annual report 2016 - marine produce australia report 2016.pdfcompanies for over 30 years. he is the...

annual report 2016

contents

chairman’s address 3

shareholder listing 4

annual financial report 5

corporate directory 55

chairman’s address Dear Shareholder,

It is with a great sense of accomplishment that we end FY16 and report on what has been another

productive and successful year. We posted a profit of $3.5m for the period – a 50% improvement on our

maiden profit in FY15; and finally, over 4.5 years on from the State Government announcement of the

development of aquaculture zones, we have now secured the majority share of the Kimberley zone and are

fully licenced to produce 15,000 tonnes finfish per annum at our Cone Bay farm.

In line with our projected expansion plans, much of the focus this year has been on increasing the fish

biomass at the farm – almost doubling the value of our stock over last year; and on expanding the farm

infrastructure capacity to support the increased biomass. We have built an additional 12 80m cages this

year, bringing our total to 34 cages - currently holding almost 2,000 tonnes of our iconic Cone Bay Barra.

We have also added a new 10-cage anchoring system at the farm to accommodate the increased cage

numbers, and now have 3 cage systems on our lease.

You will see that our harvest volume was kept relatively low for FY16, and that we only harvested a little

over 600 tonnes. This was a measured approach to ensuring that future increased harvest volumes did not

come at the expense of fish size, and that we can continue to harvest fish over 4kg. We now have a

significant harvestable biomass at the farm and expect to double our annual harvest tonnage this year.

We have invested significantly this year in improved feeding and cage cleaning equipment – and shortly will

be installing our first automated feed barge at the farm. This feed system has been purpose built and will be

used to feed 10-12 cages from a single anchored barge. We have made this investment in automated

equipment sooner than originally planned, and expect it will significantly improve the efficiency and

effectiveness of our feeding.

In November we will be welcoming two new senior members to our Perth team. Hank Poeschl joins us as

General Manager, and will oversee all farming operations and expansion plans. Hank comes with over 25

years of sea cage farming experience from countries across the world. We are also gaining a new Chief

Financial Officer, Helen Chow, who has near 20 years senior financial management experience. We are

greatly looking forward to having both Hank and Helen as integral members of our group.

I would like to make special mention of the continued hard work of all our staff; in particular our Managing

Director Dr Desiree Allen whose persistence, hard work and focus deserve our great thanks. She is joined

in her efforts by the dedicated MPA team both at Cone Bay and in the Perth office – and I extend our

gratitude to each and every one.

This is going to be another very busy but exciting year for MPA and we look forward to reporting sustained

improvements and ongoing expansion plans as the year continues.

Yours faithfully,

Miles Kennedy

3

shareholder listing

6

Top 20 Shareholders

Holder Name Securities %

1 LASBOROUGH INVESTMENTS LIMITED 10,765,149 29.51%

2 WEYBRIDGE PTY LTD 4,476,694 12.27%

3 MS DENISE M HUTTON 2,819,729 7.73%

4 FAUSTUS NOMINEES PTY LTD 2,208,414 6.05%

5 ILLOVO 2009 LIMITED 2,168,891 5.95%

6 MAXIMA PEARLING COMPANY PTY 1,933,873 5.30%

7 KENNEDY HOLDINGS PTY LTD 1,830,000 5.02%

8 SUNDEN PTY LTD 1,314,107 3.60%

9 MS JANE ELIZABETH SOMES & 871,622 2.39%

10 JCO INVESTMENTS PTY LTD 842,841 2.31%

11 EMERALD RIVER PTY LTD 606,367 1.66%

12 LENTAL PTY LTD 602,886 1.65%

13 NUTSVILLE PTY LTD 557,624 1.53%

14 T & E ALLEN INVESTMENTS PTY 465,914 1.28%

15 AWB NOMINEES PTY LTD 421,421 1.16%

16 MATHRY PTY LTD 380,000 1.04%

17 LOGICA (OVERSEAS) SA 375,000 1.03%

18 NORVEST PROJECTS PTY LTD 300,000 0.82%

19 MAKO BAY HOLDINGS PTY LTD 200,000 0.55%

20 KCS SUPERANNUATION PTY LTD 198,926 0.55%

Annual Financial Report

Year Ended 30 June 2016

marine produce australia limited

34 Bagot Road Subiaco WA 6008

telephone +61 8 9381 4483 fax +61 8 9381 5817

email [email protected] web marineproduce.com

abn 70 091 805 480

DIRECTORS’ REPORT 1

LEAD AUDITOR’S INDEPENDENCE DECLARATION 10

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

11

CONSOLIDATED STATEMENT OF FINANCIAL POSITION 12

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 13

CONSOLIDATED STATEMENT OF CASH FLOWS 14

NOTES TO THE FINANCIAL STATEMENTS 15

DIRECTORS’ DECLARATION 45

AUDITOR’S INDEPENDENT AUDIT REPORT 46

DIRECTORS’ REPORT FOR THE YEAR ENDED 30 JUNE 2016

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The directors present their report together with the consolidated financial report of Marine Produce Australia Limited (the Company or MPA), and its subsidiaries (the Group), for the financial year ended 30 June 2016 and the auditor’s report thereon.

1 DIRECTORS

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

Mr Miles Kennedy Chairman Appointed 11 June 2008

Mr Kennedy has held directorships of Australian listed resource companies for over 30 years. He is the non-executive Chairman of Lucapa Diamond Company Limited and was previously the executive Chairman of Sandfire Resources NL, Kimberley Diamond Company NL and RNI NL. Mr Kennedy practised as a Barrister and Solicitor of the Supreme Court of Western Australia and the High Court of Australia and as an Attorney of the Supreme Court of South Africa.

Dr Desiree Allen Managing Director Appointed 5 December 2012

Dr Allen joined MPA in 2011 with a strong background in both genetics (animal breeding) and environmental toxicology. She has a Bachelor of Science from Murdoch University (Australia), a Masters in Environmental Biology from the University of North Carolina (USA), and a PhD in Genetics from Indiana University (USA). Prior to joining MPA she was a Research Fellow at the University of Edinburgh (UK).

Mr Damien Kelly Non-Executive Director Appointed 18 August 2014

Mr Kelly is director of Western Tiger Corporate Advisers, a Perth-based corporate advisory and financial services firm. He has broad corporate and commercial experience spanning over 17 years, providing professional services to ASX and AIM listed companies predominately in the mining and energy sector. Mr Kelly has a MBA, Bachelor of Commerce, a Graduate Diploma in Applied Finance and Investment, full CPA qualifications and is a former officer in the Australian armed services, having graduated from the Royal Military College, Duntroon. He is also a fellow of the Financial Services Institute of Australia (FINSIA) and a member of CPA Australia.


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2 COMPANY SECRETARY

Mr Mark Clements Company Secretary Appointed 16 February 2015

Mr Clements gained a Bachelor of Commerce degree from the University of Western Australia. He is a Fellow of the Institute of Chartered Accountants and a member of both the Australian Institute of Company Directors and the Institute of Chartered Secretaries in Australia. Mr Clements currently holds the position of Company Secretary of a number of publicly listed companies and has experience in corporate finance, accounting and administration, capital raising and ASX Compliance and regulatory requirements.

3 DIRECTORS’ MEETINGS

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

Board Meetings Director Attended Held while a

director

Mr M Kennedy 5 5 Dr D Allen 5 5 Mr D Kelly 5 5

4 REMUNERATION REPORT

4.1 Principles of compensation

Remuneration is referred to as compensation throughout this report.

Key management personnel have authority and responsibility for planning, directing and controlling the activities of the Group, including directors of the Company and other executives. Key management personnel comprise the directors of the Company and senior executives for the Group.

Compensation levels for key management personnel and the Company Secretary are competitively set to attract and retain appropriately qualified and experienced directors and executives.

The compensation structures explained below are designed to attract suitably qualified candidates, reward the achievement of strategic objectives, and achieve the broader outcome of creation of value for shareholders. The compensation structures take into account:

the capability and experience of the key management personnel;

the key management personnel’s ability to influence and control performance of the business; and

the Group’s performance including the Group’s earnings, growth in share price and returns on shareholder wealth and amount of incentives within each key management person’s compensation.

Shares and options may only be issued to directors subject to approval by shareholders in general meeting. The Board has no established retirement or redundancy schemes.

Fixed compensation

Fixed compensation consists of base compensation as well as employer contributions to superannuation funds.

Non-executive directors

Total compensation for all non-executive directors is not to exceed $150,000 per annum and is set with reference to fees paid to other non-executive directors of comparable companies. Non-executive directors may receive performance related compensation for particular board approved objectives.


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4.2 Directors’ remuneration

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

Details of the nature and amount of each major element of remuneration of each director of the Group during the financial year are:

In dollars

Short-term Post-

employment

Other long term

$

Termination benefits

$

Share based

payments

Total $

Proportion of remuneration performance

related %

Salary & fees

$

STI cash bonus

$

Non-monetary benefits

$ Total

$

Superannuation benefits

$

Shares and

options $

Directors

Executive directors Dr Desiree Allen (appointed 5 Dec 2012)

2016 237,560 - - 237,560 25,241 - - - 262,8011

2015

234,124

-

-

234,124

22,241

-

-

-

256,365

Mr Justin Clarke 2016 - - - - - - - - - -

(Managing Director) 2015 23,325 - - 23,325 2,215 - 41,008 - 66,548 - (appointed 23 Nov 2010;

resigned 18 August 2014)

Non-executive directors Mr Miles Kennedy (Chairman)

2016 60,000 - - 60,000 - - - - 60,0002

2015 60,000 - - 60,000 - - - - 60,000 - (appointed 11 Jun 2008)

Mr Damien Kelly (Non-executive director)

2016 51,452 - - 51,452 - - - - 51,452 - 2015 52,110 - - 52,110 - - - - 52,110 -

(appointed 18 Aug 2014)

Totals 2016 349,012 - - 349,012 25,241 - - - 377,253 - 2015

369,559

-

-

369,559

24,456

-

41,008

-

435,023

-

1. An amount of $28,132 was accrued and unpaid at the date of the 2015 report; this is now paid in full and excluded in the 2016 report.

