IMUGENE LIMITED

Safe biological methods for poultry & pig health & disease control

Annual Report 2008

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2008 Highlights	3
Executives’ Report	4
Operations Report	6
Patent Report	14
Directors’ Report	15
Remuneration Report	18
Auditor’s Independence Declaration	25
Independent Audit Report to Members	26
Income Statement	28
Balance Sheet	29
Cash Flow Statement	30
Statement of Changes in Equity	31
Notes to the Financial Statements	32
Directors’ Declaration	56
Corporate Governance	57
Shareholder Information	60

Commonly used terms

2008 HIGHLIGHTS

Imugene’s vaccine to prevent the major pig disease, PRRS, delivers the

broiler chickens against the serious poultry parasite disease – coccidiosis

Imugene laboratory successfully expands the range of FAV platform technology poultry vaccine products

Imugene’s platform technologies have now delivered 5 vaccines through proof of concept, with a further 5 vaccines awaiting animal trials

Patent protection strengthened in range and duration – submissions and

Commercialisation strategy for product range underway in the US

platform technologies utilized to create this innovative product range. All our products are developed and undergo rigorous laboratory testing in our laboratories in Australia before proceeding to animal trials in specialist facilities in the United States and Australia.

Imugene Limited (ASX Code: IMU) specialises in the development of commercial novel animal health products for pigs and poultry. Founded in 2002, Imugene has a stable specialist management and scientific team supplemented with extensive use of consultants and facilities in the USA and Australia.

Our commercial strategy is to develop and add value to our products as we progress them towards commercialisation and sales. At an appropriate point in the development pathway, our business model is to ‘partner’ with suitable and appropriate animal health companies to use their established global regulatory, manufacturing, marketing and distribution experience and resources to complete the path to market.

Our range of products under development includes vaccines to prevent important livestock diseases and productivity enhancers to improve the economics of raising commercial livestock. These biologically-based vaccine products improve the health and welfare of pigs and poultry and reduce or eliminate the use of antibiotics, chemicals and drugs.

Imugene has extensive and comprehensive worldwide patent rights covering the range of

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EXECUTIVES’ REPORT

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Dear Shareholder

Over the last twelve months, Imugene has achieved great advances in the early stage development of its innovative vaccines for the pig and poultry industries. We have had outstanding success in all of our last three poultry and pig vaccine trials, and have increased our range of vaccines moving into clinical trials.

From our inception, we have focussed on developing biological vaccines for these two industries due to their inherent size, intensive production techniques that require novel health solutions, and increasing demand for solutions to disease problems that have unmet control or prevention products.

With over 50 billion broilers and 1 billion pigs being produced globally each year, the majority of which under intensive rearing conditions, our vaccines are targeting a large market. With the proven efficacy of our platform vaccine technologies we remain confident with this strategy.

2008 was a busy year with several major successes. Following on from our successful Avian Influenza vaccine trials, the high degree of success with our commercially based proof of concept trials for our poultry vaccine to prevent the disease Coccidiosis and the vaccine to prevent the serious pig disease ‘PRRS’ were very pleasing.

The expansion of our poultry range of vaccine products continues to build on our platform approach. Several of these will undergo their commercial proof of concept trials in the coming months. An additional pig vaccine is also ready to commence trials in the next few months.

Our financial goal is to maximise income and minimise our capital expenditure through partnering with the major multinationals who have the ability and experience to invest the necessary capital and resources to undertake the regulatory and manufacturing processes to bring each vaccine to market.

Looking forward, Imugene is well positioned to enter the ‘partnering’ phase with both platform vaccine technologies delivering vaccines that have proved very effective.

Imugene remains adequately funded in the short-term to achieve these goals.

The financial and share markets across the globe are currently very volatile and uncertain. The expectation is that this will continue at least for the short-term. This will present challenges to Imugene. However, based on the positive developments that have recently occurred, your management team believes the company is well placed to create value for shareholders, irrespective of the sentiment of the financial and capital markets.

We thank our shareholders for their continued support and to our dedicated team for all their efforts.

Yours sincerely

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GRAHAM DOWLAND Chairman

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DR WARWICK LAMB Managing Director

14 October 2008

IMUGENE LIMITED

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BENEFITS OF THE IMUGENE PLATFORM TECHNOLOGY AND THE VACCINES UNDER DEVELOPMENT

Imugene’s vaccines

�� improve pig and chicken health, resulting in improved productivity, feed conversion and therefore economic gains to the poultry and swine industries through the prevention of specific infectious diseases of economic importance.
�� prevent viral and other diseases by utilizing the animal’s own natural immune system using a harmless same species virus (Fowl or Porcine Adenovirus) as a delivery system for certain genes that ‘turn on’ the birds or pigs immune system.
�� are safe, residue free, non-antibiotic, non-drug (chemical) treatments.
�� are cost effective to manufacture and administer which is paramount within the cost-conscious intensive swine and poultry farming industries.
�� have been created to meet the changing needs of food production animal markets around the world. In response to the growing problem of bacterial antibiotic resistance, international health organizations and governments are limiting or phasing out the use of antibiotics as growth promotants in food producing animals.
�� are biological treatments that are being increasingly used in the prevention and treatment of disease as well as overall growth enhancement.
�� meet consumers demand for a higher quality food product, free from drug or chemical residues.
�� are developed from Imugene’s two platform technologies, the FAV & PAV.
for poultry
��
will meet demand in the fastest growing meat production industry in the world
must be effective early in a birds life – as broilers are usually marketed at 6-7 weeks of age
are entering a market for poultry health products worth in excess of U$4 billion
for pigs
��
are targeting the two major disease problems affecting pig herds – PRRS & PCV
are entering a market for pig health products worth in excess of U$4 billion

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Dr Michael Sheppard, Chief Scientific Officer

�� are easily administered in intensive livestock industries – orally, spray, injection intra muscularly or injection into the egg. This flexibility of mode of administration is one of the major requirements for success in these markets.
�� are ‘marker’ vaccines, thereby allowing easy differentiation between infected and vaccinated animals – a vital consideration for trade within the international poultry & pig industries

Annual Report 2008 5

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OPERATIONS REPORT

IMUGENE’S ADENOVIRAL VACCINE RANGE

Vaccines tested and proved in commercial animal trials (passed commercial proof of concept)

Broiler Poultry Range

�� Coccidiosis Disease – The coccidiosis vaccine developed using the Imugene FAV has proven to dramatically reduce (measured in commercial parameters) the effects of the protozoal disease Coccidiosis. The commercial level of efficacy and administration benefit of this vaccine is the driver that will enable the vaccine to replace the current use in broiler flocks of the increasingly less effective and chemically based ‘Coccidiostats’.
�� Avian Influenza – Bird Flu’s – Imugene’s vaccine to prevent the H5 bird flu has proven 100% effective in a two dose vaccine regime. The development of Imugene’s suite of Avian Influenza vaccines now encompasses 2 other prevalent varieties of bird flu. Outbreaks of the H7 & H9 Avian Influenza varieties continue to occur in various regions of the world. Although not as virulent as the H5 bird flu, the H7 & H9 outbreaks cause large losses. The two new vaccines have been constructed and are ready for challenge trials. Given the success with the H5 vaccine, expectation is for similar levels of effectiveness.
�� Productivity Enhancer – Imugene’s “PPE” vaccine has been proven to enhance poultry health leading to growth and weight gains and delivers improved feed conversion rates. The broiler production industry is a highly intensive industry continually seeking to improve economic gain and poultry quality and health. The Imugene vaccine is a viable replacement for the use of the increasingly less effective (and is some areas, banned) antibiotics as growth promotants.

Porcine Range

�� PRRS – Porcine Reproductive & Respiratory Syndrome – The modified Imugene vaccine was recently trialled at a specialist facility in the US and has proven to provide a high degree of protection against the PRRS disease. This is a major disease affecting pig herds in all major pig producing countries and there is no effective treatment. The Imugene PRRS vaccine is an exciting new development for the global pig industry.
�� Classical Swine Fever – Imugene’s vaccine prevents the CSF disease and was one of the earliest proven PAV platform vaccines. As a number of effective CSF vaccines exist in the market place, this vaccine does not represent a high priority for development at this time.

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Vaccines successfully passed laboratory testing – now requiring animal challenge trials (yet to pass commercial proof of concept)

IMUGENE LIMITED

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DEVELOPMENTS – 2008 FINANCIAL YEAR

Porcine Reproductive & Respiratory Syndrome (PRRS)

This viral disease is one of the most damaging diseases affecting pig producers worldwide. There is no current effective treatment to prevent the large losses it causes to the industry. It continues to increase as a problem for producers.

Imugene has been developing a vaccine using its PAV platform delivery vector to enable piglets to stimulate their immune system to protect against the PRRS disease.

In the 3[rd] quarter of 2007, a pig trial was conducted in a specialist facility in the US testing three varieties of Imugene’s vaccines against a challenge dose of the PRRS virus. The results were encouraging and indicated the PAV platform was capable of inducing positive effects against PRRS.

Around the same time, new scientific information became available to the Imugene team. This combined with the results from our 2007 trial indicated by altering part of our existing vaccine and adding an additional component the result may be a significant improvement in vaccine efficacy. These changes involved genetic engineering and were ideally suited to the PAV platform system of vaccine production.

The Imugene laboratory modified the internal workings of the PRRS vaccine and by mid 2008, the modified PRRS vaccine was constructed, laboratory tested and ready for trialling in pigs.

The two dose trial was undertaken in the 3[rd] quarter 2008 and the recently received results evidenced that the new Imugene vaccine provides a high degree of protection against the PRRS disease.

The success of this recent trial and the compelling results against such a major pig disease are very positive for Imugene’s entire pig vaccine platform. The PRRS vaccine is now our lead product to progress into the regulatory process for the PAV vaccine range with authorities in the US.

Based on the trial results Imugene is in discussions with major international animal health companies with a view to possible partnering arrangements to quickly progress the vaccine through the regulatory and commercialisation pathway, particularly in the US.

Coccidiosis

Coccidiosis is a parasitic protozoal disease affecting poultry that causes massive economic and production losses throughout the poultry industry. Current treatment for broilers takes the form of a ‘control measure’ not prevention and usually consists of in-feed chemicals, known as “coccidiostats”. This form of treatment is suffering from declining effectiveness as resistance is developing to the chemicals.

Imugene in collaboration with Abic Biological Laboratories Teva Ltd (“Abic”), the animal health division of Israel-based Teva Pharmaceutical Industries Ltd., has been developing and constructing vaccines for the broiler coccidiosis prevention market.

During 2007, the Imugene laboratory performed all necessary scientific work to develop and laboratory test the vaccine candidates ensuring their readiness for trialing in poultry.

During 2[nd] quarter 2008, Abic undertook the first challenge trial of the vaccines. Of the six variations of the vaccine candidates tested, one was clearly the most highly successful in inducing strong commercial protection against the Coccidiosis disease. This vaccine significantly reduced intestinal disease lesions and shedding (passing of coccidian eggs through faeces) of the protozoal parasite which are both major indicators of vaccine efficacy.

In this initial trial, the successful vaccine surpassed the accepted commercial parameters for effective protection against Coccidiosis . The FAV platform vector delivery system enables this effective vaccine to be administered orally (in water) on a mass scale. Accordingly, this vaccine can be developed for introduction to the large international broiler markets.

Importantly, the success of the trial proved the FAV is an effective vector for vaccines to prevent a parasitic disease as well as viral diseases.

The development of the coccidiosis vaccine will require optimization techniques to be applied and trialing to determine aspects such as minimum dose and optimum timing of administration for protection.

Abic and Imugene are in discussions regarding the arrangements to undertake these necessary stages of development. Imugene’s commercial strategy remains consistent and will be seeking to license the FAV to enable the Coccidiosis vaccine to be developed and marketed to broiler producers worldwide.

Annual Report 2008

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OPERATIONS REPORT

(CONTINUED)

Extension of the range of Poultry Disease Prevention Vaccine Products

In mid 2007, the Imugene laboratory began development of preventative vaccines for two additional poultry diseases as well as extending the Avian Influenza range of vaccines to the more prevalent varieties of H7 & H9 bird flu vaccines.

The extension of the range of poultry vaccines was warranted following the success of the in ovo (injection into the egg) method of administration and the progression of the Coccidiosis and Avian Flu (H5N1) vaccines.

Imugene’s management selected the two poultry disease targets of Chicken Anaemia and Infectious Bursal Disease as the next commercial vaccine candidates for laboratory development using the FAV.

During the 2008 year, the laboratory has been active with these vaccines under construction and testing. The total of 5 resultant vaccines are all now ready for animal trials.

Infectious Bursal Disease

Infectious Bursal Disease virus (IBDV) is a virus which causes an acute disease in young chickens. There exist the ‘Classical’ strains and the ‘Very Virulent’ strains of IBDV, both of which cause significant economic losses to the poultry industry worldwide.

The serious economical impact of both types of infection with IBDV warrants the use of preventative vaccines.

The ideal vaccine for broilers would be an effective vaccine that is convenient and inexpensive to administer, completely safe and does not damage the developing immune system of young chickens.

Imugene has completed the laboratory stage of these two potential vaccine products. Through the insertion of the protective gene of both the Classical and the Very Virulent strains of IBDV, into the FAV, Imugene believes it has produced safe and effective vaccine candidates that should not suppress the immune system of the young chickens.

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Chicken Anaemia Virus

Infectious Chicken Anaemia Virus (CAV) is similar to the IBDV in that it is a viral disease that affects broilers. CAV occurs in virtually all commercial chicken operations and is highly resistant to disinfectants and heat. In addition to suffering from the primary CAV effects, CAV affected chickens are predisposed to other infections which, in turn, cause further economic losses.

Numerous studies have shown that the damage to the immune system following infection with CAV is an important cofactor for a number of other serious avian diseases, and that it has a significant impact on broiler liveability and productivity. Eradicating the virus from commercial flocks requires a safe and effective vaccine that can prevent both vertical (hen to chick) and horizontal (chick to chick) transmission of the disease.

Imugene has completed the laboratory stage in the development of this potential preventative vaccine. The protective genes of CAV have now been inserted into the Imugene patented FAV vector and fully laboratory tested.

A poultry trial to test the efficacy of Imugene’s CAV vaccine constructs is currently being undertaken in Australia at the University of Melbourne.

A poultry trial to test the efficacy of Imugene’s Classical strain vaccine constructs is currently being undertaken in Australia at the University of Melbourne.

IMUGENE LIMITED

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Avian Influenza’s – H5, H7 & H9

Imugene is developing a suite of influenza vaccines for chickens using its patented fowl adenovirus (FAV) platform in response to the threat to both poultry and human health from the severe H5N1 strain of the virus that causes “bird flu” as well as the more prevalent but less severe H7N1 and H9N2.

In 2007 Imugene conducted several poultry trials in the US testing the efficacy of it vaccine developed to prevent the most severe form of bird flu, H5N1.

