Parliament and was replaced by
opportunities to develop the business.
                                                                Warren Miles.

Despite an excellent proposal the attempt to fold
                                                                2006/07 has been a very difficult year firstly for farmers,
a fellow co-operative in with Murray Goulburn was
                                                                but also for all the staff and employees who have
rejected. Although this rejection in hind sight was
                                                                battled to get the maximum return to farmers as well as
fortuitous it was disappointing that once again the value
                                                                satisfying customer’s requirements. The commitment
that co-operatives bring to farmers was not understood.
                                                                has been exceptional and is appreciated, thank you.

Research and Development is essential not only for the          Appreciation also goes to customers and business

Co-operative’s future, but also to develop products to          partners who have supported Murray Goulburn during

suit particular customer’s requirements. Collaboration          the year. The unprecedented drought, depletion of

within the industry on common issues continues and              water reserves, and very high stock feed prices will

Murray Goulburn has recently joined the Global Dairy            impact heavily on milk production in the 2007/2008

Platform which aims to promote and protect dairy.               year. But together we have worked hard and we are in
                                                                a strong position to continue to carry out our mission
Supplier numbers again fell due to the drought, urban           “To maximize returns to Murray Goulburn farmers
encroachment, asset transference to investment                  today and in the future”.
schemes, and also the general maturing of the industry.
This trend is expected to continue for the next few
years. The determination of suppliers to continue
in dairy despite the high costs of drought is an
undoubtable strength of the Co-operative.




                                                            6
                                                               MURRAY GOULBURN ANNUAL REPORT 2007




     The determination of suppliers to continue in dairy

despite the high costs of drought is an undoubtable strength

                    of the Co-operative.




                             7
OPERATIONS REVIEW




                                                                   Mr Stephen J. O’Rourke, Managing Director




The financial year 2006/07 saw Murray Goulburn achieve             A number of initiatives were introduced. Most critical
its ongoing objective of maximizing the return to supplier/        was to pay the highest possible milk price and to effect
shareholders whilst strengthening the financial base of the        step-ups as soon as possible. The final milk price of
Co-operative to allow future development.                          $7.70 kg. butterfat equivalent on a weighted average basis
                                                                   was 4.9% down on 2005/06 however given the soft market
This was achieved in a year of severe drought conditions
                                                                   early in the year, high Australian dollar and reduced milk
and a world market which softened during the first half
                                                                   intake the price was satisfactory and in fact 8.5% higher
before rebounding later in the year.
                                                                   than budget.

As a consequence of the adverse seasonal conditions
                                                                   An additional second half year milk price incentive
faced by all farmers milk intake fell by 7%, or 260 million
                                                                   was introduced. Additional on-farm interest free finance
litres, to 3.3 billion litres.
                                                                   was provided and loyalty rebates were brought forward.

Despite lower production, revenue increased $146 million           The Co-operative sourced large volumes of grain and hay

to $2.17 billion, driven primarily by increased sales in the       through MG Agrilink and imported Palm Kernel Extract to

Devondale and Trading Store divisions.                             assist farmers with their supplementary feed requirements.
                                                                   These feedstuffs were supplied to MG farmers at
Profit before tax of $25.7 million was 27% up on last year.
                                                                   discounted prices.
Subsequent to year-end the Co-operative declared a 1 for
10 bonus issue of ordinary shares to supplier/shareholders         Given the woeful seasonal conditions that prevailed during

and a post bonus issue dividend of 12%.                            the year MG farmers operated remarkably well to limit milk
                                                                   production to a 7% decline. The Co-operative’s various
The Co-operative’s balance sheet was again stronger
                                                                   initiatives went some way towards helping many farmers to
at year-end. Retained Profits and Reserves increased
                                                                   get through until the end of the season.
by $25 million and Total Equity increased $42 million to
$657 million. A healthy balance sheet is vital to allow            After a softening of world prices during the early part of

the Co-operative to grow and to continue to maximize               the year the world dairy market experienced a tightening in

returns to supplier/shareholders. Murray Goulburn’s net            stocks which led to record prices for powders and cheese

assets have more than doubled since 2000, a significant            being set in the second half of the year. This however was

achievement considering the persistent drought conditions          offset somewhat by the strong Australian dollar which

that have prevailed over the past five years, recognised as        spent the second half of the year well above the 80US

the worst seasonal conditions experienced in the Australian        cent level. Much lower milk intake in the second half of the

dairy industry’s history.                                          year brought about by the drought meant the Co-operative
                                                                   could not take as much advantage of the higher world
The primary focus for the Co-operative during the year
                                                                   prices as it would have liked.
was to support farmers operating in such trying seasonal
conditions.                                                        Capital investment for the year was $62 million and was
                                                                   aimed at upgrades to bulk ingredient production and the
                                                                   Co-operative’s domestic retail business. Important projects
                                                                   were completed throughout the Co-operative including
                                                                   capacity increases to UHT processing at Leongatha and
                                                                   Edit Creek in Tasmania, lactose production at Cobram and
                                                                   an extensive water re-use project at Leongatha.



                                                               8
                                                                   MURRAY GOULBURN ANNUAL REPORT 2007




    Murray Goulburn’s net assets have more than doubled

since 2000, a significant achievement considering the persistent

          drought conditions that have prevailed over

                      the past five years.




                               9
OPERATIONS REVIEW




The operations of Classic Foods in Tasmania grew during             which surpassed the current specification set by the EPA.
the period and generated benefits to the Co-operative’s             It is expected that upon the final commissioning of this
overall business. The strategic decision to acquire this            project the factory’s waste streams will be at a substantially
business was based on its ability to add value to Murray            superior quality than “best practice”.
Goulburn, generate growth in sales of its speciality product
                                                                    Further initiatives were undertaken in order to reduce the
lines and compliment the Co-operative’s already vibrant
                                                                    factory’s reliance on local water supply. The Co-operative
domestic business. The Devondale retail brand grew again
                                                                    undertook a water recycling and reuse program which
during the year and represents an increasingly valuable
                                                                    will receive a further $9 million of investment over the next
part of the Co-operative’s overall business.
                                                                    twelve months which will allow the factory to be self reliant
The Co-operative commissioned its first overseas                    for its process water requirements and achieve substantial
manufacturing site during the year with the opening of              water savings for the benefit of the local community.
a purpose built nutritional products plant in China. The
                                                                    Leongatha expanded its UHT production capacity by
plant which compliments MG’s existing infant formula
                                                                    100 million litres to 221 million litres and Edith Creek
manufacturing plant in Cobram is focussed on the
                                                                    expanded its UHT production capacity a further 50% to
packaging of consumer infant and adult nutrition products
                                                                    60 million litres a year as part of a $20 million investment in
for China’s retail market.
                                                                    this important segment of the business. Murray Goulburn
Murray Goulburn’s successful performance during                     continues to grow its UHT business in Australia and lead
2006/07 proves that the Co-operative’s strategy of strong           the industry again during the year.
financial management, maximizing returns to its supplier/
                                                                    Further work on environmental programs continued at
shareholders and strategic investment in the future is
                                                                    Koroit with the installation of a baghouse on its no 1 drier
working. Notwithstanding the urgent need for improved
                                                                    at a cost of $3.5 million.
seasonal conditions, the Co-operative’s financial base and
structure means it is well placed to prosper and grow.              The Kiewa factory expanded cream cheese production
                                                                    capacity in response to pressing market demand.


MANUFACTURING                                                       Lactose production at Cobram was increased with the

The Co-operative’s production for the year was 641,000              commissioning of additional plant which significantly

tonnes of finished product. The manufacturing effort was            improved yields.

concentrated on directing available milk supply into the
optimum product mix, manufactured in a manner which                  CAPITAL EXPENDITURE                                  $ millions

                                                                    150
maximized profitability and efficiency.

The Co-operative’s capital expenditure program totalling            120
$62 million was focussed on production efficiencies and
product mix optimisation.                                            90

At Leongatha, the Co-operative continued its programs
                                                                     60
of the site’s ten year plan. The final phase of the
$15 million waste water treatment program was completed
and enabled the factory to achieve a waste water standard                 98   99      00   01    02    03    04     05    06       07




                                                               10
                                                                      MURRAY GOULBURN ANNUAL REPORT 2007




        Murray Goulburn’s successful performance during

2006/07 proves that the Co-operative’s strategy of strong financial

management, maximizing returns to its supplier/shareholders and

           strategic investment in the future is working.




                                11
OPERATIONS REVIEW




QUALITY ASSURANCE                                                      RESEARCH AND DEVELOPMENT
Accreditation of all manufacturing sites to the internationally        The Research and Development portfolio reflects the
recognised BRC Global Food Standard, which began at                    Co-operative’s business strategy, with a focus on
Rochester in March 2006, progressed well during the year               continuous improvement of product quality and
with Koroit, Kiewa, Cobram and Leitchville being awarded               consistency, reducing costs of manufacture and
certification. Progress at Edith Creek and Leongatha is                development of new improved and innovative products.
well advanced and both sites are expected to receive                   The high prices of dairy commodities and the continuing
BRC accreditation in late 2007.                                        drought required some redirection of the R & D effort
                                                                       toward new areas.
The BRC Food Standard was initiated approximately
10 years ago by a key group of British retailers and                   Several major new product initiatives commenced during
suppliers whose aim was to develop a single food                       the year based on the state-of-the-art, powder recombining
industry best practice standard which could be widely                  plant installed at Maffra in 2006. These included the
accepted by retailers and food manufacturers. Over the                 successful development and commercialisation of a
years the standard has been refined with input from a large            range of novel, highly functional and specialised powders
number of stakeholders and is now a truly global standard              containing non-dairy components and a range of animal
adopted by 67 countries.                                               nutrition powders.

In Australia, Coles has chosen the BRC standard as one of              The Co-operative’s decision to move the manufacture
its approved options for companies supplying Coles own                 of hard grating cheese from Kiewa to Cobram required
brand products. Adoption of the BRC Standard by MG will                extensive R & D support to ensure the excellent quality and
help maintain the Co-operative’s reputation for safe, high             functionality of the products were maintained.
quality products into the future.
                                                                       Studies into the maturation of cheese provided significant
Refining and improving product analysis is an on-going                 commercial benefits for both the domestic and export
exercise across the Co-operative, taking into account ever             businesses. The development of the new Devondale
changing regulatory and market requirements, as well as                Moo Zoo range of cheese shapes products also involved
new developments in analytical equipment.                              significant input from R & D.

Additional improvements and efficiencies in product and                The launch of Devondale ‘Reduce’ UHT Milk for reduced
process control testing were made over the past 12 months              cholesterol absorption was the culmination of an extensive
with the relocation and integration of the MGN laboratory              product development effort. A significant range of other
into the main Cobram laboratory. This facility is now                  new UHT products were developed and commercial
providing the majority of the basic reference methodology              scale trials completed. Subject to successful shelf life
testing for the northern manufacturing sites, allowing                 studies, these new Devondale products will be launched
them to focus on process control and rapid instrumental                to augment the already highly successful Devondale UHT
methodology.                                                           range. A UHT animal nutrition beverage was successfully
                                                                       developed and commercialised for the export market.
Significant progress was made on moving the
Co-operative’s QA procedures, protocols, policies and                  Process development projects included a novel process
standards from hard copy manuals to an enterprise wide,                for the manufacture of lactose, the use of membrane
computerised DMS (document management system).                         technologies to fractionate milk components, improved
This will significantly reduce duplication and maintenance             control of spray driers and maximizing the yield and returns
requirements while improving documentation accessibility               from AMF processing.
and ease of use.

                                                                  12
                                                             MURRAY GOULBURN ANNUAL REPORT 2007




The launch of Devondale ‘Reduce’ UHT Milk for reduced

cholesterol absorption was the culmination of an extensive

               product development effort.




                           13
OPERATIONS REVIEW




Additional specialised equipment was installed in the                The Logistics team continued to advance the supply chain
Pilot Plant and Applications Laboratory at Cobram. These             continuous improvement program on mass management
facilities continue to be essential for effective process and        accreditation for all factory to distribution centre routes
product development and were heavily utilised throughout             with sub-contractors. These programs delivered beneficial
the year.                                                            outcomes in relation to freight movements from all
                                                                     manufacturing facilities.
With the successful establishment of Dairy Innovation
Australia Ltd., during the year R & D personnel were                 The Murray Goulburn Classic Foods (MGCF) supply chain
actively involved in both portfolio and project management           transformation was introduced with the national customer
reviews of the new dairy industry research entity.                   service division relocating to the Customer Service Centre
                                                                     at Laverton. The management of MGCF freight distribution
                                                                     was centralised with the National Freight Distribution
LOGISTICS
                                                                     Team to ensure high levels of service delivery and a cost
Storage and Distribution in 2006/07 delivered a supply
                                                                     effective solution to the business.
chain cost per tonne competitive with the previous
reporting period in an environment of increased fuel costs           Murray Goulburn Logistics continued to lead the market
across all sectors and a greater domestic volume delivered           in the development, implementation and auditing
nationally compared to lower export freight costs to the             requirements for Chain of Responsibility legislation. The
Port of Melbourne.                                                   Liaison Enforcement Committee comprising the Victoria
                                                                     Police, Worksafe, VicRoads, Victorian Transport Association
Robust information systems continued to be developed to
                                                                     and the TWU continued to use Murray Goulburn as a
meet ever changing customer requirements and internal
management efficiencies. The Co-operative’s in-house                 business model when delivering presentations to the

warehouse management system has been designed for                    general freight community.

ease of modification at reasonable cost and speed to
                                                                     The MG Transport Management Team continued to strive
ensure customer requirements are achieved within agreed
                                                                     for excellence in the area of transport and logistics reform.
timeframes.
                                                                     The Logistics division continued to deliver supply chain
There is ongoing collaboration with domestic and
                                                                     outcomes for other arms of the business, notably in
international customers to continually review and improve
                                                                     support of the fodder program with direct deliveries to the
supply chain processes. This has resulted in closer
                                                                     farmer. Co-ordination of the movement of fodder from WA,
working relationships with not only customers but other
                                                                     NT and SA ensured that the lowest possible logistics cost
supply chain partners of raw materials and transportation.
                                                                     was achieved for supplier/shareholders.
The objective of executing a combined supply chain
program is to ensure MG builds on current relationships
                                                                     Continued focus on the development and implementation
and reduces overall operational costs.
                                                                     of quality systems delivered positive results in relation
                                                                     to ISO 9001:2000 accreditation. The SAI Global audit
                                                                     in 2007 achieved the highest competency level in the
                                                                     standard. HACCP accreditation continued to deliver food
                                                                     safety awareness and processes for operational staff,
                                                                     ensuring MG food safety standards were maintained at
                                                                     the highest levels.




                                                                14
                                                                 MURRAY GOULBURN ANNUAL REPORT 2007




There is ongoing collaboration with domestic and international

     customers to continually review and improve supply

                      chain processes.




                             15
OPERATIONS REVIEW




EXPORT                                                                 in working capital savings in terms of low carry-over stocks
Total export sales for the year were $1.2 billion which was            at 30 June 2007. Strategically the system increased visibility
achieved on volumes 20 thousand metric tonnes (or 5.2%)                from customer to factory also enabling the Co-operative
lower than the previous year. The export business was                  to drive the optimum product mix and target sales to
conducted against a backdrop of severe drought conditions              core customers, applications and markets which deliver
in Australia and tumultuous changes in world dairy markets.            sustainable returns and offer superior value added potential.
Increasing global demand for dairy products, particularly
                                                                       During the year the Co-operative successfully launched
in emerging economies, surpassed global supply. This
                                                                       the MG Optimul range of ingredients, an innovative range
resulted in dairy prices breaking through historic price
                                                                       of functional blends derived from a proprietary mix of both
ceilings to unprecedented levels towards year-end, having
                                                                       dairy and non dairy ingredients. This range addresses the
started the year at price levels below the previous year.
                                                                       needs of customers in ice cream, bakery and confectionery
In contrast to 2005/06, global commodity prices started                applications with cost effective functionality. The Optimul
the financial year modestly but rapidly increased from                 range is produced at the Maffra site on equipment that
October to June. Spot milk powder prices were the first                would otherwise be idle during the off season, thereby
to rise, increasing more than US$200/t a month to a peak               providing MG with the benefits of increased plant utilisation.
around US$5000/t. Cheese and milk fat prices increased
                                                                       In January 2007 Bulgaria and Romania joined the 25
moderately from July to March, but rapidly grew on strong
                                                                       existing European Union member nations creating the
competition for limited supplies in the last three months
                                                                       EU-27. Milk production for the 27 member states finished
of the financial year. Prices for all commodities finished
                                                                       at 128.9 billion litres in 2006, down marginally on 2005.
significantly higher compared to June 2006. Unfortunately
                                                                       The two new members made a small contribution to the
due to the severe drought conditions that persisted
                                                                       2007 total EU-27 production as only a small portion of
throughout Murray Goulburn’s supply regions the Company
                                                                       their milk production is delivered to factories. Despite
was not able to take full advantage of the higher prices
                                                                       increasing world prices, EU-27 milk production increased
prevailing in the second half of the year.
                                                                       slower than expected, suggesting future EU milk
Murray Goulburn’s global competitiveness is underpinned                production will increase modestly in line with small
by low cost manufacturing and transaction costs. This,                 increases in milk quotas.
coupled with an agile responsiveness to customer needs
                                                                       EU exports have been fairly steady in a growing market,
and a strong focus on innovation, places the business in an
                                                                       meaning EU market share has actually fallen. This is a long
enviable position in the global market.
                                                                       term trend and is expected to continue as the EU market
The investment MG made in SAP continues to drive                       adjusts to the inclusion of new countries within the trading
improvements in the business. The SAP system provides                  bloc, and continued reforms result in a more internally
full visibility of all relevant business information within the        focused, market driven industry.
supply chain from customer through to manufacturing,
                                                                       During 2006/07, US milk production reached 80.49 billion
enabling the Co-operative to effectively manage a very
                                                                       litres, up 1.4% on the 79.38 billion litres produced the
difficult drought affected supply chain with the benefit of the
                                                                       previous year, but year-on-year production growth has
best available commercial information. The upward price
                                                                       slowed due to increased feed costs. This translated into US
improvement in the second half of 2007 was able to be
                                                                       cheese production increasing 3.5% to 4.366 million tonnes
quickly factored into sales plans. It also delivered benefits
                                                                       - up from 4.219 million tones. Butter production increased
                                                                       2.4% to 660,000 tonnes - up from 644,000 tonnes, however
                                                                       SMP production decreased 8% to 530,000 tonnes.