2. An amount of $25,000 was accrued and unpaid at the date of the 2015 report; this is now paid in full and excluded in the 2016 report.


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In dollars

Short-term Post-

employment

Other long term

$


$

Share based

payments

Total $

Proportion of remuneration performance

related %

Value of options as

proportion of remuneration

%

Salary & fees

$

STI cash bonus

$

Non-monetary benefits

$ Total

$

Superannuation benefits

$

Shares and

options $

Executives

Mark Clements (Company 2016 36,000 - - 36,000 - - - - 36,000 - - Secretary) 2015 13,500 - - 13,500 - - - - 13,500 - - (appointed 16 February 2015)

Tamar Kennedy (Company 2016 - - - - - - - - - - - Secretary) (appointed 3 June 2013, resigned 16 February 2015)

2015 20,061 - - 20,061 1,801 - - - 21,862 - -

Totals 2016 36,000 - - 36,000 - - - - 36,000 - - 2015 33,561 - - 33,561 1,801 - - - 35,362 - -


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4.3 Equity instruments

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

On 23 November 2015, 2,200,000 unlisted $0.75 options expiring 30 November 2018 were issued to the Directors following shareholder approval at the Company’s Annual General meeting held 23 November 2015.

(ii) Exercise of options granted as compensation

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

5 PRINCIPAL ACTIVITIES

This past year has been one of ongoing progress and development for MPA. We continue to focus on our production expansion plans, with improved equipment, greater fish inputs, key staff appointments, and continued development of workplace health and safety and staff training.

(i) OPERATING REVIEW

- Applied for, and were granted, a new Department of Fisheries Licence that allows the production of up to 15,000 tonnes finfish per annum. This approval includes additional 644 hectares of lease area adjacent to our existing 699 hectare water lease.

- Strengthened our farm management team with the promotion of Alasdair Connor to co-Manager of Marine Farming, and Nick Brearley to Innovator Skipper (Master IV).

- Expanded our farming capacity with the addition of new infrastructure, including:

o New 10-cage capacity anchoring system (now have 3 anchoring systems on our lease)

o 12 additional 80m cages (now have 34 cages in total).

- Improved our cage cleaning options with two new pressure washers and disk-drive cleaners

- Commissioned our first automated feed delivery system (feed barge), and updated our feed delivery equipment on existing boats

- Ongoing research into: feeding behaviour for optimal feed conversion and growth; cage materials for stock security; nursery conditions and fingerling genetics for improved production; and environmental conditions for optimising growth.

- Streamlined the cage building process in Derby with the continued assistance of the Derby Shire (with special thanks to all involved).

- Filed a trademark application for “Cone Bay” in relation to fish production – to ensure our iconic name, as we are known throughout Australia, is secured, and the value of that brand retained for our shareholders.


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(ii) REVIEW OF FINANCIAL RESULTS

Results from Operating Activities and Loss for the Period

The Group’s profit for the period was $3,530,000 (2015: $2,401,701). There was no impairment of property, plant and equipment or intangible assets in the year (2015: $516,787) and depreciation and amortisation was $398,106 (2015: $169,589).

Net cash provided by operating activities was ($2,659,141) (2015: $246,376).

The results from operating activities (excluding impairment and depreciation) included:

12 months

ended June 2016

12 months ended

June 2015 Profit / (loss) from farming operations (excluding impairment and depreciation) 1,368,297 (502,494) Administration and marketing expenses (1,857,847) (2,715,726) Other income 76,120 4,085 Other expense - -

Results from operating activities excluding impairment and depreciation (413,430) (3,214,135)

Impairment and depreciation (398,106) (686,376)

Loss before tax (811,536) (3,900,511)

Non IFRS unaudited

12 months

ended June 2016

12 months ended

June 2015 Farm cash operating costs (AUD) 13,154,499 10,719,168 Fish biomass growth before harvest (kg) 1,410,329 969,523

Farm cash operating cost per kg 9.33 11.06

Revenue

Revenue from sales

Revenue from the sale of fish was $7,253,391 for the period from the sale of 638,805kg. A total of 641,078kg of fish was harvested for the period. As part of the production planning, the harvest volume was intentionally kept low for part of the year so as to ensure we are able to attain the preferred size of our harvestable fish.

(iii) REVIEW OF FINANCIAL CONDITION

At 30 June 2016, the Group had a working capital surplus of $19,741,261 represented significantly by biological assets of $16,141,615 and cash and cash equivalents of $1,473,322.

The Group’s working capital will be utilised to fund operating and capital expenditure to continue to develop the Cone Bay farm site and increase profitability with scale.

The Group has the ability to slow its expansion strategy and/or harvest fish at less than the targeted harvest size to maintain sufficient cash reserves, with a resulting delay in the growth of the scale of the operations. The Group also has the ability, and is planning, to raise new equity or debt capital and to seek research and development tax refunds as it has in prior years.

The financial statements have been prepared on a going concern basis which the directors believe to be appropriate. The directors are confident that the Group will maintain sufficient levels of working capital to continue as a going concern and continue to pay its debts as and when they fall due.

If the Group is unable to continue as a going concern, it will be required to realise its assets and extinguish its liabilities other than in the ordinary course of business and at amounts that may be different to those stated in the financial statements.


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(iv) SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

In the interval between the end of the financial year and the date of this report, there has not been any item, transaction or effect of a material or unusual nature likely, in the opinion of the directors of the Company, to affect significantly the operations of the Group, the results of those operations, or the state of affairs of the Group, in future financial years.

6 DIVIDENDS

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

7 DIRECTORS’ INTERESTS

The relevant interest of each Director in the shares, debentures, interests in registered schemes and rights or options over such instruments issued by the companies within the consolidated entity and other related bodies corporate at the date of this report is as follows.

Marine Produce Australia Limited

Ordinary shares Options over ordinary shares

Mr M Kennedy 1,830,000 1,056,484 Dr D Allen 136,726 1,000,000 Mr D Kelly 62,800 221,000

On 23 November 2015, 2,200,000 unlisted $0.75 options expiring 30 November 2018 were issued to the Directors

following shareholder approval at the Company’s Annual General meeting held 23 November 2015.

8 INDEMNIFICATION AND INSURANCE OF OFFICERS AND AUDITORS

Indemnification

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

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

Insurance premiums

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

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

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

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


8 | Page

9 DETAILS OF PROCEEDINGS UNDERTAKEN ON BEHALF OF THE COMPANY

At the date of this report, there are no proceedings brought on behalf of the Company under section 237 of the Corporations Act 2001.

10 ENVIRONMENTAL REGULATION

MPA’s operations are subject to the environmental quality monitoring and maintenance outlined in Ministerial

Statement 996 and the Department of Fisheries Kimberley Aquaculture Development Zone Environmental

Monitoring and Management Plan. MPA measures water and sediment quality during 8 months of the year, and

has these samples independently tested against the quality standards set by the Environmental Protection

Authority (EPA), outlined in the DoF 2014 EMMP. MPA is required to report any results that exceed the standards,

and if that were the case, implement further testing and subsequent remedial action. MPA submits a yearly

compliance report to the EPA with sample test results and details of any non-compliance.

11 LEAD AUDITOR’S INDEPENDENCE DECLARATION

The lead auditor’s independence declaration is set out on page 10 and forms part of the Directors’ Report for the financial year ended 30 June 2016.

12 SUBSEQUENT EVENTS

In the period subsequent to year end the Group has drawn down upon existing loans by an additional $1,756,603.

The Group also received the payment of the R&D tax refund of $4,412,782 on 9 September 2016.

No other matter or circumstance has arisen since 30 June 2016 that has significantly affected or may significantly

affect the Group’s operations, the results of those operations or the Group’s state of affairs in future years.

13 NON-AUDIT SERVICES

Details of the amounts paid to the auditor of the Company and their related practices for audit services provided during the year are set out below.

2016 2015

Audit services:

Audit and review of financial reports 58,823 50,899

58,823 50,899

The following non-audit services were provided by the Company’s auditor, Grant Thornton Australia. The Directors are satisfied that the provision of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The nature and scope of each type of non-audit service provided means that auditor independence was not compromised.

Grant Thornton Australia received or is due to receive the following amounts for the provision of non-audit services:

2016 2015

Non-audit services:

Tax compliance services 25,848 14,450

25,848 14,450


9 | Page

Signed in accordance with a resolution of the Directors.

DESIREE ALLEN MANAGING DIRECTOR Dated at Subiaco 29

th September 2016.

Level 1

10 Kings Park Road

West Perth WA 6005

Correspondence to:

PO Box 570

West Perth WA 6872

T +61 8 9480 2000

F +61 8 9322 7787

E [email protected]

W www.grantthornton.com.au

Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Ltd ABN 41 127 556 389

‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the

context requires. Grant Thornton Australia Ltd is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm

is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and

are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 and its

Australian subsidiaries and related entities. GTIL is not an Australian related entity to Grant Thornton Australia Limited.

Liability limited by a scheme approved under Professional Standards Legislation. Liability is limited in those States where a current scheme applies.

