IMUGENE LIMITED - Annual Report 2011

Annual Report 2011

Safe biological methods for improving poultry and pig health

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Highlights
Chairman’s Report
Operations Report
Patent Report
Directors’ Report
Auditor’s Independence Declara
Independent Audit Report
Consolidated Statement of Com
Consolidated Statement of Fina
Consolidated Statement of Chan
Consolidated Statement of Cash
Notes to the Consolidated Finan
Directors’ Declaration
Additional Securities Exchange

1
2
4
8
13
tion
27
28
prehensive Income
30
ncial Position
31
ges in Equity
32
Flows
33
cial Statements
34
60
Information
61

Corporate Directory

Directors

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

Solicitors

Steinepreis Paganin Level 4, 16 Milligan Street Perth WA 6000

Company Secretary

Ms Julie Foster

Registered and Principal Office

Level 20, Allendale Square 77 St Georges Terrace Perth WA 6000 Telephone: (61 8) 9440 2660 Facsimile: (61 8) 9440 2699

Patent Attorney

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

Auditor

BDO Audit (WA) P/L 38 Station Street Subiaco, WA 6008

Laboratory

C/ - La Trobe University Kingsbury Drive Bundoora Victoria 3086

Bankers

Australia and New Zealand Banking Group Limited 77 St Georges Terrace Perth WA 6000

Share Register

Computershare Investor Services Pty Ltd Level 2, Reserve Bank Building 45 St Georges Terrace Perth WA 6000 Australia Telephone: 1300 557 010 International: (61 8) 9323 2000 Facsimile: (61 8) 9323 2033

Securities Exchange Listing

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

Website and Email

www.imugene.com [email protected]

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Highlights

a Steady financial result

Imugene returned to profitability and positive operating cash flow in the 2011 financial year resulting in a strong balance sheet with $2 million cash reserves on hand.

a PRRS vaccine development progresses

Final versions of Imugene’s vaccines against Porcine Respiratory and Reproductive Syndrome (PRRS) for the US and Europe complete the laboratory development phase.

a Laboratory work completed

Roll out of improvements to vaccine production techniques that improve vaccine growth and may further reduce manufacturing costs and improve efficacy for Imugene’s pig vaccines. Expansion of vaccine range to include vaccines against regional viral strains.

a Patent portfolio strengthened

New patent lodged in the US covering improved laboratory production techniques for the pig vaccines. These patents if granted will extend royalty life for the pig vaccines to about 2030. National roll-out phase of two patents lodged in 2008.

Annual Report 2011

Imugene Limited

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CHAIRMAN’S REPORt

Dear Shareholders

The 2010/11 fiscal year has delivered a steady financial result for Imugene with a return to profitability and positive operating cashflow. Our net profit after tax of $415,000 and positive cash flow of $1.1 million has strengthened the Company’s balance sheet with $2 million cash reserves on hand.

The license agreement with Novartis Animal Health announced in October 2010 started very well with an efficient transfer of technology and materials to their development teams.

We understand Novartis undertook a number of activities on our technology in 2011, including laboratory work and some animal trials. In September, the license agreement was unexpectedly terminated by Novartis. No reason was provided other than the termination was the result of an internal decision. This was a disappointing development and one that surprised us as during meetings and discussions held during July and August in the US, there was no indication of such termination.

A condition of the license agreement requires the return of all information gathered, all trial data and all materials that relate to our technology. Of particular importance to us is the data and results from any recently completed trials.

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Imugene Limited

Annual Report 2011

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CHAIRMAN’S REPORt

To date only small amount of preliminary data has been received. The Imugene scientific team will need to analyse this data and await further return of documentation and results to determine the next steps for Imugene. We anticipate receiving further data and results during November and will ensure this analysis is achieved and communicated to shareholders during the current quarter.

Once again I thank our small and dedicated team, comprising, Dr Warwick Lamb, CEO, Dr Michael Sheppard, CSO, and technical assistant, Sui Lay.

Yours sincerely

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Graham Dowland Chairman

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Annual Report 2011

Imugene Limited

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OPERAtIONS REPORt

Global licensing agreement

In October 2010, Imugene secured a global licensing deal with a leading international animal health company, for the commercialisation of the vaccines and productivity enhancers in our portfolio. The agreement gave the licencee exclusive global rights to all of Imugene’s technology and intellectual property, including its vaccines and productivity enhancers.

Following a smooth material and technology transfer program, the licensee undertook a number of activities on our technology in 2011, including laboratory work and some animal trials. In September, the license agreement was unexpectedly terminated by the licensee. No reason was provided other than the termination was the result of an internal decision. This was a disappointing development and one that surprised us as during site visits and meetings during July and August in the US and Europe, there was no indication of such termination. Under the license agreement, the licensee is required to return all information gathered, all trial data and all materials that relate to our technology. To date only small amount of preliminary data has been received. The Imugene scientific team requires further information and awaits the return of further documentation and results. Once received, we will review the Imugene portfolio and determine the next steps for Imugene. We anticipate receiving further data and results during November 2011 and aim to complete the review during the current quarter.