                                                                  16
                                                                                                                                                                           MURRAY GOULBURN ANNUAL REPORT 2007
  WORLD COMMODITY PRICES                                                                                                                             $ Aust tonnes/fob
5850




5000




4150
                                                                                                                                     Cheddar
                                                              WMP
                                            SMP



3300
                                                             AMF



2450
                                                   Butter


        JUL   DEC   JUN   DEC   JUN   DEC   JUN        DEC         JUN       DEC         JUN         DEC     JUN   DEC   JUN   DEC    JUN      DEC     JUN    DEC    JUN
        97     97    98    98    99    99    00         00          01        01          02          02      03    03    04    04     05       05      06     06     07




   AUD/USD EXCHANGE
0.85


 0.80


 0.75



0.70



0.65


0.60



 0.55



        JUL   DEC   JUN   DEC   JUN   DEC    JUN        DEC        JUN        DEC         JUN          DEC   JUN   DEC   JUN   DEC     JUN     DEC      JUN   DEC    JUN
        97     97    98    98    99    99     00         00         01         01          02           02    03    03    04    04      05      05       06    06    07




                                                                         * Source Data Dairy Australia Ltd




                     Murray Goulburn’s global competitiveness is underpinned

                            by low cost manufacturing and transaction costs.




                                                                                     17
OPERATIONS REVIEW




The US has long been a large exporter of whey products              have either been exhausted, or reduced to a fraction of
and lactose, and has become a significant exporter of               historic levels, and the expenditure and use of government
   ,
SMP accounting for 30% of world SMP trade in calendar               export subsidies in Europe and the US virtually ceased.
2006 filling the gap in protein supplies from Australia,            The US did not use its Dairy Import Export Program of
Europe and to a lesser extent New Zealand.                          subsidies again during the year and the EU voted on June
                                                                    14 2007 to remove all dairy export subsidies. For the first
The void left by traditional exporters in a growing market
                                                                    time in decades European dairy products were competing
has allowed for the emergence of new suppliers. The
                                                                    unassisted on international markets.
potential for South American countries to become
major dairy exporters is now being realised because of              MG’s export performance again demonstrated an ability
favourable market conditions. However, further expansion            to capitalize on the rapidly changing market environment.
may be hindered by South American government policies               The core strategy of maintaining strong relationships with
aimed at maintaining domestic prices at affordable levels.          customers, together with a strong focus on applications
                                                                    and market places the Co-operative in a strong position
Milk production in the Mercosur region (Argentina, Brazil,
                                                                    globally to capture opportunities to grow the value of the
Paraguay and Uruguay) showed very divergent trends in
                                                                    business.
2006/07. Milk production and export availability from the
two major sources, Argentina and Uruguay boomed in
the second half of 2006 as a result of favourable climatic          MG NUTRITIONALS
factors and a strengthening farm gate price.                        2007 marked the fifth anniversary of MG Nutritionals which
                                                                    has actively pursued its vision of becoming a “global
However, milk production in both nations fell by more than
                                                                    innovator of dairy products that improve human health and
10% year-on-year in the first half of 2007, as a result of
                                                                    well being”.
floods in the major dairying regions. This caused extensive
farm damage including loss of cows and had a major                  A key part of the strategy has been a significant investment
adverse impact on herd health.                                      in research and development, with a focus on bone health,
                                                                    muscle function and weight management. Generous
In Brazil low prices for milk during most of 2006/07 and
                                                                    financial support has been received from the Geoffrey
growing domestic demand reduced export availability to
                                                                    Gardiner Dairy Foundation and National Food Industry
a trickle. Argentina’s export availability was hindered by
                                                                    Strategy by way of a Food Industry Grant. Activities
local Government policies including a tax and imposition
                                                                    have encompassed the discovery of novel, biologically
of a maximum export price (fixed at levels way below the
                                                                    active components in milk through to commercial scale
prevailing commodity price) that encouraged processors
                                                                    manufacture of the active ingredients. Several of the
to supply the domestic market first. The driving reason for
                                                                    new bioactive ingredients and products have been taken
the Argentine Government’s actions was to keep a lid on
                                                                    through to full human clinical trials.
inflation by ensuring that the price of essential food items
such as milk did not rise to export parity.                         During the past 12 months MG Nutritionals focussed on
                                                                    the commercialisation of some of its research findings. The
Global stockpiles of dairy products have been run down
                                                                    launch of a new retail sports nutrition business, ASCEND
and the level of market intervention from governments in
                                                                    Elite Proven Sports Proteins (www. ascendsport.com.au)
the EU and US has been significantly wound back. EU and
                                                                    was the first to be announced.
US surplus (intervention) stockpiles of dairy commodities




                                                               18
                                                               MURRAY GOULBURN ANNUAL REPORT 2007




  During the past 12 months MG Nutritionals focussed on

   the commercialisation of some of its research findings.

The launch of a new retail sports nutrition business, ASCEND

 Elite Proven Sports Proteins was the first to be announced.




                             19
OPERATIONS REVIEW




Based on research findings that clearly demonstrate the              The successful Long Life Milk strategy was underpinned
performance benefits, and validate the effectiveness of              by the launch of new 2-litre packs during the year. Sales
the unique ASCEND Elite product range, MG Nutritionals               of this product were well above expectations and helped
established a new benchmark in the global market for                 Devondale Long Life Milk sales grow by 53% for the year.
protein supplements. Commercialisation of these sports               The purchase of the Liddells Lactose Free brand also
nutrition products required development of three unique              gave the business added strength in the milk market and
bioactive whey protein products as well as registration              a first time entry into the yogurt market. This acquisition fits
and approvals from the Australian Therapeutics Goods                 extremely well with the Co-operative’s direction to further
Administration, US Customs and US Food & Drugs                       grow branded strength in the domestic business and enter
Administration.
                                                                     other dairy categories.

A number of new protein food ingredients were developed
                                                                     During the year Devondale maintained its share of the
and commercialised. These included NatraPro Instant
                                                                     dairy spread market and remained the leading national
Whey Protein Isolate (WPI) which is ideal for sports
                                                                     brand. Moreover, strong support for Devondale cheese
nutrition applications and a range of specialised, functional
                                                                     was shown by consumers during the year as sales
Milk Protein Concentrates (MPC), such as NatraPro
                                                                     returned to growth. The launch in June of the new
Lactose Reduced MPC that were specifically designed for
                                                                     Devondale Moo Zoo range of snacking cheese products
nutritional and health food applications.
                                                                     and Devondale Organic continues the direction to launch
MG Nutritionals supported the establishment of the                   into markets with innovative products in markets with
Co-operative’s newly commissioned factory in China                   strong future growth potential.
through the development and manufacture of an extensive
range of highly specialised and innovative nutritional               Corporate Brands

powders for infants and adults.                                      This division achieved a strong sales growth of 9.2% over
                                                                     the full year, with sales reaching $229 million. Murray
Following the successful construction and commissioning              Goulburn’s market share of supply to retail customer
of the lactoferrin plant at Leongatha during 2003 and 2004,
                                                                     brands continues to grow and as retailers are increasingly
MG Nutritionals is now a world leading supplier of the
                                                                     following a growth strategy, it remains an important part of
highest quality lactoferrin.
                                                                     the Co-operative’s overall offering to retail partners.

                                                                     Food Service
DOMESTIC                                                             The Food Service division achieved sales growth in a
Sales for the Domestic division grew by 10.8% with four              very competitive market, with sales increasing 7.7% and
of the five divisions again showing growth. Product sales
                                                                     growth across all categories. As a further sign of the
across Australia reached $768 million including full year’s
                                                                     Co-operative’s ongoing development within this market
sales of $50 million for MG Classic Foods acquired in
                                                                     it was awarded the Supplier of the Year in the Chilled
May 2006. Again, the Retail division continued its strong
                                                                     section from the Countrywide National Supplier Network.
performance achieving overall growth of 13.7% in value
                                                                     Sales within the Specialty Cheese category continued to
for the total year.
                                                                     grow as the division launched a Fetta Cheese product to
Devondale                                                            complement the existing range.
The year saw a further improvement in Devondale sales
with overall growth 20.5%. Growth was achieved in both
volume and value with ex-factory sales of $167 million for
the year.

                                                                20
                                                        MURRAY GOULBURN ANNUAL REPORT 2007




The year saw a further improvement in Devondale sales

              with overall growth 20.5%.




                         21
OPERATIONS REVIEW




Food Ingredients                                                    The Fodder Support Program was announced when many
Sales volume for the year reached 180,965 tonnes 6.5%               farmers were struggling to source and pay for fodder to
above last year. Sales value for the year was $219 million.         supplement very limited, home grown supplies. More
The season began with weak international prices which               than 60% of the Co-operative’s farmers participated in the
impacted on first half sales. International prices started          program and more than 200,000 tonnes of fodder were
to rise from late November 2006, and this had a positive            sourced through MG Agrilink and Murray Goulburn Trading.
impact on returns and profitability in the second half.
                                                                    A joint effort between Field Services, MG Agrilink and MG
Drought conditions necessitated a strategy for the local            Trading enabled the sourcing, supply and financing of this
food ingredient business to maintain its core customer              major initiative in the true Co-operative spirit.
base. One exception was the bulk liquid business which
was responsible for the majority of volume growth in                Field staff liaised closely with other agencies, such as

domestic ingredients.                                               Rural Counsellors and Victorian Department of Primary
                                                                    Industry staff to help deliver services to Murray Goulburn
Sales of secondary products such as whey and                        farmers. In the Maffra district, MG field staff operated
buttermilk powder were slightly down due to shortages               an irrigation water broking service to assist farmers to
in supply for most of the year and this impacted on                 source additional supplies of scarce irrigation water. The
parts of the dry ingredient business. Milk fat remained             farm business analysis tool, Taking Stock, which was
extremely tight throughout the year which meant that the            co–developed by MG and is promoted by Dairy Australia,
Co-operative could not maintain all of the bulk cream               was used on many farms to measure the state of the
business. Demand remained strong throughout the year                business and to provide a basis for planning.
for all ingredients, however a strict policy of adherence to
forecasted volumes meant that additional demand could               Milk quality is a core role of Field Services and again

not be engaged without hindering planned requirements               during the year farm milk quality was excellent with more

for other customers.                                                than 89% of milk received being above the premium
                                                                    specification. The on-farm quality assurance program
Product development work continued on functional
                                                                    “MG Milkcare” continues to be an industry leader, is
ingredients in ice cream with formal approval and
                                                                    valued by the Co-operative’s customers and provides
commercial sales achieved during the year. A key part
                                                                    Murray Goulburn farmers with an approved system for
of the division’s strategy is to establish these products
                                                                    statutory compliance.
domestically before engaging export sales opportunities.
                                                                    The colostrum program consolidated on its growth over
                                                                    the past five seasons. Suppliers were paid an average net
FIELD SERVICES                                                      price of $2 per litre, a reflection of the program’s value to
The prime objective of the Field Services group for the             the Co-operative. Intake from South Australia grew and
2006/07 season was to support all shareholder/suppliers             colostrum quality once again continued to improve across
through the continuing drought conditions. With emphasis            the State.
on “on farm” assistance, field staff made more than 10,000
visits, most in relation to budget/financial assistance
however in nearly all cases a friendly face and someone to
listen to and bounce ideas off also constituted a valuable
contribution.



                                                               22
                                                         MURRAY GOULBURN ANNUAL REPORT 2007




 Strong support for Devondale cheese was shown by

consumers during the year as sales returned to growth.




                         23
OPERATIONS REVIEW




MGF@RM, the Co-operative’s farm internet service, began               Computer applications, such as the Enterprise
a conversion to a full website to provide an improved,                Resource Planning system (SAP), now underpin all
user friendly service and allow for greater flexibility. Field        the Co-operative’s financial functions and many of the
Services continued to work closely with Gippsland Herd                fundamental logistics processes. The IT department is
Improvement, the producers of the Mistro suite of farm                also responsible for the telecommunications, voice and
software, to develop integrated software services for the             data networks that provide the Co-operative’s national
benefit of supplier/shareholders.                                     and international communications, including all associated
                                                                      terminals and peripheral equipment.
A new project titled “Supply-chain driven environmental
performance in the dairy industry” was developed by                   As technology is advancing at an increasing rate, the
Field Services in co-operation with Department of Primary             IT department faces the challenge of making continuous
Industry and the West Gippsland Catchment Management                  improvements while supporting the increasing and
Authority. The project received financial support from                changing business demands in a dynamic and rapidly
the Department of Agriculture, Fisheries and Forestry                 changing technological environment. During the year the
National Landcare Program and will pilot an automated                 department upgraded the computer based platforms and
method of collecting data on-farm to demonstrate and                  achieved significant operational efficiencies. This was
report environmental stewardship. It brings together the              accomplished without any reduction to network usage
Murray Goulburn /farmer relationship, service providers               during changeover. The Co-operative’s new vendor, IBM,
and catchment planners to evaluate the effectiveness of               requested Murray Goulburn’s participation in promoting the
this approach. The pilot was made possible through the                change as a demonstration of excellence to the industry.
generous co-operation of 20 supplier/shareholders in the
                                                                      The department installed the necessary information
Yarram district.
                                                                      technology into the new site at Edith Creek, Tasmania
                                                                      to enable that venture to be fully integrated into the

INFORMATION TECHNOLOGY                                                Co-operative’s communications network and hence its

Murray Goulburn’s business operations have a high                     full computer based business operations.

dependency on information technology. Characteristic
                                                                      Other major developments included many new operational
of the majority of successful Australian companies,
                                                                      procedures. These included marketing products over the
information technology is at the core of every business
                                                                      Internet, enhanced methods of producing farm payments
process, crucial to innovation and a key driver to enterprise
                                                                      and significant improvements in specifically targeted
success. Hence the IT department has a crucial role
                                                                      business operations.
in all the Co-operative’s core business processes by
implementing a range of computer-based applications.                  The ASCEND suite of products is the first major internet
These perform the complex calculations and processes                  enterprise of the Co-operative. This is accessed through
supporting existing and new business practices necessary              the web site - www.ascendsport.com.au - which provides
for success in the increasingly competitive local and                 on-line purchasing of a range of elite nutrition products
international markets in which the Co-operative operates.             produced and marketed by MG Nutritionals to approved
                                                                      customers.




                                                                 24
                                                                MURRAY GOULBURN ANNUAL REPORT 2007




     A joint effort between Field Services, MG Agrilink

and MG Trading enabled the sourcing, supply and financing

    of this major initiative in the true Co-operative spirit.




                               25
OPERATIONS REVIEW




Other significant projects undertaken by the department             MG Agrilink assisted farmers in sourcing alternative feed
provided enhanced time-keeping procedures throughout                sources and in excess of 50,000 tonnes of grain and
the organisation, improved capability for management                50,000 tonnes of hay were sold throughout the year.
of products from development through manufacture to
                                                                    It is expected that these alternative feed strategies will
sales and expanded data communications using EDI
                                                                    continue due to the expected difficulties that will be faced
technology with major customers, key vendors and
                                                                    in traditional pasture growth techniques which face parts of
transport operators.
                                                                    the State. In response to this Murray Goulburn Trading has
All risk management and governance KPI’s were met                   increased its expertise in the areas of agronomic services
during the year by a generous margin.                               and animal feed nutrition for the benefit of those farmers
                                                                    who wish to use such services.

TRADING                                                             The division’s farmer loyalty program paid out
Murray Goulburn’s Trading Stores achieved another record            approximately $3.5 million to those farmers who supported
result increasing revenues by 41% from $141 million to              the Trading Stores during the financial year which was up
$199 million for the year. The division’s main focus was            from $2.1 million the previous year. This cash payment
on assisting farmers in sourcing alternative feed and farm          was made in two lots, the first $400,000 in January 2007
inputs domestically and internationally during the height of        when farmers were most in need and the second payment
the drought period.                                                 after the end of the financial year. The division enhanced
                                                                    the supplier loyalty program with adjustments to increase
The Co-operative embarked on a major feed sourcing
                                                                    the product lines and percentages where these benefits
program in early December 2006 when it became evident
                                                                    were available.
that the harvest season was facing extreme difficulties.
The initiative was taken to source Palm Kernel Extract              The Co-operative purchased land and buildings in
(PKE) from overseas and this was well received by the               Leongatha to be refurbished in 2007/08 to accommodate
Co-operative’s farmers. More than 60,000 tonnes of                  the new Trading Store. At Maffra, bulk fertilizer spreading
PKE were delivered from February 2007 and this had                  facilities which included new spreader trucks, trailers,
an immediate impact on production yields and butterfat              loader, fertilizer bins and a bin truck were introduced and
content to those farmers who used the product. Farmers              proved to be a successful part of the store’s operation
also received the benefits of the Co-operative’s bulk               utilised by our farmers.
purchasing power and delivery expertise.
                                                                    MG Agrilink transferred its operation into the existing
Other alternative feed initiatives included hay purchases           administration block in Numurkah located on the
from Western Australia. This program required significant           Goulburn Valley Highway in Numurkah, and integrated as
logistics and distribution organisation and more than               part of the Murray Goulburn Trading business in sourcing
25,000 tonnes of product was distributed direct to Murray           and supplying grain and hay to the Co-operative’s
Goulburn supplier/shareholders in the second half of the            supplier/shareholders.
financial year.