Auditor’s Independence Declaration

To the Directors of Marine Produce Australia Limited

In accordance with the requirements of section 307C of the Corporations Act 2001, as lead

auditor for the audit of Marine Produce Australia Limited for the year ended 30 June 2016, I

declare that, to the best of my knowledge and belief, there have been:

a no contraventions of the auditor independence requirements of the Corporations Act

2001 in relation to the audit; and

b no contraventions of any applicable code of professional conduct in relation to the

audit.

GRANT THORNTON AUDIT PTY LTD Chartered Accountants

M A Petricevic

Partner - Audit & Assurance

Perth, 29 September 2016

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 JUNE 2016

11 | Page

Consolidated

Note 2016 2015

Revenue from sales 7,253,391

9,015,943

Raw materials and consumables (9,340,477)

(7,119,679)

Farm personnel expenses 9 (3,814,022)

(3,599,490)

Fair value gain on biological assets 7,269,405

1,200,732

Impairment of property, plant and equipment 8 -

-

-

(516,787)

-

-

Depreciation and amortisation (398,106)

(169,589)

Administrative and marketing expenses (1,857,847)

(2,715,726)

Other income 76,120

4,085

Results from operating activities (811,536)

(3,900,511)

Finance income 7 37,066

40,280

Finance costs 6 (108,312)

(79,224)

Net finance costs (71,246)

-879,412

(38,944)

-879,412

Loss before income tax (882,782)

(3,939,455)

Income tax benefit – research and development tax incentive

11 4,412,782

3,533,370

6,341,156

3,533,370

Profit for the period: attributable to owners of the Company

3,530,000 2,401,701

Other comprehensive income for the period, net of tax -

-

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

3,530,000 2,401,701

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

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2016

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Consolidated

Note 2016 2015

Assets

Cash and cash equivalents 12 1,473,322

2,063,069

Trade and other receivables 13 5,688,011

760,308

4,837,960

Inventories 14 760,308

441,489

Biological assets 15 16,141,615

8,658,598

Total current assets 24,063,256

16,001,116

Property, plant and equipment 8/17 4,949,139

2,914,323

Other assets 94,737 91,380

Biological assets 15 70,716

284,329

Total non-current assets 5,114,592

3,290,032

Total assets 29,177,848

19,291,148

Liabilities

Trade and other payables 20 3,509,439

471,702

2,066,503

471,702

Loans and borrowings 21 471,702

1,164,310

Employee benefits 22 340,854

226,331

Total current liabilities 4,321,995

3,457,144

Loans and borrowings 21 1,182,965

691,359

Provision for restoration 19 119,586

110,384

Employee benefits 22 60,230 -

Total non-current liabilities 1,362,781

801,743

Total liabilities 5,684,776

4,258,887

Net assets 23,493,072

15,032,261

Equity

Share capital 23 60,505,645

55,699,560

Reserves 124,726

-

Accumulated losses (37,137,299)

(40,667,299)

Total equity 23,493,072

15,032,261


CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2016

13 | Page

Note Share capital

Share options reserve

Accumulated Losses Total equity

Balance at 1 July 2014 54,481,090 1,473,020 (44,542,020) 11,412,090

Profit for the period - - 2,401,701 2,401,701

Other comprehensive income - - - -

Total comprehensive profit for the year - - 2,401,701 2,401,701

Transactions with owners in their capacity as owners:

Share issues 23 820,243

- - 820,243

Share issue costs (14,462)

- - (14,462)

Exercise of options 412,689

- - 412,689

Expiry of options - (1,473,020)

1,473,020

-

Balance at 30 June 2015 55,699,560

- (40,667,299)

15,032,261

Balance at 1 July 2015 55,699,560

- (40,667,299)

15,032,261

Profit for the period - - 3,530,000

3,530,000

Other comprehensive income - - - -

Total comprehensive profit for the year - - 3,530,000

3,530,000

Transactions with owners in their capacity as owners:

Share issues 23 4,902,739 - - 4,902,739

Share issue costs (96,654) - - (96,654)

Reserves - 124,726 - 124,726

Balance at 30 June 2016 60,505,645 124,726 (37,137,299) 23,493,072


CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 30 JUNE 2016

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Consolidated

Note 2016 2015

Cash flows from operating activities

Cash receipts from customers 6,978,503

9,775,142

Cash paid to suppliers and employees (13,588,449)

(13,515,166)

Cash used in operations (6,609,946)

(3,740,024)

Interest received 37,066

40,280

Research and development tax incentive receipts 3,913,739

3,946,120

Net cash used in operating activities 28 (2,659,141)

246,376

Cash flows from investing activities

Acquisition of property, plant and equipment 17 (2,427,417)

(1,652,730)

Net cash used in investing activities (2,427,417)

(1,652,730)

Cash flows from financing activities

Proceeds from issue of share capital 23 4,902,739

-96,654

1,232,932

-96,654

Payment of transaction costs 23 (96,654)

(14,462)

Proceeds from borrowings 21 203,293

2,078,169

Repayment of borrowings 21 (404,296)

(674,000)

Interest paid on borrowings (108,271)

(79,224)

Net cash provided by financing activities 4,496,811

2,543,415

Net decrease in cash and cash equivalents (589,747) 1,137,061

Cash and cash equivalents at 1 July 2,063,069

926,008

Cash and cash equivalents at 30 June 12 1,473,322

2,063,069


NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2016

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1 Reporting entity

Marine Produce Australia Limited (the Company) is a company domiciled in Australia. The address of the Company’s registered office is 34 Bagot Road, Subiaco WA 6008. The consolidated financial statements of the Group as at and for the year ended 30 June 2016 comprise the Company and its subsidiaries (together referred to as the ‘Group’ and individually as ‘Group entities’).

The Group is a for-profit entity involved in the seafood and aquaculture industry, specifically including the farming of fin fish (Barramundi) in sea cages.

2 Basis of preparation

(a) Statement of compliance

The financial report is a general purpose financial report which has been prepared in accordance with Australian Accounting Standards (AASBs) (including Australian Interpretations) adopted by the Australian Accounting Standards Board (AASB) and the Corporations Act 2001 (Cth). The consolidated financial report of the Group complies with International Financial Reporting Standards (IFRSs) and interpretations adopted by the International Accounting Standards Board (IASB).

The consolidated financial statements were approved and authorised for issue by the Board of Directors on 29th September 2016.

(b) Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis except for the following material items in the statement of financial position:

biological assets are measured at fair value less costs to sell;

property plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses; and

share based payments are measured at fair value of services provided.

The methods used to determine fair values are discussed further in Note 3 (m).

(c) Functional and presentation currency

These consolidated financial statements are presented in Australian Dollars, which is the Group’s functional currency.

(d) Use of estimates and judgements

The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from those estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

Information about critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the following notes:

Note 8 - Impairment of property, plant and equipment and intangible assets

Note 15 - Biological assets

Note 23 - Share Capital

Note 3(b) - Depreciation methods and rates


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(e) Going concern

The financial statements have been prepared on a going concern basis which the Directors believe to be

appropriate. The Directors are confident that the Group will be able to maintain sufficient levels of working capital

to continue as a going concern and continue to pay its debts as and when they fall due.

For the period ended 30 June 2016, the Group made a profit of $3,530,000 (2015: $2,401,701). At 30 June 2016,

the Group had a working capital surplus of $19,741,261 represented significantly by biological assets of

$16,141,615 and cash and cash equivalents of $1,473,322.

The Directors are confident that the Group can continue as a going concern and as such are of the opinion that the

financial report has been appropriately prepared on a going concern basis.

The Group’s 2017 cash flow forecast assumes an increase in the working capital spending required to support its

ongoing expansion plans. These increased costs specifically include feeding and growing the fish biomass to sustain

increasing harvest volumes. This ongoing expansion is expected to be funded by sales of fish, further research and

development tax refunds, and some equity and/or debt investment. During 2016 the Group also secured an

additional rolling capital expenditure loan from National Australia Bank.

Key risks associated with Barramundi farming and the ability to successfully grow and harvest fish for sale are

discussed in Note 15.

The directors believe that it is appropriate to prepare the financial statements using the going concern basis as the

Group has the ability to slow its expansion strategy and/or harvest fish at less than the targeted harvest size to

maintain sufficient cash reserves, with a resulting delay in the growth of the scale of the operations. In any case,

the Group is planning to raise new equity or debt capital.

Should the Group be unable to undertake the initiatives disclosed above, there is uncertainty which may cast

doubt as to whether or not the Group will be able to continue as a going concern and whether it will realise its

assets and extinguish its liabilities in the normal course of business and at the amounts stated in the financial

statements.

The financial statements do not include any adjustments relating to the recoverability and classification of

recorded asset amounts nor to the amounts and classification of liabilities that might be necessary should the

Group not continue as a going concern.

3 Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by Group entities.

(a) Basis of consolidation

Subsidiaries

Subsidiaries are entities controlled by the Group. During the reporting period the Company had a 100% interest in the following subsidiaries:

MPA Fish Farms Pty Ltd; MPA Marketing Pty Ltd;

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

In the Company’s financial statements, investments in subsidiaries are carried at cost.


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Transactions eliminated on consolidation

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

(b) Property, plant and equipment

Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials; direct labour;; and, an appropriate proportion of production overheads.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net within other income in profit or loss.

Subsequent costs

Subsequent expenditure is capitalised only when it is probable that the future economic benefits associated with the expenditure will flow to the Group. Ongoing repairs and maintenance is expensed as incurred.

Depreciation

Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value.

Depreciation is recognised in profit or loss on an adjusted reducing balance basis over the estimated useful lives of each part of an item of property, plant and equipment, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset.

The estimated useful lives for the current and comparative periods are as follows:

Plant and equipment 5 – 15 years Fixtures and fittings 5 – 10 years Major components 3 – 5 years Boats 15 years Depreciation methods, useful lives and residual values are reviewed at each financial year end and adjusted if appropriate.