Imugene’s business model is to maximise income from the receipt of research fees, license and royalty income from an alliance partner with sufficient expertise and infrastructure to develop, market and exploit the Imugene range of vector vaccines. This model leverages Imugene’s strong laboratory development resources with the downstream product development, regulatory, distribution and sales resources of an alliance partner, resulting in a mutually beneficial long term partnership.

About Imugene’s vaccines

Imugene applies proprietary technology to make its ‘adenoviral vector (AV) vaccines’, special viruses that are taken up by pig or poultry tissue, but do not cause disease. The viruses are engineered to contain genes for proteins that stimulate the animal’s immune system. When cells take up the virus, they make the protein of interest, which in turn stimulates the immune response that provides protection against disease if the animal is later infected with the disease virus.

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Imugene Limited

Annual Report 2011

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OPERAtIONS REPORt

Product pipeline

Porcine Reproductive and Respiratory Syndrome (PRRS) vaccine

The laboratory phase of our development program for our lead product, the vaccine against PRRS has been successfully completed over the last year. Two versions of the PRRS vaccine have been produced, one suitable for use in the US against the common US strains of the PRRS virus and a second for use in Europe against the common European viral strains. The European version of the PRRS vaccine has not yet completed any animal trials.

During the last 12 months, a major improvement was made to the Porcine Adenoviral Vector platform, which results in the virus vaccine growing to much higher concentrations. Higher viral numbers mean lower cost of goods for each dose of the vaccines and could also mean that a lower dose will be required to protect the pigs from disease. Together, these two effects can significantly reduce the cost of each vaccine dose, thereby improving the profit margin on these products. This new improvement has now been successfully built in to both the US and European versions of our PRRS vaccines. We anticipate these will be the final versions of the vaccines going through animal trials.

PRRS is a disease caused by a viral infection and results in damage to the lungs of pigs, as well as increased incidence of abortion, premature farrowing and stillborn piglets. It is regarded as one of the most damaging diseases to affect the pig industry, worldwide, causing productivity losses of up over US$1 billion every year.

Our US version of the PRRS vaccine under development for pigs has undergone successful trials at a specialty pig trial facility in the US using clinical parameters based on those used by the US Department of Agriculture (USDA) in the regulatory evaluation and approval process for PRRS vaccines.

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About porcine respiratory and reproductive syndrome (PRRS)

PRRS is one of the most damaging diseases to affect the pig industry worldwide, leading to estimated losses of about US$1 billion per annum.

PRRS is caused by a virus that infects the respiratory tract. Infection with the PRRS virus is associated with increased incidences of abortion, premature farrowing and still born piglets.

In trials of PRRS vaccines, the extent of infection is determined by the amount of damage in the lungs (lung lesion scores) and the number of viral particles and how long they persist in the blood and lungs of infected pigs.

The market

The total value of the global pig health products market is estimated to be in excess of US$4 billion per annum, and the market for biological products is projected to grow substantially over the next five years as the markets for antibiotics-supplemented feed shrink. The new biological products will include vaccines for diseases such as PRRS and biological productivity enhancers to replace antibiotics.

Annual Report 2011

Imugene Limited

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OPERAtIONS REPORt

Other products in development

Work in our laboratory at La Trobe University in Melbourne is nearing completion, with the successful finalisation of the laboratory phase of the PRRS vaccine development. Other work undertaken at our laboratory facility at La Trobe University included updating all of our pig vaccines to incorporate the recent product improvements through the entire range of our vaccines. This work involved incorporating the new improvement made to the Porcine Adenoviral Vector platform, which results in the virus vaccine growing to much higher concentrations. Final versions of several vaccines to cover viral strain variations, such as H1 and H3 influenza strains, were also completed, expanding the range of available vaccines.

Imugene’s platform technology

By definition, a true ‘platform’ technology must support the continued creation of novel products or processes, and therefore long-term research and development. Patent-protected adenoviral delivery vectors, specific for pigs or poultry, form the basis of Imugene’s platform technology.

Benefits

Engineered adenoviral vectors can:

carry the genes of the viral or bacterial proteins associated with each specific infectious disease
enhance productivity by carrying a gene for a natural pig or poultry protein that acts to strengthen the immune system – healthy animals gain weight more quickly than those expending metabolic energy to fight infection
enhance productivity without the need for chemicals such as antibiotics, drugs and hormones

Intellectual Property and Patent Portfolio

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The long term commercial success of Imugene depends heavily on our intellectual property portfolio. Accordingly a significant amount of work is undertaken each year to maintain our patents and progress our patent applications. During the last year, two of our major newer patent applications lodged in the US in late 2010, progressed into the national phase. This involves a roll-out, in which the patent applications will be lodged in PCT countries and selected countries outside the PCT agreement. If granted, these patents will greatly extend the commercial life of all our Porcine Circovirus (PCV2) vaccine candidates and selected poultry vaccines.