                                                               26
FINANCIAL REPORT 2007
MURRAY GOULBURN CO-OPERATIVE CO. LIMITED FOR THE FINANCIAL YEAR ENDED 30 JUNE 2007




                                                                                                                                              MURRAY GOULBURN ANNUAL REPORT 2007
Directors’ Report                                                                                                                        28

Directors in Office                                                                                                                      29

Income Statement                                                                                                                         30

Balance Sheet                                                                                                                            31
Statement of Recognised Income & Expense                                                                                                 32

Statement of Cash Flows                                                                                                                  33

Notes                                                                                                                                    34

Directors’ Declaration                                                                                                                   63

Independent Auditor’s Report                                                                                                             64

Audit Independence Declaration                                                                                                           65




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.



                                                                   27
                                                                   27
DIRECTORs’ REPORT



Your Directors present the following report for the financial year ended              Events Subsequent to Balance Date
30th June, 2007.                                                                      Other than the declaration of dividends detailed in Note 7 ‘Unrecognised
Directors                                                                             Amounts’, no matters or circumstances have arisen since the end of the
The directors listed on page 29 each held office as a director of the                 financial year which significantly affected or may significantly affect the
company during or since the end of the financial year except for:                     operations of the consolidated entity, the results of those operations, or the
                                                                                      state of affairs of the consolidated entity in financial years subsequent to the
P Weller - resigned 29 November 2006                                                  financial year ended 30 June 2007.
WH Miles - appointed 28 February 2007
                                                                                      Environmental Regulations
Company Secretary                                                                     Murray Goulburn operates eight manufacturing sites throughout Victoria
IC Bird (B.BUS. ASA), company secretary, joined the company in 1990.                  in accordance with licence requirements pursuant to the Environment
Principal Activities                                                                  Protection Act (1970). The company also operates its own internal programs
The principal activities of the consolidated entity constituted by the                and systems designed to deliver positive environmental outcomes through
company and the entities it controlled during the year have been:                     the reduction in emissions, energy use, minimisation of product losses, and
                                                                                      the maximising of re-use and recycling initiatives.
- The processing of the whole milk of its shareholder suppliers and
  the manufacture, marketing and distribution of dairy products.                      Continual environmental improvement remains an important focus for the
                                                                                      company in order that the sustained viability of its supplier shareholders
- The operation of retail stores as a service to the suppliers.
                                                                                      continues and supports the objectives of both strong and vibrant supply
No significant change in the nature of these activities occurred during               whilst adhering to the obligations of the environment of compliance. The
the year.                                                                             company continued to update and deliver outcomes in line with its revised
Dividends Paid or Recommended                                                         Strategic Environment Improvement Plan first established with EPA in 2001.
The following dividends were paid or recommended during the year :                    During the year the company began work on the new Federal Government’s
                                                                                      requirements under the Energy Efficiency Opportunities Act 2006 (EEO).
a) In respect of the financial year ended 30th June 2006 as recommended
                                                                                      The EEO focuses on large commercial users of energy undertaking an audit
   in the 2006 financial report :
                                                                                      process of all its required premises in order to identify energy efficiency
                                                                         $000         opportunities. The program is over five years and MG has commenced the
  Interim dividend paid on 3 July 2006                                                program across a number of sites.
    On A and C class preference shares at 4.0% unfranked                 1,280
                                                                                      At Leongatha the company completed and commissioned its largest waste
    On B class preference shares at 2.5% unfranked                         175
                                                                                      water treatment facility. The program was planned over three stages at a
  Final dividend paid on 1 November 2006                                              total cost of in excess of $15 million. The facility now removes almost all
    On ordinary shares at 5.0% unfranked                                 7,482        organics, fat, oil and grease from the factory’s wastewater leaving a basic
    On A and C class preference shares at 4.0% unfranked                 1,350        saline stream for discharge into the local water authority’s discharge system.
    On B class preference shares at 2.5% unfranked                         209
                                                                                      The company continued its program of converting its diesel powered milk
                                                                     10,496           tankers to natural gas. The initiative will deliver immediate reductions in CO2
b) In respect of the financial year ended 30th June 2007 :                            emissions surpassing any licence requirements considered by regulators.
  Interim dividend paid on 9 July 2007                                                Murray Goulburn remains a signatory to the National Packaging covenant.
  (Dividends declared subsequent to 30 June 2007                                      The company agreed to terms in 2001 and continues to support this
  and therefore not recognised)                                                       voluntary system which encourages industry to develop cleaner and more
    On A and C class preference shares at 4.0% unfranked                 1,294        efficient solutions to the problems associated with commercial and industrial
    On B class preference shares at 2.5% unfranked                         167        packaging.
  Final dividend recommended for payment on or                                        The company had no prosecution or infringement notices from the EPA to report.
  after 30 September 2007                                                             Insurance of Officers
  (Dividends declared subsequent to 30 June 2007                                      During the financial year the company paid a premium of $168,264 to
  and therefore not recognised)                                                       insure the directors and senior managers of the company. The liabilities
    On ordinary shares at 12.0% unfranked                            21,960           insured include costs and expenses that may be incurred in defending civil
    On A and C class preference shares at 4.0% unfranked              1,294           or criminal proceedings that may be brought against the officers in their
    On B class preference shares at 2.5% unfranked                      167           capacity as officers of the consolidated entity.
                                                                     24,882           Auditor’s Independence Declaration
Review of Operations                                                                  Our auditors have provided the Board of Directors with a signed
Please refer to the Chairman’s Report and the Review of Operations                    Independence Declaration in accordance with section 307C of the
comments.                                                                             Corporations Act 2001. This declaration is included at page 65 of this
                                                                                      financial report.
Future Developments
Disclosure of information regarding likely developments in the operations             Rounding of Amounts to the Nearest Thousand Dollars
of the consolidated entity in future financial years and the expected results         The company is of the kind referred to in ASIC Class Order 98/0100 dated
of those operations is likely to result in unreasonable prejudice to the              10 July 1998, and in accordance with that Class Order amounts in the
consolidated entity. Accordingly, this information has not been disclosed             directors’ report and the financial report have been rounded off to the nearest
in this report.                                                                       thousand dollars.
                                                                                      Signed in accordance with a resolution of the Board of Directors.
Significant Changes in the State of Affairs
No significant change in the state of affairs of the consolidated entity
occurred during the financial year.
                                                                                      I.W. MacAulay
                                                                                      Director
                                                                                      Melbourne, 26 September 2007

                                                                                 28
DIRECTORs IN OFFICE



                                                                                      Meetings Attended




                                                                                                                                                                 MURRAY GOULBURN ANNUAL REPORT 2007
                                                 Full Meetings                        Meetings of Committees
                                                  of Directors
                                                                                      Audit           Finance       Zone     Compliance Remuneration Supplier
                                                                                                                                                     Relations
                                                    15 held                           3 held           4 held       1 held     2 held      1 held      5 held
Director
IW MacAulay                                             15                              3*                4          1*          2*           1          5
Yarram
Chairman
LA Jarvis OAM                                           15                               3                4           *           2           1          *
Kergunyah
Deputy Chairman
ST Mills                                                14                               3                4           *           *           *          *
Numurkah
Deputy Chairman
WM Brown                                                15                               3                4           *           *           *          *
Kongwak
GJ Davies                                               14                               *                *           1           2           *          *
Fish Point via Swan Hill
DF Howard                                               14                               *                *           *           2           *          5
Camperdown
WH Miles                                                 5                               *                *           *           *           *          1
Calivil
5 full Board meetings and 1 Supplier Relations committee meeting held whilst a member of the Board and committee

JP Pye                                                  15                               *                *           1           *           *          5
Bessiebelle
JT Vardy                                                14                               *                *           1           *           *          5
Maffra
WJA Verboon                                             15                               *                *           *           *           *          5
Korumburra
P Weller                                                 7                               *                *           *           *           *          2
Lockington
7 full Board meetings and 2 Supplier Relations committee meetings held whilst a member of the Board and committee

SJ O’Rourke                                             15                               *                4           *           *           *          *
Gisborne
Managing Director

* Not a member of the relevant committee

For qualifications and experience refer to page 2.




                                                                                         29
INCOME sTATEMENT
for the Financial Year ended 30 June 2007




                                                                 Note                  Consolidated                       Company
                                                                                2007                  2006         2007              2006
                                                                                $000                  $000         $000              $000

Sales revenue                                                     2          2,173,197          2,027,479       1,925,872       1,877,807
Cost of sales                                                                (1,845,116)       (1,721,207)      (1,627,954)    (1,594,424)
Gross profit                                                                   328,081            306,272         297,918           283,383
Other income                                                      2              1,821                 1,031       15,758             5,896
Share of profit of associates                                    13              1,585                  828               -                 -
Distribution expenses                                                         (131,081)          (123,346)       (125,329)      (121,379)
Marketing expenses                                                             (65,273)           (55,208)        (61,077)          (51,793)
Administration expenses                                                        (57,767)           (56,197)        (46,148)          (46,009)
Finance costs                                                     3            (38,168)           (31,859)        (46,487)          (40,462)
Other expenses                                                                 (13,450)           (21,241)        (26,676)          (26,182)
Profit before income tax                                                        25,748                20,280        7,959             3,454
Income tax expense                                                4              (4,028)              (6,092)        (917)           (2,635)
Profit for the period                                                           21,720                14,188        7,042              819




Attributable to:
    Equity holders of the parent                                                16,863                 9,060        7,042              819
    Minority interest                                                            4,857                 5,128              -                 -
                                                                                21,720                14,188        7,042              819


The accompanying Notes form part of these Financial Statements




                                                                        30
BALANCE shEET
as at 30 June 2007




                                                                 Note                Consolidated                     Company




                                                                                                                                            MURRAY GOULBURN ANNUAL REPORT 2007
                                                                              2007                  2006       2007              2006
                                                                              $000                  $000       $000              $000

Current Assets
Cash                                                                          19,610                11,205     13,627             7,469
Receivables                                                       8          346,811            338,281       332,873           316,318
Inventories                                                       9          410,004            536,361       388,939           514,816
Other                                                            10            2,142                 2,969      2,142             2,611
Total Current Assets                                                         778,567            888,816       737,581           841,214

Non Current Assets
Receivables                                                       8           47,223                47,857     61,102            63,714
Investments accounted for using the Equity Method                13            8,307                 6,738            -                 -
Other Financial Assets                                           11             448                   430      10,644            23,177
Property, Plant & Equipment                                      14          619,371            622,547       597,846           603,593
Intangible Assets                                                15           10,603                 6,603      4,000                   -
Other                                                            10           18,255                12,549     18,243            12,549
Total Non Current Assets                                                     704,207            696,724       691,835           703,033
Total Assets                                                             1,482,774            1,585,540      1,429,416      1,544,247

Current Liabilities
Payables                                                         16          208,801            230,905       182,532           201,978
Borrowings                                                       17          328,172            498,237       328,172           498,237
Current Tax Payable                                              18                  -                 37             -                 -
Provisions                                                       19           30,314                28,583     28,858            26,348
Total Current Liabilities                                                    567,287            757,762       539,562           726,563

Non Current Liabilities
Payables                                                         16            6,962                 8,201      5,262             8,201
Borrowings                                                       17          194,355            158,457       309,592           273,023
Provisions                                                       19            8,604                 8,082      8,496             7,449
Deferred Tax Liabilities                                         20           48,211                37,936     48,575            38,100
Total Non Current Liabilities                                                258,132            212,676       371,925           326,773
Total Liabilities                                                            825,419            970,438       911,487       1,053,336
Net Assets                                                                   657,355            615,102       517,929           490,911

Equity
Issued Capital                                                   22          206,911            195,260       206,911           195,260
Reserves                                                         23          146,862            128,144        98,026            79,205
Retained Earnings                                                24          206,548            200,181       212,992           216,446
Parent Entity Interest                                                       560,321            523,585       517,929           490,911
Minority Interest                                                25           97,034                91,517            -                 -
Total Equity                                                                 657,355            615,102       517,929           490,911


The accompanying Notes form part of these Financial Statements




                                                                        31
sTATEMENT OF RECOGNIsED INCOME AND EXPENsE
for the Financial Year ended 30 June 2007




                                                                 Note               Consolidated                     Company
                                                                             2007                  2006       2007             2006
                                                                             $000                  $000       $000             $000

Gain on property revaluation                                     23                 -              10,363            -         10,098
Gain on cashflow hedges taken to equity                          23          28,206                 3,307     28,206            3,307
Exchange differences arising on translation
of foreign operations                                            23            (147)                      -          -                -
Revaluation reserve transferred to income statement              23             (83)                      -      (83)                 -
Income tax on items taken directly to or transferred
from equity                                                       4          (8,393)               (4,101)    (8,437)          (4,021)
Net Income recognised directly in equity                                     19,583                 9,569     19,686            9,384
Profit for the period                                                        21,720                14,188      7,042             819
Total recognised income for the period                                       41,303                23,757     26,728           10,203




Attributable to:
    Equity holders of the parent                                             36,446                18,629     26,728           10,203
    Minority interest                                                         4,857                 5,128            -                -
                                                                             41,303                23,757     26,728           10,203


The accompanying Notes form part of these Financial Statements




                                                                        32
sTATEMENT OF CAsh FLOWs
for the Financial Year ended 30 June 2007



                                                                 Note                 Consolidated                        Company




                                                                                                                                                MURRAY GOULBURN ANNUAL REPORT 2007
                                                                               2007                  2006          2007              2006
                                                                               $000                  $000          $000              $000

Cash flows from operating activities
    Receipts from customers                                              2,138,149             1,955,535        1,927,454       1,802,303
    Payments to suppliers and employees                                  (1,923,351)          (1,894,226)       (1,720,847)    (1,745,507)
                                                                             214,798                 61,309       206,607           56,796
    Dividends received                                                                1                   3           332              249
    Interest received                                                           1,820                 1,356         1,528            1,229
    Interest paid                                                             (42,757)           (31,804)         (42,757)          (31,778)
    Income taxes paid                                                          (2,181)               (1,913)              -                 -
    Net cash inflow from operating activities                    32b         171,681                 28,951       165,710           26,496


Cash flows from investing activities
    Payments for property, plant and equipment                                (62,482)           (71,115)         (58,096)          (66,790)
    Investment in associated company                                             (316)                 (254)         (316)            (254)
    Proceeds from the sale of property, plant,
    equipment and vehicles                                                      2,475                 2,074         2,177            1,359
    Payments for investments in subsidiaries                                          -                     -        (458)          (18,465)
    Payments for businesses, net of cash acquired                33                   -          (17,417)             533                   -
    Payments for intangible assets                                             (4,000)                      -       (4,000)                 -
    Net cash (outflow) from investing activities                              (64,323)           (86,712)         (60,160)          (84,150)


Cash flows from financing activities
    Dividends paid                                                             (9,143)           (19,312)           (9,143)         (19,312)
    Proceeds from the issue of ordinary and
    non-redeemable preference shares                                          10,298                 14,325        10,298           14,325
    Proceeds from minority interest                                              439                   915                -                 -
    Repayment of lease liabilities                                             (1,037)                 (840)        (1,037)           (840)
    Proceeds from borrowings                                                  55,000                 68,178        55,000           68,179
    Repayment of borrowings                                                  (154,510)                      -    (154,510)                  -
    Net cash (outflow) inflow from financing activities                       (98,953)               63,266       (99,392)          62,352

Net increase in cash                                                            8,405                 5,505         6,158            4,698
Cash at the beginning of the year                                             11,205                  5,700         7,469            2,771
Cash at the end of the year                                      32a          19,610                 11,205        13,627            7,469