(c) Intangible assets

Research and development

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in the profit or loss as incurred.

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


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Subsequent costs

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is recognised in profit or loss as incurred.

Amortisation

Amortisation is calculated over the costs of the asset, less its residual value.

Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets from the date that they are available for use, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. The estimated useful lives for the current and comparative periods is 10 years.

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

(d) Biological assets

Biological assets (fish 400 grams and larger) are measured at fair value less costs to sell, with any change therein recognised in profit or loss. Fair value is determined based on average market sales price. Costs to sell include all costs that are necessary to sell the assets, including costs necessary to get the assets to market.

As the fair value of the assets is based on its present location and condition, the Group applies direct costing to estimate fair value of fish in cages where they have not yet reached a saleable size:

Fish up to 400 grams are measured at cost plus direct feed cost and direct fish management costs.

(e) Inventories

Inventories are measured at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and costs to sell.

The cost attributed to harvested fish is equal to the fair value less estimated selling costs previously recorded in biological assets at the date of harvest, determined in accordance with the accounting policy for biological assets. Any change in value at the date of harvest is recognised in the income statement. Once harvested, fish inventories are accounted for as normal inventories.

The cost of other inventories is based on the first-in first-out principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. Cost includes an appropriate share of overheads based on normal operating capacity.

(f) Impairment

Non-derivative financial assets (including receivables)

The carrying amounts of the Group’s non-derivative financial assets, other than biological assets (see accounting policy (d)), inventories (see accounting policy (e)) and deferred tax assets (see accounting policy (k)) are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.

For intangible assets that are not yet available for use, the recoverable amount is estimated at each balance sheet date.

An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement, unless an asset has previously been revalued, in which case the impairment loss is recognised as a reversal to the extent of that previous revaluation with any excess recognised through profit or loss.

Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units (group of units) and then, to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis (except for individual assets or groups of assets have been valued separately).


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Calculation of recoverable amount

The recoverable amount of the Group’s investments and receivables carried at amortised cost is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate (i.e. the effective interest rate computed at initial recognition of these financial assets). Receivables with a short duration are not discounted.

Impairment of receivables is not recognised until objective evidence is available that a loss event has occurred. Significant receivables are individually assessed for impairment. Impairment testing of receivables that are not impaired individually is performed by placing them into portfolios of receivables with similar risk profiles and undertaking a collective assessment of impairment. Non-significant receivables are not individually assessed. Instead, impairment testing is performed by placing non-significant receivables in portfolios of similar risk profiles based on objective evidence from historical experience adjusted to for any effects of conditions existing at each balance sheet date.

Non-financial assets

The carrying amounts of the Group’s non-financial assets, other than biological assets, investment property, inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill and indefinite life intangible assets are tested annually for impairment. An impairment loss is recognised if the carrying amount of an asset or its related cash-generating unit (CGU) exceeds its recoverable amount.

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Subject to an operating segment ceiling test, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment is tested reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination.

Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU (or group of CGUs), and then to reduce the carrying amounts of the other assets in the CGU (or group of CGUs) on a pro rata basis (except for individual assets or groups of assets have been valued separately).

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

(g) Employee benefits

Defined contribution plans

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

Short-term benefits

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


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Termination benefits are recognised as an expense when the Group is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to terminate employment before the normal retirement date. Termination benefits for voluntary redundancies are recognised if the Group has made an offer encouraging voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably.

(h) Provisions

A provision is recognised in the Statement of Financial Position when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

(i) Revenue

Sale of goods

Revenue from the sale of goods is recognised in profit or loss when persuasive evidence exists that the significant risks and rewards of ownership have been transferred to the buyer. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due, the costs incurred or to be incurred cannot be measured reliably, there is a risk of return of goods or there is continuing management involvement with the goods.

Transfers of risks and rewards vary depending on the individual terms of the contract of sale. For sales of Barramundi, transfer usually occurs when the product is received by the customer.

Gain from change in fair value of biological assets

Biological assets relating to aquaculture activities and products are stated at fair value less estimated point-of-sale costs, with any resultant gain or loss recognised in the income statement. Point-of-sale costs include all costs that would be necessary to sell the assets, including costs necessary to get the assets to market.

As the fair value of the assets is based on its present location and condition, the Company applies direct costing to estimate fair value of Barramundi in cages where they have not yet reached a saleable size of 400 grams.

(j) Expenses

Financing income and expenses

Financing costs comprise interest payable on borrowings (calculated using the effective interest method), facilities and interest receivable on funds invested that are recognised in the income statement. Borrowing costs are expensed as incurred and included in financing costs.

Interest income is recognised in the income statement as it accrues, using the effective interest method.

(k) Income tax

Income tax on profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Research and development incentive is recognised as an income tax benefit in the year in which it is earned. The corresponding receivable is held within other receivables.


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Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: initial recognition of goodwill, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that the future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Tax consolidation

The Company and its wholly-owned Australian resident entities have formed a tax-consolidated group with effect from 1 July 2004 and are therefore taxed as a single entity from that date. The head entity within the tax-consolidated group is Marine Produce Australia Limited.

Current tax expense/income and deferred tax assets arising from unused tax losses of the subsidiaries is assumed by the head entity and are recognised in the separate financial statements of the members of the tax consolidated group using the “separate tax payer within group” approach by reference to the carrying amount of assets and liabilities in the separate financial statements of each entity and the tax values applying under tax consolidation.

Any current tax liabilities (or assets) and deferred tax assets arising from unused tax losses of the subsidiaries is assumed by the head entity in the tax consolidated group and are recognised as amounts payable (receivable) to (from) other entities in the tax-consolidated group in conjunction with any tax funding arrangement amounts (refer below). Any difference between these amounts is recognised by the Company as an equity contribution or distribution.

The Company recognises deferred tax assets arising from unused tax losses of the tax-consolidated group to the extent that it is probable that future taxable profits of the tax-consolidated group will be available against which the asset can be utilised.

Any subsequent period adjustments to deferred tax assets arising from unused tax losses as a result of revised assessments of the probability of recoverability is recognised by the head entity only.

Nature of tax funding arrangements and tax sharing arrangements

The head entity, in conjunction with other members of the tax-consolidated group, has not entered into a tax funding or sharing arrangement with members of the tax-consolidated group in respect of tax amounts.

(l) Goods and services tax

Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), except where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the balance sheet.

Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from investing and financing activities which are recoverable from, or payable to, the ATO are classified as operating cash flows.


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(m) Determination of fair values

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

Biological assets

The fair value of fish is set out in Note 3(d).

Trade and other receivables

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

(n) Financial instruments

Non-derivative financial assets

The Group initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets (including assets designated at fair value through profit and loss) are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument.

The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.

The Group has the following non-derivative financial assets: trade and other receivables, and cash and cash equivalents.

Trade and other receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.

Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.

Non-derivative financial liabilities

The Group initially recognises debt securities issued and subordinated liabilities on the date that they are originated. All other financial liabilities (including liabilities designated at fair value through profit or loss) are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire. Financial assets and liabilities are offset and the net amount presented in the Statement of Financial Position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

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

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

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


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Share capital

Ordinary shares

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

Dividends

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

(o) Government grants

An unconditional government grant is recognised in profit or loss as other income when the grant becomes receivable.

Grants that compensate the Group for expenses incurred are recognised in profit or loss as other income on a systematic basis in the same period in which the expenses are recognised.

Research and development tax incentives are recognised in the statement of profit or loss when received or when the amount to be received can be reliably estimated.

4 New standards and interpretations not yet adopted

A number of new and revised standards are effective for the current reporting period, however there was no need

to change accounting policies or make retrospective adjustments as a result of adopting these standards.

Information on these new standards is presented below.

AASB 2015-1 Amendments to Australian Accounting Standards – Annual Improvements to Australian Accounting Standards 2012-2014 Cycle

These amendments arise from the issuance of Annual Improvements to IFRS 2012-2014 Cycle in September 2014

by the IASB.

Among other improvements, the amendments clarify that when an entity reclassifies an asset (or disposal group)

directly from being held for sale to being held for distribution (or vice-versa), the accounting guidance in

paragraphs 27-29 of AASB 5 Non-current Assets Held for Sale and Discontinued Operations does not apply. The

amendments also state that when an entity determines that the asset (or disposal group) is no longer available for

immediate distribution or that the distribution is no longer highly probable, it should cease held-for-distribution

accounting and apply the guidance in paragraphs 27-29 of AASB 5.

AASB 2014-3 Amendments to Australian Accounting Standards – Accounting for Acquisitions of Interests in Joint Operations

The amendments to AASB 11 Joint Arrangements state that an acquirer of an interest in a joint operation in which

the activity of the joint operation constitutes a ‘business’, as defined in AASB 3 Business Combinations, should;

apply all of the principles on business combinations accounting in AASB 3 and other Australian Accounting

Standards except principles that conflict with the guidance of AASB 11. This requirement also applies to the

acquisition of additional interests in an existing joint operation that results in the acquirer retaining joint

control of the joint operation (note that this requirement applies to the additional interest only, i.e., the

existing interest is not re-measured) and to the formation of a joint operation when an existing business is

contributed to the joint operation by one of the parties that participate in the joint operation; and

provide disclosures for business combinations as required by AASB 3 and other Australian Accounting

Standards.


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AASB 2014-4 Amendments to Australian Accounting Standards – Clarification of Acceptable Methods of Depreciation and Amortisation

The amendments to AASB 116 prohibit the use of a revenue-based depreciation method for property, plant and

equipment. Additionally, the amendments provide guidance in the application of the diminishing balance method

for property, plant and equipment.