The most recent trial tested the vaccine in a two dose regime against a very lethal challenge dose of the Asian strain of the H5N1 virus. The Imugene vaccine achieved the aim of protecting birds from bird flu using the vaccine via oral administration in live birds. Protection levels achieved 100%.

The results of Imugene’s H5N1 vaccine trials to date can be summarized:

�� 100% protection against highly pathogenic H5N1 with two-dose regime – 7 out of 8 control birds died following challenge
�� Dual method of delivery demonstrated – in ovo (egg) and orally
�� Protection as early as 14–21 days of age
�� Single oral dose also effective (>80% effective) with birds at 14 days old
�� Platform suitable to make vaccines against other avian influenza viruses
�� Protective across virus strains as all trials use a heterologous challenge model
�� Vaccine is a marker vaccine (vaccinated birds differentiated from infected birds)

The primary aim for a commercial bird flu vaccine for broilers is to provide immunity early in a bird’s life but the protection need only be short-term as broiler birds typically reach market weight by 42–49 days of age.

Following the demonstrated effectiveness of the H5N1 vaccine, the Imugene laboratory began developing a suite of vaccines designed to protect broilers from the two other prevalent forms of Avian Influenza caused by H7 & H9. The decision to expand the vaccine range to cover other influenza viruses was made to maximise the commercialisation value for a suite of vaccines preventing the most serious and most prevalent forms of Avian Influenza.

Whilst the H7 & H9 viruses tend to cause less severe disease in birds than the H5 virus, outbreaks of both continue to occur globally and have been commercially damaging to poultry producers including in the US.

Laboratory construction and testing of these new Avian Influenza vaccines has been finalised. Imugene’s expectations are for these new vaccines to achieve similar levels of protection that the H5 vaccine delivers.

Trialing of the vaccines requires high level bio-security and safety facilities. Imugene will seek to have these vaccines trialled in 2009.

Regulatory

Our first regulatory application has been submitted in the US in relation to our FAV vaccine for Avian Influenza (H5N1). Together with our experienced US based regulatory advisors, Imugene is undertaking the methodical process of working through the regulatory procedures to determine the steps necessary to bring the FAV & PAV vaccines to the USA market. This process is aimed at enhancing the value of our vaccine delivery platforms to potential licensees for each of our vaccine products.

The initial registration documents apply to the Imugene Avian Influenza (H5N1) vaccine and were lodged at the US Department of Agriculture (USDA). We have received confirmation from the USDA that the preliminary regulatory submission has been allocated to a USDA appointed reviewer. Further regulatory submissions are required before the vaccine can be registered.

Poultry Productivity Enhancer

Imugene has developed a productivity enhancer (or immune system booster) for broiler poultry. The vaccine has been proven to enhance poultry health leading to growth and weight gains and delivers improved feed conversion rates.

Imugene’s patented vaccine boosts a natural component of the immune system, a cytokine known as gamma interferon (Imugene owns the exclusive worldwide license to the patented chicken gamma interferon). This boost to the immune system increases resistance to a range of bacterial as well as viral infections. Improved disease protection is provided for both gastrointestinal and respiratory diseases. Preventing these diseases improves growth rates, reduces mortality and reduces the costs of production (the major cost being feed).

Annual Report 2008

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OPERATIONS REPORT

CONTI

The vaccine has demonstrated in contained trials of up to 1200 chickens, unsurpassed growth rates of 13% in poultry broilers (meat birds) with 8% improvements in Feed These growth rates are more than 14% above the theoretical maximum performance industry standard (Ross Standard).

The Poultry Productivity Enhancer delivers economic gains to the producer in a number of ways:

An increase in rate of growth, thereby reducing the number of days to grow chickens to market weight, saving in all infrastructure and labour costs
amount of feed input to produce each kilogram of chicken meat
Reduction in mortality through prevention of disease
Ease of administration: any vaccine treatment in the poultry industry must be able to be delivered cheaply, either in the egg or water, feed or aerosol, depending
Consistent size and quality of chicken meat produced.

improvements in each of these parameters. The producer of the input (the vaccine) versus the increase in the value of the output (chicken meat).

The poultry industry is one of the most intensive of all farming industries and measures its costs and savings in the fractions of percentages.

Merial Limited, a multinational Animal Health company, is currently the global sub-licensee for this vaccine. Under the terms of this license, Merial is responsible for the continued development and regulatory process for this vaccine. Merial has advised that the progress of this vaccine continues to be dependent upon the regulatory pathway being followed in the US.

Whilst Merial’s development processes have frustrated management, with information being gathered to assist the regulatory applications, this major product will progress through the commercialisation process alongside rather than leading our other main poultry products.

Porcine Circovirus (PCV)

Porcine Circovirus is a major pig disease. This disease stunts growth, increases mortality and weight loss progressing to emaciation in pigs aged 5-18 weeks. Other breathing, jaundice, fever, stomach ulcers, diarrhea and can reach 40%.

Imugene has been developing PCV vaccine candidates to progress to initial proof of concept trials. These have been constructed using methods similar to the PRRS vaccines. The vaccine candidates are currently undergoing laboratory testing which will ultimately be followed by proof of concept animal challenge trials.

The PRRS and PCV diseases are the two most economically for PCV diseases.

Patent Status & Intellectual Property Agreements

Imugene’s intellectual property position for both the FAV and PAV is tabulated within this Annual Report.

All patents (other than the PAV in the US) are owned by Organisation (“CSIRO”) and since late 2002 have been licensed exclusively to Imugene.

In the US and as part of the 2006 negotiated resolution and settlement to a US based patent interference that occurred with respect to the PAV patent, Imugene has received an assignment of the CSIRO PAV patent application. Subsequently this patent was granted by the led to Imugene receiving an assignment of the re-issued PAV patent owned by the other interfering party.

During 2008, Imugene has been investigating a number of its developments that have the potential to both increase the range and duration of patent protection for the FAV & PAV platform intellectual property. Accordingly,

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application in China & Korea had been granted. This was particularly important as China has the largest pig population in the world. Diseases such as PRRS and

IMUGENE LIMITED

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Classical Swine Fever are prevalent in China and present a large market opportunity for effective pig vaccines. China currently has approximately 500 million pigs and is responsible for 53% of world annual pork meat production.

ADDITIONAL DETAILED INFORMATION

Porcine Reproductive & Respiratory Syndrome (PRRS)

Pig Trial Information

The PRRS animal challenge trials undertaken in 2007 and 2008 were conducted at a specialist trial facility in the US. Summary information from the most recent trial is presented below.

PRRS is caused by a viral infection. The major clinical signs are the result of areas of diseased lung (consolidation). To evaluate the severity of an infection, standardised lung lesion scores are generated by scoring the diseased areas in each of the 7 lung lobes from each pig and then generating an average. The lower the average lung lesions score the better, as this indicates a lower level of disease.

Another important measure of PRRS virus infection in pigs is the level and duration of the presence of the PRRS virus in the pig’s blood (also known as viremia). In normal situations, following exposure to the PRRS virus, a prolonged acute productive infection takes place characterized by viremia that can last several weeks. An effective vaccine administered prior to exposure with the PRRS virus will reduce the percentage of viremia and the duration of viremia.

clinical illness and therefore better weight gains following infection.

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The trial consisted of 45 piglets split into 3 groups. The vaccinated groups each received 2 doses, 14 days apart. One group was given the vaccine by injection; the other group was given the vaccine orally. All groups were challenged with the live PRRS virus 14 days following the second dose vaccine administration.

Following challenge with the live PRRS virus, the vaccinated trial pigs compared to the unvaccinated control pigs:

�� had much lower lung lesion scores
�� better weight gains over the 14 day post-challenge period
�� lower viremia counts in the orally vaccinated group

In addition, clinical illness slows weight gain during and after infection. An effective vaccine should result in less

�� no viremia in the group vaccinated by injection

A summary of the results, following challenge with the PRRS virus, for the average lung lesion score and average 14 day body weight gain appears in the following table.

	CONTROL GROUP	IMUGENE’S ORAL	IMUGENE’S INJECTED
		VACCINE	VACCINE
Average Lung Lesion Score	9.76%	1.31%	1.88%
Average 14 Day Body Weight Gain	5.45kg	6.00kg	6.37kg
% Improvement in weight gain above control	NA	10.1%	16.9%

Following challenge with the live PRRS virus, vaccinated pigs had much lower lung lesion scores and better weight gains over the 14 day post-challenge period compared to the unvaccinated control pigs. The difference in lung lesion scores was statistically significant.

Annual Report 2008

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OPERATIONS REPORT

(CONTINUED)

This outstanding result shows that the modified Imugene PRRS vaccine correctly primed the pigs’ immune system so as to very efficiently prevent disease from the PRRS virus challenge.

Virus Isolation from sera in control and vaccinated pigs (challenge on Day 28)

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80
70
60
50
T1
40 T2
30 T3
20
10
0
Day 28 Day 32 Day 35 Day 38 Day 42
T1 unvaccinated T2 IM vaccinated T3 Orally vaccinated
Viremia (%)
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The PRRS Disease

PRRS also known as mystery swine disease or blue ear disease is characterised by abortion, premature farrowing, stillborn and mummified piglets, respiratory disease with loss by death and chronic poor performance of nursing and weaned pigs.

PRRS is recognised as the biggest problem disease in the worldwide swine industry. For over 20 years there has been little success in economical and effective control of this highly variable viral disease.

The virus of PRRS has a particular affinity for the macrophages particularly those found in the lung. Macrophages are part of the body defences. They ingest and remove invading bacteria and viruses. Those present in the lung are called alveolar macrophages. In contrast to most other bacteria and viruses, macrophages do not destroy the PRRS virus. Instead, the virus multiplies inside them and then kills the macrophages. Up to 40% of the macrophages are destroyed. This removes a major part of the body’s defence mechanism and allows bacteria and other viruses to proliferate and cause more damage.

PRRS is one of the most economically damaging diseases of pigs worldwide causing estimated annual industry losses over US$1 billion. In the US alone PRRS is estimated to cost US$550-750 million annually to pork producers.

There is no effective treatment for the viral infection. Vaccines have been developed but are either ineffective or suffer safety issues. Farm management procedures have been implemented but the disease persists.

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Dr Sui Lay, Imugene Senior Research Scientist

IMUGENE LIMITED

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Coccidiosis

Poultry trial information

The initial cocci trial was undertaken at the University of Technology Sydney in Australia. This trial was designed to test and compare the performance of several versions of the Imugene constructed vaccines. The blinded trial consisted of 24 groups with 20 broiler birds in each group.

The vaccine candidate groups that produced the successful protection were orally vaccinated at 1 and 14 days old. On day 28, all birds were challenged with the Eimeria maxima species of coccidia. (E. maxima is one of the most common and problematic species of coccidia).

The trial measured protective efficacy in two ways:

Lesion Scoring – Birds in the Lesion scoring groups were euthanased 7 days following challenge and were scored as to the severity of coccidiosis effect (lesions) in the gut. Scoring was from “0” (no lesions) to “+4” (severe lesions).
Oocyst shedding – The oocyst is the coccidian cyst that is transferred from an infected bird via the faeces and is the infective stage for other broilers. Birds in the oocyst scoring groups had fecal material collected for each of the four days following challenge and oocysts were counted. A reduction of the peak litter oocysts of between 60-80% is considered commercial efficacy.

The protective vaccine group’s results are:

Lesions : (the lower the score the better) 74% of birds had a score of 1 lesion or less (control group 6%)
11% of birds had a score of 3 lesions or more (control group 44%)

The Coccidiosis Disease

Coccidiosis is one of the most common and costly diseases in poultry and is prevalent worldwide. The parasitic disease causes weight loss and poor feed conversion and the death rate in chicks and adult birds can be high. Coccidiosis preventatives and treatments are the second biggest poultry health product category, second to infeed antibiotics.

Current treatment for poultry (broiler) producers

Current treatment for broilers is control only, not prevention, through the use of coccidiostats or low doses of coccidia as a type of vaccine. Coccidiostats are usually administered in the feed as additives and as they are chemicals they are suffering from declining effectiveness as resistance is developing.

The global market for broilers is in excess of 50 billion birds per year and current sales of coccidiostats and other preventatives exceeds U$600 million per year.

Commercial proposition

Coccidiostats are becoming less effective and cannot be used to prevent the disease. Preventative vaccines exist and are based on live attenuated vaccines and sub-unit vaccines. These sub-unit vaccines are injectable vaccines used for breeders and layers and the current vaccines are essentially low doses of weakened disease causing coccidian that do not prevent infection completely.

An effective virally vectored vaccine, the Imugene vaccine, deliverable orally by water, would be commercially attractive for its significant improvement in administration efficiency.

Oocysts: (the lower the count the better) Group max daily oocyst count <68,000 (control group>350,000) vaccine reduction 80%

Group total oocyst count <139,000 (control group>668,000) vaccine reduction 79%

Annual Report 2008

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PATENT REPORT

Poultry Adenovirus Patents (FAV)

Poultry Adenovirus Patents	(FAV)
COUNTRY/JURISDICTION	PATENT/APPLICATION NO.	STATUS
United States	6296852	Granted
Australia	64994/94	Granted
New Zealand	263772	Granted
Europe	94912411.9	Allowed, validation pending in Germany, Great
Europe	05076351.5	Britain, France, Italy, Belgium, The Netherlands
Japan	6522542	Granted

Pig Adenovirus Patents (PAV)

COUNTRY/JURISDICTION	PATENT/APPLICATION NO.	STATUS
United States	09/485512 / 7323177	Granted
United States	6492343	Granted
Australia	757683	Granted
New Zealand	503039	Granted
Europe	98938527.3 / 1007088	Granted
Japan	2000-509443	Pending
Vietnam	20000211	Granted
Brazil	98111841	Pending
China	98809116X	Granted
Hong Kong	1103506.0	Pending
Indonesia	2000-0491 / 14936	Granted
Korea	2000-70001486 / 746524	Granted
Mexico	2000-001562	Pending

Methods and Compositions for increasing Tissue Tropism of Recombinant Adenoviral Vestors

COUNTRY/JURISDICTION	PATENT/APPLICATION NO.	STATUS
Argentina	070103361	Pending (fled 07/27/07)
PCT	PCT/US07/074533	Pending (fled 07/27/07)
Taiwan	096127865	Pending (fled 07/30/07)

Novel Avian Cytokines and Genetic Sequences Encoding Same (‘Chicken Gamma Interferon’) (derived from PCT/AU96/00114)

from PCT/AU96/00114)
COUNTRY/JURISDICTION	PATENT/APPLICATION NO.	STATUS
United States	6642032/6083724	Granted
Australia	689028	Granted
New Zealand	302188	Granted
Europe	96903831.4	Under prosecution (Ofce action fled)
Canada	2214453	Under prosecution (Ofce action fled)
Mexico	976735	Pending (Ofce action not yet issued)

New PAV Patent Application

COUNTRY/JURISDICTION	PATENT/APPLICATION NO.	STATUS
United States	11/387026	Pending
United States	12/197056	Pending
IMUGENE LIMITED

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DIRECTORS’ REPORT

30 JUNE 2008

The Directors of Imugene Limited present their report on the Consolidated Entity consisting of Imugene Limited (“the Company” or “Imugene”) and the entities it controlled at the end of, or during, the year ended 30 June 2008 (“Consolidated Entity” or “Group”).