In addition, a new patent application was lodged in the US covering improvements made to the growth characteristics of our Porcine Adenovirus Vector Vaccines. If granted, these patents will greatly extend the commercial life of all our porcine vaccine range as patent protection will be extended to approximately 2030.

Imugene Limited

Annual Report 2011

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OPERAtIONS REPORt

Imugene’s Product Portfolio

Poultry

Pigs

a Coccidiosis preventative vaccine

Challenge trials showed very strong protection against this major poultry disease

Immune system boosting ‘Poultry Productivity Enhancer’

Trials have proven >10% improvement in weight gains and feed conversion

a Porcine Reproductive &

Respiratory Disease preventative vaccine

Proved highly effective in US-based trials conducted by Imugene in 2008 and 2010

Additional vaccine for European PRRS virus completes laboratory phase and now ready for clinical trials

a Avian Flu (H5N1) preventative vaccine & Diagnostic

Challenge trials proved Imugene’s vaccine 100% effective with in ovo and oral vaccine administration

Suitable for administration on mass scale (broiler birds) as no injection or handling of birds required

a Avian Flu (H7 & H9) preventative vaccine

Vaccines have completed the laboratory construction stage

Ready for animal trials Infectious Bursal Disease preventative vaccine

Vaccines at the laboratory construction and testing stage

a Chicken Anemia Virus preventative vaccine

a Porcine Circovirus disease - preventative vaccine

Undergoing vaccine laboratory development

a Classical Swine Fever preventative vaccine

Proven effective, requires regulatory applications and approvals

a Swine Flu (H3 & H1) preventative vaccine

Vaccines at the laboratory construction and testing stage

a Immune system boosting ‘Porcine Productivity Enhancer’

Vaccines at the laboratory construction and testing stage

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Annual Report 2011

Imugene Limited

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PAtENt REPORt

Pig Adenovirus Patents (PAV) (19813, 19814 and 19819 Families)

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Country/Jurisdiction Patent/Application No. Status
United States 7323177 Granted
United States 7473428 Granted
United States 7785602 Granted
Australia 0757683 Granted
Brazil 98111841 Pending
China 10366292 Granted
United States 6492343 Granted
Reissue filed (11/518,612) and Notice of
Allowance received
Europe 1007088 Granted; Validated in Austria, Belgium; Switzerland,
Cyprus, Germany, Denmark, Spain, Finland, France, Great
Britain, Greece, Ireland, Italy, Luxembourg, Monaco, The
Netherlands, Portugal, and Sweden
Europe 07005454.9 Pending
Hong Kong 1032755 Granted
Indonesia 0014936 Granted
Japan 4365023 Granted
Japan 2009-156467 Inactive
Korea 746524 Granted
Mexico 278098 Granted
New Zealand 503039 Granted
Vietnam 4355 Granted
PCT PCT/AU1998/000648 Pending
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Poultry Adenovirus Patents (FAV) (19821 Family)

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Country/Jurisdiction Patent/Application No. Status
Australia 676042 Granted
United States 6296852 Granted
New Zealand 263772 Granted
Granted; Validated in Belgium, Germany, France,
Europe 690912
Great Britain, Italy, The Netherlands
Europe 5076351.5 Inactive
Japan 3606870 Granted
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Imugene Limited

Annual Report 2011

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PAtENt REPORt

Methods and Compositions for Increasing tissue tropism of Recombinant Vectors (19822 Family)

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Country/Jurisdiction Patent/Application No. Status
Argentina 070103361 Pending
Australia 2007278887 Pending
Brazil 0714932-8 Pending
Canada 2,658,805 Pending
China 200780026689.3 Pending
Europe 07804942.6 Pending
Hong Kong 9110843.9 Pending
Japan 2009-521375 Pending
Korea 10-2009-7003405 Pending
Mexico MX/a/2009/000898 Pending
Taiwan 096127865 Pending
United States 60/833,985 Expired
United States 12/373,772 Pending
PCT PCT/IB07/002710 Pending
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Novel Avian Cytokines and Genetic Sequences Encoding Same (‘Chicken Gamma Interferon’) (derived from PCt/AU96/00114)

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Country/Jurisdiction Patent/Application No. Status
United States 6642032 / 6083724 Granted
Australia 689028 Granted
New Zealand 302188 Granted
Europe 96903831.4 Decision to Grant issued April 2011
Canada 2214453 Under prosecution (Response to Office action filed)
Mexico 976735 Granted
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Annual Report 2011