The amendments to AASB 138 present a rebuttable presumption that a revenue-based amortisation method for

intangible assets is inappropriate. This rebuttable presumption can be overcome (ie., a revenue-based

amortisation method might be appropriate) only in two (2) limited circumstances:

intangible asset is expressed as a measure of revenue, for example when the predominant limiting factor

inherent in an intangible asset is the achievement of a revenue threshold; or

when it can be demonstrated that revenue and the consumption of the economic benefits of the intangible

asset are highly correlated.

AASB 2014-9 Amendments to Australian Accounting Standards – Equity Method in Separate Financial Statements

The amendments introduce the equity method of accounting as one of the options to account for an entity’s

investments in subsidiaries, joint ventures and associates in the entity’s separate financial statements.

AASB 2015-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 101

The Standard makes amendments to AASB 101 Presentation of Financial Statements arising from the IASB’s

Disclosure Initiative project. The amendments:

Clarify the materiality requirements in AASB 101, including an emphasis on the potentially detrimental effect

of obscuring useful information with immaterial information

Clarify that AASB 101’s specified line items in the statement(s) of profit or loss and other comprehensive

income and the statement of financial position can be disaggregated

Add requirements for how an entity should present subtotals in the statement(s) of profit and loss and other

comprehensive income and the statement of financial position

clarify that entities have flexibility as to the order in which they present the notes, but also emphasise that

understand-ability and comparability should be considered by an entity when deciding that order

remove potentially unhelpful guidance in AASB 101 for identifying a significant accounting policy

AASB 2015- 4 Amendments to Australian Accounting Standards – Financial Reporting Requirements for Australian Groups with a Foreign Parent

AASB 2015-4 amends AASB 128 Investments in Associates and Joint Ventures to ensure that its reporting

requirements on Australian groups with a foreign parent align with those currently available in AASB 10

Consolidated Financial Statements for such groups. AASB 128 will now only require the ultimate Australian entity

to apply the equity method in accounting for interests in associates and joint ventures, if either the entity or the

group is a reporting entity, or both the entity and group are reporting entities.


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AASB 1057 Application of Australian Accounting Standards

In May 2015, the AASB decided to revise Australian Accounting Standards that incorporate IFRSs to minimise

Australian specific wording even further. The AASB noted that IFRSs do not contain application paragraphs that

identify the entities and financial reports to which the Standards (and Interpretations) apply. As a result, the AASB

decided to move the application paragraphs previously contained in each Australian Accounting Standard (or

Interpretation), unchanged, into a new Standard AASB 1057 Application of Australian Accounting Standards.

AASB 2015-9 Amendments to Australian Accounting Standards – Scope and Application Paragraphs removes the

application paragraphs from each Australian Accounting Standard.

Impact of standards issued but not yet applied

New and revised accounting standards and amendments that are currently issued for future reporting periods that

are relevant to the Company include:

AASB 9 Financial Instruments

AASB 9 introduces new requirements for the classification and measurement of financial assets and liabilities.

These requirements improve and simplify the approach for classification and measurement of financial assets

compared with the requirements of AASB 139.

The effective date is for annual reporting periods beginning on or after 1 January 2018.

The Company is yet to undertake a detailed assessment of the impact of AASB 9. However, based on the

Company’s preliminary assessment, the Standard is not expected to have a material impact on the transactions

and balances recognised in the financial statements when it is first adopted for the year ending 30 June 2019.

AASB 15 Revenue from Contracts with Customers

AASB 15 replaces AASB 118: Revenue, AASB 111 Construction Contracts and some revenue-related Interpretations. In summary, AASB 15:

establishes a new revenue recognition model;

changes the basis for deciding whether revenue is to be recognised over time at a point in time;

provides a new and more detailed guidance on specific topics (eg multiple element arrangements, variable

pricing, rights of return and warranties); and

expands and improves disclosures about revenue.

The Company is yet to undertake a detailed assessment of the impact of AASB 15. However, based on the Company’s preliminary assessment, the Standard is not expected to have a material impact on the transactions and balances recognised in the financial statements when it is first adopted for the year ending 30 June 2018.

AASB 16 Leases

AASB 16 replaces AASB 117 Leases and some lease-related Interpretations. In summary, AASB 16:

requires all leases to be accounted for ‘on-balance sheet’ by lessees, other than short-term and low value asset leases;

provides new guidance on the application of the definition of lease and on sale and lease back accounting;

largely retains the existing lessor accounting requirements in AASB 117; and

requires new and different disclosures about leases.


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The Company is yet to undertake a detailed assessment of the impact of AASB 16. However, based on the

Company’s preliminary assessment, the Standard is not expected to have a material impact on the transactions

and balances recognised in the financial statements when it is first adopted for the year ending 30 June 2020.

AASB 2014-3 Amendments to Australian Accounting Standards – Accounting for Acquisitions of Interests in Joint

Operations

This amendment impacts on the use of AASB 11 when acquiring an interest in a joint operation.

The effective date is for annual reporting periods beginning on or after 1 January 2016. When these amendments

are first adopted for the year ending 30 June 2017, there will be no material impact on the transactions and

balances recognised in the financial statements.

AASB 2014-4 Amendments to Australian Accounting Standards – Clarification of Acceptable Methods of

Depreciation and Amortisation

The amendments to AASB 116 prohibit the use of a revenue-based depreciation method for property, plant and

equipment. Additionally, the amendments provide guidance in the application of the diminishing balance method

for property, plant and equipment.


are first adopted for the year ending 30 June 2017, there will be no material impact on the transactions and

balances recognised in the financial statements.

AASB 2014-9 Amendments to Australian Accounting Standards – Equity Method in Separate Financial

Statements

The amendments introduce the equity method of accounting as one of the options to account for an entity’s

investments in subsidiaries, joint ventures and associates in the entity’s separate financial statements.


are first adopted for the year ending 30 June 2017, there will be no material impact on the financial statements.

AASB 2014-10 Amendments to Australian Accounting Standards – Sale or Contribution of Assets between an

Investor and its Associate or Joint Venture

The amendments address a current inconsistency between AASB 10 Consolidated Financial Statements and AASB

128 Investments in Associates and Joint Ventures (2011). The amendments clarify that, on a sale or contribution of

assets to a joint venture or associate or on a loss of control when joint control or significant influence is retained in

a transaction involving an associate or a joint venture, any gain or loss recognised will depend on whether the

assets or subsidiary constitute a business, as defined in AASB 3 Business Combinations. Full gain or loss is

recognised when the assets or subsidiary constitute a business, whereas gain or loss attributable to other

investors’ interests is recognised when the assets or subsidiary do not constitute a business.


are first adopted for the year ending 30 June 2017, there will be no material impact on the financial statements.


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5 Parent company disclosure

As at, and throughout, the financial year ending 30 June 2016 the parent company of the Group was Marine Produce Australia Limited.

Company 2016 2015

Result of the parent entity Profit for the period 3,530,000 2,401,701 Other comprehensive income - - Total comprehensive income for the period 3,530,000 2,401,701 Financial position of parent entity at year end

Current assets 5,505,234 5,924,891 Total assets 26,153,569 18,249,235 Current liabilities (159,319) (306,014) Total liabilities (2,660,497) (3,216,974) Total equity of the parent entity comprising of:

Share capital 60,505,645 55,699,560 Option reserve 124,726 - Accumulated losses (37,137,299) (40,667,299)

Total equity 23,493,072 15,032,261

Marine Produce Australia Limited has a guarantee in place under a facility agreement – refer to Note 21. For disclosures of capital and operating commitments refer Note 25 and Note 26, respectively. 6 Finance costs

2016 2015

Interest expense 108,312 79,224

108,312 79,224

Interest expense

Interest charges for Capital Finance and NAB Finance, for the provision of secured working capital facilities – refer to Note 21 for further details of movements, terms and conditions of these facilities.

7 Finance income

2016 2015

Interest income from cash and cash equivalents 37,066 40,280

37,066 40,280


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8 Impairment of property, plant and equipment and intangible assets

Note 2016 2015

Carried values prior to impairment: Property, plant and equipment 4,949,139 3,431,110

4,949,139 3,431,110 Impairment charges: Property, plant and equipment - (516,787)

- (516,787) Carried value following impairment: Property, plant and equipment 4,949,139 2,914,323

17 4,949,139 2,914,323

The Group has undertaken a review of the carrying value of its property, plant and equipment to assess whether any impairment triggers existed at balance date.

In assessing impairment, management estimates the recoverable amount of each asset or cash-generating unit based on expected future cash flows and uses an interest rate to discount them. Estimation uncertainty relates to assumptions about future operating results and the determination of a suitable discount rate. Expected future cash flows are based on management’s best estimates based on prior period actual results with the application of a growth rate of 2.5% (2015: 2.5%). The discount rate applied is equivalent to 14% (2015: 14%). In 2016, the Group did not recognise impairment (2015: $516,787). Refer to Note 2(d), 2(e) and Note 15 for additional details around estimates and assumptions.