The accompanying Notes form part of these Financial Statements




                                                                        33
NOTEs TO ThE FINANCIAL sTATEMENTs
for the financial year ended 30 June 2007




NOTE 1: Summary of Significant Accounting Policies
This general purpose financial report has been prepared in accordance with the Corporations Act 2001, Accounting Standards and Interpretations,
and complies with other requirements of the law. Accounting Standards include Australian equivalents to International Financial Reporting Standards
(‘A-IFRS’) which ensure that the company and the consolidated financial statements and accompanying notes comply with International Financial Reporting
Standards (‘IFRS’).
The financial statements were authorised for issue by the directors on 26 September 2007.
The financial report has been prepared on the basis of historical cost, except for the revaluation of certain non current assets and financial instruments.
The financial report is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($000), unless otherwise indicated, in
accordance with ASIC Class Order 98/0100 which does apply to the Company.
In applying the consolidated entity’s accounting policies, below, management continually evaluates judgments, estimates and assumptions based on
experience and other factors, including expectations of future events that may have an impact on the consolidated entity. All judgments, estimates and
assumptions made are believed to be reasonable based on the most current set of circumstances available to management. Actual results may differ from
the judgments, estimates and assumptions.
a) Adoption of New and Revised Standards
   Except for amendments to AASB 8 ‘Operating Segments’, which the consolidated entity has early adopted, Australian Accounting Standards and
   Interpretations that have recently been issued or amended but are not yet effective have not been adopted by the consolidated entity for the annual
   reporting period ended 30 June 2007. As a result of adopting AASB 8, the consolidated entity is not required to present segment information.
  In particular, AASB 7 ‘Financial Instruments: Disclosures’, AASB 101 ‘Presentation of Financial Statements’ and Interpretation 10 ‘Interim Financial
  Reporting and Impairment’ are all effective for the financial year commencing 1 July 2007 and will be applied in the financial report of the consolidated
  entity in that annual reporting period.
  The directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements
  of the consolidated entity or the company.
b) Principles of Consolidation
   The consolidated financial statements incorporate the assets and liabilities of all entities controlled by Murray Goulburn Co-Operative Co. Limited
   (“company”) as at 30 June 2007 and the results of all controlled entities for the year then ended from the date on which the company obtained control.
   The effects of all transactions between entities in the consolidated entity are eliminated in full. The company and its controlled entities together are
   referred to in this financial report as the consolidated entity.
  On acquisition, the assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. Any excess of
  the cost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. If, after reassessment, the fair values of the
  identifiable net assets acquired exceed the cost of acquisition, the deficiency is credited to profit and loss in the period of acquisition.
  The interest of minority shareholders in the equity of controlled entities is shown separately in the consolidated balance sheet.
c) Income Tax
   Current tax represents income taxes payable or recoverable in respect of the taxable profit or loss for the period. Current tax is recognised in the
   income statement, except when it relates to items credited or debited directly to equity, and is calculated based on tax rates and tax laws current as
   at reporting date.
  Deferred tax is accounted for using the comprehensive balance sheet liability method in respect of temporary differences arising from differences between
  the carrying amount of assets and liabilities in the financial statements and the corresponding tax base of those items. Deferred tax is recognised in the
  income statement except (i) when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in
  equity or (ii) where it relates to items arising from the initial recognition of assets and liabilities, other than as a result of business combinations, which
  affects neither taxable income or accounting profit. Furthermore, a deferred tax liability is not recognised in relation to taxable temporary differences
  arising from goodwill.
  Deferred tax assets are recognised to the extent that it is probable that sufficient taxable amounts will be available against which deductible temporary
  differences or unused tax losses can be utilised.
  Deferred tax is measured at the rate of income tax expected to apply in the period in which the benefit will be received or the liability will become payable
  based on applicable tax rates and tax laws.




                                                                              34
NOTE 1: Summary of Significant Accounting Policies (continued)




                                                                                                                                                                     MURRAY GOULBURN ANNUAL REPORT 2007
c) Income Tax (continued)
   Deferred tax assets and liabilities are offset as the company / consolidated entity intends to settle its current tax assets and liabilities on a net basis.
  The company and its wholly-owned entities are part of a tax-consolidated group. Murray Goulburn Co-operative Co. Limited is the head entity in the tax
  consolidated group. Tax expense/income, deferred tax assets and deferred tax liabilities arising from temporary differences of the members of the tax
  consolidated group are recognised in the separate financial statements of the members of the tax consolidated group using a ‘group allocation’ approach.
  Under this approach each entity prepares a notional taxable income or loss as if it were a taxpayer in its own right except that distributions made and
  received, capital gains and losses, gains or losses from intra-group debt forgiveness and similar items arising on transactions within the tax consolidated
  group are treated as having no tax consequence. The tax expense/income, deferred tax assets and deferred tax liabilities arising from temporary
  differences of the members of the tax consolidated group is allocated to each entity with reference to the individual entities notional tax calculation.
  Current tax liabilities and assets and deferred tax assets arising from unused tax losses and tax credits of the members of the tax consolidated group are
  recognised by the company (as head entity in the tax consolidated group).
  Due to the existence of a tax funding arrangement between the entities in the tax consolidated group, amounts are recognised as payable to or receivable
  by the company and each member of the group in relation to the tax contribution amounts paid or payable between the parent entity and the other
  members of the tax consolidated group in accordance with the arrangement. Further information about the tax funding arrangement is detailed in Note 4
  to the financial statements.
  Where the tax contribution amount recognised by each member of the tax-consolidated group for a particular period is different to the aggregate of the
  current tax liability or asset and any deferred tax asset arising from unused tax losses and tax credits in respect of that period, the difference is recognised
  as a contribution from (or distribution to) equity participants.
d) Derivative Financial Instruments
   The consolidated entity enters into a variety of derivative financial instruments to manage its exposure to foreign exchange and interest rate risk, including
   forward exchange contracts, currency options and interest rate swaps. Further details of derivative financial instruments are disclosed in Note 30.
  Derivatives are initially recognised at fair value at the time of entering a derivative contract and are subsequently remeasured to fair value at each
  reporting date. The fair value calculation of derivative financial instruments is measured by using valuation techniques based on observable market prices
  or rates. The resulting gain or loss is recognised in profit or loss immediately unless the derivative is designated and effective as a hedging instrument,
  in which event, the timing of the recognition in profit or loss depends on the nature of the hedge relationship. The consolidated entity designates certain
  derivatives as either fair value hedges when they hedge the exposure to changes in the fair value of recognised assets, liabilities or firm commitments or
  cash flow hedges when they hedge exposure to variability in cash flows of highly probable forecast transactions.
  Fair Value Hedge
  Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in profit or loss together with any changes in the
  fair value of the hedged asset or liability that is attributable to the hedged risk.
  Hedge accounting is discontinued when the hedge instrument expires or is sold, terminated, exercised, no longer qualifies for hedge accounting or the
  consolidated entity revokes the hedge relationship. The adjustment to the carrying amount of the hedged item arising from the hedged risk is amortised
  to profit or loss from that date.
  Cash Flow Hedge
  The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are deferred in equity. The gain or loss
  relating to the ineffective portion is recognised in profit or loss. Amounts deferred in equity are transferred to profit or loss in the period when the hedged
  item is recognised in profit or loss.
  Hedge accounting is discontinued when the hedge instrument expires or is sold, terminated, exercised, no longer qualifies for hedge accounting or
  the consolidated entity revokes the hedge relationship. At that time, any cumulative gain or loss deferred in equity at that time remains in equity and
  is recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast transaction is no longer expected to occur, the
  cumulative gain or loss that was deferred in equity is recognised immediately in profit or loss.
  Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are recognised immediately in profit or loss.
e) Foreign Currencies
   Foreign currency transactions during the year are converted to Australian currency at the exchange rate ruling at the date of the transaction.
   Foreign currency monetary items at balance date are translated at the exchange rate ruling at that date. Exchange differences are recognised in
   the income statement in the period in which they arise except for differences on transactions entered into to hedge certain foreign currency risks
   – refer Note 1 (d) above.




                                                                                 35
NOTEs TO ThE FINANCIAL sTATEMENTs
for the financial year ended 30 June 2007




NOTE 1: Summary of Significant Accounting Policies (continued)
f) Property, Plant and Equipment
   Land and buildings are measured at fair value. Plant and equipment are included at cost being the purchase consideration determined as at the date of
   acquisition plus costs incidental to the acquisition less impairment. The cost of fixed assets constructed within the consolidated entity includes the cost
   of materials and direct labour. All fixed assets including buildings and capitalised leasehold assets, but excluding freehold land, are depreciated over
   their estimated useful lives commencing from the time the asset is held ready for use.
  Any revaluation increase arising on the revaluation of land and buildings is credited to the asset revaluation reserve, except to the extent that it reverses
  a revaluation decrease for the same asset previously recognised as an expense in profit or loss, in which case the increase is credited to the income
  statement to the extent of the decrease previously charged. A decrease in carrying amount arising on the revaluation of land and buildings is charged
  as an expense in profit or loss to the extent that it exceeds the balance, if any, held in the asset revaluation reserve relating to a previous revaluation of
  that asset.
  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 of disposal and the proceeds of disposal, and is included in the income statement of the group in the year of disposal. Any realised revaluation
  increment relating to the disposed asset which is included in the asset revaluation reserve is transferred to retained earnings.
g) 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
   (excluding land) over its expected useful life to the consolidated entity.
  The expected useful lives are as follows:
  Buildings                   30 to 40 years     Vehicles    3 to 8 years
  Plant and Equipment         5 to 15 years      Tankers     10 to 20 years
h) Impairment of Assets
   The carrying amount of assets is reviewed each balance date to identify any impairment loss. Assets are written down to recoverable amount where the
   carrying value of the asset exceeds the recoverable amount, by reference to cash-generating units. The recoverable amount is the greater of fair value less
   costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount
   rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses are recognised in the
   income statement unless the asset is carried at valuation in which case the impairment loss is recognised as a revaluation decrease to the extent of any
   previous increase.
i) Financial Assets
    Investments in associated companies are accounted for under the equity method in the consolidated financial statements and the cost method in the
    company financial statements.
  Trade receivables, loans and other receivables are recorded at amortised cost less impairment. The adjustment to employee loans has been capitalised as
  an asset to the extent that it relates to future employee services.
j) Intangible Assets
    Intangible assets are recorded at cost less impairment. All potential intangible assets acquired in a business combination are identified and recognised
    separately from goodwill where they satisfy the definition of an intangible asset and their fair value can be measured reliably.
k) Goods and Services Tax
   Revenues, 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 part of the cost of acquisition of
     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. Cash flows are included in
  the cash flow statement on a gross basis. The GST component of cash flows arising from investing and financing activities which is recoverable from, or
  payable to, the taxation authority is classified as operating cash flows.
l) Leased Assets
    Leased assets classified as finance leases are capitalised as fixed assets. A finance lease effectively transfers from the lessor to the lessee substantially
    all the risks and benefits incidental to the ownership of the leased asset. The amount initially brought to account is the fair value or, if lower, 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 between interest 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 to the 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.




                                                                              36
NOTE 1: Summary of Significant Accounting Policies (continued)




                                                                                                                                                                      MURRAY GOULBURN ANNUAL REPORT 2007
m) Inventories
  Dairy produce stocks are valued at the lower of cost and net realisable value. Cost comprises direct materials, direct labour, maturation costs and an
  allocation of fixed factory 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 the first in first out basis.
  Net realisable value represents the estimated selling price less selling, marketing and distribution costs.
n) Goodwill
   Goodwill, representing the excess of the cost of acquisition over the fair value of the assets and liabilities acquired, is recognised as an asset and, for
   the purpose of impairment testing, is allocated to the cash generating unit to which it relates. Goodwill is tested for impairment annually or where an
   indicator of impairment is identified. Goodwill is not amortised however, any impairment is recognised immediately in profit or loss.
o) Accounts Payable
   Trade payables and other accounts payable are recognised when the consolidated entity becomes obliged to make future payments resulting from the
   purchase of goods and services.
p) Provisions
   Provisions are recognised when the consolidated entity has a present obligation, the future sacrifice of economic benefits is probable and the amount
   of the provision can be measured reliably. The amount recognised as a provision is the best estimate of the consideration required to settle the present
   obligation at reporting date. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the
   present value of those cash flows.
q) Employee Benefits
   Provision is made for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave and sick leave when it is probable
   that settlement will be required and they are capable of being measured reliably.
  Provisions are measured at their nominal values using the remuneration rate expected to apply at the time of settlement where they are expected to be
  settled within twelve months. Provisions not expected to be settled within twelve months are measured at the present value of the estimated future cash
  outflows in respect of services provided up to balance date.
  For defined benefit superannuation plans, the cost of providing benefits is determined using the projected unit credit method, with actuarial valuations
  being carried out at each reporting date. Actuarial gains and losses are recognised immediately in profit or loss in the year in which they occur.
  Past service cost is recognised immediately to the extent that the benefits are already vested, and otherwise is amortised on a straight-line basis over the
  average period until the benefits become vested.
  The defined benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligation, adjusted for unrecognised
  past service cost, net of the fair value of the plan assets. Any asset resulting from this calculation is limited to past service cost, plus the present value of
  available refunds and reductions in future contributions to the plan.
r) Borrowings
   Borrowings are recorded initially at fair value, net of transaction costs. Subsequent to initial recognition, borrowings are measured at amortised cost with
   any difference between the initial recognised amount and the redemption value being recognised in profit and loss over the period of the borrowing using
   the effective interest rate method.
s) Borrowing Costs
   Interest expense is recognised using the effective interest rate method. Borrowing costs attributable to qualifying assets are capitalised as part of the cost
   of those assets.
t) Revenue Recognition
   Revenue from the sale of goods and disposal of assets is recognised when the consolidated entity has transferred to the buyer the significant risks and
   rewards of ownership of the goods.
  Interest revenue is recognised on a time proportion basis using the effective interest method.
  Dividend revenue is recognised on a receivable basis.




                                                                                37
NOTEs TO ThE FINANCIAL sTATEMENTs
for the financial year ended 30 June 2007




                                                              Note                 Consolidated                       Company
                                                                            2007                  2006         2007              2006
                                                                            $000                  $000         $000              $000

NOTE 2: Revenue
Revenue
Sales revenue                                                             2,173,197         2,027,479        1,925,872      1,877,807
                                                                          2,173,197         2,027,479        1,925,872      1,877,807
Other Income
Interest received or receivable from:
- wholly controlled entities                                  31                   -                     -        862               98
- other persons                                                              1,820                 1,028        1,528              901
Dividends received from other corporations                                         1                   3        7,882              249
Service and management fees receivable                        31                   -                     -      5,486             4,648
                                                                             1,821                 1,031       15,758             5,896
Sales and other income                                                    2,175,018         2,028,510        1,941,630      1,883,703


NOTE 3: Profit from Operations before
Income Tax Expense has been
determined after:
Crediting / charging as gains and losses :
Borrowing Costs
Interest paid or payable to :
- controlled entities                                         31                   -                     -      8,319             8,629
- other persons                                                             37,966                31,644       37,966            31,618
- finance charges on finance leases                                            202                  215           202              215
Total borrowing costs expensed                                              38,168                31,859       46,487            40,462

Depreciation of :
- buildings                                                                  6,488                 5,996        6,268             5,933
- plant and equipment and vehicles                                          56,639                52,990       55,303            53,866
                                                              14            63,127                58,986       61,571            59,799

Amortisation of :
- leasehold improvements                                                           2                   2              1               1
- capitalised leases                                                           632                  790           632              790
                                                              14               634                  792           633              791

Net (gain) loss on sale and scrapping of non-current assets                   (747)                 (738)        (707)             (749)
Loss on disposal of investments                                                    -                120               -            289
Write down of inventories to net realisable value                            6,641                14,347        6,641            14,347
Write down of investments in subsidiaries                     33                   -                     -     13,325             4,188
Rental expense on operating leases                                           1,548                 9,015        1,285             8,759
Research and development expenditure                                         8,056                 5,867        8,056             5,867
Employee benefits
(excluding defined benefit expense in Note 27)                             170,022            158,969         155,559           151,219




                                                                     38
                                                             Note                        Consolidated                               Company




                                                                                                                                                            MURRAY GOULBURN ANNUAL REPORT 2007
                                                                                  2007                  2006                 2007                2006
                                                                                  $000                  $000                 $000                $000

NOTE 4: Income Tax Expense
a) Income tax recognised in profit or loss
  Tax expense comprises:
      Current tax expense                                                          2,146                 2,201                      -                   -
      Deferred tax expense                                                         1,882                 3,891                   917             2,635
  Income tax expense                                                               4,028                 6,092                   917             2,635




  The prima facie income tax expense on pre-tax
  accounting profit reconciles to the income tax expense
  in the financial statements as follows:
  Profit before income tax expense                                                25,748                20,280                7,959              3,454
  Income tax calculated at the Australian
  statutory tax rate of 30%                                                        7,724                 6,084                2,388              1,036
      Dividends as a co-operative (i)                                             (3,029)                      -              (3,029)                   -
      Write off investment in subsidiary                                                 -                     -              3,997              1,257
      Transactions within the tax-consolidated group
      that are exempt from taxation                                                      -                     -              (2,265)                   -
      Sundry items                                                                  (667)                    8                  (174)              342
  Income tax expense                                                               4,028                 6,092                   917             2,635

  (i) A tax deduction is obtained for unfranked dividends paid by the company. This amount does not include the benefit of tax deductions for dividends
      declared but not recognised, as disclosed in Note 7 below (the tax benefit of approximately $7,465,000 at the corporate tax rate of 30% will be
      recognised in the financial year ending 30 June 2008).