Imugene Limited

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PAtENt REPORt

PCV 2-Based Methods and Compositions for the treatment of Pigs (19823 Family)

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Country/Jurisdiction Patent/Application No. Status
Argentina 20090104893 Pending
Australia 2009328622 Pending
Brazil N/A Pending
Canada 2746340 Pending
China 2009 80156731.2 Pending
Eurasian Patent Convention 201170813 Pending
Europe 9832698.6 Pending
Georgia N/A Pending
Hong Kong N/A Pending
Indonesia W-00 2011 02463 Pending
India 4757/CHENP/2011 Pending
Japan 2011-539853 Pending
Korea 10-2011-7016343 Pending
Mexico MX/a/2011/006400 Pending
New Zealand 593584 Pending
Philippines 1-2011-501586 Pending
Singapore 201104393-2 Pending
Taiwan 98142364 Pending
Ukraine N/A Pending
United States 61/122,555 Expired
United States 12/621,607 Pending
Vietnam 1-2011-01806 Pending
PCT PCT/AU2009/001616 Pending
South Africa 2011/04461 Pending
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Imugene Limited

Annual Report 2011

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PAtENt REPORt

Methods and Compositions for Use of a Coccidiosis Vaccine (20026 Family)

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Country/Jurisdiction Patent/Application No. Status
Argentina 20090104894 Pending
Australia 2009328621 Pending
Brazil N/A Pending
Canada 2746310 Pending
China 2009 80156725.7 Pending
Eurasian Patent Convention 201170812 Pending
Europe 9832697.8 Pending
Georgia N/A Pending
Hong Kong N/A Pending
Croatia 20110484 Pending
Indonesia W-00 2011 02465 Pending
Israel 213061 Pending
India 4993/DELNP/2011 Pending
Japan 2011-539852 Pending
Korea 10-2011-7016344 Pending
Mexico MX/a/2011/006409 Pending
Malaysia PI2011002747 Pending
New Zealand 593546 Pending
Philippines 1-2011-201139 Pending
Singapore 201104394-0 Pending
Taiwan 98142361 Pending
Ukraine 201108866 Pending
United States 61/122,596 Expired
United States 12/621,421 Pending
Vietnam 1-2011-01807 Pending
PCT PCT/AU2009/001615 Pending
South Africa 2011/04460 Pending
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Annual Report 2011

Imugene Limited

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PAtENt REPORt

Methods and Compositions for Increasing titer of Recombinant Porcine Adenovirus-3 Vectors (22718 Family)

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Country/Jurisdiction Patent/Application No. Status
Argentina 20100104482 Pending
Taiwan 99142223 Pending
United States 61/266,541 Expired
United States 12/956,099 Pending
PCT PCT/AU2010/001627 Pending – awaiting entry into national phases in PCT
countries
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Porcine Adenovirus 3-based PRRSV Vaccines (23323 Family)

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Country/Jurisdiction Patent/Application No. Status
Argentina 20110101841 Pending
Taiwan 100118732 Pending
United States 61/348,925 Expired
United States 13/109,714 Pending
PCT PCT/AU2011/000648 Pending – awaiting entry into national phases in PCT
countries
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Imugene Limited

Annual Report 2011

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DIRECtORS’ REPORt

For the year ended 30 June 2011

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 (“Consolidated Entity” or “Group”) during the year ended 30 June 2011.

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 Dr Warwick Lamb Mr Roger Steinepreis

Each Director held office from 1 July 2010 until the date of this report.

Current Directors

Mr. Graham Dowland – Non-Executive Chairman

Qualifications - B.Com, CA

Mr Dowland is a qualified chartered accountant. He has been involved as 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 finance director of Aurora Oil & Gas Limited (appointed 22 February 2005).

Former Directorships of Australian Listed Public Companies in the last 3 years

Mint Wireless Limited (resigned January 2008) Eureka Energy Limited (resigned July 2010)

Special responsibilities

Chair of the Board Chair of the nomination committee Chair of audit committee Chair of remuneration committee

Interest in shares and options over shares in Group companies at the date of this report 7,667,576 fully paid ordinary shares in Imugene

Dr. Warwick Lamb - Managing Director

Qualifications – BVSc, M Vet Clin Stud, FACVSc

Dr Lamb is a specialist veterinarian with broad experience within the profession and the animal health industry. He has worked in private general practice, private specialist practice and University practice both in Australia and the USA. Prior to forming Imugene with Mr Graham Dowland in mid 2002, Dr Lamb founded one of Australia’s first stand-alone specialist and emergency veterinary practices in Australia. He has had extensive interactions with major global animal health companies throughout his career.