9 Farm personnel expenses

2016 2015

Wages and salaries 2,768,062 2,658,448 Other associated personnel expenses 608,241 635,323 Superannuation costs 262,966 252,553 Increase in liability for annual leave 174,753 53,166

3,814,022 3,599,490

10 Auditor’s remuneration

2016 2015

Audit services Audit and review of financial reports – Grant Thornton Audit Pty Ltd 58,823

50,899

Total auditors remuneration 58,823 50,899

11 Income tax expense recognised in the income statement

2016 2015

Current tax expense Current period (4,412,782) (4,119,725) Current tax of prior period - (2,221,431)

(4,412,782) (6,341,156)

Deferred tax expense Origination and reversal of temporary differences - -

Total income tax expense (4,412,782) (6,341,156)


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

2016 2015

Accounting loss before tax (881,480) (3,939,455)

Loss excluding income tax (881,480) (3,939,455)

Income tax (benefit) using the Company’s domestic tax rate of 30% (2015:30%)

(264,444) (1,181,837)

Non-deductible expenses 39,212 2,067 Recoupment of prior year tax losses not brought to account (373,235) (2,221,431) Research and development offset income tax rate variance (1,470,927) (1,373,242) Assessable research and development feedstock adjustment 48,821 467,451 Deferred tax asset not brought to account (2,392,209) 62,742 Deferred tax loss not brought to account 403,815 - Research and development tax refund – amendment prior year (2,096,906) Feedstock adjustment amendment of prior year (403,815) -

Income tax expense (benefit) (4,412,782) (6,341,156)

12 Cash and cash equivalents

2016 2015

Cash at bank 1,473,322 2,063,069

Cash in the statement of cash flows 1,473,322 2,063,069

The Group currently maintains a $400,000 overdraft facility with NAB. This amount of the facility used at 30 June 2016 was nil (2015: nil).

The Group’s exposure to interest rate risk and a sensitivity analysis for financial assets and liabilities are disclosed in Note 24.

13 Trade and other receivables

2016 2015

Trade receivables 1,058,837 818,448 Provision for doubtful debt - (19,440) Other receivables 16,600 3,411 Research and development tax refund

(1) 4,412,782 3,913,739

GST receivable 199,792 121,802

5,688,011 4,837,960

The research and development tax refund has been received subsequent to reporting date. Refer note 30.

The Group’s exposure to credit and currency risks and impairment losses related to trade and other receivables are disclosed in Note 24.


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14 Inventories

2016 2015

Stock of feed - at cost 485,236 102,425 Consumable stock - at cost 49,684 56,152 Harvested fish stock - at net realisable value 225,388 282,912

760,308 441,489

15 Biological assets

Barramundi (tonnes)

Barramundi AUD

2016 2015 2016 2015 Balance at 1 July 944,283 788,405 8,942,927 7,742,194 Increase due to net growth 1,410,329 980,677 14,194,829 9,826,087 Increase due to acquisitions - - 327,966 390,589 Decrease due to harvest (641,078) (824,799) (7,253,391) (9,015,943)

Balance at 30 June 1,713,534 944,283 16,212,331 8,942,927

Gain from changes in fair value 7,269,405 1,200,732

Biological assets have been classified as both a current and non-current asset in the Consolidated Statement of Financial Position. Current biological assets are those which are expected to be harvested within the next 12 months and non-current biological assets will be harvested in later financial years. Group exposure to risk

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

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

weather conditions;

predator risks;

possibility of disease and high mortality rates;

sales price of and market for its products;

exchange rates affecting international market pricing;

unexpected developments in aquaculture development and operating costs;

general economic and stock market conditions in Australia and worldwide, particularly relating to the availability of capital; and

access to sufficient funding to allow grow-out to marketable size.

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

Regulatory and environmental risks The Group is subject to laws and regulations of Australia, and specifically Western Australia. Although the Group has currently obtained all required approvals it is possible that future legislative and regulatory changes may have a possible adverse impact on the Group’s operation and profitability.


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There are a number of environmental conditions which the Group must comply with and failure to meet such conditions could lead to forfeiture of key operating licences and leases and significant liability could be imposed on the Group for damages or penalties for non-compliance by the Group with environmental laws or regulations. The Group has established environmental policies and procedures aimed at compliance with local environmental and other laws. Management performs regular reviews to identify environmental risks and to ensure that the systems in place are adequate to manage those risks. Supply and demand risks The Group is exposed to risks arising from fluctuations in the price and sales volume of fish. MPA’s financial position and future development depends, to a considerable extent, on the price of Barramundi and demand for the fish is affected by a large number of different factors, over which the Group has little control. Where practicable, the Group manages this risk by aligning its harvest volume to market supply and demand. Management performs regular industry trend analysis to ensure that the Group’s pricing structure is in line with the market and to ensure that projected harvest volumes are consistent with the expected demand. Climate and other risks The Group’s fish farm is exposed to the risk of damage from climatic conditions as it is located in a tropical cyclone threat area. Although the main impacts of tropical lows and cyclones in the Derby region are heavy rainfall and associated flooding, there is still the risk that a severe cyclone may impact the Group’s operation. During the past twelve years of operating, the Group has had firsthand experience of cyclones and has subsequently developed and established procedures aimed at monitoring and mitigating those risks, including insuring itself against damage to its assets caused by natural disasters. Basis of estimation and valuation The measurement of the number, weight and value of fish stock involves:

sample counting of fish in cages during cage transfers and grading;

sample weighing of fish in cages and extrapolation of results to total holding in sampled cage; and

current market values and selling costs. In line with industry practice there is a degree of estimation in these processes which requires management and

staff to make judgments, estimates and assumptions that affect the reported quantities and value of the Group’s

biological assets. Fish numbers are estimated allowing for cannibalism, stock losses and under delivery of small fish

at time of purchase. Actual results, for example at later harvest, may differ positively or negatively from those

estimates. The estimates and assumptions applied are reviewed on an ongoing basis.

There is inherent uncertainty in the biomass estimate and resultant live fish valuation. This is common to all such

valuations and best practice methodology is used to facilitate reliable estimates. Biomass is estimated using a

model that simulates fish growth. Actual growth will invariably differ to some extent, which is monitored and stock

records adjusted via harvest counts and weights, periodic sample weight checks, physical counts on transfer to sea

cages and subsequent splitting of cages, mortality counts and reconciliation of the perpetual records after physical

counts and on cage closeout.

Competition Competition from domestic and foreign fish producers may pose a risk to the Group. The Group can provide no assurance that it will be able to compete effectively with existing or new competitors or that increased competition will not have a material adverse effect on the Group’s future operating and financial performance. Similarly, no assurances can be given regarding future Barramundi prices.


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Adverse movements in feed pricing and supply A substantial proportion of the Group’s marine-based costs of growing Barramundi are represented by the cost of fish feed required. Any material disruptions in the supply of feed or adverse movements in feed pricing have the potential to materially impact on the Group. Disease and predators There is always a possibility of disease and high mortality rates caused by the introduction of diseases to fish stocks. In addition, the Group’s farming operations are subject to the activities of natural predators. 16 Deferred tax assets and liabilities

Movement in temporary differences during the year

Balance

1 July 2014

Recognised in other

comprehensive income

Balance 30 June 2015

Recognised In loss

Recognised in other

comprehensive income

Balance 30 June

2016

Property, plant and equipment (819,534) - (787,431) 145,805 - (641,626) Intangible assets (515,071) - (515,071) - - (515,071) Inventory - - 47,573 2,149,572 - 2,197,145 Payables (29,877) - (12,463) 13 - (12,450) Pension and other employee obligations - - (93,254) (28,017) - (121,271) Provisions (53,892) - (14,377) 13,332 - (1,045) Capital raising costs (26,254) (4,339) (19,120) (7,085) (28,996) (55,201) Tax loss carry-forwards (9,409,526) - (2,283,100) (30,580) - (2,313,680) (10,854,154) (4,339) (3,677,243) 2,243,040 (28,996) (1,463,199) Deferred tax assets not brought to account 10,854,154 4,339 3,677,243 (2,243,040) 28,996 1,463,199

- - - - - -

Movement in unrecognised deferred tax assets and liabilities during the year

Balance 1 July 2014

Additions Balance 30 June 2015

Additions Balance 30 June 2016

Taxable temporary differences

- (47,573) (47,573) (2,149,572) (2,197,145)

Deductible temporary differences

1,445,076 (3,360) 1,441,716 (95,052) 1,346,664

Tax income losses 8,644,586 (6,361,486) 2,283,100 30,580 2,313,680 Tax capital losses 764,940 (764,940) - - -

10,854,602 (7,177,359) 3,677,243 (2,214,044) 1,463,199

No deferred tax asset has been recognised in respect to the losses disclosed above. The deductible temporary differences and tax losses do not expire under current tax legislation. Deferred tax assets have not been recognised in respect to these items because it is not probable that future taxable profit will be available against which the Group can utilise the benefits there from.


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17 Property, plant and equipment

Plant and

equipment Capital works

in progress Total

Gross carrying amount

Balance at 1 July 2014 9,887,356 - 9,887,356

Acquisitions 736,699 944,500 1,681,199

Balance at 30 June 2015 10,624,055 944,500 11,568,555

Depreciation and impairment losses

Balance at 1 July 2014 7,972,946 - 7,972,946

Depreciation 164,499 - 164,499

Impairment 516,787 - 516,787

Balance at 30 June 2015 8,654,232 - 8,654,232

Carrying amount at 30 June 2015 1,969,823 944,500 2,914,323

Gross carrying amount

Balance at 1 July 2015 10,624,055 944,500 11,568,555

Transfers from capital works in progress 944,500 (944,500) -

Acquisitions 1,586,742 840,677 2,427,419

Balance at 30 June 2016 13,155,297 840,677 13,995,974

Depreciation and impairment losses

Balance at 1 July 2015 8,654,232 - 8,654,232

Depreciation 392,603 - 392,603

Balance at 30 June 2016 9,046,835 - 9,046,835

Carrying amount at 30 June 2016 4,108,462 840,677 4,949,139

Management reviews its estimate of the useful lives of depreciable assets at each reporting date, based on the expected utility of the assets. Uncertainties in these estimates relate to technical obsolescence that may change the utility of certain assets.