Directors

The names of directors in office at any time during the financial year or since the end of the financial year are:

Mr Graham Dowland (first appointed 30 August 2002) Dr Warwick Lamb (first appointed 30 August 2002) Mr Roger Steinepreis (first appointed 29 January 2002)

Each director held their office from 1 July 2007 until the date of this report.

Current Directors

Mr Graham Dowland – Chairman Qualifications – BCom, CA

Dr Warwick Lamb – Managing Director Qualifications – BVSc, M Vet Clin Stud, FACVSc

Dr Lamb is a specialist veterinarian with experience within the profession at all levels. He has the rare combination of having worked in private general practice, private specialist practice and University practice both in Australia and the USA. He is a registered specialist in canine and feline medicine and a Fellow of the Australian College of Veterinary Scientists. Dr Lamb was awarded the Small Animal Practitioner of the Year 2001 by the Australian Small Animal Veterinary Association.

Dr Lamb developed Australia’s first stand-alone, referral only internal medicine specialist hospital in Australia. This practice remains the leading private referral practice in the country, employing some 12 veterinarians and providing 24-hour emergency and critical care facilities.

Other current directorships of Australian listed public companies

None.

Mr Dowland has for the past 20 years, been involved as either a significant shareholder, director or senior consultant / advisor with a number of public companies listed on Stock Exchanges in Australia, Canada and the United Kingdom with operations internationally. These companies have been and continue to be involved in various industries including pharmaceutical research and development – specifically human and animal biotechnology, gold mining and exploration, oil and gas exploration and production, manufacturing, and industrial technology development and marketing.

Mr Dowland has been involved in the development phase of numerous businesses that have achieved listings and capital raisings from the various major international Stock Exchanges.

Other current directorships of Australian listed public companies

Mr Dowland is also a non-executive director of Aurora Oil & Gas Limited and Chairman of Eureka Energy Limited.

Former directorships of Australian listed public companies in the last 3 years

None.

Mr Roger Steinepreis – Non-Executive Director Qualifications – BJuris LLB

Roger Steinepreis graduated from the University of Western Australia where he completed his law degree. He was admitted as a barrister and solicitor of the Supreme Court of Western Australia in 1987 and has been practising as a lawyer for approximately 21 years.

He is the legal adviser to a number of public companies on a wide range of corporate related matters. His areas of practice focus on company restructures, initial public offerings and takeovers.

Other current directorships of Australian listed public companies

Mr Steinepreis is a director of:

Former directorships of Australian listed public companies in the last 3 years

Mr Dowland previously held the position of Chairman of Mint Wireless Ltd between October 2006 and January 2008.

Comtel Corporation Ltd Avonlea Minerals Ltd Adavale Resources Ltd

Former directorships of Australian listed public companies in the last 3 years

Commoditel Limited Pocketmail Group Limited

Annual Report 2008

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DIRECTORS’ REPORT

(CONTINUED)

Special responsibilities

Mr Steinepreis is the lead non-executive director of the Company and acts as chair for meetings of the board to consider Audit or Remuneration Committee business.

Company Secretary

Ms Julie Foster

Qualifications – BA(Hons), ACA (ICAEW)

Appointed 29 May 2008.

Ms Foster has a degree in Accounting and Finance and is a Chartered Accountant (UK). She is also currently Company Secretary for ASX Listed Eureka Energy Limited. Ms Foster previously worked for Chartered Accounting firms in both the UK and Perth.

Mr Alexander Neuling

Qualifications – BSc (Hons), ACA (ICAEW), ACIS

Resigned 29 May 2008.

Principal activities

The principal activity of the Consolidated Entity during the financial year was animal health biopharmaceutical development and commercialisation. No significant change in the nature of this activity occurred during the financial year.

Dividends

No dividends have been declared, provided for or paid in respect of the financial year ended 30 June 2008.

Summary review of operations

For the financial year ending 30 June 2008 the Group recorded a net loss of $1,910,925 (2007: $2,304,263) and a net cash outflow from operations of $1,272,900 (2007: $1,702,853).

During the year the Company invited its shareholders to subscribe to a fully underwritten, non-renounceable rights issue on the basis of 1 new share for every 10 fully paid ordinary shares held at an issue price of 14 cents per share. The net cash inflow of $1,727,411 together with existing cash reserves at the start of the year, were primarily applied towards the development of the range of poultry and pig vaccines including the PRRS vaccine animal trials, extension of the patent protection within both families of patents and the implementation of an expanded vaccine development program.

Coccidiosis vaccine trial

In May 2008, Imugene announced that a trial conducted in collaboration with Abic Biological Laboratories Teva Ltd (Abic) testing variations of coccidiosis vaccine candidates had proved successful in providing protection against the coccidiosis disease. The vaccine candidates were constructed by Imugene using its patented Fowl Adenoviral Vector (FAV) delivery system and Abic’s patented coccidian genetic material. One vaccine candidate proved to be a clear best performer and further development of the vaccine will be undertaken in the next quarter to determine aspects such as minimum dose and optimum date of administration for protection.

PRRS vaccine trial

In October 2007, Imugene announced that trials to identify the optimal PAV based PRRS vaccine candidate to be progressed to the development program had been completed in the US. During late 2007 and early 2008, the optimised vaccine underwent final modifications and improvements as a result of external scientific information aimed at increasing the vaccine efficacy. In July 2008, the revised and optimised PRRS vaccine commenced trials at a specialist pig trial facility in the US. On 20 August 2008, Imugene announced that the preliminary results from the trials show that the PRRS vaccine provides a very high degree of protection against the PRRS disease when two doses are administered either orally or by injection.

Imugene will use these results in discussions with major international animal health companies with a view to possible licensing agreements.

Consolidated results

	2008 $	2007 $
Consolidated loss before income tax beneft Income tax beneft Net loss	(2,149,664) 238,739 (1,910,925)	(2,561,309) 257,046
		(2,304,263)

Significant changes in the state of affairs

No changes in the state of affairs of the Consolidated Entity occurred during the financial year and to the date of this report.

IMUGENE LIMITED

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Post balance date events

Subsequent to year-end, the Company received $142,000 (inclusive of GST) from AusIndustry under its Commercial Ready grant in respect of the quarters to 31 March 2008, and 30 June 2008.

On 20 August 2008, the Company announced that the preliminary results from the recent trials of the modified PRRS vaccine have been successful. The PRRS vaccine has proved to be highly effective in the degree of protection it provides against the PRRS disease. The Directors anticipate that these results will be used in discussions with major international animal health companies with a view to possible licensing agreements.

As at the date of this report there are no matters or circumstances, which have arisen since 30 June 2008 that have significantly affected or may significantly affect:

(a) the operations, in financial years subsequent to 30 June 2008, of the Consolidated Entity constituted by Imugene Limited and the entities it controls from time to time;

Employees

	2008	2007
The number of full time equivalent
people employed by the Consolidated Entity at balance date (including	5	5
consultants)

Information on directors’ interests in securities of Imugene

	INTEREST IN SECURITIES	INTEREST IN SECURITIES
	AT THE DATE OF THIS REPORT
	Fully Paid Ordinary Shares	Executive Performance Options
Graham Dowland	7,667,576	500,000
Warwick Lamb	7,670,002	2,500,000
Roger Steinepreis	4,990,046	–

There were no shares granted to directors during the year as remuneration.

(b) the results of those operations; or
(c) the state of affairs, in financial years subsequent to 30 June 2008, of the Consolidated Entity.

Likely developments

Due to the nature of the Consolidated Entity’s business activities, the Directors are not able to state:

(a) likely developments in the entities’ operations; or
(b) the expected results of these operations,

as to do so would result in unreasonable prejudice to the Consolidated Entity.

Environmental regulation

The Consolidated Entity’s environmental obligations are regulated under both State and Federal laws. The Company has a policy of exceeding or at least complying with its environmental performance obligations.

During the financial year, the Consolidated Entity did not materially breach any particular or significant Commonwealth, State or Territory regulation in respect to environmental management.

Meetings of Directors

The following table sets out the number of meetings of the Company’s directors held during the year ended 30 June 2008, and the number of meetings attended by each director (includes matters decided by circulating resolution).

	NO. ELIGIBLE TO ATTEND	NO. ATTENDED
Full board meetings
Graham Dowland	6	6
Warwick Lamb	6	6
Roger Steinepreis	6	6
Audit committee meetings
Graham Dowland	2	2
Warwick Lamb	2	2
Roger Steinepreis	2	1

Annual Report 2008

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DIRECTORS’ REPORT

(CONTINUED)

Share options

At the date of this report the following options have been granted over unissued capital:

DESCRIPTION	2008 NUMBER EXERCISE PRICE EXPIRY
Unlisted performance options Unlisted advisor incentive options Total	4,350,000 $ 0.25 31-Dec-09 3,000,000 $ 0.20 31-Mar-11 7,350,000

No shares were issued during or since the end of the financial year on exercise of share options. Upon exercise each option is convertible into one fully paid ordinary share.

REMUNERATION REPORT (Audited)

This remuneration report is set out under the following main headings:

A Principles used to determine the nature and amount of remuneration
B Details of remuneration
C Service agreements
D Share-based compensation
E Additional information

This remuneration report outlines the director and executive remuneration arrangements of the Company and Group in accordance with the requirements of the Corporations Act 2001 and its Regulations. For the purposes of this report, key management personnel (KMP) of the Group are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company and the Group, directly or indirectly, including any director (whether executive or otherwise) of the parent company, and includes the executives in the Company and the Group receiving the highest remuneration.

Details of executives (including the highest paid executives of the Company and the Group)

Mr Alex Neuling Company Secretary (1 July 2007 to 29 May 2008)

Ms Julie Foster Company Secretary (Appointed 29 May 2008)

No remuneration was paid to directors or other key management personnel of the Group by Group companies other than Imugene Limited, accordingly remuneration paid to key management personnel of the Group is the same as that paid to key management personnel of the Company.

A. Principles used to determine the nature and amount of remuneration (audited)

A separate remuneration committee has not been formed. At present the functions of the remuneration committee in relation to the remuneration of the Company’s executives (including share and benefit plans) are carried out by the full board of directors (Board). No directors are present at meetings of the Board in this function where their own remuneration is being considered. Issues of remuneration are considered annually or otherwise as required.

Details of key management personnel

(i) Directors

Mr Graham Dowland Chairman Mr Warwick Lamb Managing Director Mr Roger Steinepreis Non-Executive Director

(ii) Other key management personnel of the Group

The objective of the remuneration committee is to ensure that pay and rewards are competitive and appropriate for the results delivered. The charter adopted by the remuneration committee aims to align rewards with achievement of strategic objectives. The remuneration framework applied provides a mixture of fixed and variable pay and a blend of short and long-term incentives as appropriate.

Dr Michael Sheppard Chief Scientific Officer

IMUGENE LIMITED

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Non-executive directors

The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at General Meeting. The Company’s policy is to remunerate non-executive directors at market rates (for comparable companies) for time, commitment and responsibilities. Fees for non-executive directors are not linked to the performance of the Company, however to align directors’ interests with shareholders’ interests, directors are encouraged to hold shares in the Company.

Retirement benefits and allowances

No retirement benefits or allowances are paid or payable to directors of the Company.

Other benefits

No motor vehicle, health insurance or other similar allowances are made available to directors (other than through salary-sacrifice arrangements).

Executives

Executive pay and reward consists of base pay, shortterm performance incentives, long-term performance incentives and other remuneration such as superannuation. Long-term performance incentives to date have comprised options granted at the discretion of the remuneration committee in order to align the objectives of executives with shareholders and the Company. The grant of share options is not directly linked to previously determined performance milestones or hurdles as the current stage of the Group’s activities makes it difficult to determine effective and appropriate key performance indicators and milestones.

There is currently no board policy in relation to the person granted the option limiting his or her exposure to risk in relation to the securities. The remuneration committee intends to review whether such a policy would be likely to be of benefit during the coming financial year.

��

Executives are offered a competitive level of base pay which comprises the fixed (unrisked) component of their pay and rewards. Base pay for senior executives is reviewed annually to ensure market competitiveness. There are no guaranteed base pay increases included in any senior executives’ contracts.

��

Payment of short-term incentives is dependent on the achievement of key performance milestones as determined by the remuneration committee. For the year ended 30 June 2008, these milestones required performance in relation to key strategic, non-financial measures linked to drivers of performance in future reporting periods.

Short-term bonus payments may be adjusted up or down in line with under or over achievement relative to target performance levels at the discretion of the remuneration committee. For the year ended 30 June 2008, short-term incentives paid or payable to key management personnel of the Company / Group totalled $20,000 & were awarded to Michael Sheppard on the basis of a contractual agreement. Bonuses paid or payable during this and the prior financial year were related specifically to achievement of two development and commercialisation milestones considered to be directly linked to an increase in the value of the Group’s portfolio of assets.

100% of the bonus granted on 14 December 2007 was paid in the 2008 financial year. There were no forfeitures. The maximum short-term incentive bonus for the 2008 financial year is $20,000. The minimum amount of shortterm incentive bonus assuming Michael Sheppard did not meet the personal performance target for the financial year is nil.

The bonus paid to Michael Sheppard represents 9.76% of his remuneration received for the 2008 financial year.

No other key management personnel or executives were entitled to bonuses during the year.

Vesting conditions for options granted during the year are linked to periods of service.

Annual Report 2008

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DIRECTORS’ REPORT

(CONTINUED) – Remuneration Report (Audited)

B. Details of remuneration (audited)

Amounts of remuneration

Details of the remuneration of the directors and key management personnel of Imugene Limited and the Group are set out in the following tables.

100% of cash bonuses are dependent on the satisfaction of performance conditions (as detailed under �� above). Other elements of remuneration are not directly related to performance.

Relationship between the remuneration policy and company performance

There is no relationship between the remuneration policy for key management personnel and the Company’s performance.

The tables below set out summary information about the Consolidated Entity’s earnings and movement in shareholder wealth for the five years to June 2008:

	$	$	$	$	$
	30 JUNE 2008	30 JUNE 2007	30 JUNE 2006	30 JUNE 2005	30 JUNE 2004
Revenue	92,214	165,534	63,251	389,501	123,598
Net loss before tax	(2,149,664)	(2,561,309)	(2,439,279)	(2,116,968)	(2,785,629)
Net loss after tax	(1,910,925)	(2,304,263)	(2,187,219)	(1,794,208)	(2,115,675)

Imugene Limited adopted the Australian equivalents to International Financial Reporting Standards with effect from 1 July 2004, which resulted in various changes to its accounting policies from that date. The results for the year ended 30 June 2004 are reported in accordance with Imugene Limited’s previous accounting policies as permitted under Australian accounting standards as applicable at that time.