Annual Report 2011

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For the year ended 30 June 2011

DIRECtORS’ REPORt

Since the formation of Imugene, Dr Lamb has overseen the selection and development of Imugene’s animal health technologies, managed and expanded the intellectual property portfolio and overseen the design and execution of a comprehensive animal trial program in Australia and the USA. Most importantly Dr Lamb has formulated and executed a commercial strategy to license Imugene’s intellectual property portfolio.

Other Current Directorships of Australian Listed Public Companies

None

Former Directorships of Australian Listed Public Companies in the last 3 years None

Special responsibilities

Managing Director

Interest in shares and options over shares in Group companies at the date of this report 8,670,002 fully paid ordinary shares in Imugene

Mr Roger Steinepreis - Non-Executive Director

Qualifications - B.Juris 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 over 20 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: Avonlea Minerals Limited (appointed May 2007) Adavale Resources Limited (appointed May 2007) Apollo Consolidated Limited (appointed August 2009) Firestrike Resources Limited (appointed 10 March 2011)

Former Directorships of Australian Listed Public Companies in the last 3 years ComTel Corporation Limited (resigned December 2010)

Special responsibilities

Lead independent director of the Company.

Interest in shares and options over shares in Group companies at the date of this report Nil

Company Secretary

Ms Julie Foster

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

Appointed 29 May 2008

Ms Foster has a degree in Accounting and Finance, is a Chartered Accountant (UK) and is a member of Chartered Secretaries Australia. She is also currently Company Secretary for ASX Listed Aurora Oil & Gas Limited and Elixir Petroleum Limited, and previously worked for Chartered Accounting firms in both the UK and Perth.

Imugene Limited

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DIRECtORS’ REPORt

For the year ended 30 June 2011

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 2011 (2010: nil).

Review of operations

For the year ending 30 June 2011 the Group recorded a net profit after tax of $415,539 (2010: net loss $1,535,041) and a net cash inflow from operations of $1,090,407 (2010: net cash outflow of $1,742,810).

During the first quarter of the current reporting period Imugene undertook partnering discussions with several global animal health companies. In return for granting an exclusive global license, Imugene sought an initial payment, milestone payments and royalties on product sales. Our aim was to partner with a company with sufficient resources and experience to take over the future development of our vaccine range.

In parallel with conducting these partnering discussions, Imugene continued to advance the development of its vaccines independently, with an emphasis on our Porcine Reproductive and Respiratory Syndrome (PRRS) vaccine. Prior to signing any partnering agreements Imugene undertook another successful US based trial of our lead PRRS vaccine. The trial, completed early in the half year, yielded results confirming previous positive trial results and generated important information for the future commercialisation of the PRRS vaccine.

During the second quarter of the current reporting period and as announced on 13 October 2010 Imugene granted an exclusive global license to Novartis Animal Health Inc, a business unit within the global Novartis group. This agreement gives Novartis exclusive global rights to all of Imugenes’ technologies and intellectual properties. Specific terms of the agreement have not been disclosed due to the confidentiality terms of the agreement. The agreement provides Novartis with exclusive rights to commercialise Imugens’ animal health vaccines in return for license fees, milestone payments, research fees and royalties. Since entering into this agreement, Imugene has earned fees of US$2.5 million.

The signing of this commercial agreement is in keeping with Imugenes’ business model to maximise income from the receipt of research fees, license and royalties from an alliance partner with sufficient expertise and infrastructure to develop, market and exploit the Imugene range of vector vaccines.

Throughout the first and second quarters, Imugene personnel based at the Imugene laboratory at La Trobe University worked successfully on a scientific improvement to the Imugene PAV pig vaccines. This major improvement, which dramatically improves the growth of the vaccines and should lower the cost of production, has now been incorporated into the Imugene Porcine Reproductive and Respiratory Syndrome (PRRS) vaccines. Patents have been lodged to protect this important improvement. These patents if granted will allow protection of Imugenes’ pig vaccines for approximately 20 years from the date of lodgement, greatly increasing the value of the vaccines by increasing their commercial life. The improvement is being progressively incorporated into all Imugene’s other PAV based pig vaccines.

During the last two quarters of the current reporting period, our laboratory work focused the preparation and execution of the technical and material transfer processes. The technology transfer process involves, amongst other matters, the transfer of information and accumulated trial data for Imugenes’ range of vaccines and productivity enhancers to our global licensee. The material transfer process involves the physical shipment of vaccines, cell lines and other biological material. Both processes proceeded very well during the period and are nearing completion.

Annual Report 2011

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DIRECtORS’ REPORt

For the year ended 30 June 2011

Other work undertaken at our laboratory facility at La Trobe University included updating and expansion of our product range to roll out our recent product improvements through the entire range of our vaccines, and to develop specific vaccines for global regions such as Europe. For some diseases, such as PRRS, virus strain variation between the US and Europe may require separate strains of vaccine. Imugenes’ technology allows for a simple change in the material delivered to vary a vaccine for administration in another region if required.