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18 Intangible assets

Development assets

Barramundi Total Cost At 1 July 2014 823,160 823,160 Amortisation and impairment losses (823,160) (823,160) At 30 June 2015 - -

At 1 July 2015 - - At 30 June 2016 (Note 8) - -

19 Environmental provision

Site Restoration Total Cost

Balance at 1 July 2015 110,384 110,384

Provisions made during the year 9,202 9,202

Balance at 30 June 2016 119,586 119,586

Site restoration A provision of $110,384 was made during 2015 in respect of the Group’s obligation to remove operating equipment and rehabilitate environmental sites used in the production of Barramundi at Cone Bay. This was reviewed during the current year and an additional provision of $9,202 has been made based on management’s best estimates of future cost incurred. In accordance with the lease of land and waters agreement, all operating equipment must be removed and affected environmental sites must be rehabilitated to the satisfaction of the Department of Fisheries at the cessation of the lease, which expires in 21 years. Because of the long-term nature of the liability, the biggest uncertainty in estimating the provision is the costs that will be incurred. In particular, the Group has assumed that the site will be restored using technology and materials that are available currently.

20 Trade and other payables

2016 2015

Trade payables 3,278,231 1,742,221

Other payables and accrued expenses 231,208 324,282

3,509,439 2,066,503

There were no amounts due and payable to Directors of the entity included in the above amounts – refer to Note 29.

The Group’s exposure to currency and liquidity risk related to trade and other payables is disclosed in Note 24.


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21 Loans and borrowings

2016 2015

Current interest-bearing loans 471,702 1,164,310

Non-current interest bearing loans 1,182,965 691,359

1,654,667 1,855,669

Movements in loans and borrowings during 2016

Facility Opening

Drawn in cash Repaid in

cash

Closing

1-Jul-15 30-Jun-16

NAB Finance - Innovator 977,500 - 285,490 692,010

NAB Finance – Work Vessels 878,169 113,180 116,066 875,283

Capital Finance - Crown Forklifts - 44,000 1,496 42,504

Capital Finance - Net & Pressure Cleaning - 46,113 1,243 44,870

Total 1,855,669 203,293 404,295 1,654,667

This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings, which are measured at amortised cost. For more information about the Group’s exposure to interest rate and liquidity risk, see Note 24.

NAB Finance

During the period the Group received further funds of $113,180 from National Australia Bank (NAB) which

completed previously secured payments for vessels, and $90,113 from Capital Finance. The Group has honoured

its covenant obligations with existing finance provider National Australia Bank (NAB), including maintaining capital

ratios and minimum equity levels since the agreements were entered into.

The loan agreements are with MPA Fish Farms Pty Ltd and the parent company, Marine Produce Australia Ltd,

acted as guarantor. The following is a list of security interests held by NAB in relation to the agreements:

- General security charge over all present and future rights, property and undertakings of MPA Fish Farms

Pty Ltd.

- General security charge over all present and future rights, property and undertakings of Marine Produce

Australia Ltd

- General security charge over all present and future rights, property and undertakings of MPA Marketing

Pty Ltd

- 1st

Registered Ships Mortgage given by MPA Fish Farms Pty Ltd over the Innovator vessel.

- Guarantee and Indemnity for $1,985,569 given by Marine Produce Australia Limited and MPA Marketing

Pty Ltd supported by:

Security interest and Charge over all present and future rights, property and

undertakings of MPA Marketing Pty Ltd

Security interest and Charge over all present and future rights, property and

undertakings of Marine Produce Australia Ltd


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Subsequent to reporting date, MPA Fish Farms Pty Ltd entered equipment loans over each new vessel, superseding

the original loan. NAB has security of each vessel for each loan in addition to each loan being secured by the a

general security charge over all present and future rights, property and undertakings of MPA Fish Farms Pty Ltd,

Marine Produce Australia Pty Ltd and MPA Marketing Pty Ltd.

22 Employee benefits

Current

2016 2015

Provision for annual leave 288,407 226,330 Provision for long service leave 112,677 -

401,084 226,330

Defined superannuation contribution funds

The Group makes contributions to defined contribution superannuation funds. The amount recognised as an expense during the period was $335,160 (2015: $333,645).

23 Share capital

Ordinary Shares Options

No. shares $ No. options $

On issue at 1 July 2014 94,900,231 54,481,090 20,118,583 1,473,020

Consolidation 1:4 23,725,292 54,481,090 5,029,673 1,473,020

Issue of share capital 1,598,802 799,243 - -

Issue of share capital for no cash consideration

- - 799,428 -

Share application funds received - 21,000 - -

Transaction costs - (14,462) - -

Exercise of options 515,862 412,689 (515,862) -

Expiry of options - - (4,513,811) (1,473,020)

On issue at 30 June 2015 25,839,956 55,699,560 799,428 -

On issue at 1 July 2015 25,839,956 55,699,560 799,428 -

Rights issue 42,000 - 21,000 -

Issue of shares(i)

309,517 - - -

Issue of options to directors(ii)

- - 2,200,000 124,726

Issue of shares pursuant to rights

issue(iv)

9,805,477 4,902,739 - -

Transaction costs - (96,654) - -

On issue at 30 June 2016 35,996,950 60,505,645 3,020,428 124,726

Note

(i) On 7 August 2015 the Company issued 309,517 fully paid ordinary shares (Loyalty Shares), made on the basis of

3 Loyalty Shares for every 5 unlisted $0.80 options which option holders exercised prior to expiry on 31 October

2014;


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(ii) The assessed fair value at grant date of options granted during the year ended 30 June 2016 was $0.0567 per option (2015 – nil). The fair value at grant date is independently determined using an adjusted form of the Black Scholes Model that takes into account the exercise price, the term of the option, the impact of the dilution (where material), the share price at grant date and expected price volatility of the underlying share price at grant date and expected price volatility of the underlying share, the expected dividend yield, the risk free rate for the term of the option and the correlations and volatilities of the peer group companies. The use of this valuation technique was utilised in place of a valuation method equivalent to the fair value of services for which these issuances pertain as the fair value of services could not readily be attributable. The model inputs for options granted during the year ended 30 June 2016 included: (a) Options are granted for no consideration and vest immediately. (b) Exercise price: $0.75 (c) Grant date: 23 November 2015 (d) Expiry date: 30 November 2018 (e) Share price at grant date: $0.50 (f) Expected price volatility of the company’s shares: 33% (g) Expected dividend yield: nil (h) Risk-free interest rate: 1.89%

The expected price volatility is based on the historic volatility (based on the remaining life of the options), adjusted for any expected changes to future volatility due to publicly available information;

(iii) The Company issued 9,805,477 fully paid ordinary shares pursuant to the prospectus for a non-renounceable offer (“Offer”) of new shares dated 16 November 2015, at an issue price of $0.50 per share to raise up to approximately $5,238,295 (before the expenses of the Offer) of which 9,805,477 fully paid ordinary shares were issued.

Dividends

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

Issue of options

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

2016 2015

Weighted average

exercise price

Number of options

Weighted average

exercise price

Number of options

Outstanding at the beginning of the period

0.75 799,428 0.20 20,118,583

Consolidation 1:4 - - 0.20 5,029,673 Issued for no cash consideration 0.75 2,221,000 0.75 799,428 Options exercised - - 0.20 (515,862) Options lapsed - - 0.20 (4,513,811)

Outstanding at the end of the period 0.75 3,020,428 0.75 799,428


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24 Financial risk management

Exposure to credit and interest rate risks arises in the normal course of the Group’s businesses. The Group and Company are not exposed to foreign currency risk as sales, purchases and borrowings are made in the functional currency, being AUD.

The Company and Group have exposure to the following risks from their use of financial instruments:

Credit risk

Liquidity risk

Market risk

Interest rate risk

Operational risk

This note presents information about the Group’s exposure to each of the above risks, their objectives, policies and processes for measuring and managing risk, and the management of capital. Further quantitative disclosures are included throughout this financial report.

The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework.

Risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aim to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

(i) Credit risk

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

Exposure to credit risk

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

Carrying amount 2016 2015

Trade and other receivables 5,688,011 4,837,960 Cash and cash equivalents 1,473,322 2,063,069

7,161,333 6,901,029

Trade and other receivables

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the Group’s customer base, including the default risk of the industry. The Group’s revenue is not significantly attributable to sales transactions with a single customer.

The Group does not require collateral in respect of trade and other receivables.

The Group’s maximum exposure to credit risk for trade receivables at the reporting date by geographic region, being within Australia, was $1,058,837 (2015: $818,448). All sales are made to wholesale customers.


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Impairment losses

The Group’s trade receivables that are past due $334,636 (2015: $818,448). The ageing of the Group’s receivables at the reporting date was:

Gross Impairment Gross Impairment

2016 2016 2015 2015

Not past due 724,181 - - -

Past due 0-30 days 310,253 - 522,982 -

Past due 31-120 days 24,403 - 295,022 18,996

Past due 121 days - - 444 444

1,058,837 - 818,448 19,440

The Group has reviewed its receivables at period end for impairment. The Group believes that no impairment is necessary (2015: $19,440).

(ii) Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

The Group projects revenue and costs, which assists it in monitoring cash flow requirements and optimising its cash return on investments. Typically the Group seeks to ensure that it has sufficient cash on demand to meet expected operational expenses for a period of at least 30 days, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.