                                                                           39
NOTEs TO ThE FINANCIAL sTATEMENTs
for the financial year ended 30 June 2007




NOTE 4: Income Tax Expense (continued)
b) Deferred income tax at 30 June relates to the following:
                                                                                              Consolidated
                                                     Opening        Transition to    Charged           Charged      Acquisitions   Closing
                                                     Balance         AASB 139       to Income          to Equity    / Disposals    Balance
  2007                                                $000             $000            $000              $000          $000         $000

  Gross Deferred Tax Liabilities
     Property, plant and equipment                   (56,086)             -           1,532                  25           -        (54,529)
      Consumables                                     (4,921)             -            721                     -          -         (4,200)
      Cash flow hedges                                  (992)             -               -            (8,462)            -         (9,454)
      Other                                           (1,553)             -          (1,937)                   -          -         (3,490)
                                                     (63,552)             -            316             (8,437)            -        (71,673)
  Gross Deferred Tax Assets
     Provisions                                       11,203              -            657                     -          -        11,860
      Tax losses                                      14,208              -          (2,770)                   -          -        11,438
      Other                                              205              -             (85)                  44          -           164
                                                      25,616              -          (2,198)                  44          -        23,462
  Net Deferred Tax Liability                         (37,936)             -          (1,882)           (8,393)            -        (48,211)


                                                                                              Consolidated
                                                     Opening      Transition to      Charged           Charged     Acquisitions    Closing
                                                     Balance       AASB 139         to Income          to Equity   / Disposals     Balance
  2006                                                $000           $000              $000              $000         $000          $000

  Gross Deferred Tax Liabilities
     Property, plant and equipment                   (53,810)             -            904             (3,109)          (71)       (56,086)
      Consumables                                     (3,440)             -          (1,292)                   -       (189)        (4,921)
      Cashflow hedges                                         -     (1,850)               -                  858          -          (992)
      Other                                                   -           -          (1,387)                   -       (166)        (1,553)
                                                     (57,250)       (1,850)          (1,775)           (2,251)         (426)       (63,552)

  Gross Deferred Tax Assets
     Provisions                                       10,450              -            172                     -       581         11,203
      Tax losses                                      16,496              -          (2,288)                   -          -        14,208
      Other                                              188              -               -                    -         17           205
                                                      27,134              -          (2,116)                   -       598         25,616
  Net Deferred Tax Liability                         (30,116)       (1,850)          (3,891)           (2,251)         172         (37,936)




                                                                       40
NOTE 4: Income Tax Expense (continued)




                                                                                                                                                                MURRAY GOULBURN ANNUAL REPORT 2007
                                                                                                      Company
                                Opening              Transition to      Charged            Charged            Charged to       Acquisitions        Closing
                                Balance               AASB 139         to Income           to Equity         Subsidiary (i)    / Disposals         Balance
 2007                            $000                   $000              $000               $000               $000              $000              $000

 Gross Deferred Tax Liabilities
    Property, plant
    and equipment               (55,777)                   -              1,422                 25                   -                 -           (54,330)
    Consumables                   (4,706)                  -                797                   -                  -             (291)              (4,200)
    Cash flow hedges                (992)                  -                   -            (8,462)                  -                 -              (9,454)
    Other                         (1,320)                  -             (1,888)                  -                  -             (281)              (3,489)
                                 (62,795)                  -                331             (8,437)                  -             (572)           (71,473)

 Gross Deferred Tax Assets
    Provisions                    10,298                   -                708                   -                  -              342               11,348
    Tax losses                    14,208                   -             (1,879)                  -               (891)                -              11,438
    Other                            189                   -                (77)                  -                  -                 -                112
                                  24,695                   -             (1,248)                  -               (891)             342               22,898
 Net Deferred Tax Liability      (38,100)                  -               (917)            (8,437)               (891)            (230)           (48,575)


                                                                                                      Company
                                Opening          Transition to          Charged           Charged             Charged to         Acquisitions      Closing
                                Balance           AASB 139             to Income          to Equity          Subsidiary (i)      / Disposals       Balance
 2006                            $000               $000                  $000              $000                $000                $000            $000

 Gross Deferred Tax Liabilities
    Property, plant
    and equipment               (53,631)                   -                883             (3,029)                  -                 -           (55,777)
    Consumables                   (3,440)                  -             (1,266)                  -                  -                 -              (4,706)
    Cash flow hedges                    -            (1,850)                   -               858                   -                 -                (992)
    Other                               -                  -             (1,320)                  -                  -                 -              (1,320)
                                 (57,071)            (1,850)             (1,703)            (2,171)                  -                 -           (62,795)

 Gross Deferred Tax Assets
    Provisions                     9,908                   -                390                   -                  -                 -              10,298
    Tax losses                    16,496                   -             (1,323)                  -               (965)                -              14,208
    Other                            188                   -                  1                   -                  -                 -                189
                                  26,592                   -               (932)                  -               (965)                -              24,695
 Net Deferred Tax Liability      (30,479)            (1,850)             (2,635)            (2,171)               (965)                -           (38,100)

 (i) The tax expense associated with the utilisation of tax losses by another member of the tax-consolidated group is charged to the profit or loss
     of the subsidiary.
 All available tax losses have been brought to account and are included in the net deferred tax liability.
 The company and its wholly-owned entities are part of a tax-consolidated group. The head entity within the tax-consolidated group is Murray Goulburn
 Co-operative Co. Limited. The members of the tax-consolidated group are identified in Note 12.
 Entities within the tax-consolidated group have entered into a tax funding arrangement and a tax sharing agreement with the head entity. Under the terms
 of the tax funding arrangement, each of the entities in the tax-consolidated group has agreed to pay a tax equivalent payment to or from the head entity,
 based on the current tax liability or current tax asset of the entity. Such amounts are reflected in amounts receivable from or payable to other entities in
 the tax-consolidated group.
 The tax sharing agreement entered into between members of the tax-consolidated group provides for the determination of the allocation of income tax
 liabilities between the entities should the head entity default on its tax payment obligations. No amounts have been recognised in the financial statements
 in respect of this agreement as payment of any amounts under the tax sharing agreement is considered remote.




                                                                              41
NOTEs TO ThE FINANCIAL sTATEMENTs
for the financial year ended 30 June 2007




NOTE 5: Compensation of Key Management Personnel
The key management personnel of Murray Goulburn Co-operative Co. Limited (consolidated and parent company) during the year were:
                                                                             Short Term                    Post Employment
                                                                      Fees &            Non          Retirement        Superannuation      TOTAL
                                                                      Salary          Monetary        Benefit
2007                                                                    $                   $             $                    $             $

IW MacAulay              Chairman, non executive director            112,500              10,058        10,100             10,125        142,783
LA Jarvis OAM            Deputy chairman, non executive director      60,938                    -       10,100                5,484       76,522
ST Mills                 Deputy chairman, non executive director      51,563                    -       10,100                4,641       66,304
WM Brown                 Non executive director                       45,000                    -       10,100                4,050       59,150
GJ Davies                Non executive director                       45,000                    -       10,100                4,050       59,150
DF Howard                Non executive director                       45,000                    -       10,100                4,050       59,150
JP Pye                   Non executive director                       45,000                    -       10,100                4,050       59,150
J Vardy                  Non executive director                       45,000                    -       10,100                4,050       59,150
WJA Verboon              Non executive director                       45,000                    -       10,100                4,050       59,150
P Weller (i)             Non executive director                       18,750                    -                -            1,688       20,438
WH Miles (ii)            Non executive director                       15,000                    -       10,100                1,350       26,450
SJ O’Rourke              Managing Director                          1,186,267           64,223                   -        105,165       1,355,655
P Kerr                   Chief Operating Officer                     368,078            36,171                   -         32,580        436,829
N Longstaff              General Manager-Retail, Marketing, Sales    258,505            27,088                   -         22,752        308,345
P Hobman                 General Manager-MG Nutritionals / R&D       246,987            29,460                   -         21,914        298,361
TOTAL                                                               2,588,588          167,000         101,000            229,999       3,086,587

                                                                               Short Term                  Post Employment
                                                                      Fees &            Non           Retirement       Superannuation     TOTAL
                                                                      Salary          Monetary         Benefit
2006                                                                     $                  $              $                   $             $

IW MacAulay              Chairman, non executive director            110,417            10,085          10,435                9,938      140,875
LA Jarvis OAM            Deputy chairman, non executive director      66,250                    -       10,435                5,963       82,648
WM Brown                 Non executive director                       44,167                    -       10,435                3,975       58,577
GJ Davies                Non executive director                       44,167                    -       10,435                3,975       58,577
DF Howard                Non executive director                       44,167                    -       10,435                3,975       58,577
TD Keele (iii)           Non executive director                       17,917                    -              (iii)          1,613       19,530
JC Mason (iii)           Non executive director                       17,917                    -              (iii)          1,613       19,530
ST Mills                 Non executive director                       44,167                    -       10,435                3,975       58,577
JP Pye (iv)              Non executive director                       26,250                    -       10,435                2,363       39,048
JT Vardy                 Non executive director                       44,167                    -       10,435                3,975       58,577
WJA Verboon              Non executive director                       44,167                    -       10,435                3,975       58,577
P Weller (iv)            Non executive director                       26,250                    -       10,435                2,363       39,048
WB Sanderson (v)         Non executive director                       22,396                    -                -            2,016       24,412
SJ O’Rourke              Managing Director                          1,041,938           61,265                   -         92,565       1,195,768
P Kerr                   Chief Operating Officer                     350,316            41,610                   -         31,005        422,931
N Longstaff              General Manager-Retail, Marketing, Sales    240,237            27,667                   -         21,450        289,354
P Hobman                 General Manager-MG Nutritionals / R&D       229,570            27,774                   -         20,550        277,894
TOTAL                                                               2,414,460          168,401         104,350            215,289       2,902,500

Total short term employee benefits for key management personnel (consolidated and parent) is $2,755,588 (2006: $2,582,861).
Total post employment employee benefits for key management personnel (consolidated and parent) is $330,999 (2006: $319,639).




                                                                         42
NOTE 5: Compensation of Key Management Personnel (continued)




                                                                                                                                                                  MURRAY GOULBURN ANNUAL REPORT 2007
Non monetary compensation includes the provision of a motor vehicle, health insurance and notional interest on an interest free loan disclosed
in Note 31(d).
Non executive directors’ compensation consists of an annual fee approved by the members at the Annual General Meeting, amounts provided by
the company for retirement benefits and superannuation at the statutory rate of 9.0%. The retirement benefit paid is equivalent to total emoluments
received in the preceding 3 years for more than 10 years continuous board service or pro rata after 6 years continuous board service until the full benefit
becomes payable.
The managing director’s compensation is set by the remuneration committee and is fixed. The remuneration committee considers market related data and
the overall continued performance of the consolidated entity in assessing the managing director’s cash salary and other entitlements.
Executives’ compensation is fixed and is assessed against market rates and individual performance and is determined by the Managing Director annually.
All key personnel listed above were employed by the company throughout the year ended 30 June 2007 and 30 June 2006 except for:
(i) P Weller resigned from the Board of Directors on 29 November 2006.
(ii) WH Miles was appointed to the Board of Directors on 28 February 2007.
(iii) TD Keele and JC Mason retired from the Board of Directors on 30 November 2005 at which time they each received their full retirement benefit of
      $123,000 for more than 10 years continuous board service. The amounts paid are excluded from the remuneration table above as the Retirement
      Benefits disclosed represent amounts provided by the company during the year to be paid at a later date.
(iv) JP Pye and P Weller were appointed to the Board of Directors on 30 November 2005.
(v) WB Sanderson retired from the Board of Directors on 30 November 2005.
                                                               Note                         Consolidated                                 Company
                                                                                     2007                   2006                  2007                2006
                                                                                       $                     $                     $                    $

NOTE 6: Remuneration of Auditors
Remuneration received by the auditor of the parent entity:
  - auditing or reviewing the financial reports                                    318,000                313,000               300,000            290,000
  - taxation services                                                               19,593                  4,612                19,593              4,612
  - corporate finance services                                                     153,944                 86,350               153,944             86,350
  - assurance related                                                               12,437                 84,545                12,437             84,545
                                                                                   503,974                488,507               485,974            465,507

                                                               Note                         Consolidated                                 Company
                                                                                     2007                   2006                  2007                2006
                                                                                     $000                   $000                  $000                $000

NOTE 7: Dividends Paid or Proposed
Recognised amounts
Dividends in relation to the 2006 financial year
Fully Paid Ordinary Shares
Interim dividend 5 cents per share franked to 100%                                        -                 7,032                      -              7,032
Final dividend of 5 cents per share unfranked                                         7,482                     -                  7,482                  -
Fully Paid A Class Non Cumulative Non-Redeemable
Preference Shares
Interim dividend of 4 cents per share unfranked                                         805                        -                 805                      -
Final dividend of 4 cents per share unfranked                                           779                        -                 779                      -
Fully Paid B Class Non Cumulative Non-Redeemable
Preference Shares
Interim dividend of 2.5 cents per share unfranked                                       175                        -                 175                      -
Final dividend of 2.5 cents per share unfranked                                         209                        -                 209                      -
Fully Paid C Class Non Cumulative Non-Redeemable
Preference Shares
Interim dividend of 4 cents per share unfranked                                         475                        -                 475                      -
Final dividend of 4 cents per share unfranked                                           571                        -                 571                      -
                                                                 24                  10,496                 7,032                10,496               7,032

Dividends recognised during the current year differ to unrecognised amounts in the prior year below due to movements in issued capital during the period
between the 2006 financial report and the actual payment of the dividend.
                                                                              43
NOTEs TO ThE FINANCIAL sTATEMENTs
for the financial year ended 30 June 2007




                                                             Note                        Consolidated                               Company
                                                                                  2007                  2006                 2007               2006
                                                                                  $000                  $000                 $000               $000

NOTE 7: Dividends Paid or Proposed (continued)
Unrecognised amounts
Dividends in relation to the 2006 financial year
Fully Paid Ordinary Shares
Final dividend of 5 cents per share unfranked                                            -               7,834                      -           7,834
Fully Paid A Class Non Cumulative Non-Redeemable
Preference Shares
Interim dividend of 4 cents per share unfranked                                          -                805                       -               805
Final dividend of 4 cents per share unfranked                                            -                793                       -               793
Fully Paid B Class Non Cumulative Non-Redeemable
Preference Shares
Interim dividend of 2.5 cents per share unfranked                                        -                175                       -               175
Final dividend of 2.5 cents per share unfranked                                          -                165                       -               165
Fully Paid C Class Non Cumulative Non-Redeemable
Preference Shares
Interim dividend of 4 cents per share unfranked                                          -                476                       -               476
Final dividend of 4 cents per share unfranked                                            -                460                       -               460
                                                                                         -              10,708                      -          10,708
Dividends in relation to the 2007 financial year
Fully Paid Ordinary Shares
Final dividend of 12 cents per share unfranked                (i)                21,960                        -            21,960                     -
Fully Paid A Class Non Cumulative Non-Redeemable
Preference Shares
Interim dividend of 4 cents per share unfranked               (ii)                   753                       -                753                    -
Final dividend of 4 cents per share unfranked                 (i)                    753                       -                753                    -
Fully Paid B Class Non Cumulative Non-Redeemable
Preference Shares
Interim dividend of 2.5 cents per share unfranked             (ii)                   167                       -                167                    -
Final dividend of 2.5 cents per share unfranked               (i)                    167                       -                167                    -
Fully Paid C Class Non Cumulative Non-Redeemable
Preference Shares
Interim dividend of 4 cents per share unfranked               (ii)                   541                       -                541                    -
Final dividend of 4 cents per share unfranked                 (i)                    541                       -                541                    -
                                                                                 24,882                        -            24,882                     -

(i) The final dividend for Ordinary shares and A, B and C class preference shares was declared on 25 July 2007 and will be paid on or after 30 September
    2007. The value of the final dividend for Ordinary shares is based on total shares outstanding at 30 June 2007, shares to be issued out of the share
    allotment reserve and the one for ten bonus issue to be made in September 2007. As the final dividend was declared subsequent to the financial year
    end it has not been recognised as a liability at 30 June 2007.
(ii) The interim dividend for A, B and C class preference shares was declared on 2 July 2007 and paid on 9 July 2007. As the interim dividend was
     declared subsequent to the financial year end it has not been recognised as a liability at 30 June 2007.


                                                                                         Consolidated                               Company
                                                                                  2007                    2006               2007               2006
                                                                                  $000                    $000               $000               $000

Adjusted franking account balance                                                  7,506                 7,251                6,777             6,560




                                                                         44
                                                                Note                         Consolidated                                 Company




                                                                                                                                                                MURRAY GOULBURN ANNUAL REPORT 2007
                                                                                      2007                   2006                  2007                2006
                                                                                      $000                   $000                  $000                $000

NOTE 8: Receivables
Current
Trade receivables                                                                   287,179                292,830               273,978             271,958
Less: allowance for doubtful debts                                                     (475)                  (537)                 (334)               (351)
                                                                                    286,704                292,293               273,644             271,607
Other receivables                                                                     46,804                41,437                 45,926              40,160
Receivables from hedge contracts                                  (i)                 13,303                 4,551                 13,303               4,551
                                                                                    346,811                338,281               332,873             316,318
Non Current
Amounts receivable from a controlled entity                                                -                     -                 13,879              15,857
Other receivables                                                28                   47,223                47,857                 47,223              47,857
                                                                                      47,223                47,857                 61,102              63,714

(i) Receivables from foreign currency hedge contracts
    represent unrealised gains on foreign exchange contracts
    that are hedges against sales.
   Unrealised gains and losses on foreign currency hedge
   contracts are deferred in equity or recognised in profit
   or loss as appropriate.