	30 JUNE 2008	30 JUNE 2007	30 JUNE 2006	30 JUNE 2005	30 JUNE 2004
Share price at start of year	$0.25	$0.10	$0.13	$0.21	$0.19
Share price at end of year	$0.07	$0.25	$0.10	$0.13	$0.21
Basic loss per share	(1.4)	(1.8)	(1.7)	(1.5)	(2.0)
Diluted loss per share	(1.4)	(1.8)	(1.7)	(1.5)	(2.0)

Imugene Limited adopted the Australian equivalents to the International Financial Reporting Standards with effect from 1 July 2004, which resulted in various changes to its accounting policies from that date. The basic and diluted earnings per share for the year ended 30 June 2004 were calculated in accordance with Imugene Limited’s previous accounting policies as permitted under Australian accounting standards as applicable at that time.

Amounts paid or payable to key management personnel of the Company / Group are set out on the next page. Alex Neuling and Julie Foster are not key management personnel of the Group but are company executives.

IMUGENE LIMITED

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2008	SHORT-TERM BENEFITS POST-EMPLOYMENT BENEFITS SHARE-BASED PAYMENT Cash salary and fees $ Cash bonus $ Non-monetary benefts $ Super- annuation $ Retirement benefts $ Options $ Total $	SHORT-TERM BENEFITS POST-EMPLOYMENT BENEFITS SHARE-BASED PAYMENT Cash salary and fees $ Cash bonus $ Non-monetary benefts $ Super- annuation $ Retirement benefts $ Options $ Total $
	Cash salary and fees $ Cash bonus $
Non-executive directors Roger Steinepreis 25,000 –		– – – – 25,000
Sub-Total non-executive directors 25,000 –		– – – – 25,000
Executive directors Graham Dowland 174,996 – Warwick Lamb 180,762 – Other key management personnel Michael Sheppard 160,550 20,000 Executives – Company Secretary Alex Neuling (1/07/07 to 29/05/08) – – Julie Foster (Appointed 29/05/08) – –		– – – 23,703 198,699 37,425 20,642 – 118,515 357,344 – 14,450 – 11,540 206,540 – – – – – – – – – –
Totals 541,308 20,000		37,425 35,092 – 153,758 787,583
2007
Non-executive directors Roger Steinepreis 25,000 –		– – – _ 25,000
Sub-Total non-executive directors 25,000 –		– – – – 25,000
Executive directors Graham Dowland 174,000 – Warwick Lamb 181,573 – Other key management personnel Michael Sheppard 146,789 20,000 Richard Brandon (14/06/06 to 14/12/06) 67,664 – Executives – Company Secretary Alex Neuling * – –		– – – 57,587 231,587 47,469 20,642 – 287,935 537,619 – 13,211 – 180,791 360,791 – 5,907 – – 73,571 – – – 15,387 15,387
Totals 595,026 20,000		47,469 39,760 – 541,700 1,243,955

��

��
��

Annual Report 2008

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DIRECTORS’ REPORT

(CONTINUED) – Remuneration Report (Audited)

C. Service agreements (audited)

Remuneration and other terms of agreement for the Chairman are formalised in a consultancy agreement with an associated Company of Mr Dowland. Remuneration and other terms of agreement with the Company Secretary are not formalised in an agreement. Remuneration and other terms of agreement with the Managing Director and the other key management personnel are formalised in service agreements. Each of these agreements provide for the provision of performance-related cash bonuses and / or grant of options. Other major provisions of the agreements relating to remuneration are set out below.

All contracts with executives may be terminated by either party with varying notice periods, subject to termination payments as detailed below.

Mr Graham Dowland, Chairman

Term of agreement – indefinite.
��
�� Consultancy fee inclusive of superannuation and taxes, but excluding GST of $175,000 per annum, to be reviewed annually by the Board.

Dr Warwick Lamb, Managing Director

�� Term of agreement – indefinite.
�� Base salary, inclusive of superannuation for the year ended 30 June 2008 of $250,000, to be reviewed annually by the Board.
�� Payment of a termination benefit on early termination by the Company, other than for gross misconduct, equal to base salary for twelve months.
Dr Michael Sheppard, Chief Scientific Officer
�� Term of agreement – rolling annual, anniversary on 21 March.
�� Base salary, inclusive of superannuation for the year ended 30 June 2008 of $175,000.
�� Payment of a termination benefit on early termination by the Company, other than for gross misconduct, equal to base salary and benefits for the remainder of the contract term.
�� Payment of a termination benefit on early termination by the Company, other than for gross misconduct, equal to six months consultancy fees.

D. Share-based compensation (audited)

Options

During the financial year, the following share-based payments arrangements to key management personnel were in existence:

GRANT DATE	DATE VESTED AND EXERCISABLE	EXPIRY DATE	EXERCISE PRICE	VALUE PER OPTION AT GRANT DATE
24 Aug 2005	31 Jan 2006	31 Oct 2007	$0.50	$0.01
24 Aug 2005	24 Aug 2005	31 Oct 2007	$0.38	$0.03
18 Jan 2007	18 Jan 2007	31 Dec 2009	$0.25	$0.16
18 Jan 2007	18 Jan 2008	31 Dec 2009	$0.25	$0.17

Details of options over ordinary shares in the Company provided as remuneration to each director of Imugene and each of the key management personnel of the Parent Entity and the Group are set out below. When exercisable, each option is convertible into one ordinary share of Imugene.

IMUGENE LIMITED

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	NO. OF OPTIONS GRANTED DURING THE YEAR NO. OF OPTIONS VESTED DURING THE YEAR DURING THE FINANCIAL YEAR	NO. OF OPTIONS GRANTED DURING THE YEAR NO. OF OPTIONS VESTED DURING THE YEAR DURING THE FINANCIAL YEAR
	2008 2007	2008 2007 % of grant vested % of grant forfeited
Directors of Imugene Limited Graham Dowland Warwick Lamb	– 500,000 – 2,500,000	250,000 250,000 100 – 1,250,000 1,250,000 100 –
Other key management personnel of the Group Michael Sheppard Alex Neuling	– 1,250,000 – 100,000	150,000 1,100,000 100 – – 100,000 100 –

Fair Value of Options

The fair value of each option is estimated on the date of grant using the Black-Scholes Option Valuation Model.

No options were granted to key management personnel during the year ended 30 June 2008.

The model inputs for options granted during the year ended 30 June 2007 included:

	2007
Dividend yield	–
Expected volatility	95.2%
Historical volatility	95.2%
Risk-free interest rate	5.9%
Expected life of option	1.5 years

Options granted carry no dividend or voting rights. Upon exercise, each option is convertible into one fully paid ordinary share to rank pari passu with fully paid ordinary shares then on issue.

No options provided as remuneration to directors or key management personnel as remuneration were exercised during the year (2007: none).

E. Additional Information (audited)

As detailed under headings A & B, remuneration of executives consists of an unrisked element (base pay) and cash bonuses based on performance in relation to key strategic, non-financial measures linked to drivers of performance in future reporting periods. As such, remuneration is not linked to the financial performance of the Company in the current or previous reporting periods.

No cash bonuses were forfeited during the year by directors or key management personnel or remained unvested at yearend.

Additional information required by section 300A (1) of the Corporations Act 2001 in relation to share-based compensation is set out on the next page.

Annual Report 2008

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DIRECTORS’ REPORT

(CONTINUED)

	A	B	C	D
	REMUNERATION	VALUE AT GRANT	VALUE AT	VALUE AT LAPSE
	CONSISTING OF OPTIONS	DATE	EXERCISE DATE	DATE
NAME	%	$	$	$
Directors of Imugene Limited
Graham Dowland	12	–	–	–
Warwick Lamb	33	–	–	–
Roger Steinepreis	0	–	–	–
Other key management
personnel of the Group
Michael Sheppard	6	–	–	–

A = The percentage of the value of remuneration consisting of options, based on the value of options expensed during the current year.
B = The value at grant date calculated in accordance with AASB2 Share-based Payment of options granted / cancelled during the year as part of remuneration.
C = The value at exercise date of options that were granted as part of remuneration and were exercised during the year, being the intrinsic value of the options at that date.
D = The value at lapse date of options that were granted as part of remuneration that lapsed during the year.

Auditor’s Independence Declaration

The auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is included on page 25 of the Annual Report.

Non-Audit Services

No non-audit services were provided to the Group by the auditor during the year (or by another person or firm on the auditor’s behalf) and accordingly the directors are satisfied that the provision of non-audit services, during the year, by the auditor is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 .

During the year, the Company has paid a premium in respect of a contract insuring the directors of the Company (as named above) and the Company Secretary Ms Julie Foster (formerly Mr Alex Neuling – 1 July 2007 to 29 May 2008) against liabilities incurred as such a director, secretary or executive officer to the extent permitted by the Corporations Act 2001 . The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. The Company has not otherwise, during or since the financial year, indemnified or agreed to indemnify an officer or auditor of the company or of any related body corporate against a liability incurred as such an officer or auditor.

This report is made in accordance with a resolution of the directors made pursuant to section 298(2) of the Corporations Act 2001 .

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GRAHAM DOWLAND Executive Chairman Perth, Western Australia

8 September 2008

IMUGENE LIMITED

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AUDITOR’S INDEPENDENCE DECLARATION

Deloitte Touche Tohmatsu A.C.N. 74 490 121 060 Woodside Plaza Level 14 240 St Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia

The Board of Directors Imugene Limited Level 20, 77 St Georges Terrace Perth WA, 6000

DX 206 Tel: +61 (0) 8 9365 7000 Fax: +61 (0) 8 9365 7001 www.deloitte.com.au

8 September 2008

Dear Board Members

In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Imugene Limited.

As lead audit partner for the audit of the financial statements of Imugene Limited for the financial year ended 30 June 2008, I declare that to the best of my knowledge and belief, there have been no contraventions of:

(i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and

(ii) any applicable code of professional conduct in relation to the audit.

Yours sincerely

DELOITTE TOUCHE TOHMATSU

Mark Gover Partner Chartered Accountants

Liability limited by a scheme approved under Professional Standards Legislation.

Annual Report 2008

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INDEPENDENT AUDIT REPORT TO MEMBERS

Deloitte Touche Tohmatsu A.C.N. 74 490 121 060 Woodside Plaza Level 14 240 St Georges Terrace Perth WA 6000 GPO Box A46 Perth WA 6837 Australia

DX 206 Tel: +61 (0) 8 9365 7000 Fax: +61 (0) 8 9365 7001 www.deloitte.com.au

Independent Auditor’s Report to the members of Imugene Limited

We have audited the accompanying financial report of Imugene Limited, which comprises the balance sheet as at 30 June 2008 and the income statement, cash flow statement and statement of changes in equity for the year ended on that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year as set out on pages 28 to 56.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001 . This responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 2, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements , that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the financial report, comprising the financial statements and notes complies with International Financial Reporting Standards.

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Liability limited by a scheme approved under Professional Standards Legislation.

26 IMUGENE LIMITED

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Auditor’s Independence Declaration

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001 .

Auditor’s Opinion

In our opinion:

(a) the financial report of Imugene Limited is in accordance with the Corporations Act 2001 , including:
(i) giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2008 and of their performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001 ; and
(b) the financial report also complies with International Financial Reporting Standards as disclosed in Note 2.

Report on the Remuneration Report

We have audited the Remuneration Report included in the directors’ report on pages 18 to 24 of the directors’ report for the year ended 30 June 2008. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001 . Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditor’s Opinion

In our opinion the Remuneration Report of Imugene Limited for the year ended 30 June 2008, complies with section 300A of the Corporations Act 2001 .

DELOITTE TOUCHE TOHMATSU

Mark Gover Partner Chartered Accountants Perth, 8 September 2008

Annual Report 2008

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INCOME STATEMENT

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2008

NOTE	CONSOLIDATED 2008 $ 2007 $	CONSOLIDATED 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $
Revenue from continuing operations (5) Other income (6) Total income Research and development Business development Commercialisation expenses (7) Corporate and administration costs Impairment writedown of investment in controlled entities (7) Loss before income tax beneft Income tax beneft (8) Net loss attributable to members of Company Earnings / (loss) per share Basic loss per share (cents per share) (25) Diluted loss per share (cents per share) (25)	92,214 315,630 407,844 (1,132,644) (191,582) (570,932) (662,350) – (2,149,664) 238,739 (1,910,925) (1.4) (1.4)	165,534 310,723 476,257 (1,077,187) (303,209) (936,819) (720,351) – (2,561,309) 257,046 (2,304,263) (1.8) (1.8)	825,975 315,630 1,141,605 (1,350,341) (191,582) (226,878) (644,331) (878,137) (2,149,664) 238,739 (1,910,925)	901,362 310,723
				1,212,085 (1,055,520) (303,209) (484,983) (703,332) (1,226,350)
				(2,561,309) 257,046
				(2,304,263)

The above income statement should be read in conjunction with the accompanying notes.

IMUGENE LIMITED

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BALANCE SHEET

AS AT 30 JUNE 2008

NOTE	CONSOLIDATED 2008 $ 2007 $	CONSOLIDATED 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $
Current assets Cash and cash equivalents (9) Trade and other receivables (10) Tax assets (11) Total current assets Non-current assets Receivables (12) Other fnancial assets (13) Property, plant and equipment (14) Intangible assets (15) Total non-current assets Total assets Current liabilities Trade and other payables (16) Provisions (17) Total liabilities Net assets Equity Contributed equity (18) Reserves (19) Accumulated losses (19) Total equity	1,619,678 60,771 189,869 1,870,318 – – 9,944 3,283,165 3,293,109 5,163,427 400,940 92,425 493,365 4,670,062 14,907,453 960,003 (11,197,394) 4,670,062	1,099,226 1,226 525,460 1,625,912 – – 10,151 3,624,305 3,634,456 5,260,368 472,618 87,932 560,550 4,699,818 13,180,042 806,245 (9,286,469) 4,699,818	1,482,886 54,635 189,869 1,727,390 3,391,834 310,332 9,944 – 3,712,110 5,439,500 677,013 92,425 769,438 4,670,062 14,907,453 960,003 (11,197,394) 4,670,062	868,618 1,226 525,460
				1,395,304
				2,892,548 1,188,470 10,151 –
				4,091,169
				5,486,473
				698,723 87,932
				786,655
				4,699,818
				13,180,042 806,245 (9,286,469)
				4,699,818

The above balance sheet should be read in conjunction with the accompanying notes.