DIRECtORS’ REPORt

Our intellectual property portfolio is crucial to the commercial success of Imugene. Accordingly a significant amount of work is undertaken each year to maintain and progress our patents and patent applications. During the last year, two of our major newer patent applications progressed into the national phase. This involves a roll-out, in which applications will be lodged in PCT countries and selected countries outside the PCT agreement. If granted, these patents will greatly extend the commercial life of all our PCV2 vaccine candidates and selected poultry vaccines.

In addition, as mentioned earlier, a new patent application was lodged in the US covering improvements made to the growth characteristics of our Porcine Adenovirus Vector Vaccines. If granted, these patents will greatly extend the commercial life of all our porcine vaccine range as patent protection will be extended to approximately 2030.

During the last quarter of the reporting period, Dr Warwick Lamb, CEO of Imugene visited the licensee’s facilities.

With Imugenes’ commercial partner taking over responsibility for the commercialisation of Imugenes’ vaccines, Mr Graham Dowland relinquished his executive role on 30 November 2010 to become non-executive chairman.

Consolidated results

Consolidated proft / loss before income tax beneft Income tax beneft Net proft / (loss)	2011 $ 179,539 236,000 415,539	2010 $
		(1,765,041) 230,000
		(1,535,041)

Significant changes in the state of affairs

No significant changes in the state of affairs of the Consolidated Entity occurred during the financial year and to the date of this report other than as referred to in the Review of Operations.

Post balance date events

There are no matters or circumstances, which have arisen since 30 June 2011 that have significantly affected or may significantly affect the operations in future financial years of the Consolidated Entity, the results of those operations, or the Consolidated Entity’s state of affairs in future financial years.

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.

Imugene Limited

Annual Report 2011

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DIRECtORS’ REPORt

For the year ended 30 June 2011

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.

Greenhouse gas and energy data reporting requirements

The Consolidated Entity has reviewed its obligations under the Energy Efficiency Opportunities Act 2006 and the National Greenhouse and Energy Reporting Act 2007 and does not consider that it has any reporting requirements under these Acts.

Meetings of Directors

The following table sets out the number of meetings of the Company’s directors held during the year ended 30 June 2011, and the number of meetings attended by each Director (includes matters decided by circulating resolution).

	Number eligible to attend	Number attended
Full board meeting
Graham Dowland	5	5
Warwick Lamb	5	5
Roger Steinepreis	5	5
Audit committee meetings
Graham Dowland	2	2
Warwick Lamb	2	2
Roger Steinepreis	2	2
Remuneration committee meetings
Graham Dowland	1	1
Warwick Lamb	1	1
Roger Steinepreis	1	1

Share Options

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

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Year Ended Year Ended
30 June 2011 30 June 2010
Exercise Exercise
Description Number Price Number Price Expiry
Unlisted advisor incentive options - - 3,000,000 $0.20 31-Mar-2011
Total - 3,000,000
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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.

Annual Report 2011

Imugene Limited

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For the year ended 30 June 2011

DIRECtORS’ REPORt

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 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 Group, directly or indirectly, including any director (whether executive or otherwise) of the Group receiving the highest remuneration.

The information provided in this remuneration report has been audited as required by section 308(3c) of the Corporations Act 2001.

Details of key management personnel

(a) Directors

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

(b) Other key management personnel of the Group

Dr. Michael Sheppard Chief Scientific Officer (c) Executive Ms. Julie Foster Company Secretary

The Directors and other key management personnel represent the highest paid executives of the Group.

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

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. 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.

The objective of the Board, acting in its capacity as remuneration committee, is to ensure that pay and rewards are competitive and appropriate for the results delivered. The remuneration committee charter adopted by the Board aims to align rewards with achievement of strategic objectives and the creation of value for shareholders. The remuneration framework applied provides a mix of fixed and variable pay and a blend of short and long-term incentives as appropriate.

Imugene Limited

Annual Report 2011

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DIRECtORS’ REPORt

For the year ended 30 June 2011

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

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. Nonexecutive directors do not receive share options.

Non-executive directors’ fees and payments are reviewed annually by the Board.

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).

Executive pay

Executive pay and reward consists of base pay, short-term performance incentives, long-term performance incentives and other remuneration such as superannuation.

Base pay

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. Base pay was increased during the year.

Short-term incentives

Contractual agreements with directors and other key management personnel provide for the provision of performance-related cash bonuses to be determined by the remuneration committee.

The contractual agreement with Dr Michael Sheppard includes a specific provision for the payment of an incentive bonus linked to the achievement of development and commercialisation scientific related milestones in relation to key strategic, non-financial measures linked to drivers of performance in future reporting periods. All bonuses payable under this agreement have been paid.