NOTE 9: Inventories
Finished goods
- at cost                                                                           350,445                311,817               329,380             291,583
- at net realisable value                                                            20,921                191,019                20,921             191,019
Raw materials and stores - at cost                                                   38,638                 33,525                38,638              32,214
                                                                                    410,004                536,361               388,939             514,816

NOTE 10: Other Assets
Current
Prepayments                                                                            2,142                  2,969                 2,142               2,611
                                                                                       2,142                  2,969                 2,142               2,611
Non Current
Net defined benefit superannuation fund asset                    27                    8,161                  4,399                 8,161               4,399
Other                                                                                 10,094                  8,150                10,082               8,150
                                                                                      18,255                12,549                 18,243              12,549

NOTE 11: Other Non Current Financial Assets
Investments
   Shares in controlled entities at cost                         12                        -                      -                 5,509              18,377
   Shares in other unquoted corporations at cost                 (i)                     448                    430                   448                 430
   Shares in associates at cost                                  13                        -                      -                 4,687               4,370
                                                                                         448                    430                10,644              23,177

(i) Shares in other unquoted corporations are recorded at cost as the range of reasonable fair value estimates is significant and the probabilities of the
    various estimates cannot be reasonably assessed.




                                                                               45
NOTEs TO ThE FINANCIAL sTATEMENTs
for the financial year ended 30 June 2007




NOTE 12: Controlled Entities
All controlled entities, except for Murray Goulburn Investment Ltd and Qingdao Murray Goulburn Dairy Co., Ltd, are wholly owned.
Control of all voting shares in Murray Goulburn Investment Ltd vests in Murray Goulburn Co-operative Co. Limited.
Murray Goulburn Co-operative Co. Limited holds 51% of all voting shares in Qingdao Murray Goulburn Dairy Co., Ltd.
All controlled entities are incorporated in Victoria with the exception of Qingdao which is incorporated in China.
Murray Goulburn Nominees Pty Ltd and Murray Goulburn Superannuation Pty Ltd are beneficially owned.
                                                                                                                               2007               2006
                                                                                                                               $000               $000
Entity                                                                                                Class of Share               Company’s Investment
                                                                                                                                      at Book Value
Parent Entity: Murray Goulburn Co-operative Co. Limited                             (a)                                               -               -
Controlled Entities of Murray Goulburn Co-operative Co. Limited:
Murray Goulburn Trading Pty Ltd                                                    (b)(e)                Ordinary             2,100               2,100
Murray Goulburn Investment Limited                                                                       Ordinary             2,000               2,000
MG Nutritionals Pty Ltd                                                            (b)(c)                Ordinary                 -                   -
Meiji-MGC Dairy Co Pty Ltd                                                         (b)(c)                Ordinary                 -                   -
Lavery International Pty Ltd                                                       (b)(c)                Ordinary                 -                   -
Classic Food Holdings Pty Ltd                                                       (b)                  Ordinary                 -              13,325
Qingdao Murray Goulburn Dairy Co., Ltd                                              (d)                  Ordinary             1,409                 952
Controlled Entities of Classic Food Holdings Pty Ltd:
Classic Foods Pty Ltd                                                               (b)                  Ordinary                     -               -
                                                                                                                              5,509              18,377

(a) Murray Goulburn Co-operative Co. Limited is the head entity within the tax-consolidated group.
(b) These wholly-owned entities are members of the tax-consolidated group.
(c) These wholly-owned entities are small proprietary companies pursuant to the Corporations Act 2001 and consequently are relieved from the requirement
    to prepare audited financial reports.
(d) Qingdao Murray Goulburn Dairy Co., Ltd is incorporated in China.
(e) This wholly-owned entity has entered into a deed of cross guarantee with Murray Goulburn Co-operative Co. Limited pursuant to ASIC Class Order
    98/1418 and is relieved from the requirement to prepare and lodge an audited financial report.
The consolidated income statement of entities which are party to the deed of cross guarantee is:


                                                                                      2007                  2006
                                                                                      $000                  $000
Income Statement
Sales revenue                                                                     2,124,233             2,018,274
Cost of sales                                                                   (1,802,680)            (1,713,150)
Gross profit                                                                        321,553               305,124
Other income                                                                         10,465                  1,027
Distribution expenses                                                             (126,619)              (122,588)
Marketing expenses                                                                 (65,273)               (55,208)
Administration expenses                                                            (57,123)               (55,935)
Finance costs                                                                      (45,116)               (39,171)
Other expenses                                                                     (26,558)               (25,999)
Profit before income tax                                                             11,329                  7,250
Income tax expense                                                                   (1,882)               (3,776)
Profit for the period                                                                  9,447                 3,474




                                                                             46
NOTE 12: Controlled Entities (continued)




                                                                                                            MURRAY GOULBURN ANNUAL REPORT 2007
The consolidated balance sheet of entities which are party to the deed of cross guarantee is:
                                                                                     2007          2006
                                                                                     $000          $000
Balance Sheet
Current Assets
Cash                                                                                19,474        10,691
Receivables                                                                        351,636       326,507
Inventories                                                                        405,718       530,426
Other                                                                                2,142         2,611
Total Current Assets                                                               778,970       870,235
Non Current Assets
Receivables                                                                         61,102        63,714
Other Financial Assets                                                               8,545        21,079
Property, Plant & Equipment                                                        601,101       607,099
Intangible Assets                                                                    4,155           155
Other                                                                               18,243        12,549
Total Non Current Assets                                                           693,146       704,596
Total Assets                                                                     1,472,116      1,574,831
Current Liabilities
Payables                                                                           210,079       224,386
Borrowings                                                                         327,805       498,237
Provisions                                                                          30,314        27,843
Total Current Liabilities                                                          568,198       750,466
Non Current Liabilities
Payables                                                                             5,262         8,201
Borrowings                                                                         295,642       254,046
Provisions                                                                           8,604         7,544
Deferred Tax Liabilities                                                            48,254        37,840
Total Non Current Liabilities                                                      357,762       307,631
Total Liabilities                                                                  925,960      1,058,097
Net Assets                                                                         546,156       516,734
Equity
Issued Capital                                                                     206,911       195,260
Reserves                                                                           100,421        81,601
Retained Earnings (i)                                                              238,824       239,873
Parent Entity Interest                                                             546,156       516,734
Minority Interest                                                                        -             -
Total Equity                                                                       546,156       516,734



(i) Movement in Retained Earnings
Balance at the beginning of the financial year                                     239,873       243,431
Net profit                                                                           9,447         3,474
Dividends provided for or paid                                                     (10,496)       (7,032)
Balance at the end of the financial year                                           238,824       239,873




                                                                              47
NOTEs TO ThE FINANCIAL sTATEMENTs
for the financial year ended 30 June 2007




NOTE 13: Investments Accounted for using the Equity Method
                                                                                             Consolidated                          Company
                                                                                    2007                     2006          2007                2006
                                                                                    $000                     $000          $000                $000


Investments in Associated Companies                                                 8,307                    6,738           -                      -

                                                                                                     Country of                    Ownership
Name of Associate                                  Principal activity                              Incorporation            2007               2006
Intermix Australia Pty Ltd                         Food ingredient processing                         Australia            33.3%               33.3%
Dairy Technical Services Ltd                       Dairy analytical and technical services            Australia            31.5%               31.5%
Australian Milk Products Pty Ltd                   Exporter of dairy products                         Australia            50.0%               50.0%
MG Agrilink Pty Ltd                                Sale of grain                                      Australia            50.0%               50.0%
MGM (Aust) Pty Ltd                                 Retail of dairy products                           Australia            50.0%               50.0%
Investments in associated companies are accounted for in the consolidated financial statements using the equity method of accounting. The company
carrying amount is at cost (refer Note 11).


Movement in Investments in Associated Companies                                              Consolidated
                                                                                     2007                   2006
                                                                                     $000                   $000
Equity accounted amount at the beginning of the financial year                      6,738                   6,151
Acquisition of interests in associates                                                316                         8
Share of profit after income tax                                                    1,585                    828
Dividends received from associates                                                  (332)                   (249)
Equity accounted amount at the end of the financial year                            8,307                   6,738

The consolidated entity does not share any commitments or contingent liabilities of its associates.




                                                                              48
                                                                Note                          Consolidated                                Company




                                                                                                                                                                    MURRAY GOULBURN ANNUAL REPORT 2007
                                                                                       2007                  2006                  2007                 2006
                                                                                       $000                  $000                  $000                 $000

NOTE 14: Property, Plant and Equipment
Land and Buildings
   Freehold land at fair value                                     (i)                50,800                 50,078                49,420              48,543
   Buildings at fair value                                         (i)               216,075               213,471                210,855             208,071
   less accumulated depreciation                                                      (6,304)                    -                 (6,266)                  -
                                                                                     209,771               213,471                204,589             208,071
Leasehold Improvements
   At cost                                                                                288                   288                     43                  43
   less accumulated amortisation                                                         (229)                 (227)                    (2)                 (1)
                                                                                           59                    61                     41                  42
Total Land and Buildings                                                             260,630               263,610                254,050             256,656
Plant and Equipment
   At cost                                                                            843,633              805,767                822,542             790,743
   less accumulated depreciation                                                     (550,490)            (504,547)              (543,960)           (499,269)
Total Plant and Equipment                                                            293,143               301,220                278,582             291,474
Vehicles
   At cost                                                                             50,679                45,239                50,383              44,944
   less accumulated depreciation                                                      (28,468)              (21,026)              (28,317)            (20,938)
                                                                                      22,211                 24,213                22,066              24,006
   Leased Vehicles
   Capitalised present value of lease payments                                          3,638                 4,417                  3,638               4,417
   less accumulated amortisation                                                       (1,378)               (1,691)                (1,378)             (1,691)
                                                                                        2,260                 2,726                  2,260               2,726
Total Vehicles                                                                        24,471                 26,939                24,326              26,732
Buildings and Plant in the course of construction                                     41,127                 30,778                40,888              28,731
Total Property, Plant and Equipment                                                  619,371               622,547                597,846             603,593
(i) Valuations of Land and Buildings
  The basis of valuation of land and buildings is fair value being the market value for existing use of all freehold land and buildings. Directors have
  assessed the carrying value of land and buildings at 30 June 2007 and are satisfied that it is not materially different from its fair value. Revaluations as at
  30 June 2006 were based on directors and independent assessments. This is in accordance with a policy of revaluing property progressively to ensure
  that the carrying value of land and buildings does not differ materially from their fair value.
Reconciliations
Reconciliations of the carrying amounts of each class of property, plant and equipment are set out below.
                                                                         Land and         Plant and            Vehicles         In course of           Total
                                                                         Buildings        Equipment                             construction
Consolidated                                                               $000             $000                 $000               $000               $000

Carrying amount at 1 July 2005                                           238,581            290,152             11,596              48,270            588,599
   Additions (including transfers from capital work in progress)          15,586             52,365             21,676             (17,492)            72,135
   Revaluations                                                           10,363                  -                  -                   -             10,363
   Acquisition of business                                                 5,793              6,476                295                   -             12,564
   Disposals                                                                (715)              (363)              (258)                  -             (1,336)
   Depreciation                                                           (5,996)           (47,410)            (5,580)                  -            (58,986)
   Amortisation                                                               (2)                 -               (790)                  -               (792)

Carrying amount at 30 June 2006                                          263,610            301,220             26,939              30,778            622,547
   Additions (including transfers from capital work in progress)           3,802             39,993              8,251              10,349             62,395
   Disposals                                                                (292)              (682)              (836)                  -             (1,810)
   Depreciation                                                           (6,488)           (47,388)            (9,251)                  -            (63,127)
   Amortisation                                                               (2)                 -               (632)                  -               (634)
Carrying amount at 30 June 2007                                          260,630            293,143             24,471              41,127            619,371


                                                                               49
NOTEs TO ThE FINANCIAL sTATEMENTs
for the financial year ended 30 June 2007




NOTE 14: Property, Plant and Equipment (continued)
                                                                        Land and          Plant and          Vehicles     In course of          Total
                                                                        Buildings         Equipment                       construction
Company                                                                   $000              $000              $000            $000              $000

Carrying amount at 1 July 2005                                           237,016          290,229             11,596          48,046           586,887
   Additions (including transfers from capital work in progress)          15,476           49,971             21,676         (19,315)           67,808
   Revaluations                                                           10,098                -                  -               -            10,098
   Disposals                                                                   -             (352)              (258)              -              (610)
   Depreciation                                                           (5,933)         (48,374)            (5,492)              -           (59,799)
   Amortisation                                                               (1)               -               (790)              -              (791)
Carrying amount at 30 June 2006                                          256,656          291,474             26,732          28,731           603,593
   Additions (including transfers from capital work in progress)           3,800           33,801              8,251          12,157            58,009
   Disposals                                                                (137)            (579)              (836)              -            (1,552)
   Depreciation                                                           (6,268)         (46,114)            (9,189)              -           (61,571)
   Amortisation                                                               (1)               -               (632)              -              (633)
Carrying amount at 30 June 2007                                          254,050          278,582             24,326          40,888           597,846


                                                                                              Consolidated                          Company
                                                                                      2007                   2006            2007                2006
                                                                                      $000                   $000            $000                $000

NOTE 15: Intangible Assets
Goodwill at cost                                                                      5,359                  5,359                  -                  -
Export Quota at cost                                                                  1,244                  1,244                  -                  -
Brandnames at cost                                                                    4,000                         -         4,000                    -
Total Intangible Assets                                                              10,603                  6,603            4,000                    -

Intangible assets recognised by the consolidated entity have an indefinite useful life.
Reconciliations
Reconciliations of the carrying amounts of each class of intangible assets are set out below.
                                                                                             Consolidated                                   Company
                                                      Goodwill         Export Quota       Brandnames            Total                      Brandnames
                                                       $000               $000               $000               $000                          $000

Carrying amount at 1 July 2006                          5,359              1,244                  -            6,603                                   -
Acquisition of intangibles                                   -                  -             4,000            4,000                           4,000
Carrying amount at 30 June 2007                         5,359              1,244              4,000           10,603                           4,000

Goodwill, export quotas and brandnames have been allocated for impairment testing purposes to the Dairy Produce cash generating unit. In testing for
impairment, management have tested the value in use and have considered relevant budgeted cash flow projections based on five years.




                                                                             50
                                                                  Note                   Consolidated                                 Company




                                                                                                                                                            MURRAY GOULBURN ANNUAL REPORT 2007
                                                                                  2007                  2006                   2007              2006
                                                                                  $000                  $000                   $000              $000

NOTE 16: Payables
Current
Trade payables                                                                   68,615                66,631                  47,400            41,406
Payable to suppliers                                                             93,149               128,776                  93,149           128,776
Sundry payables and accrued expenses                                             47,037                35,498                  41,983            31,796
                                                                                208,801               230,905              182,532              201,978
Non Current
Interest rate swap                                                                 3,092                 5,257                  3,092             5,257
Other                                                                              3,870                 2,944                  2,170             2,944
                                                                                   6,962                 8,201                  5,262             8,201

NOTE 17: Borrowings
Current
Lease liability                                                   26                967                 1,722                  967                1,722
Bank loans                                                                      327,205               496,515              327,205              496,515
                                                                                328,172               498,237              328,172              498,237
Non Current
Lease liability                                                   26              1,053                 1,420                1,053                1,420
Bank loans                                                                       25,000                     -               25,000                    -
Private placement senior notes                                                  138,302               157,037              138,302              157,037
Domestic note issue                                                              30,000                     -               30,000                    -
Payable to controlled entities                                                        -                     -              115,237              114,566
                                                                                194,355               158,457              309,592              273,023

The bank loans, private placement senior and domestic
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 18: Current Tax Payable
Income tax payable                                                                       -                 37                         -                 -

NOTE 19: Provisions
Current
Dividends                                                                                2                   2                        2              2
Employee benefits                                                                30,312                 28,581                 28,856            26,346
                                                                                 30,314                 28,583                 28,858            26,348
Non Current
Employee benefits                                                                  8,604                 8,082                  8,496             7,449
                                                                                   8,604                 8,082                  8,496             7,449

NOTE 20: Deferred Tax Liabilities
Deferred tax liability                                             4             48,211                 37,936                 48,575            38,100

NOTE 21: Contingent Liabilities
Unsecured guarantees and warranties given in the normal course of business include commitments for the disposal of effluent.




                                                                           51
NOTEs TO ThE FINANCIAL sTATEMENTs
for the financial year ended 30 June 2006




                                                               Note                        Consolidated                                 Company
                                                                                    2007                   2006                  2007                2006
                                                                                    $000                   $000                  $000                $000

NOTE 22: Issued Capital
161,412,643 fully paid ordinary shares
(2006: 150,867,646)                                            22(a)               161,413               150,868               161,413             150,868
18,820,106 fully paid A class 8% non cumulative
non-redeemable participating preference shares
(2006: 19,826,316)                                             22(b)                18,820                19,826                 18,820             19,826
6,675,428 fully paid B class non cumulative
non-redeemable participating preference shares
(2006: 6,599,444)                                              22(c)                  6,675                 6,599                 6,675              6,599
13,529,710 fully paid C class non cumulative
non-redeemable participating preference shares
(2006: 11,493,501)                                             22(d)                13,530                11,494                 13,530             11,494
                                                                                   200,438               188,787               200,438             188,787
Former Reserves included in Contributed Equity
Former Share Premium and Capital Redemption Reserves           22(e)                  6,473                 6,473                 6,473              6,473
                                                                                   206,911               195,260               206,911             195,260
a) Ordinary Shares
   Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the 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 poll each share
   is entitled to one vote. Upon ceasing supply of milk to the company, shareholders’ ordinary shares are converted into a class of non cumulative, non
   redeemable preference shares as determined by the board.
b) A class 8% Non Cumulative Non-redeemable Preference Shares
   The company has on issue to non suppliers 18,820,106 A class 8% non cumulative, non redeemable preference shares as at 30 June 2007. The shares
   entitle holders to receive, out of profits available for dividend, a preferential dividend at a rate of 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.
c) B class Non Cumulative Non-redeemable Preference Shares
   The company has on issue to non suppliers 6,675,428 B class non cumulative, non redeemable preference shares as at 30 June 2007. The shares entitle
   holders to receive, out of profits available for dividend, a preferential dividend at a variable rate.
   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.
d) C class Non Cumulative Non-redeemable Preference Shares
   The company has on issue to non suppliers 13,529,710 C class non cumulative, non redeemable preference shares as at 30 June 2007. The shares
   entitle holders to receive, out of profits available for dividend, a preferential dividend at a variable rate.
   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.
e) Changes to the Corporations Act 2001 which became effective on 1 July 1998 abolished the par value concept in relation to contributed equity. As a
   consequence the amounts standing 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.