Annual Report 2008

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CASH FLOW STATEMENT

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2008

NOTE	CONSOLIDATED 2008 $ 2007 $	CONSOLIDATED 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $
Cash fows from operating activities Receipts from customers Payments to suppliers and employees Income tax repayments received Other income Net cash outfow from operating activities (24) Cash fows from investing activities Payments for property, plant and equipment Interest received Net cash infow from investing activities Cash fows from fnancing activities Proceeds from issue of shares Issue costs Net cash infow from fnancing activities Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year (9)	25,488 (2,111,826) 574,331 239,107 (1,272,900) (2,499) 68,440 65,941 1,828,072 (100,661) 1,727,411 520,452 1,099,226 1,619,678	65,413 (2,381,408) 273,648 339,494 (1,702,853) – 104,835 104,835 – – – (1,598,018) 2,697,244 1,099,226	500 (1,986,137) 574,331 239,107 (1,172,199) (2,499) 61,555 59,056 1,828,072 (100,661) 1,727,411 614,268 868,618 1,482,886	– (2,363,877) 273,648 341,067
				(1,749,162)
				– 96,704
				96,704
				– –
				–
				(1,652,458) 2,521,076
				868,618

The above statement of cash flows should be read in conjunction with the accompanying notes.

IMUGENE LIMITED

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STATEMENT OF CHANGES IN EQUITY

FOR THE FINANCIAL YEAR ENDED 30 JUNE 2008

NOTE	CONSOLIDATED 2008 $ 2007 $	CONSOLIDATED 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $
Share Capital At the beginning of the year Issue of shares during the year (18) Costs of issue (18) At the end of the year (18) Share Based Payment Reserve At the beginning of the year Option expense (19) At the end of the year (19) Accumulated losses At the beginning of the year Loss for the year (19) At the end of the year (19) Total Equity At the beginning of the year At the end of the year Net income recognised directly in equity Loss for the year Total recognised income and expense for the year	13,180,042 1,828,072 (100,661) 14,907,453 806,245 153,758 960,003 (9,286,469) (1,910,925) (11,197,394) 4,699,818 4,670,062 – (1,910,925) (1,910,925)	13,180,042 – – 13,180,042 264,545 541,700 806,245 (6,982,206) (2,304,263) (9,286,469) 6,462,381 4,699,818 – (2,304,263) (2,304,263)	13,182,042 1,828,072 (100,661) 14,907,453 806,245 153,758 960,003 (9,286,469) (1,910,925) (11,197,394) 4,699,818 4,670,062 – (1,910,925) (1,910,925)	13,180,042 – –
				13,180,042
				264,545 541,700
				806,245
				(6,982,206) (2,304,263)
				(9,286,469)
				6,462,381 4,699,818 – (2,304,263)
				(2,304,263)

The above statement of changes in equity should be read in conjunction with the accompanying notes.

Annual Report 2008

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NOTES TO THE FINANCIAL STATEMENTS

1. Corporate information

The financial report of Imugene Limited (the Company or “Imugene”) for the year ended 30 June 2008 was authorised for issue in accordance with a resolution of the directors on 8 September 2008.

Imugene Limited (“Parent Entity”) is a Company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange. The financial report includes separate financial statements for Imugene as an individual entity and the Consolidated Entity comprised by Imugene and its subsidiaries (“Group or Consolidated Entity”).

The nature of the operations and principal activities of the Group are described in the Directors’ Report.

2. Summary of significant accounting policies

The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

a) Basis of preparation

The financial report is a general-purpose financial report, which has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001 .

The financial report has also been prepared on a historical cost basis.

The financial report is presented in Australian dollars, which is Imugene Limited’s functional and presentation currency.

Statement of compliance

The financial report complies with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the Financial Report of Imugene Limited complies with International Financial Reporting Standards (IFRS).

Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have not been adopted by the Group for the reporting period ending 30 June 2008.

The Directors have assessed the impact of these new or amended Standards and Interpretations (to the extent relevant to the Group) and no such revisions or new Standards and Interpretations are expected to have any material impact on the accounting policies of the Group.

Going Concern

The financial report has been prepared on a going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the normal course of business.

The Group incurred a net loss of $1,910,925 for the year to 30 June 2008 and had a net cash outflow from operations of $1,272,900 for the year. Notwithstanding this, the financial report has been prepared on a going concern basis based on available cash assets at year-end of $1,619,678; receipts of approximately $130,000 under government grants subsequent to year-end; and, the expectation that the Company will be able to source additional funds if required by means of additional equity and / or debt fund raisings.

The Directors consider it probable that the Company will complete a combination of transactions including commercial agreements that will provide additional uncommitted funds for the Company’s operations. It is also possible that a capital raising will be undertaken before the end of the current financial year. At present the Company has a number of funding alternatives open to it and will continue to assess these options to identify the most advantageous alternative.

In the event that a fund raising cannot be completed within this timeframe, it is expected that expenditure commitments can be deferred sufficiently to enable the Group to continue as a going concern for the foreseeable future.

IMUGENE LIMITED

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b) Principles of consolidation

Subsidiaries

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Imugene Limited as at 30 June 2008 and the results of all subsidiaries for the year then ended.

Subsidiaries are all those entities over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights.

The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries are consistent with the policies adopted by the Group.

Investments in subsidiaries are accounted for at cost in the individual financial statements of Imugene Limited.

c) Foreign currency

All foreign currency transactions during the financial year are translated into the functional currency using the exchange rate prevailing at the date of the transaction.

Foreign currency monetary assets and liabilities at the reporting date are translated at the exchange rate existing at reporting date.

Exchange differences are recognised in profit or loss in the period in which they arise.

d) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable.

The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and specific criteria have been met for each of the Group’s activities as described below:

Management fees to subsidiaries

Revenue from management fees charged by the Company to its wholly owned subsidiaries is recognised in the accounting period in which management services are rendered.

Sale of goods

Revenue from the sale of goods and disposal of other assets is recognised when the Consolidated Entity has transferred to the buyer the significant risks and rewards of ownership of the goods.

Royalties, licence fees and milestone payments

Royalty revenue, revenue from the sale of sub-licences and milestone payments are recognised on an accruals basis in accordance with the substance of the relevant agreement.

Interest income

Interest income is recognised on a time proportionate basis using the effective interest method.

Annual Report 2008

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NOTES TO THE FINANCIAL STATEMENTS

(CONTINUED)

2. Summary of significant accounting policies (continued)

Dividends

Dividends are recognised as revenue when the right to receive payment is established.

e) Government grants

Government grants are assistance by the government in the form of transfers of resources to the Consolidated Entity in return for past or future compliance with certain conditions relating to the operating activities of the entity.

Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions.

Government grants relating to costs are deferred and recognised in the income statement over the period necessary to match them with the costs that they are intended to compensate.

f) Income tax

The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the applicable tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.

Deferred tax

Deferred income tax is provided in full, using the comprehensive balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax assets and liabilities are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the Parent Entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Current and deferred tax for the period

Current and deferred tax is recognised as an expense or income in the income statement, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity, or where it arises from the initial accounting for a business combination, in which case it is taken into account in the determination of goodwill or excess.

Tax consolidation

The Company and all its wholly-owned Australian resident entities are part of a tax consolidated group under Australian taxation law. Imugene Limited is the head entity in the tax-consolidated group.

IMUGENE LIMITED

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Imugene Limited and the controlled entities in the tax consolidated group account for their own current and deferred tax amounts. These tax amounts are measured as if each entity in the tax consolidated group continues to be a stand alone taxpayer in its own right.

In addition to its own current and deferred tax amounts, Imugene Limited also recognises the current tax liabilities (or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in the tax consolidated group.

Entities within the tax-consolidated group have entered into a tax funding arrangement and a tax-sharing agreement with the head entity. Under the terms of the tax funding arrangement, Imugene Limited and each of the entities in the tax-consolidated group has agreed to pay a tax equivalent payment to or from the head entity, based on the current tax liability or current tax asset of the entity. Assets or liabilities arising under this arrangement are recognised as amounts receivable from or payable to other entities in the Group and amounts are determined by reference to amounts recognised in the financial records of members in the Group.

Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised as a contribution to (or distribution from) wholly-owned tax consolidated entities.

g) Impairment of assets

Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.

An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at fair value, in which case the impairment loss is treated as a revaluation decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cashgenerating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at fair value, in which case the reversal of the impairment loss is treated as a revaluation increase.

h) Cash and cash equivalents

For cash flow statement presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts.

i) Financial assets

Investments in subsidiaries are measured at cost.

Other financial assets are classified as financial assets ‘at fair value through the profit or loss’, ‘held to maturity investments’, ‘available for sale’ financial assets and ‘loans and receivables’. The classification depends on the nature and purpose for which the financial assets were acquired and is determined at the time of initial recognition.

Annual Report 2008

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NOTES TO THE FINANCIAL STATEMENTS

(CONTINUED)

2. Summary of significant accounting policies (continued)

Purchases and sales of financial assets are recognised on trade-date – the date on which the Group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through the profit or loss. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all the risks and rewards of ownership.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Trade receivables, loans, and other receivables are subsequently recorded at amortised cost, using the effective interest method, less impairment.

Impairment

The Consolidated Entity assesses at each balance sheet date whether there is objective evidence that a financial asset or group of financial assets is impaired.

j) Property, Plant and equipment

Plant and equipment and fixtures and fittings are stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the items. In the event that settlement of all or part of the purchase consideration is deferred, cost is determined by discounting the amounts payable in the future to their present value as at the date of acquisition.

Depreciation is calculated on a straight line basis so as to write off the cost of each asset, net of residual values over their estimated useful lives, as follows:

Fixtures and fittings 5 years Plant and equipment 5 – 15 years

The estimated useful lives, residual values and depreciation methods are reviewed, and adjusted if appropriate, at each reporting date.

k) Intangible assets

Patents, trademarks and licenses

Patents, trademarks and licences are recorded at cost less accumulated amortisation and impairment. Amortisation is charged on a straight line basis over their expected useful lives of 15 years. The estimated useful life and amortisation method is reviewed at the end of each annual reporting period.

Research and development costs

Expenditure on research activities is recognised as an expense in the period in which it is incurred.

Costs incurred on development projects (relating to the design and testing of new or improved products) are recognised as intangible assets if, and only if, all of the following are demonstrated:

��
��
��
��
the technical feasibility of completing the intangible asset so that it will be available for use or sale;
the intention to complete the intangible asset and use or sell it;
the ability to use or sell the intangible asset;
how the intangible asset will generate probable future economic benefits;

IMUGENE LIMITED

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�� the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; and
�� the ability to measure reliably the expenditure attributable to the intangible asset during its development.

Other development expenditures that do not meet these criteria are recognised as an expense as incurred.

Intangible assets acquired in a business combination

All potential intangible assets acquired in a business combination are identified and recognised separately from goodwill where they satisfy the definition of an intangible asset and their fair value can be measured reliably.

l) Payables

Trade payables and other accounts payable represent liabilities for goods and services provided to the Group prior to the end of the financial year which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.

m) Provisions

Provisions are recognised when the Consolidated Entity has a present obligation, the future sacrifice of economic benefits is probable, and the amount of the provision can be measured reliably.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is probable that recovery will be received and the amount of the receivable can be measured reliably.

The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at reporting date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cashflows estimated to settle the present obligation, its carrying amount is the present value of those cashflows.

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that recovery will be received and the amount of the receivable can be measured reliably.

An onerous contract is considered to exist where the Consolidated Entity has a contract under which the unavoidable cost of meeting the contractual obligations exceed the economic benefits estimated to be received. Present obligations arising under onerous contracts are recognised as a provision to the extent that the present obligation exceeds the economic benefits estimated to be received.

n) Employee benefit

Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave expected to be settled within 12 months of the reporting date are recognised in the provision for employee benefits in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the liabilities are settled.

Provisions made in respect of employee benefits which are not expected to be settled within 12 months are measured as the present value of the estimated future cash outflows to be made by the Consolidated Entity in respect of services provided by employees up to reporting date.

o) Defined contribution superannuation plans

Contributions to defined contribution superannuation plans are expensed when incurred.

Annual Report 2008

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NOTES TO THE FINANCIAL STATEMENTS

(CONTINUED)

2. Summary of significant accounting policies (continued)

p) Share-based payments

Share-based compensation benefits are provided to employees where the Board considers that this provides a costeffective and efficient means of remunerating and incentivising employees.

The fair value of the options granted is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at the grant date and recognised over the period during which the employees become unconditionally entitled to the options.

The fair value at grant date is independently determined using a Black-Scholes Option Pricing Model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option.

The fair value of the options granted is adjusted to reflect market vesting conditions, but excludes the impact of any nonmarket vesting conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each reporting date, the entity revises its estimate of the number of options that are expected to become exercisable. The employee benefit expense recognised each period takes into account the most recent estimate. The impact of the revision to original estimates, if any, is recognised in the income statement with a corresponding adjustment to equity.

q) Financial instruments issued by the Company

Debt and equity instruments

Debt and equity instruments are classified as either liabilities or as equity in accordance with the substance of the contractual arrangement.

Contributed equity

Ordinary shares are classified as equity.

Transaction costs directly attributable to the issue of new shares or options are shown in equity as a deduction from the proceeds.

r) Earnings per share

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year.

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.

s) Goods and services tax

Revenues, expenses and assets are recognised net of the amount of associated goods and services tax (GST), except:

i. where the amount of GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense; or
ii. for receivables and payables which are stated inclusive of GST receivable or payable.

The net amount of GST recoverable from, or payable to, the taxation authority is included as part of other receivables or payables in the balance sheet. Cash flows are included in the cash flow statement on a gross basis. The GST component of cash flows arising from investing and financing activities which are recoverable from, or payable to, the taxation authority are classified as operating cash flows.

IMUGENE LIMITED

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3. Financial risk management

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group. The Group uses different methods to measure different types of risk to which it is exposed.

Imugene’s board of directors (Board) performs the duties of a risk management committee in identifying and evaluating sources of financial and other risks. The Board seeks to apply principles for overall risk management which balance the potential adverse effects of financial risks on Imugene’s financial performance and position with the “upside” potential made possible by exposure to these risks and by taking into account the costs and expected benefits of the various methods available to manage them.

The Group and the Parent Entity hold the following financial instruments:

	CONSOLIDATED 2008 $ 2007 $	CONSOLIDATED 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $
Financial assets Cash and cash equivalents Loans and receivables Financial liabilities Amortised cost	1,619,678 60,771 1,680,449 400,940	1,099,226 1,226 1,100,452 442,275	1,482,886 54,635 1,537,521 677,013	868,618 1,226
				869,844
				668,380

a) Market risk

i. Foreign exchange risk

Imugene Limited is based in Australia, its shares are listed on the Australian Securities Exchange and the Group reports its financial performance and position in Australian dollars (A$). The Group operates internationally, with the result being that the Group is to some extent exposed to foreign exchange risk arising from fluctuations in the A$ / US$ exchange rate.

As at balance date, the Board has formed the view that it would not be beneficial for the Group to purchase forward contracts or other derivative financial instruments to hedge this foreign exchange risk. Factors which the Board considered in arriving at this position included: The expense of purchasing such instruments; the inherent difficulties associated with forecasting the timing and quantum of US$ cash inflows and outflows at a time when the Consolidated Entity is still at the commercialisation and development stage of monetising its intellectual property. The Board may reconsider its position with regard to hedging against foreign exchange risk in the future as the Group’s activities evolve and / or in response to industry or macro-economic factors.