The Board acting in its capacity as the remuneration committee established a short term incentive (STI) plan for the Managing Director to award a cash bonus for the 2011 calendar year. The remuneration committee considers the appropriate targets and key performance indicators (KPIs) to link the STI plan and the level of payout if targets are met. For the 2011 calendar year, the KPIs linked to the STI plan are based on individual commercial and operational targets. The maximum target bonus opportunity is $75,000.

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 2011, short-term incentives paid or payable to key management personnel of the Group were $132,500 (2010: Nil) as follows:

Annual Report 2011

Imugene Limited

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DIRECtORS’ REPORt

For the year ended 30 June 2011

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

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Performance related cash bonus
Contractual Discretionary
performance performance
Grant date bonus bonus Total Paid Forfeited
$ $ $
Executive directors
Graham Dowland Mar 11 - 45,000 45,000 100% -
Warwick Lamb Mar 11 - 65,000 65,000 100% -
Other key management personnel
Michael Sheppard Mar 11 - 22,500 22,500 100% -
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Discretionary bonuses paid during the financial year ended 30 June 2011 to Dr Lamb and Mr Dowland were specifically related to the successful completion of and value attributed to the Alliance Agreement with Imugenes’ Strategic Alliance Partner. The achievement of this significant milestone was considered to be directly linked to an increase in the value of the Group’s portfolio of assets.

The bonuses paid took into account the significant effort that the small and dedicated management team have applied in the development of the Groups intellectual property assets over the past six years. In particular, the implementation and execution of the Groups commercialisation strategy which commenced in late 2005 has directly resulted in the securing of the Alliance.

A discretionary bonus was also paid to Dr. Michael Sheppard during the financial year ended 30 June 2011 specifically in recognition of Mr. Sheppard’s work in increasing the performance of the Groups pig vaccines.

Long-term incentives

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 Group.

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.

Imugene Limited

Annual Report 2011

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DIRECtORS’ REPORt

For the year ended 30 June 2011

B. Details of remuneration

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.

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Share-
Post-employment based
Short-term benefits benefits payment
Cash Non- Perfor-
salary and Cash monetary Super- Retirement mance
fees bonus benefits annuation benefits Options Total related
2011 $ $ $ $ $ $ $ %
Non-executive
directors
Roger Steinepreis 44,992 - - - - - 44,992 -
Graham Dowland [1] 40,138 3,612 43,750 -
Sub-total non-
85,130 - - 3,612 - - 88,742
executive directors
Executive directors
Graham Dowland [1] 72,915 45,000 - - - - 117,915 38%
Warwick Lamb 236,451 65,000 - 21,588 - - 323,039 20%
Sub-total
309,366 110,000 - 21,588 - - 440,954
executive directors
Other executives
Michael Sheppard [2] 88,488 22,500 - 7,964 - - 118,952 19%
Julie Foster [3] - - - - - - - -
Sub-total other
88,488 22,500 - 7,964 - - 118,952
executives
Total – key manage- 482,984 132,500 - 33,164 - - 648,648
ment personnel
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Annual Report 2011

Imugene Limited

21 Back to contents

For the year ended 30 June 2011

DIRECtORS’ REPORt

B. Details of remuneration (continued)

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Share-
Post-employment based
Short-term benefits benefits payment
Cash Non- Perfor-
salary and Cash monetary Super- Retirement mance
fees bonus benefits annuation benefits Options Total related
2010 $ $ $ $ $ $ $ %
Non-executive
directors
Roger Steinepreis 50,000 - - - - - 50,000 -
Sub-total non-
50,000 - - - - - 50,000
executive directors
Executive directors
Graham Dowland 175,000 - - - - - 175,000 -
Warwick Lamb 230,590 - 27,174 22,893 - - 280,657 -
Sub-total executive
-
405,590 27,174 22,893 455,657
directors
Other executives
Michael Sheppard [2] 137,137 - - 12,342 - - 149,479 -
Julie Foster [3] - - - - - - - -
Sub-total other
137,137 - - 12,342 - - 149,479
executives
Total – key manage- 592,727 - 27,174 35,235 - - 655,136
ment personnel
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* relates to salary sacrificed novated car lease payments which ceased in February 2010. 1 Mr. Dowland was appointed non-executive chairman on 30 November 2010 (previously executive chairman).

2 Dr. Sheppard ceased full-time employment and commenced part-time employment during March 2010.

3 Ms. Foster is not key management personnel of the Group but is a Company executive.

The relevant proportions of remuneration that are linked to performance and those that are fixed are as follows.

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Fixed remuneration At risk – STI At risk - LTI
2011 2010 2011 2010 2011 2010
Directors of Imugene Limited
Graham Dowland 72% 100% 28% - - -
Warwick Lamb 80% 100% 20% - - -
Roger Steinepreis 100% 100% - - - -
Other key management personnel
of the Group
Michael Sheppard 19% 100% 81% - - -
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* Since short-term incentives are provided exclusively by way of discretionary cash bonus, the percentages disclosed can

only reflect the remuneration realised during the year. No short-term incentives were awarded during the year ended 30 June 2010.