The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements:

2016

Carrying amount

Contractual cash flows

6 months or less

6-12 months

1-2 years

2-5 years More than

5 years


Secured loans 1,654,667 1,654,667 469,282 501,776 683,619 - Trade and other payables

3,509,439 3,509,439 3,509,439 - - - -

5,164,106 5,164,106 3,509,439 469,282 501,776 683,619 -

2015

Carrying amount

Contractual cash flows

6 months or less

6-12 months

1-2 years 2-5 years More

than 5 years


Secured loans 1,855,669 1,855,669 1,164,310 691,359 - -

Trade and other payables 2,066,503 2,066,503 2,066,503 - - - -

3,922,172 3,922,172 2,066,503 1,164,310 691,359 - -


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(iii) Market risk

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

(iv) Interest rate risk

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

Carrying amount 2016 2015

Fixed rate instruments Financial assets 1,473,322 2,063,069 Financial liabilities (1,654,667) (1,855,669)

(181,345) 207,400

Fair value sensitivity analysis for fixed rate instruments

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

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

Fair values versus carrying amounts

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

Consolidated 2016 2015 Carrying amount Fair value Carrying amount Fair value

Trade and other receivables 5,688,011 5,688,011 4,837,960 4,837,960 Current tax assets - - Cash and cash equivalents 1,473,322 1,473,322 2,063,069 2,063,069 Secured loans (1,654,667) (1,654,667) (1,855,669) (1,855,669) Trade and other payables (3,509,439) (3,509,439) (2,066,503) (2,066,503)

1,997,227 1,997,227 2,978,857 2,978,857

Interest rates used for determining fair value

For all the financial assets and liabilities, that are expected to be settled within 12 months, estimated cash flows have not been discounted to determine fair value.

For all the financial assets and liabilities, that are expected to be settled after 12 months and later, estimated cash flows have been discounted applying their interest rate.

(v) Capital management

The Board’s policy is to maintain a working capital base so as to maintain investor, creditor and market confidence.

Practices have been established to ensure:

capital and operating expenditure and revenue commitments above a certain size obtain prior Board approval;

financial exposures are controlled;

business transactions are properly authorised and executed;

the quality and integrity of personnel; and

financial reporting accuracy and compliance with the financial reporting regulatory framework.


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There were no changes in the Group’s approach to working capital management during the year. Neither the Company nor any of its subsidiaries are subject to externally imposed capital requirements. Refer Note 2(e) for the directors’ assessment of going concern.

25 Capital and other commitments

2016 2015

Capital expenditure commitments Plant and equipment

Contracted but not provided for and payable within one year - 47,500

26 Operating leases as lessee

The Group has operating leases in place for island access and infrastructure, office rent, use of the transit sheds at Derby Wharf, aquaculture lease for the operation in Cone Bay, work vehicles and miscellaneous office rentals. The future minimum lease payments are as follows;

Minimum lease payments due

Within 1 year

1 to 5 years After 5 years

Total

30 June 2016 263,747 344,433 771,867 1,380,047 30 June 2015 580,379 959,079 347,375 1,886,833

Lease expense during the period amounted to gross amounts of $580,379 (2015: $606,379) representing the minimum lease payments. In the current period, credit notes granted from lessors totalled $635,000 (2015: nil), which included credits for prior period charges. 27 Consolidated entities

Country of Incorporation

Ownership interest

2016 2015

Parent entity Marine Produce Australia Limited Subsidiaries MPA Fish Farms Pty Ltd Australia 100% 100% MPA Marketing Pty Ltd Australia 100% 100%


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28 Reconciliation of cash flows from operating activities

2016 2015 Profit for the period 3,530,000 2,401,701 Adjustments for: Finance costs 108,312 79,224 Depreciation and amortisation 398,106 169,589 Impairment loss - 516,787

Operating profit before changes in working capital and provisions 4,036,418 3,167,301 Increase in biological assets (7,269,404) (1,200,732) Increase in trade and other receivables (850,051) (1,632,744) Increase in inventories (318,819) (263,128) Increase in other assets (3,356) (28,469) Increase in trade and other payables 1,442,936 150,981 Increase in provisions and employee benefits 303,135 53,167

Net cash used in/provided by operating activities (2,659,141) 246,376

29 Related parties

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

Non-executive directors Executives

Mr M Kennedy (Chairman) Dr D Allen (Managing Director)

Mr D Kelly (Non-executive Director) Mr M Clements (Company Secretary)

Key management compensation disclosures

Information regarding individual Directors and executives compensation and some equity instruments disclosures is provided in the remuneration report section of the Directors’ Report.

Key management personnel and directors transactions

The terms and conditions of the transactions with key management personnel and their related parties were no more favourable than those available, or which might reasonably be expected to be available, on similar transactions to non-key management personnel related entities on an arm’s length basis. The aggregate amounts recognised during the year relating to key management personnel and their related parties were as follows:

Key management personnel and their related parties

Transaction

2016 2015

Mr M Kennedy The Bagot Road Property Partnership Rent and outgoings 74,567 47,766 The Bagot Road Group Payroll recovery &

management fee - 239,984

Kennedy Holdings Rent and outgoings 25,433 - Mr D Kelly Western Tiger Corporate Advisors Corporate advisory &

consulting services 50,349 20,000


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An amount of $74,567 (30 June 2015: $47,766) was paid to The Bagot Road Property Partnership, associated with director Miles Kennedy, relating to office rent and associated costs during the period. No payments were made to The Bagot Road Group during the period. The contract arrangement with Bagot Road Group Pty Ltd, a company 50% owned by director Miles Kennedy until 31 May 2014 and thereafter wholly owned was terminated on 31 January 2015 and all staff were transferred to the Marine Produce Australia payroll. An amount of $25,433 was paid to Kennedy Holdings, a company owned by director Miles Kennedy, relating to office rent and associated costs during the period. An amount of $50,349 (30 June 2015: $20,000) was paid to Western Tiger Corporate Advisors, a company owned by director Damien Kelly, relating to corporate advisory and consulting services.

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

In AUD 2016 2015 Assets and liabilities arising from the above transaction

Other related parties Current receivables - - Key management personnel Current receivables - - Other related parties Current payables 1,688 76,910

Total payments/total liabilities 1,688 76,910

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

Subsidiaries

Loans are made by the Company to wholly owned subsidiaries. Loans outstanding between the Company and its controlled entities are callable on demand, have no fixed date of repayment and are non-interest bearing. At 30 June 2016, such loans to subsidiaries totalled $50,097,945 (2015: $44,879,594). These loans have been recognised as a non-current receivable of $18,163,033 (2015: $9,413,383) after provision for non-recovery.

Interest-free loans made by the Company to its subsidiaries are repayable on demand. The Company has no intention to demand the loans within the next 12 months.

Shares and options over equity instruments

The movement during the reporting period in the number of shares in MPA held directly, indirectly or beneficially by each key management person, including their related parties is as follows.

Shares held at 1

July 2015 Purchases Share Purchase

Plan/Rights Issue Shares Held at

30 June 2016

Directors M Kennedy 694,357 520,156 515,405 1,729,918 D Allen 61,250 2,850 54,500 118,600 D Kelly - 42,000 20,800 62,800 Company Secretary

M Clements - - - -


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The movement during the reporting period in the number of options over ordinary shares in MPA held directly, indirectly or beneficially by each key management person, including their related parties is as follows.

Options Held at 1

July 2015 Options Held at

30 June 2016 Issued and vested

during the year

Vested and exercisable at 30 June 2016

Directors M Kennedy 110,002 1,110,002 1,000,000 1,110,002 D Allen 18,125 1,018,125 1,000,000 1,018,125 D Kelly - 221,000 221,000 221,000 Company Secretary

M Clements - - - -

Transactions with key management personnel

Key management of the Group are the executive members of Board of Directors and members of the Executive Council. Key management personnel remuneration includes the following expenses;

2016 2015

Short term employee benefits: - salaries including bonuses 390,012 403,120

Total short term employee benefits 390,012 403,120 Post-employment benefits: - superannuation benefits 25,716 26,257

Total post-employment benefits 25,716 26,257

Termination benefits - 41,008

Total remuneration 415,728 470,385

30 Subsequent Events

In the period subsequent to year end the Group has drawn down upon existing loans by an additional $1,756,603.

The Group also received the payment of the R&D tax refund of $4,412,782 on 9 September 2016.

No other matter or circumstance has arisen since 30 June 2016 that has significantly affected or may significantly

affect the Group’s operations, the results of those operations or the Group’s state of affairs in future years.


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DIRECTORS’ DECLARATION

In accordance with a resolution of the Directors of Marine Produce Australia Limited, I state that:

1. In the opinion of the Directors:

(a) the financial statements and notes of Marine Produce Australia Limited for the financial year ended 30 June 2016 are in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the Group’s financial position as at 30 June 2016 and of its performance; and

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

(b) the financial report also complies with International Financial Reporting Standards as disclosed in note 2(a);

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

2. This declaration has been made after receiving the declarations required to be made to the directors in accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2016.

On behalf of the Board.

DESIREE ALLEN MANAGING DIRECTOR

Dated at Subiaco 29th September 2016.

australian business number

70 091 805 480

board of directors

miles kennedy – non-executive chairman

desiree allen – managing director

damien kelly – non-executive director

company secretary

mark clements

registered office and principle

place of business

34 bagot road

subiaco 6008

western australia

postal address

po box 1008

west perth 6872

western australia

communication details

telephone: (+61 8 ) 9381 4483

facsimile: (+61 8 ) 9381 5817

email: [email protected]

web: www.marineproduce.com

auditors

grant thornton australia

1/10 kings park road

west perth 6005

western australia

telephone: (+61 8 ) 9480 2000

facsimile: (+61 8 ) 9322 7787

lawyers

drummond law

48 matheson road

applecross 6153

western australia

telephone: (+61 8 ) 9364 9016

facsimile: (+61 8 ) 9364 7973

email: [email protected]

share registry

security transfer registrars pty ltd

770 canning highway

applecross 6153

western australia

telephone: (+61 8 ) 9315 2333

facsimile: (+61) 9315 2233

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