The Parent Entity’s financial assets and liabilities are all denominated in Australian dollars. The carrying amounts of the Group’s financial assets and liabilities are denominated in Australian dollars except as set out below:

	CONSOLIDATED	CONSOLIDATED	PARENT ENTITY	PARENT ENTITY
	2008	2007	2008	2007
	US $	US $	US $	US $
Financial assets
Cash and cash equivalents	12,798	114,789		–	–

Annual Report 2008

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NOTES TO THE FINANCIAL STATEMENTS

(CONTINUED)

3. Financial risk management (continued)

Group sensitivity

Based on the financial instruments held at 30 June 2008, had the Australian dollar weakened / strengthened by 10% against the US dollar with all the other variables held constant, the Group’s loss for the year would have been $1,300 lower / higher (2007 – $14,000 lower / higher) mainly as a result of foreign exchange gains/losses on translation of US dollar denominated financial instruments as detailed in the above table. The loss is less sensitive to movements in the Australian dollar / US dollar exchange rates in 2008 than 2007 because of the decreased amount of US dollar denominated cash and cash equivalents. The Group’s exposure to other foreign exchange movements is not material.

Parent Entity sensitivity

The Parent Entity’s exposure to foreign exchange movements is not material.

ii. Interest rate risk

As at and during the year ended on balance date the Group had no significant interest-bearing assets or liabilities other than liquid funds on deposit. As such, the Group’s income and operating cash flows (other than interest income from funds on deposit) are substantially independent of changes in market interest rates. The Group’s exposure to interest rate risk and the effective weighted average interest rate for each class of financial assets and liabilities is set out below:

CONSOLIDATED PARENT ENTITY 2008 $ 2007 $ 2008 $ 2007 $	CONSOLIDATED PARENT ENTITY 2008 $ 2007 $ 2008 $ 2007 $
Financial assets Cash and cash equivalents Floating rate 1,619,678 1,099,226 1,482,886*	868,618

��

Group sensitivity

At 30 June 2008, if interest rates had changed by –/+ 80 basis points from the year end rates with all other variables held constant, the loss for the year would have been $13,000 lower / higher (2007 – change of 80 basis points: $12,000 lower / higher), mainly as a result of lower / higher interest income from cash and cash equivalents.

Parent Entity sensitivity

At 30 June 2008, if interest rates had changed by –/+ 80 basis points from the year end rates with all other variables held constant, the loss for the year would have been $10,000 lower / higher (2007 – change of 80 basis points: $7,000 lower / higher), mainly as a result of lower / higher interest income from cash and cash equivalents.

iii. Commodity price risk

The Group is not exposed to commodity price risk.

b) Credit risk

Credit risk is managed on a group basis. Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit exposures to customers. For banks and financial institutions, only independently rated parties with a minimum rating of ‘A’ are accepted. The Group trades only with recognised, trustworthy third parties. It is the Group’s policy to perform credit verification procedures in relation to any customers wishing to trade on credit terms with the Group. These include taking into account the customers financial position and any past experience to set individual risk limits as determined by the Board.

The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets as summarised on page 39.

IMUGENE LIMITED

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	CONSOLIDATED	CONSOLIDATED	PARENT	ENTITY
	2008	2007	2008	2007
	$	$	$	$
Cash at bank and short-term bank deposits
AA Rated	1,619,678	1,099,226	1,482,886	868,618

c) Liquidity risk

Prudent liquidity risk management involves the maintenance of sufficient cash, marketable securities, committed credit facilities and access to capital markets. It is the policy of the Board to ensure that the Group is able to meet its financial obligations and maintain the flexibility to pursue attractive investment opportunities through keeping committed credit lines available where possible, ensuring the Group has sufficient working capital and preserving the 15% share issue limit available to the Company under the ASX Listing Rules. The Group manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.

Maturities of financial liabilities

Group – As at the reporting date the Group had total financial liabilities of $400,940 (2007: $442,275), comprised of non interest–bearing trade creditors and accruals with a maturity of 1–3 months.

Parent Entity – As at the reporting date the Parent Entity had total financial liabilities of $677,013 (2007: $668,380), comprised of non interest–bearing trade creditors and accruals with maturity of 1–3 months.

d) Fair value estimation

The fair value of financial assets and financial liabilities must be estimated for recognition and measurement and/or disclosure purposes.

The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

e) Capital risk management

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders.

The capital structure of the Group consists of cash and cash equivalents and equity attributable to equity holders of the Parent Entity.

None of the Group’s entities are subject to externally imposed capital requirements.

4. Critical accounting estimates & judgements

In preparing this financial report the Group has been required to make certain estimates and assumptions concerning future occurrences. There is an inherent risk that the resulting accounting estimates will not equate exactly with actual events and results.

Annual Report 2008

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NOTES TO THE FINANCIAL STATEMENTS

(CONTINUED)

4. Critical accounting estimates & judgements (continued)

a) Significant accounting judgements

In the process of applying the Group’s accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements:

Deferred tax assets

The Group has carried forward tax losses which have not been recognised as deferred tax assets as it is not considered sufficiently probable that these losses will be recouped by means of future profits taxable in the appropriate jurisdictions.

b) Significant accounting estimates and assumptions

The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain assets and liabilities within the next annual reporting period are:

Share-based payment transactions

The Group measures the cost of equity-settled transactions with employees and consultants by reference to the fair value of the equity instruments at the date at which they are granted. The fair value is determined using a Black-Scholes Model, using the assumptions detailed in note 19.

Impairment of assets

In the absence of readily available market prices, the recoverable amounts of assets are determined using estimations of the present value of future cashflows using asset-specific discount rates. For patents, licences and other rights, these estimates are based on various assumptions concerning, for example future sales profiles, market penetration, milestone achievement dates and production profiles.

As at 30 June 2008, the carrying value of patents, licences and other rights is $3,283,165 (2007: $3,624,305).

5. Revenue

	CONSOLIDATED 2008 $ 2007 $	CONSOLIDATED 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $
From continuing operations Sales revenue Management fees Other revenue Sub-license / contract research fees Interest	– – 25,000 67,214 92,214 92,214	– – 63,841 101,693 165,534 165,534	765,647 765,647 – 60,328 60,328 825,975	807,800
				807,800
				– 93,562
				93,562
				901,362

IMUGENE LIMITED

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6. Other income

6. Other income
	CONSOLIDATED 2008 $ 2007 $		PARENT ENTITY 2008 $ 2007 $
Government grants Other	315,130 500 315,630	309,151 1,572 310,723	315,130 500 315,630	309,151 1,572
				310,723

The Company’s accounting policy in relation to Government Grants is disclosed in note 2 (e).

Imugene announced on 8 November 2006 that it had been awarded an Australian government Commercial Ready grant to produce and test vaccines to protect chickens from the avian influenza. The total grant amount is expected to be approximately $880,000 on a matched funding basis. Originally the payments were to be drawn over two years in line with the Company’s actual and forecast spending on the project. During the year the Company was granted a variation to extend the project period to a total of two years and six months. As at balance sheet date, an amount of $45,680 has been classified as accrued income in relation to receipts under the grant (refer to note 10). (2007: $30,343 deferred income – refer note 16).

Previously, funding has also been received under two Biotechnology Innovation Fund grants (also on a matched funding basis) for projects which have been completed.

7. Expenses

	CONSOLIDATED 2008 $ 2007 $	CONSOLIDATED 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $
Depreciation of non-current assets Tangible fxed assets Commercialisation expenses Patent expenses Employee expenses Amortisation of intangibles Impairment writedown Investments in wholly-owned subsidiaries	2,706 38,210 191,582 341,140 570,932 –	4,565 178,107 417,572 341,140 936,819 –	2,706 35,296 191,582 – 226,878 (878,137)	4,565 67,411 417,572 –
				484,983
				(1,226,350)

Annual Report 2008

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NOTES TO THE FINANCIAL STATEMENTS

(CONTINUED)

8. Income Tax

8. Income Tax
	CONSOLIDATED 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $
Current tax 189,869 202,929 189,869 202,929 Under provision recognised in prior years 48,870 54,117 48,870 54,117 238,739 257,046 238,739 257,046 A reconciliation between tax expense and the product of accounting result before income tax multiplied by the Group’s applicable income tax rate is as follows: Accounting loss before tax from continuing operations (2,149,664) (2,561,309) (2,149,664) (2,561,309) Tax at the Australian statutory income tax rate of 30% (2007: 30%) (644,899) (768,393) (644,899) (768,393) Tax efect of amounts which are not deductible / (taxable) in calculating taxable income Research & development expenses (claimed under Tax Concession) 187,148 187,791 187,148 187,791 Share-based payment expense 46,127 162,510 46,127 162,510 Sundry other – 10,969 – 5,887 Tax efect of termporary timing diferences in relation to unrecognised deferred tax assets / liabilities: (i) (ii) Impairment writedown – – 263,441 367,156 Patent costs 11,463 45,564 10,589 18,909 Sundry other (65,574) (10,968) (54,605) (10,968) (465,735) (372,527) (192,199) (37,108) Less tax losses not recognised (ii) 465,735 372,527 192,199 37,108 Research & Development Tax Concession Current Year 189,869 202,929 189,869 202,929 Under provision recognised in prior year 48,870 54,117 48,870 54,117 Income tax beneft 238,739 257,046 238,739 257,046 (i) Deferred tax liability arising from temporary diferences attributable to: Amounts recognised in proft or loss (42,728) (56,380) (42,278) (56,380) Less set of of deferred tax assets under set-of provisions 42,728 56,380 42,278 56,380 (ii) Deferred tax assets not recognised Arising from temporary diferences attributable to: Amounts recognised in proft or loss 126,444 317,384 1,872,197 1,426,976 Amounts recognised directly in equity 76,379 81,461 76,379 81,461 Carried forward tax losses 2,224,522 1,758,787 2,224,522 1,758,787			202,929 54,117
			257,046
			(37,108) 37,108
			202,929 54,117
			257,046
			(56,380) 56,380
			1,426,976 81,461 1,758,787

IMUGENE LIMITED

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9. Current assets – Cash and cash equivalents

	CONSOLIDATED 2008 $ 2007 $	CONSOLIDATED 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $
Cash at bank and in hand – AUS dollars Cash at bank and in hand – US dollars	1,606,354 13,324 1,619,678	963,957 135,269 1,099,226	1,482,886 – 1,482,886	868,618 –
				868,618

The carrying amount of cash and cash equivalents is a reasonable approximation of fair value.

(a) Foreign exchange and Interest rate risk exposure

Information about the Group’s and the Parent Entity’s exposure to foreign exchange risk and interest rate risk in relation to cash and cash equivalents is provided in note 3.

10. Current assets – Trade and other receivables

	CONSOLIDATED 2008 $ 2007 $	CONSOLIDATED 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $
Accrued income (refer note 6) Goods and services tax recoverable Other	45,680 6,136 8,955 60,771	– – 1,226 1,226	45,680 – 8,955 54,635	– – 1,226
				1,226

(a) Foreign exchange and Interest rate risk exposure

Information about the Group’s and the Parent Entity’s exposure to foreign exchange risk and interest rate risk in relation to trade and other receivables is provided in note 3.

(b) Fair value

Due to the short-term nature of these receivables, their carrying value approximates fair value.

11. Current assets – Tax assets

11. Current assets – Tax assets	11. Current assets – Tax assets
CONSOLIDATED PARENT ENTITY 2008 $ 2007 $ 2008 $ 2007 $
Research & development Tax Concession receivable 189,869 525,460 189,869	525,460

Annual Report 2008

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NOTES TO THE FINANCIAL STATEMENTS

(CONTINUED)

12. Non-current assets – Receivables

12. Non-current assets – Receivables
	CONSOLIDATED 2008 $ 2007 $		PARENT ENTITY 2008 $ 2007 $
Receivables from wholly-owned subsidiaries At amortised cost (a) Fair values	–	–	3,391,834	2,892,548

	CONSOLIDATED 2008 $ 2007 $		PARENT ENTITY 2008 $ 2007 $
Receivables from wholly-owned subsidiaries	– –		3,391,834 2,892,548

The loans to subsidiaries are interest free and have no fixed repayment terms. No allowance has been made for doubtful debts.

	CONSOLIDATED 2008 $ 2007 $	CONSOLIDATED 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $
Investments in wholly-owned subsidiaries At cost Less impairment write-down	– – –	– – –	6,695,912 (6,385,580) 310,332	6,695,912 (5,507,442)
				1,188,470

(a) Wholly-owned Group

Details of interests in wholly-owned controlled entities are set out at part (b) of this note. Details of dealings with controlled entities are as follows:

Inter-company account

Imugene provides working capital to its controlled entities. Transactions between Imugene and other controlled entities in the wholly owned Group during the year ended 30 June 2008 consisted of:

(i) Working capital advanced by Imugene Limited;
(ii) Provision of management and other services by Imugene Limited, and
(iii) Expenses paid by Imugene Limited on behalf of its controlled entities

The above transactions were made interest free with no fixed terms for the repayment of principal on the working capital advanced by Imugene Limited.

At balance date amounts receivable from controlled entities totalled $3,391,834 (2007: $2,892,548).

IMUGENE LIMITED

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(b) Investments in Controlled Entities

NAME OF ENTITY	COUNTRY OF INCORPORATION	CLASS OF SHARES	EQUITY	HOLDING
			2008	2007
			%	%
Controlled Entities
Brightsun Investments Pty Ltd	Australia	Ordinary	100	100
VectoGen Pty Ltd	Australia	Ordinary	100	100
BioMimic Technologies Pty Ltd	Australia	Ordinary	100	100
Paragen Pty Ltd	Australia	Ordinary	100	100

(c) Ultimate Parent Company

The ultimate parent company of the wholly-owned Group is Imugene Limited, a company incorporated in Australia.