                                                                            52
NOTE 22: Issued Capital (continued)




                                                                                                                                                      MURRAY GOULBURN ANNUAL REPORT 2007
f) Movements in Issued Capital
                                                                                                  Number of Shares
                                                        Ordinary              A Class                 B Class         C Class            Total
                                                         Shares              Preference              Preference      Preference
                                                                               Shares                  Shares          Shares

Balance at 30 June 2005                               136,874,567             21,082,166             6,315,882        6,767,604     171,040,219
Shares issued                                          14,324,559                        -                      -              -     14,324,559
Dividend reinvestment plan issues                        3,334,894                32,021                15,668          39,546         3,422,129
Transfers                                               (3,666,374)           (1,287,871)              267,894        4,686,351                   -
Balance at 30 June 2006                               150,867,646             19,826,316             6,599,444       11,493,501     188,786,907
Shares issued                                          10,297,527                        -                      -              -     10,297,527
Dividend reinvestment plan issues                        1,203,753                29,985                41,984          77,731         1,353,453
Transfers                                                 (956,283)           (1,036,195)               34,000        1,958,478                   -
Balance at 30 June 2007                               161,412,643             18,820,106             6,675,428       13,529,710     200,437,887

All shares were issued at a price of $1.00 and are fully paid at 30 June 2007 and 30 June 2006.


                                                             Note                        Consolidated                          Company
                                                                                  2007                   2006           2007               2006
                                                                                  $000                   $000           $000               $000

NOTE 23: Reserves
Capital reserve                                                                   36,916                36,916          24,290            24,290
Asset revaluation reserve                                                         77,784                77,842          44,080            44,138
General reserve                                                                    5,257                 5,257           2,648             2,648
Hedge Reserve                                                                     22,059                 2,315          22,059             2,315
Share allotment reserve                                                            4,949                 5,814           4,949             5,814
Foreign currency translation reserve                                                (103)                    -               -                 -
                                                                                 146,862               128,144          98,026            79,205

Movements in Reserves
Asset Revaluation Reserve
   Balance at the beginning of the financial year                                 77,842                70,588          44,138            37,069
   Increment on revaluation of land and buildings              14                      -                10,363               -            10,098
   Deferred tax liability arising on revaluation               4                       -                (3,109)              -            (3,029)
   Transfer to Income Statement                                                      (83)                    -             (83)                -
   Related income tax                                          4                      25                     -              25                 -
   Balance at the end of the financial year                                       77,784                77,842          44,080            44,138

Hedge Reserve
  Balance at the beginning of the financial year                                   2,315                     -           2,315                 -
  Adjustment on transition to AASB 139 and AASB 132 on 1 July 2005                     -                 4,316               -             4,316
  Transferred to profit or loss                                                        -                (4,316)              -            (4,316)
  Gains / (losses) on cash flow hedges                                            28,206                 3,307          28,206             3,307
  Related income tax                                       4                      (8,462)                 (992)         (8,462)             (992)
   Balance at the end of the financial year                                       22,059                 2,315          22,059             2,315

Share Allotment Reserve
   Balance at the beginning of the financial year                                  5,814                 5,788           5,814             5,788
   Allotment of shares to suppliers                                               (5,814)               (5,788)         (5,814)           (5,788)
   Shares to be issued in lieu of milk payments                                    4,949                 5,814           4,949             5,814
   Balance at the end of the financial year                                        4,949                 5,814           4,949             5,814

At 30 June 2007 an amount of $4,949,000 (2006: $5,814,000) was due to suppliers, being deductions made from milk payments during the year. This
debt was satisfied by the allotment of fully paid shares in September 2007 (September 2006).


                                                                            53
NOTEs TO ThE FINANCIAL sTATEMENTs
for the financial year ended 30 June 2007




                                                                Note                           Consolidated                                   Company
                                                                                      2007                      2006                   2007              2006
                                                                                      $000                      $000                   $000              $000

NOTE 23: Reserves (continued)
Foreign Currency Translation Reserve
   Balance at the beginning of the financial year                                         -                       -                     -                  -
   Translation of foreign operations                                                   (147)                      -                     -                  -
   Related income tax                                             4                      44                       -                     -                  -
   Balance at the end of the financial year                                            (103)                      -                     -                  -
Nature and Purpose of Reserves
   Capital Reserve
   The capital reserve is used to accumulate realised capital profits.
   Asset Revaluation Reserve
   The asset revaluation reserve is used to record increments and decrements on the revaluation of non-current assets.
   General Reserve
   The general reserve is used from time to time to transfer profits from retained earnings. There is no policy of regular transfer.
   Hedge Reserve
   The hedge reserve represents hedging gains and losses recognised on the effective portion of cash flow hedges. The cumulative deferred gain or loss on
   the hedge is recognised in profit or loss when the hedged transaction impacts the profit or loss.
   Share Allotment Reserve
   The 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.
   Foreign Currency Translation Reserve
   The foreign currency translation reserve represents exchange differences relating to the translation from the functional currencies of the Group’s foreign
   controlled entities into Australian dollars.

                                                                Note                           Consolidated                                   Company
                                                                                      2007                    2006                     2007              2006
                                                                                      $000                    $000                     $000              $000

NOTE 24: Retained Earnings
Balance at the beginning of the financial year                                       200,181               198,153                216,446               222,659
Net profit attributable to members of the parent entity                               16,863                 9,060                  7,042                   819
Dividends provided for or paid                                    7                  (10,496)               (7,032)               (10,496)               (7,032)
Balance at the end of the financial year                                             206,548               200,181                212,992               216,446

NOTE 25: Minority Interests
Minority interests comprises :
95,967,606 fully paid Employees Profits Participation
Units (2006: 90,602,211) and 5 (2006: 5) fully paid
ordinary shares in MG Employees Equity Ltd                        28                  95,968                  90,602                    -                  -
980,000 ordinary shares in Qingdao Murray Goulburn
Dairy Co., Ltd (2006: 980,000)                                                         1,066                    915                     -                  -
                                                                                      97,034                  91,517                    -                  -




                                                                             54
                                                                Note                         Consolidated                                 Company




                                                                                                                                                                 MURRAY GOULBURN ANNUAL REPORT 2007
                                                                                      2007                   2006                  2007                2006
                                                                                      $000                   $000                  $000                $000

NOTE 26: Capital and Leasing Commitments
a) Minimum future finance lease payments
   - Due within 1 year                                                                 1,070                  1,907                 1,070               1,907
   - Due within 1-5 years                                                              1,165                  1,548                 1,165               1,548
   Minimum lease payments                                                              2,235                  3,455                 2,235               3,455
   Less future finance charges                                                          (215)                  (313)                 (215)               (313)
   Present value of minimum lease payments                                             2,020                  3,142                 2,020               3,142

   Classified as :
   Current borrowings                                            17                      967                  1,722                   967               1,722
   Non current borrowings                                        17                    1,053                  1,420                 1,053               1,420
                                                                                       2,020                  3,142                 2,020               3,142
   Finance leases relate to motor vehicles with
   lease terms of two to three years.
b) Operating Lease Commitments
   - Due within 1 year                                                                 2,705                  2,648                 2,438               2,409
   - Due within 1-5 years                                                              4,605                  4,043                 4,249               3,808
   - Due longer than 5 years                                                           5,816                  4,785                 5,617               4,591
                                                                                      13,126                11,476                 12,304             10,808

   Operating leases relate to Trading stores, warehousing
   facilities and vehicles with lease terms of between
   1 to 31 years. Some leases have an option to extend
   the lease term. The consolidated entity does not have
   an option to purchase the leased assets at the expiry
   of the lease period.
c) Capital Expenditure Commitments
   Contracted capital expenditure commitments due within one year                     23,610                27,361                 23,529             25,609

NOTE 27: Defined Benefit Superannuation Plan
The Company participates in a defined benefit superannuation plan, the MGC Superannuation Fund, which has been established and sponsored by the
parent entity. This plan is a funded plan and provides a lump sum benefit on retirement, death, disablement and withdrawal. The defined benefit section of
the plan is closed to new members.
Contributions are made by employees and the consolidated entity as percentages of salary. The consolidated entity is obliged to make contributions as
specified in the rules of the fund.
The consolidated entity expects to make a contribution of $1,016,000 (2006: $995,000) to the plan during the next financial year. The method used to
determine the employer contribution recommendations at the last actuarial review was the Target Funding method. The method adopted affects the timing of
the cost to the consolidated entity.
The consolidated entity has recognised an asset in the balance sheet in respect of its defined benefit superannuation arrangements. If a surplus exists in the
plan, the consolidated entity may be able to take advantage of it in the form of a reduction in the required contribution rate, depending on the advice of the
plan’s actuary.
The consolidated entity may at any time by notice to the Trustee terminate its contributions. The consolidated entity has a liability to pay the contributions
due prior to the effective date of the notice, but there is no requirement for the consolidated entity to pay any further contributions, irrespective of the
financial condition of the plan.




                                                                               55
NOTEs TO ThE FINANCIAL sTATEMENTs
for the financial year ended 30 June 2007




NOTE 27: Defined Benefit Superannuation Plan (continued)
                                                                                      2007                 2006
                                                                                      $000                 $000
Reconciliation of the Fair Value of Plan Assets
   Fair value of plan assets at beginning of the year                               29,894                27,308
      Expected return on plan assets                                                 1,877                 1,703
      Actuarial gains / (losses)                                                     2,808                 2,308
      Employer contributions                                                         1,055                   966
      Contributions by plan participants                                               755                   701
      Benefits paid                                                                 (1,246)               (2,701)
      Taxes, premiums and expenses paid                                               (342)                 (458)
      Transfers in                                                                      75                    67
   Fair value of plan assets at end of the year                                     34,876                29,894
The fair value of plan assets includes no amounts relating to any of
the consolidated entity’s own financial instruments or any property
occupied by, or other assets used by, the consolidated entity.
The actual return on plan assets was $4,685,000 (2006: $4,011,000).
Reconciliation of the Present Value of the Defined Benefit Obligation
   Present value of the defined benefit obligations at beginning of the year        25,495                27,454
      Current service cost                                                             906                 1,066
      Interest cost                                                                  1,205                 1,108
      Contributions by plan participants                                               755                   701
      Actuarial (gains) / losses                                                      (133)               (1,742)
      Benefits paid                                                                 (1,246)               (2,701)
      Taxes, premiums and expenses paid                                               (342)                 (458)
      Transfers in                                                                      75                    67
   Present value of the defined benefit obligations at end of the year              26,715                25,495

Net superannuation asset / (liability) included in Other Non Current
Assets / Other Non Current Payables                                                  8,161                 4,399

(Income) Expense recognised in Income Statement
    Service cost                                                                       906                  1,066
    Interest cost                                                                    1,205                  1,108
    Expected return on assets                                                       (1,877)                (1,703)
    Actuarial (gain) / loss                                                         (2,941)                (4,050)
   Superannuation (income) / expense                                                (2,707)                (3,579)

Superannuation (income) / expense is allocated to cost of sales
(70%) and administration expenses (30%).
Historical information
   Experience adjustments (gain) / loss on plan assets                              (2,808)                (2,308)
   Experience adjustments (gain) / loss on plan liabilities                            625                    440

                                                                                       2007                  2006
Principal actuarial assumptions used:
   Discount rate                                                                       5.3%                   4.9%
   Expected rate of return on plan assets                                              6.5%                   6.5%
   Expected salary increase rate                                                       4.0%                   4.0%
The percentage invested in each asset class at the balance date:
   Australian equity                                                                    34%                   34%
   International equity                                                                 28%                   29%
   Fixed income                                                                         15%                   14%
   Property                                                                              8%                    8%
   Other                                                                                15%                   15%
In determining the expected rate of return on assets, the actuary has considered the expected future investment returns for each major asset class net of
investment tax and investment fees.




                                                                               56
NOTE 27: Defined Benefit Superannuation Plan (continued)




                                                                                                                                                                       MURRAY GOULBURN ANNUAL REPORT 2007
Details of the defined benefit plan as extracted from the plan’s most recent financial report calculated in accordance with AAS25 “Financial
Reporting by Superannuation Plans” are as follows:
                                                                                      1 July 2004
                                                                                         $000
Net market value of plan assets                                                          23,686
Accrued benefits                                                                         23,119
Net surplus / (deficit)                                                                     567
The long term assumptions adopted for the last actuarial
review of the plan as at 1 July 2004 were:
    Expected rate of return on assets (discount rate)                                      6.5%
   Expected salary increase rate                                                           4.5%

NOTE 28: Murray Goulburn Group Employees Profits Participation Scheme
In 1993 Murray Goulburn established an Employees Profits Participation Scheme under which employees of the Murray Goulburn Group with 12 months
or more work experience with the Murray Goulburn Group could choose to invest in Employees Profits Participation Units in MG Employees Equity Limited
(“MGEE”). MGEE invests the employees’ contributions in A class participating non-cumulative non redeemable preference shares in Murray Goulburn
Investment Limited.
Eligible employees must borrow all monies required to pay for the MGEE Employees Profits Participation Units either from MGEE or Murray Goulburn. The
maximum amount each employee is entitled to borrow is equivalent to one year’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 employees repay their loans at 3% per annum.
At 30th June 2007, 1,734 employees were eligible to participate in the Scheme. Of that number, 1,455 employees had been issued with 95,967,606 $1.00
Employees Profits Participation Units. During the year ended 30th June 2007, MGEE issued 5,365,395 Employees Profits Participation Units including
5,002,459 in satisfaction of dividends paid.
The value of Employees Profits Participation Units issued by MG Employees Equity Limited to employees of the consolidated entity is recognised as a
Minority Interest. Loans owing by employees are included in other receivables in Note 8 above.
Amounts recognised are as follows:
                                                                                                Consolidated                                   Company
                                                                                        2007                      2006                 2007                2006
                                                                                        $000                      $000                 $000                $000

Minority Interest                                                                      95,968                    90,602                    -                    -
Employee loans (current and non current)                                               48,928                    49,180                 296                  268

NOTE 29: Events Subsequent to Balance Date
Other than the declaration of dividends detailed in Note 7 ‘Unrecognised Amounts’, no matters or circumstances have arisen since the end of the financial
year which significantly affected or may significantly affect the operations of the consolidated entity, the results of those operations, or the state of affairs of
the consolidated entity in financial years subsequent to the financial year ended 30 June 2007.

NOTE 30: Financial Instruments
The consolidated entity enters into forward foreign exchange contracts, currency options and interest rate swaps to manage foreign exchange risk and
interest rate risk. Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the
basis on which income and expenses are recognised, in respect of financial instruments are disclosed in Note 1 to the financial statements and below.
The consolidated entity’s activities expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates. The
consolidated entity enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign currency risk, including:
• Forward foreign currency and foreign currency option contracts to hedge the exchange rate risk arising on the sale of exported dairy goods in $US; and
• Interest rate swaps to mitigate the risk of rising interest rates.
The consolidated entity does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes. The use
of financial derivatives is governed by the consolidated entity’s policy approved by the board of directors which provides written principles on the use of
financial derivatives. Compliance with policy and exposure limits is reviewed by senior management and the board of directors on a continuous basis.
The consolidated entity has established procedures to manage the effectiveness of forward foreign exchange contracts in accordance with A-IFRS so that the
impact of changes in their fair value on the company’s profit and loss is minimised.




