On 22 January 1982, the International Center for Living Aquatic Resources Management (ICLARM) and the Ministry of Agriculture and Fisheries Development of Sabah, Malaysia (MAFD), signed a Memorandum of Agreement to cooperate and assist each other in research and development projects related to fisheries and aquaculture development. Both parties recognized the tremendous potential for coastal aquaculture development along Sabah's extensive and relatively unpolluted coastline. The first project under this Memorandum of Agreement is the development of a marine hatchery for research on finfish. From the experience gained in the marine research hatchery, a pilot production hatchery and demonstration/pilot production activities will be developed. The objectives of the project are: a) To establish a research hatchery in Sabah for the development of hatchery techniques for mass seed production of marine and brackishwater finfish species suitable for economically viable forms of aquaculture. b) To implement this technology in a pilot production hatchery. c) To initiate aquaculture demonstration projects using seed produced at the research and pilot production hatcheries. This report covers Phase I of the project and describes the work of a two-week consultancy mission to the Department of Fisheries (DOF), Sabah (November 29-December 13, 1982).