14. Non-current assets – Property, plant & equipment

	CONSOLIDATED 2008 $ 2007 $	CONSOLIDATED 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $
Plant & equipment At cost Accumulated depreciation Total plant and equipment (a) Fixtures and Fittings At cost Accumulated depreciation Total fxtures and fttings (a) Total net book value (a) Reconciliations Plant and Equipment Carrying amount at beginning of year Additions Disposals Depreciation expense Total plant & equipment Fixtures and Fittings Carrying amount at beginning of year Depreciation expense Total fxtures and fttings	32,366 (24,857) 7,509 3,675 (1,240) 2,435 9,944 7,518 2,499 – (2,508) 7,509 2,633 (198) 2,435	29,866 (22,348) 7,518 3,675 (1,042) 2,633 10,151 19,382 – (7,512) (4,352) 7,518 2,846 (213) 2,633	32,366 (24,857) 7,509 3,675 (1,240) 2,435 9,944 7,518 2,499 – (2,508) 7,509 2,633 (198) 2,435	29,866 (22,348)
				7,518 3,675 (1,042)
				2,633
				10,151
				19,382 – (7,512) (4,352)
				7,518
				2,846 (213)
				2,633

Annual Report 2008

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NOTES TO THE FINANCIAL STATEMENTS

(CONTINUED)

15. Non-current assets –Intangible assets

	CONSOLIDATED 2008 $ 2007 $	CONSOLIDATED 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $
Patents, licences and other rights Opening cost Closing cost Accumulated amortisation at the start of the year Amortisation charge Accumulated amortisation at the end of the year Opening net book amount Closing net book amount	5,117,095 5,117,095 (1,492,790) (341,140) (1,833,930) 3,624,305 3,283,165	5,117,095 5,117,095 (1,151,650) (341,140) (1,492,790) 3,965,445 3,624,305	– – – – – – –	–
				– – –
				– –
				–

The Group holds a number of patents and licences in relation to its Adenoviral Vector Delivery platform technology. The patented Porcine and Fowl Adenoviral Vector Delivery Systems (PAV and FAV) are biological platform technologies for the pig and poultry industry. From these two systems, vaccines and biologically based productivity enhancers are constructed. There are no unfulfilled performance conditions in relation to the Group’s rights to use these patents and licences, however under the terms of the licences the Group is responsible for the upkeep of the patents and patent applications. Imugene’s R&D expenditure during the period relates principally to the continued development of these technologies and the vaccines and vaccine candidates derived from them.

The carrying amount of these patents and licences of $3,283,165 (2007: $3,624,305) will be fully amortised in 10 years (2007: 11 years). It remains Imugene’s strategy to realise the value of these assets by progressing vaccines derived from the technologies through to a stage where remaining regulatory, marketing and manufacturing processes can be licensed or otherwise outsourced to major animal health companies and / or contract facilities.

16. Current liabilities – Trade and other payables

	CONSOLIDATED 2008 $ 2007 $	CONSOLIDATED 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $
Trade payables Deferred income (refer note 6) Other payables	379,526 – 21,414 400,940	419,045 30,343 23,230 472,618	379,516 – 297,497 677,013	419,035 30,343 249,345
				698,723

The average credit period on purchases is 45 days from the date of invoice. Group policy is to pay all invoices not in dispute within 30 days from date of invoice.

(a) Fair value

The carrying amount of trade payables is a reasonable approximation of fair value.

(b) Foreign exchange risk exposure

Information about the Group’s and Parent Entity’s exposure to foreign exchange risk is provided in note 3.

IMUGENE LIMITED

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17. Current liabilities – Provisions

	CONSOLIDATED 2008 $ 2007 $ 92,425 87,932 92,425 87,932	PARENT ENTITY 2008 $ 2007 $ 92,425 87,932 92,425 87,932	PARENT ENTITY 2008 $ 2007 $ 92,425 87,932 92,425 87,932
			87,932
			87,932

(a) Amounts not expected to be settled within the next 12 months

The entire obligation for annual leave is presented as current, since the Group does not have an unconditional right to defer settlement. However, based on past experience, the Group does not expect all employees to take the full amount of accrued leave within the next 12 months.

18. Contributed equity

	CONSOLIDATED & PARENT ENTITY	CONSOLIDATED & PARENT ENTITY	CONSOLIDATED & PARENT ENTITY	CONSOLIDATED & PARENT ENTITY
	2008	2007	2008	2007
	Shares	Shares	$	$
(a) Share capital
Fully paid ordinary shares	143,637,520	130,579,564	14,907,453	13,180,042

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of shares held. On a show of hands every holder of ordinary shares present at a meeting or by proxy, is entitled to one vote. Upon a poll every holder is entitled to one vote per share held.

(b) Movements in ordinary share capital

DESCRIPTION DATE Opening balance 1 July 2006 Balance 30 June 2007 Rights issue 23 January 2008 Placement 31 January 2008 Less: transaction costs arising on issue Closing balance 30 June 2008	NUMBER OF SHARES 130,579,564 130,579,564 4,212,495 8,845,161 143,637,220	$ 13,180,042
		13,180,042 589,749 1,238,323 (100,661)
		14,907,453

i. Rights issue

On 3 December 2007, the Company invited its shareholders to subscribe to a fully underwritten, non-renounceable rights issue on the basis of 1 share for every 10 fully paid ordinary shares held at an issue price of $0.14 per share.

4,212,495 ordinary shares were taken up in the rights issue raising $589,749 before costs of issue.

Annual Report 2008

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NOTES TO THE FINANCIAL STATEMENTS

(CONTINUED)

18. Contributed equity (continued)

The first $200,000 (1,428,571 shares) of the shortfall were sub-underwritten by the directors of Imugene. 7,416,590 shortfall shares were issued to professional and sophisticated investor clients nominated by the underwriter. The total amount raised from the underwritten shares was $1,238,323 before costs of issue.

19. Reserves and accumulated losses

	CONSOLIDATED 2008 $ 2007 $	CONSOLIDATED 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $
(a) Share-based payment reserve Balance 1 July Option expense Balance 30 June (b) Accumulated losses Balance 1 July Net loss for the year Balance 30 June	806,245 153,758 960,003 9,286,469 1,910,925 11,197,394	264,545 541,700 806,245 6,982,206 2,304,263 9,286,469	806,245 153,758 960,003 9,286,469 1,910,925 11,197,394	264,545 541,700
				806,245
				6,982,206 2,304,263
				9,286,469

With respect to the payment of dividends (if any) by Imugene in subsequent financial years, no franking credits are currently available, or are likely to become available in the next 12 months.

Expenses arising from share-based payment transactions recognised during the year are as follows:

CONSOLIDATED & PARENT ENTITY 2008 $ 2007 $	CONSOLIDATED & PARENT ENTITY 2008 $ 2007 $	CONSOLIDATED & PARENT ENTITY 2008 $ 2007 $
Recognised as part of Research & development expense Business development expense Commercialisation expense Corporate and Administration expense	81,494 36,132 36,132 – 153,758	277,887 95,420 153,007 15,386
		541,700

Imugene does not have a formal employee share option plan however the Board has from time to time granted options to employees and officers on a discretionary basis where it is considered that this provides a cost-effective and efficient means of remunerating and incentivising employees. In addition, shareholders have, in general meeting, approved the grant of incentive options to Directors. The share-based payment expenses above have been recognised in respect of the fair value of options granted as remuneration.

The fair value of options granted was calculated using the Black-Scholes Option Pricing Model. The expense has been apportioned pro-rata to reporting periods where vesting periods apply.

IMUGENE LIMITED

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The weighted average fair value of options granted during the year was $0.002 per option (2007: $0.16). Key inputs to the model used in the calculation were as follows:

�� Expected price Volatility – 35.5% (2007: 95%) based on the historical volatility adjusted for any expected changes to future volatility due to publicly available information
�� Exercise prices – (contractual exercise price of options, as disclosed in note 20)
�� Expiry dates – (contractual expiry date of options, as disclosed in note 20)
�� Share price at grant date – $0.07 (2007: $0.30)

20. Options

As at balance date, the Company and Consolidated Entity has the following classes of options on issue:

DESCRIPTION	2008 NUMBER	2007 NUMBER EXERCISE PRICE EXPIRY
Unlisted performance options Type 1 Type 6 Type 7 Type 9 Type 10 Total	– – – 4,350,000 3,000,000 7,350,000	4,633,333 $0.225 31 Oct 07 333,333 $0.375 31 Oct 07 200,000 $0.500 31 Oct 07 4,350,000 $0.250 31 Dec 09 – $0.200 31 Mar 11 9,516,666

The options issued during the year vest on 30 September 2008. There are no specific vesting conditions attached.

Options carry no dividend or voting rights. Upon exercise, each option is convertible into one ordinary share to rank pari passu in all respects with the Company’s existing fully paid ordinary shares.

(a) Movements in the number of options on issue during the year are as follows:

	2008 NUMBER	2007 NUMBER
At 1 July Granted during the year Type 9 Type 10 Expired during the year Listed Options Type 1 Type 2 Type 3 Type 4 Type 5 Type 6 Type 7 Type 8 At 30 June	9,516,666 – 3,000,000 – (4,633,333) – – – – (333,333) (200,000) – 7,350,000	15,666,666 4,350,000 – (4,250,000) – (2,000,000) (2,000,000) (2,000,000) (200,000) – – (50,000)
		9,516,666

Annual Report 2008

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NOTES TO THE FINANCIAL STATEMENTS

(CONTINUED)

21. Key management personnel disclosures

(a) The Directors of Imugene Limited during the year were:

Mr Graham Dowland (Chairman)

Dr Warwick Lamb (Managing Director)

Mr Roger Steinepreis (Non-executive Director)

(b) Other than the directors, the following persons also had authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly during the current and prior financial years.

2008 2007

Dr Michael Sheppard (Chief Scientific Officer)

Dr Richard Brandon (Business Development Officer, appointed 14 June 2006 – 14 December 2006)

In addition, the Company Secretary, Julie Foster appointed 29 May 2008, is deemed a Company executive under section 9 of the Corporations Act 2001 . Alex Neuling held the office of Company Secretary from 1 July 2007 to 29 May 2008 and therefore is deemed a company executive under section 9 of the Corporations Act 2001 , for this period.

	CONSOLIDATED 2008 $ 2007 $	CONSOLIDATED 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $
Short-term employee benefts Post-employment benefts Share-based payments	598,733 35,092 153,758 787,583	662,495 39,760 541,700 1,243,955	598,733 35,092 153,758 787,583	662,495 39,760 541,700
				1,243,955

IMUGENE LIMITED

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Equity instrument disclosures relating to key management personnel

(i) Option holdings

The numbers of options over ordinary shares in the Company held during the financial year by each director of Imugene Limited and other key management personnel of the Group, including their personally related parties, are set out below.

Balance at start of the year Granted as compensation Exercised Other changes Balance when ceased to hold offce	Balance at the end of the year Vested and exercisable Unvested
2008
Directors of Imugene Limited Graham Dowland 500,000 – – – – Warwick Lamb 2,500,000 – – – – Roger Steinepreis – – – – –	500,000 500,000 – 2,500,000 2,500,000 – – – –
Other key management personnel of the Group Michael Sheppard 1,500,000 – – (250,000) –	1,250,000 1,250,000 –
2007
Directors of Imugene Limited Graham Dowland 2,500,000 500,000 – (2,500,000) – Warwick Lamb 2,500,000 2,500,000 – (2,500,000) – Roger Steinepreis – – – – –	500,000 250,000 250,000 2,500,000 1,250,000 1,250,000 – – –
Other key management personnel of the Group Michael Sheppard 1,500,000 1,250,000 – (1,250,000) –	1,500,000 1,350,000 150,000

(ii) Share holdings

The numbers of shares in the Company held during the financial year by each director of Imugene Limited and other key management personnel of the Group, including their personally related parties, are set out below. There were no shares granted during the reporting period as compensation.

	Balance at start			Balance at the
	of the year	Acquired	Other changes	end of the year
2008
Directors of Imugene Limited
Graham Dowland	6,790,002	877,574	–	7,667,576
Warwick Lamb	6,400,001	1,270,001	–	7,670,002
Roger Steinepreis	4,263,678	726,368	–	4,990,046
Other key management personnel of the Group
Michael Sheppard	156,589	115,659	–	272,248
2007
Directors of Imugene Limited
Graham Dowland	6,790,002	–	–	6,790,002
Warwick Lamb	6,400,001	–	–	6,400,001
Roger Steinepreis	4,263,678	–	–	4,263,678
Other key management personnel of the Group
Michael Sheppard	228,589	–	(72,000)	156,589

Annual Report 2008

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NOTES TO THE FINANCIAL STATEMENTS

(CONTINUED)

21. Key management personnel disclosures (continued)

(iii) Loans to key management personnel

There were no loans made to directors of Imugene Limited or other key management personnel of the Group (or their personally related entities) during the current or previous financial year.

(iv) Other transactions with key management personnel

During the year, Vetspec Pty Ltd and VSC Services Pty Ltd, companies of which Dr Warwick Lamb is a director and beneficial shareholder, provided a serviced office (in Sydney) and other administration services to the Company. For the year ended 30 June 2008, the Company paid totalling $66,000 (2007: $66,000) to Vetspec Pty Ltd and VSC Services Pty Ltd and this has been recognised in the financial statements as an expense.

The aggregate amount recognised as an expense in relation to these transactions is $66,000 (2007: $66,000).

22.Remuneration of auditors

During the year the following fees were paid or payable for services provided by the auditor of the Parent Entity, its related practices and non-related audit firms:

	CONSOLIDATED 2008 $ 2007 $	CONSOLIDATED 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $
Deloitte Touche Tohmatsu for: – an audit or review of fnancial reports and other audit work under the_Corporations Act 2001_ Unrelated audit frms for audit of regulatory returns Total remuneration for audit services	53,700 1,200 54,900	40,625 3,500 44,125	35,000 1,200 36,200	40,625 3,500
				44,125

23. Segment information

The Company and Consolidated Entity operates in one geographical and business segment, being the research, development and commercialisation of animal health technologies in Australia.

24.Reconciliation of loss after income tax to net cash outflow from operating activities

	CONSOLIDATED 2008 $ 2007 $	CONSOLIDATED 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $	PARENT ENTITY 2008 $ 2007 $
Loss for the year Depreciation and amortisation Share based payment (note 19) Interest income Provision for employee benefts Impairment writedown on investments in wholly-owned subsidiaries Loss on disposal of fxed assets Decrease / (increase) in working capital Net cash outfow from operating activities	(1,910,925) 343,846 153,758 (67,214) 4,493 – – 203,142 (1,272,900)	(2,304,263) 345,705 541,700 (101,693) 14,495 – 7,511 (206,308) (1,702,853)	(1,910,925) 2,706 153,758 (60,328) 4,493 878,137 – (240,040) (1,172,199)	(2,304,263) 4,565 541,700 (93,562) 14,495 1,226,350 7,511 (1,145,958)
				(1,749,162)

IMUGENE LIMITED

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25. Earnings / (Loss) per share

25. Earnings / (Loss) per share
	CONSOLIDATED 2008 Cents 2007 Cents
Basic / diluted loss per share Loss attributable to the ordinary equity holders of the Company Loss used in calculation of basic / diluted loss per share Loss Weighted average number of ordinary shares / potential ordinary shares used as the denominator in calculating basic / diluted loss per share	(1.4) $ (1,910,925) Number 136,431,579	(1.8)
		$ (2,304,263)
		Number 130,579,564

The options on issue (note 20) represent potential ordinary shares but are not dilutive as they would decrease the loss per share. Accordingly they have been excluded from the weighted average number of ordinary shares and potential ordinary shares used in the calculation of diluted earnings per share.