                                                                                 57
NOTEs TO ThE FINANCIAL sTATEMENTs
for the financial year ended 30 June 2007




NOTE 30: Financial Instruments (continued)
a) Foreign Currency Risk Management
   The group undertakes transactions denominated in foreign currencies, hence exposures to exchange rate fluctuations arise. Exchange rate exposures are
   managed within approved policy parameters utilising forward foreign exchange contracts and currency derivatives.
  Forward Foreign Exchange Contracts
  The consolidated entity maintains a policy of matching anticipated future cash flows in foreign currencies with forward exchange contracts in the same
  currency and with closely corresponding settlement dates. Forward exchange contracts are entered into when committed orders are received for the
  delivery of goods.
  At balance date, the entity has $US415 million (2006: $US342 million) forward exchange contracts outstanding with maturity dates not exceeding one
  year, of which $US4 million (2006: $USnil) relate to receivables at balance date and $US411 million (2006: $US342 million) 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 match the underlying hedge transaction.
  Currency Options
  During the year the consolidated entity entered into a range of US Dollar currency options with varying maturities and strike rates. By simultaneously
  purchasing and selling options in a barrier structure, the entity has effectively capped an exchange rate should the AUD strengthen whilst maintaining the
  flexibility to improve the exchange rate should the AUD trade at favourable levels.
  At balance date, the entity had bought call options to the value of $US60 million outstanding (2006: $US60 million) with varying strike rates. All
  currency options have expiry dates not exceeding one year and were purchased or sold strictly as a means of reducing foreign exchange risk associated
  with hedging future sales denominated in $US.
b) Interest Rate Risk
   Trade and other receivables, trade payables and accruals, loans from the state government of Victoria, and dividends payable, are non-interest bearing.
  The AUD bank 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 Interbank Offered 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 deposit rate.
  Bank loans consist of short term and long term USD and AUD revolving loan facilities, on which interest is payable at floating rates. Rates on US Dollar
  loans are based on either LIBOR or SIBOR. Rates on AUD loans are based on the 30 day bank bill swap rate.
  Interest on floating AUD domestic notes is based on the three month BBSW rate. Fixed AUD domestic notes bear interest at 6.82%.
  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
  market rate ruling at the time of entering into the individual lease agreements.
  The Private Placement bears interest at a fixed rate of 4.98%. The Private Placement will be repaid as follows: $US36.0 million (18 October 2009),
  $US30.0 million (18 October 2010), $US24.0 million (18 October 2011), $US18.0 million (18 October 2012) and $US12.0 million (18 October 2013).
  The company entered into an interest rate swap for a notional amount of $US120.0 million to manage the cash flow risk associated with this facility. It
  has effectively swapped its fixed interest rate exposure of 4.98% for a variable interest rate, based on a 6 month LIBOR rate, through to 2009. The fair
  value of the interest rate swap at 30 June 2007 is $3.1 million (2006: $5.2 million). The fair value has been recorded in profit or loss together with
  changes in the fair value of the hedged liability.
c) Credit Risk Exposures
   The consolidated entity’s maximum exposure to credit risk at balance date in relation to financial assets is the carrying amount, net of any allowances, of
   those assets as indicated in the consolidated balance sheet. The consolidated entity minimises concentrations of credit risk by undertaking transactions
   with a large number of customers and counterparties in various countries. The consolidated entity is not materially exposed to any individual foreign
   country or individual customer.
d) Hedges of Anticipated Future Transactions
   Forward exchange contracts are utilised to hedge future committed orders. The fair value of these contracts at balance date, is $10.8 million (2006: $3.6
   million). This amount will be realised during the next financial year when the underlying hedge transactions take place.
e) Fair Value
   On-balance sheet financial instruments
   The carrying amount recorded in the financial statements represents the fair value of all assets and liabilities, determined in accordance with the
   accounting policies in Note 1 to the financial statements, except for those mentioned below. The fair value is derived by discounting the expected future
   cash flows by the current interest rates for assets and liabilities with similar risk profiles.
  The fair value of the Private Placement at balance date is $136.1 million (2006: $154.6 million).
f) Liquidity Risk Management
   The consolidated entity manages liquidity risk by maintaining adequate borrowing facilities, by continuously monitoring forecast and actual cash flows
   and matching the maturity profiles of financial assets and liabilities.




                                                                              58
                                                                     Note                     Consolidated                             Company




                                                                                                                                                                  MURRAY GOULBURN ANNUAL REPORT 2007
                                                                                      2007                     2006             2007                   2006
                                                                                      $000                     $000             $000                   $000

NOTE 31: Related Parties
Transactions 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 group
   Provision of a loan to Classic Food Holdings Pty Ltd.                                  -                       -             13,879                 15,813
   Interest received from Classic Food Holdings Pty Ltd on
   intercompany loan provided                                          2                  -                       -                 862                   98
   Interest paid to controlled entities on intercompany
   loan balances                                                       3                  -                       -               8,319                 8,629
   Purchase of goods from Murray Goulburn Trading Pty Ltd                                 -                       -                 174                   186
   Sale of finished product to Murray Goulburn Trading Pty Ltd                            -                       -                 872                   739
   Purchase of goods from Classic Food Holdings Pty Ltd                                   -                       -               4,872                     -
   Sale of finished product to Classic Food Holdings Pty Ltd                              -                       -               1,189                     -
   Rent received from Murray Goulburn Trading Pty Ltd                                     -                       -                 652                   636
   Service fees and management fees charged to
   controlled entities for general administration duties               2                  -                       -              5,486                  4,648
   Interest free loan to MG Employees Equity Ltd                                          -                       -             48,633                 48,912
   Dividend received from Classic Food Holdings Pty Ltd                                   -                       -              7,550                      -
   Purchase of business from Classic Food
   Holdings Pty Ltd and Classic Foods Pty Ltd
   at carrying value                                                  33                  -                       -               9,704                       -
   Amounts payable to controlled entities arising
   through the intercompany accounts                                                      -                       -            115,237            114,566
b) Associated companies
   Transactions between the parent entity and its associates include the sale of goods and the provision of technical and consultancy services by the parent
   entity. Transactions are on normal commercial terms and conditions.
c) Directors of the parent entity
   Shareholdings of directors in the parent entity, allotted to them in their capacity as suppliers of milk to the company:
                                         Shares held at       Acquired      Shares held at                    Shares held at   Acquired    Shares held at
                                          1 July 2005                       30 June 2006                       1 July 2006                 30 June 2007
                                             Ordinary         Ordinary         Ordinary                          Ordinary      Ordinary        Ordinary
                                               No.              No.              No.                               No.           No.             No.

  IW MacAulay                                 139,812            17,319         157,131                           157,131        17,872         175,003
  LA Jarvis OAM                               294,906            52,863         347,769                           347,769        23,924         371,693
  ST Mills                                     58,459            19,929          78,388                            78,388        13,736          92,124
  WM Brown                                    118,394            27,892         146,286                           146,286        15,961         162,247
  GJ Davies                                   148,488            29,397         177,885                           177,885        22,140         200,025
  DF Howard                                   184,180            46,030         230,210                           230,210        27,417         257,627
  JP Pye                                       70,914            20,026          90,940                            90,940        15,867         106,807
  J Vardy                                     213,435            44,703         258,138                           258,138        46,333         304,471
  WJA Verboon                                  64,466            20,780          85,246                            85,246        14,169          99,415
  P Weller (i)                                 64,060            13,962          78,022                                 -             -               -
  WH Miles (ii)                                     -                 -               -                           144,919        41,623         186,542
                                            1,357,114          292,901        1,650,015                         1,716,912      239,042        1,955,954

  (i) P Weller resigned from the office of director during the current financial year and accordingly his shareholdings at 30 June 2007 are not disclosed.
  (ii) WH Miles was appointed to the office of director during the current financial year and accordingly his shareholdings prior to 1 July 2006 are
       not disclosed.
Directors of the parent company supply milk to the consolidated entity, are able to purchase goods at Murray Goulburn Trading Pty Ltd stores at commercial
prices and can obtain loans from the consolidated entity in the same manner as all other suppliers.
Aggregate of loans to 6 (2006: 3) directors as at financial year end: $195,200 (2006: $134,569).
Total interest paid by directors: $2,964 (2006: $4,187).

                                                                               59
NOTEs TO ThE FINANCIAL sTATEMENTs
for the financial year ended 30 June 2007




NOTE 31: Related Parties (continued)
d) Key Management Personnel
   Key management personnel of the consolidated entity participate in the Employees Profits Participation Scheme under the same terms and conditions
   available to all employees (refer Note 28). All loans are interest free and repayable at 3.0% per annum.
  Key management personnel hold the following number of Employees Profits Participation Units in MG Employees Equity Limited:
                                            Shares held at     Net Other   Shares held at                Shares held at Net Other Shares held at
                                             1 July 2005        Change     30 June 2006                   1 July 2006    Change   30 June 2007
                                                 No.             No.             No.                           No.             No.              No.

  SJ O’Rourke                               1,451,916          129,514      1,581,430                      1,581,430         234,678        1,816,108
  P Kerr                                      479,562           39,373        518,935                        518,935          49,641            568,576
  N Longstaff                                 284,734           38,284        323,018                        323,018          38,865            361,883
  P Hobman                                    233,730           35,223        268,953                        268,953          35,892            304,845

Interest free loans to key management personnel, the terms of which are disclosed in Note 28, via the Employees Profits Participation Scheme:
                                                                                             Highest         Highest        Notional            Notional
                                            Balance at        Balance at    Balance         in Period       in Period       Interest            Interest
                                            1 July 2005      30 June 2006 30 June 2007        2006            2007            2006                2007
                                                 $                 $               $            $               $               $                  $

SJ O’Rourke                                   822,275          832,275        941,025       840,000          943,950          41,364             44,333
P Kerr                                        288,625          288,350        297,850       290,975          298,775          14,424             14,655
N Longstaff                                   195,325          208,575        221,325       210,375          221,975          10,098             10,748
P Hobman                                      202,125          215,675        228,725       217,400          229,350          10,445             11,110

Notional interest is included in non monetary compensation of key management personnel.




                                                                            60
                                                                                              Consolidated                                  Company




                                                                                                                                                                    MURRAY GOULBURN ANNUAL REPORT 2007
                                                                                       2007                    2006                  2007                 2006
                                                                                       $000                    $000                  $000                 $000

NOTE 32: 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                                                               19,610                 11,205                 13,627                7,469
  Cash per statement of cash flows                                                     19,610                 11,205                 13,627                7,469

b) Reconciliation of Profit for the Period to Net Cash Flow
   from Operating Activities
   Profit for the Period                                                               21,720                 14,188                  7,042                 819
   Depreciation                                                                        63,127                 58,986                 61,571              59,799
   Amortisation                                                                           634                    792                    633                 791
   (Gain) Loss on disposal of fixed assets                                               (747)                  (738)                  (707)               (749)
   Loss on disposal of investments                                                          -                    120                      -                 289
   Share of (profit) loss of associated company                                        (1,253)                  (579)                     -                   -
   Write down of investments in subsidiaries                                                -                      -                 13,325               4,188
   Dividend received via intercompany account                                               -                      -                 (7,550)                  -
   Profit from defined benefit superannuation fund                                     (2,707)                (3,579)                (2,707)             (3,579)
  Change in operating assets and liabilities
     Decrease (increase) in trade receivables                                          3,059                 (57,344)                (4,612)            (56,365)
     Decrease (increase) in other receivables and prepayments                        (22,141)                  5,816                (14,116)             12,954
     Decrease (increase) in inventories                                              126,357                 (45,124)               125,877             (43,482)
     Increase (decrease) in trade payables and amounts due to suppliers              (20,404)                 51,816                (19,298)             42,836
     Increase (decrease) in amounts payable to controlled entities                         -                       -                    674               3,914
     Increase in provisions                                                            2,154                     706                  3,540               1,481
     Increase in deferred tax liability                                                1,882                   3,891                  2,038               3,600
  Net cash inflow from operating activities                                          171,681                  28,951                165,710              26,496
c) Financing Arrangements
   Credit facility                                                                   603,560                 568,870                603,560             568,870
  Amount utilised                                                                    308,595                 486,310                314,578             490,046
  Unused credit facility                                                             294,965                  82,560                288,982              78,824

  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
  financial ratios are met.
d) Non-cash Financing and Investing Activities
   During the financial year the consolidated entity acquired plant and motor vehicles with an aggregate fair value of $859,000 (2006: $1,436,000) by
   means of finance leases. These acquisitions are not reflected in the statement of cash flows or Note 32(b).




                                                                                61
NOTEs TO ThE FINANCIAL sTATEMENTs
for the financial year ended 30 June 2007




NOTE 33: Business Combinations
In respect of the financial year ended 30 June 2007
   On 30 June 2007, the parent entity acquired the business of Classic Food Holdings Pty Ltd and Classic Foods Pty Ltd. As part of the acquisition
   the following assets and liabilities were transferred to the parent entity at the carrying amounts recorded by Classic Food Holdings Pty Ltd and
   Classic Foods Pty Ltd, via an intercompany account, and the investment in subsidiaries was written down to nil.
In respect of the financial year ended 30 June 2006
   On 3 July 2005, the company acquired 100% of the shares of Lavery International Pty Ltd, an exporter of dairy products.
   On 3 July 2005, the consolidated entity acquired North East Fertilizer, a business specialising in fertilizer logistics.
   On 1 May 2006, the company acquired 100% of the voting shares of Classic Food Holdings Pty Ltd, specialising in the manufacture and sale of long life
   food products on a contract packaging basis.
   The company contributed $458,000 (2006: $952,000) to Qingdao Murray Goulburn Dairy Co., Ltd., a retailer of dairy products.
The value of assets and liabilities as at the date of acquisition were (2006: Consolidated at fair value):

                                                                                              Consolidated                            Company
                                                                                       2007                   2006             2007                   2006
                                                                                       $000                   $000             $000                   $000

Current Assets
  Cash                                                                                   -                      576               533                   -
  Receivables                                                                            -                   12,992            11,129                   -
  Prepayments                                                                            -                      133               128                   -
  Inventories                                                                            -                    5,889             6,931                   -
Non Current Assets
  Property, Plant and Equipment                                                          -                   12,564                   -                 -
  Deferred Tax Assets                                                                    -                      172                   -                 -
  Intangible assets                                                                      -                    1,244                   -                 -
Current Liabilities
  Payables                                                                               -                    (6,088)          (7,654)                  -
  Employee benefits                                                                      -                    (1,390)            (696)                  -
  Borrowings                                                                             -                    (8,652)               -                   -
Non Current Liabilities
  Employee benefits                                                                      -                      (541)            (437)                  -
  Borrowings                                                                             -                    (4,265)               -                   -
  Deferred Tax Liability                                                                 -                         -             (230)                  -
Net assets acquired                                                                      -                   12,634             9,704                   -
Goodwill on acquisition                                                                  -                    5,359                 -                   -
Consideration for the interest acquired                                                  -                   17,993             9,704                   -
Cash (outflow) inflow on acquisition
  Net cash acquired with subsidiary                                                      -                       576              533                   -
  Cash paid                                                                              -                   (17,993)               -                   -
Net cash (ouflow) inflow                                                                 -                   (17,417)             533                   -


NOTE 34: Additional Information
Murray Goulburn Co-operative Co. Limited is a company limited by shares, incorporated and domiciled in Australia.
Its registered office and principal place of business is:
Murray Goulburn Co-operative Co. Limited
140 Dawson Street
Brunswick, Victoria, 3056




                                                                              62
DIRECTORs’ DECLARATION



In the directors’ opinion:




                                                                                                                                                                  MURRAY GOULBURN ANNUAL REPORT 2007
a) There are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable;
b) The attached financial statements and notes thereto are in accordance with the Corporations Act 2001, including compliance
   with accounting standards; and
c) The attached financial statements and notes thereto give a true and fair view of the company’s and consolidated entity’s financial position as at 30 June
   2007 and performance for the financial year ended on that date.
At the date of this declaration, the company is within the class of companies affected by ASIC Class Order 98/1418. The nature of the deed of cross
guarantee is such that each company which is party to the deed guarantees to each creditor payment in full of any debt in accordance with the deed
of cross guarantee.
In the directors’ opinion, there are reasonable grounds to believe that the company and the companies to which the ASIC Class Order applies, as detailed in
Note 12 to the financial statements will, as a group, be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the
deed of cross guarantee.
This declaration is made in accordance with a resolution of the directors.




IW MacAulay
Director
Melbourne
26 September 2007




                                                                               63
INDEPENDENT AUDITOR’s REPORT
to the members of Murray Goulburn Co-operative Co. Ltd




We have audited the accompanying financial report of Murray Goulburn Co-operative Co. Ltd (the company), which comprises the balance sheet as at 30
June 2007, and the income statement, cash flow statement and statement of recognised income and expense for the year ended on that date, a summary of
significant accounting policies, other explanatory notes and the directors’ declaration of the consolidated entity comprising the company and the entities it
controlled at the year’s end as set out on pages 30 to 63.
Directors’ Responsibility for the Financial Report
The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting
Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility includes establishing and maintaining
internal control relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error;
selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1, the directors
also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with the Australian equivalents to
International Financial Reporting Standards ensures that the consolidated financial statements and notes, comply with International Financial Reporting
Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing
Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit
to obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected
depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In
making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order
to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by
the directors, as well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Auditor’s Independence Declaration
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
Auditor’s Opinion
In our opinion:
(a) the financial report of Murray Goulburn Co-operative Co. Ltd is in accordance with 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 2007 and of their performance for the year
      ended on that date; and
  (ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001; and
(b) the consolidated financial statements and notes also comply with International Financial Reporting Standards as disclosed in Note 1.




DELOITTE TOUCHE TOHMATSU




T Imbesi
Partner
Chartered Accountants
Melbourne, 26 September 2007
Liability limited by a scheme approved under Professional Standards Legislation.




                                                                              64
AUDIT INDEPENDENCE DECLARATION



26 September 2007




                                                                                                                                                         MURRAY GOULBURN ANNUAL REPORT 2007
The Board of Directors
Murray Goulburn Co-operative Co. Limited
140 Dawson Street
BRUNSWICK VIC 3056
Dear Sirs
Murray Goulburn Co-operative Co. Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors
of Murray Goulburn Co-operative Co. Limited.
As lead audit partner for the audit of the financial statements of Murray Goulburn Co-operative Co. Limited for the financial year ended 30 June 2007,
I declare that to the best of my knowledge and belief, there have been no contraventions of:
(i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely




DELOITTE TOUCHE TOHMATSU




T Imbesi
Partner
Chartered Accountants
Liability limited by a scheme approved under Professional Standards Legislation.




                                                                             65
                                        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.

				
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