26. Subsequent events

Subsequent to year-end, the Company received $142,000 (inclusive of GST) from AusIndustry under its Commercial Ready grant in respect of the quarters to 31 March 2008, and 30 June 2008.

On 20 August 2008, the Company announced that the preliminary results from the recent trials of the modified PRRS vaccine have been successful. The PRRS vaccine has proved to be highly effective in the degree of protection it provides against the PRRS disease. The directors anticipate that these results will be used in discussions with major international animal health companies with a view to possible licensing agreements.

Other than as disclosed above, no event has arisen since 30 June 2008 that would be likely to materially affect the operations of the Consolidated Entity, the results of the Consolidated Entity or the state of affairs of the Consolidated Entity not otherwise disclosed in the Consolidated Entity’s financial report.

27. Contingencies

The Consolidated Entity has no contingent assets or liabilities at balance date (2007: none).

28.Related party transactions

There have been no transactions with related parties during the year ended 30 June 2008 other than as disclosed elsewhere in the financial report (2007: none).

Annual Report 2008

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DIRECTORS’ DECLARATION

In the directors’ opinion:

(a) The financial statements and notes set out on pages 28 to 55 are in accordance with the Corporations Act 2001 , including:
(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
(ii) giving a true and fair view of the Company’s and Consolidated Entity’s financial position as at 30 June 2008 and of their performance, for the financial year ended on that date; and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.

The directors have been given the declarations required by section 295A of the Corporations Act 2001 .

Signed in accordance with a resolution of the directors made pursuant to section 295(5) of the Corporations Act 2001 .

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GRAHAM DOWLAND Executive Chairman

Perth, Western Australia

8 September 2008

56 IMUGENE LIMITED

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ADDITIONAL SECURITIES EXCHANGE INFORMATION

CORPORATE GOVERNANCE

Introduction

Imugene Limited ACN 009 179 551 (“ Company ”) has adopted systems of control and accountability as the basis for the administration of corporate governance. Some of these policies and procedures are summarised below.

The following additional information about the Company’s corporate governance practices is set out on the Company’s website at www.imugene.com:

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Corporate governance disclosures and explanations;
Statement of Board and Management Functions;
Nomination Committee Charter;
policy and procedure for selection and appointment of new directors;
summary of code of conduct for directors and key executives;
summary of policy on securities trading;
Audit Committee Charter;
policy and procedure for selection of external auditor and rotation of audit engagement partners;
summary of policy and procedure for compliance with continuous disclosure requirements;
summary of arrangements regarding communication with and participation of shareholders;
summary of Company’s risk management policy and internal compliance and control system;
process for performance evaluation of the Board, Board committees, individual directors and key executives;
Remuneration Committee Charter; and
Corporate Code of Conduct.

Explanations for departures from best practice recommendations

During the Reporting Period the Company has complied with each of the Ten Essential Corporate Governance Principles[1] and the corresponding Best Practice Recommendations[2] as published by the ASX Corporate Governance Council (“ ASX Principles and Recommendations ”), other than in relation to the matters specified below.

Annual Report 2008

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ADDITIONAL SECURITIES EXCHANGE INFORMATION

(CONTINUED)

PRINCIPLE REF	RECOMMENDATION REF	NOTIFICATION OF DEPARTURE	EXPLANATION FOR DEPARTURE
2	2.1	The Board comprises one non-	The Board considers that its current composition
		executive director and two	is adequate for the Company’s current size and
		executive directors, none of whom	operations and includes an appropriate mix of
		satisfy the test of independence	skills and expertise relevant to the Company’s
		in box 2.1 of the ASX Corporate	investments. Imugene Limited considers
		Governance Council’s Principles	industry experience and specifc expertise to be
		of Good Corporate Governance	important attributes of its board members.
		(“Independence Test”).
2	2.2	The Chairman does not satisfy	Notwithstanding that Mr Dowland does not
		the ASX Corporate Governance	satisfy all aspects of the Independence Test,
		Council’s Independence Test.	the Board considers that its current structure
			is appropriate for the Company’s size and
			operations. In addition, Mr Dowland has played
			a key role in re-directing the Company and has
			extensive experience as both a director and
			chairman of various listed companies, making him
			the most qualifed Board member for this role.
			In situations where it would be inappropriate for
			Mr Dowland to act as chairman (for example,
			when there is a confict of interest), the Board
			has appointed Mr Roger Steinepreis as the lead
			non-executive director.
2	2.4	A separate nomination	Given the Board comprises three members and
		committee has not been formed.	director appointments are relatively infrequent,
			it was decided that no efciencies would be
			achieved by establishing a separate nomination
			committee. The whole Board carries out the
			duties which would otherwise be undertaken by
			the nomination committee and each member
			excludes him or herself from matters in which
			he has a material person interest and otherwise
			ensures compliance with all aspects of the
			_Corporations Act_in relation to related party
			transactions.
4	4.2	A separate audit committee has	The whole Board carries out the duties of the
		not been formed.	audit committee. In so acting, the whole Board
			follows the audit committee charter a copy of
			which is available to shareholders on request.
4	4.3	The full Board carries out the	Due to the small scale of the Company’s
		functions of an audit committee	business and the size of the Board, the Board
		which is not in compliance with	does not consider that the Company will gain
		the criteria specifed in the best	any beneft from a separate audit committee.
		practice recommendation 4.3.

1 ��

2 ��

IMUGENE LIMITED

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Skills, experience, expertise and term of office of each director

A profile of each director containing the applicable information is set out in the Directors’ Report.

Identification of independent directors

The Board currently has no directors that satisfy the test of independence in box 2.1 of ASX Corporate Governance Council’s Principles of Good Corporate Governance (“Independence Test”).

Statement concerning availability of independent professional advice

If a director considers it necessary to obtain independent professional advice to properly discharge the responsibility of his/her office as a director then, provided the director first obtains approval for incurring such expense from the chairperson, the Company will pay the reasonable expenses associated with obtaining such advice.

Names of nomination committee members and their attendance at committee meetings

The full Board carries out the functions of a nomination committee in accordance with the Nomination Committee Charter. Details of meetings of the Board and committees are disclosed in the Directors’ Report.

Names and qualifications of audit committee members

The full Board carries out the functions of an audit committee in accordance with the Audit Committee Charter.

The relevant financial expertise and industry experience of each of the Board members is set out in the Directors’ Report.

Number of audit committee meetings and names of attendees

Details of meetings of the Board and committees are disclosed in the Directors’ Report.

Confirmation whether performance evaluation of the board and its members have taken place and how conducted

During the Reporting Period an evaluation of the Board and its members was carried out by the Board. External consultants were not used.

Company’s remuneration policies

Details of the Company’s remuneration policies are disclosed in the Remuneration Report contained in the Directors’ Report.

Names of remuneration committee members and their attendance at committee meetings

The full Board carries out the functions of a remuneration committee in accordance with the Remuneration Committee Charter. Details of meetings of the Board and committees are in the Directors’ Report.

Existence and terms of any schemes for retirement benefits for non-executive directors

The Company does not have any schemes relating to retirement benefits for non-executive directors.

Annual Report 2008

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ADDITIONAL SECURITIES EXCHANGE INFORMATION

(CONTINUED)

SHAREHOLDER INFORMATION

The shareholder information set out below was applicable as at 30 September 2008.

1. Twenty largest shareholders

ORDINARY SHARES NUMBER	PERCENTAGE
Dr Warwick Lamb 7,395,002 Mrs Trefna Dowland 5,313,002 W B Nominees Ltd 4,745,479 Merrill Lynch (Australia) Nominees Pty Ltd 4,655,207 Blueknight Corporation Pty Ltd 3,523,231 Lost Ark Nominees Pty Ltd 3,134,664 Mcrae Investments Pty Ltd 2,718,833 Yambali Pty Ltd 2,500,000 Merrill Lynch (Australia) Nominees Pty Ltd 2,485,533 Techstart Australia Pty Ltd 2,387,738 Greenfeld Company Ltd 2,358,831 Darley Pty Ltd 2,000,000 Mr Henry Wiechecki 2,000,000 Mr Stephen James Moyle & Mrs Christine Maree Moyle 1,925,000 Eurasia Pty Ltd 1,833,334 Donwillow Pty Ltd 1,660,000 Lost Ark Nominees Pty Ltd 1,500,000 Blueknight Corporation Pty Ltd 1,466,816 Mr Gordon Menzies Wilson 1,179,703 Lost Ark Nominees Pty Ltd 1,166,816	5.15% 3.70% 3.30% 3.24% 2.45% 2.18% 1.89% 1.74% 1.73% 1.66% 1.64% 1.39% 1.39% 1.34% 1.28% 1.16% 1.04% 1.02% 0.82% 0.81%
TOTAL TOP 20 55,949,189 Other 87,688,031	38.95% 61.05%
Total ordinary shares on issue 143,637,220	100.00%

IMUGENE LIMITED

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2. Distribution of equity securities

2. Distribution of equity securities
	ORDINARY SHARES	UNLISTED OPTIONS
1 – 1,000	559	–
1,001 – 5,000	345	–
5,001 – 10,000	379	–
10,001 – 100,000	823	–
100,001 – and over	204	5
	2,310	5

There are 1,134 holders holding less than a marketable parcel of ordinary shares.

3. Unquoted securities

The names of the holders holding more than 20% of each class of unlisted securities are set out below:

Performance options – excise price of $0.25 and expiry date of 31 December 2009

	NUMBER ON ISSUE	NUMBER OF HOLDERS
Dr Warwick Lamb	2,500,000	1
Dr Michael Sheppard	1,250,000	1
Total holders of more than 20% of class	3,750,000	2
Other		2
	600,000
Total performance options on issue	4,350,000	4

Performance options – excise price of $0.20 and expiry date of 31 March 2011

	NUMBER ON ISSUE	NUMBER OF HOLDERS
Southern Cross Equities Pty Ltd	3,000,000	1
Total performance options on issue	3,000,000	1

4. Substantial holders

Set out below are the names of the substantial holders and the number of equity securities held by those substantial holders (including those equity securities held by their associates), as disclosed in the substantial holding notices given to the Company:

	NUMBER HELD	PERCENTAGE OF ISSUED SHARES
Dominic Wainford	12,655,207	8.81%
Graham Dowland	7,667,576	5.34%
Warwick Lamb	7,670,002	5.34%

Annual Report 2008

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ADDITIONAL SECURITIES EXCHANGE INFORMATION

(CONTINUED)

5. Voting rights

See Notes 18 and 20 to the Financial Statements.

6. On-market buy back

There is currently no on-market buy back program for any of Imugene’s listed securities.

Company Secretary, registered and principal administrative office and share registry

See Corporate Directory.

62 IMUGENE LIMITED

CORPORATE DIRECTORY

Directors

Mr Graham Dowland – Chairman Dr Warwick Lamb – Managing Director Mr Roger Steinepreis – Non-Executive Director

Company Secretary

Ms Julie Foster

Registered and Principal Office

Level 20, Allendale Square 77 St Georges Terrace Perth WA 6000 Australia

Telephone: (61 8) 9440 2660 Facsimile: (61 8) 9440 2699

Solicitors

Steinepreis Paganin Level 4, 16 Milligan Street Perth WA 6000

Patent Attorney

McAndrews Held & Malloy Ltd 500 West Madison Street 34th Floor Chicago, IL 60661

Auditor

Deloitte Touche Tohmatsu 240 St Georges Terrace Perth WA 6000

Bankers

Laboratory

C/– La Trobe University Kingsbury Drive Bundoora Victoria 3086

Share Register

Computershare Investor Services Pty Ltd Level 2, Reserve Bank Building 45 St Georges Terrace Perth WA 6000 Australia

Australia and New Zealand Banking Group Limited

Stock Exchange Listing

Imugene Limited shares are listed on the Australian Securities Exchange (Symbol: IMU).

Website and Email

www.imugene.com [email protected]

Telephone: 1300 557 010 International: (61 8) 9323 2000 Facsimile: (61 8) 9323 2033

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ABN 99 009 179 551 Level 20 Allendale Square 77 St Georges Terrace, Perth, WA 6000 GPO Box 2530, Perth, WA 6001 Tel +61 8 9440 2660 Fax +61 8 9440 2699

www.imugene.com

AI assistant

IMUGENE LIMITED — Annual Report 2008

65124_rns_2008-10-22_e2856ff6-17e7-4c93-b9a8-d51cc6b00480.pdf

CONTENTS

2008 HIGHLIGHTS

EXECUTIVES’ REPORT

Dear Shareholder

BENEFITS OF THE IMUGENE PLATFORM TECHNOLOGY AND THE VACCINES UNDER DEVELOPMENT

Imugene’s vaccines

OPERATIONS REPORT

IMUGENE’S ADENOVIRAL VACCINE RANGE

Porcine Range

DEVELOPMENTS – 2008 FINANCIAL YEAR

Porcine Reproductive & Respiratory Syndrome (PRRS)

Coccidiosis

OPERATIONS REPORT

(CONTINUED)

Extension of the range of Poultry Disease Prevention Vaccine Products

Infectious Bursal Disease

Chicken Anaemia Virus

Avian Influenza’s – H5, H7 & H9

Regulatory

Poultry Productivity Enhancer

OPERATIONS REPORT

CONTI

Porcine Circovirus (PCV)

Patent Status & Intellectual Property Agreements

ADDITIONAL DETAILED INFORMATION

Pig Trial Information

OPERATIONS REPORT

(CONTINUED)

The PRRS Disease

Coccidiosis

Poultry trial information

The Coccidiosis Disease

Current treatment for poultry (broiler) producers

Commercial proposition

PATENT REPORT

Poultry Adenovirus Patents (FAV)

DIRECTORS’ REPORT

30 JUNE 2008

Directors

Current Directors

Mr Graham Dowland – Chairman Qualifications – BCom, CA

Dr Warwick Lamb – Managing Director Qualifications – BVSc, M Vet Clin Stud, FACVSc

Other current directorships of Australian listed public companies

Other current directorships of Australian listed public companies

Former directorships of Australian listed public companies in the last 3 years

Mr Roger Steinepreis – Non-Executive Director Qualifications – BJuris LLB

Other current directorships of Australian listed public companies

Former directorships of Australian listed public companies in the last 3 years

Former directorships of Australian listed public companies in the last 3 years

DIRECTORS’ REPORT

(CONTINUED)

Special responsibilities

Company Secretary

Ms Julie Foster

Mr Alexander Neuling

Principal activities

Dividends

Summary review of operations

Coccidiosis vaccine trial

PRRS vaccine trial

Consolidated results

Significant changes in the state of affairs

Post balance date events

Employees

Information on directors’ interests in securities of Imugene

Likely developments

Environmental regulation

Meetings of Directors

DIRECTORS’ REPORT

(CONTINUED)

Share options

REMUNERATION REPORT (Audited)

Details of key management personnel

(i) Directors

(ii) Other key management personnel of the Group

Non-executive directors

Retirement benefits and allowances

IMUGENE LIMITED Annual Report 2008

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