Imugene Limited

Annual Report 2011

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DIRECtORS’ REPORt

For the year ended 30 June 2011

C. Service agreements

On appointment to the Board, all non-executive directors enter into a service agreement with the Group in the form of a letter of appointment. The letter summarises the Board policies and terms, including compensation, relevant to the office of director.

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, if any, 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 - Non – Executive Chairman

Imugene has entered into an employment agreement with Mr. Dowland effective 1 December 2010. The following is a summary of the terms of the agreement.

Term of agreement – indefinite
Annual fee of $60,000 per annum inclusive of superannuation.
Additional fees inclusive of superannuation for Chairing both the Audit and Remuneration Committees of:
Chair of the Audit Committee - $12,500
Chair of the Remuneration Committee - $2,500.

Prior to 1 December 2010, Mr Dowland’s terms of agreement were formalised in a consultancy agreement with Avalon Valley Pty Ltd, an associate company of Mr Dowland. The material terms of the consultancy agreement with Avalon Valley Pty Ltd were a consultancy fee inclusive of superannuation and taxes, but excluding GST of $175,000 per annum and a termination benefit on early termination by the Group, other than for gross misconduct, equal to six months consultancy fees.

Dr Warwick Lamb, Managing Director

Term of agreement – indefinite
Base salary, inclusive of superannuation of $275,000, to be reviewed annually by the board.
Annual minimum increase in salary package in accordance with the annual Australian CPI for the previous calendar year.
Payment of two potential incentive bonuses for the 2011 calendar year, for successful achievement of two commercialisation key performance indicators.
Payment of a termination benefit on early termination by the Group, 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 of $87,500 (full time equivalent $175,000).
Payment of three potential incentive bonuses for the successful achievement of three development and commercialisation milestones. The incentive bonuses have been paid.
Payment of a termination benefit on early termination by the Group, other than for gross misconduct, equal to base salary and benefits for the remainder of the contract term.

Remuneration and other terms of agreement with the Company Secretary are not formalised in an agreement.

Annual Report 2011

Imugene Limited

23 Back to contents

DIRECtORS’ REPORt

For the year ended 30 June 2011

D. Share-based compensation

Options

Details of options over shares in Imugene Limited provided as remuneration to Directors and key management personal are set out below. No options were granted to key management personnel during the year ended 30 June 2011 (2010: nil). No options provided as remuneration to directors or key management personnel as remuneration were exercised during the year (2010: nil).

	Number of options	Number of options	Number of
	granted during	vested during	options expired
	the year	the year	during the year
Directors of Imugene Limited
Graham Dowland	-	-	500,000
Warwick Lamb	-	-	2,500,000

E. Additional Information

Share –based compensation: Options

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

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A B C D
Remuneration
Value at Value at Value at
Name consisting of
grant date exercise date lapse date
options
% $ $ $
Directors of Imugene Limited
Graham Dowland - - - -
Warwick Lamb - - - -
- - - -
Roger Steinepreis
Other key management personnel
of the Group
- - - -
Michael Sheppard
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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 AASB 2 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 because a vesting condition was not satisfied.

Relationship between the remuneration policy and Group performance

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 Group in the current or previous reporting periods.

Imugene Limited

Annual Report 2011

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DIRECtORS’ REPORt

For the year ended 30 June 2011

E. Additional Information (continued)

The tables below set out summary information about the Consolidated Entity’s earnings and movement in shareholder wealth for the five years to 30 June 2011:

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30 June 30 June 30 June 30 June 30 June
2011 2010 2009 2008 2007
$ $ $ $ $
Revenue 2,237,275 44,018 3,024,028 92,214 165,534
Net profit / (loss) before tax 179,539 (1,765,041) 252,500 (2,149,664) (2,561,309)
Net (loss) / profit after tax 415,539 (1,535,041) 650,286 (1,910,925) (2,304,263)
No dividends have been paid for the five years to 30 June 2011.
30 June 30 June 30 June 30 June 30 June
2011 2010 2009 2008 2007
Share price at start of year $0.03 $0.07 $0.07 $0.25 $0.10
Share price at end of year $0.03 $0.03 $0.07 $0.07 $0.25
Basic earnings / (loss) per share (cents) 0.29 (1.1) 0.5 (1.4) (1.8)
Diluted earnings / (loss) per share (cents) 0.29 (1.1) 0.4 (1.4) (1.8)
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- End of audited remuneration 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 auditor has complied with the general standard of independence for auditors imposed by the Corporations Act 2001 .

Insurance and Indemnity of Officers and Auditors

During the year, the Group has paid a premium in respect of a contract insuring the directors of the Group (as named above) and the Company Secretary, Ms Julie Foster, 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 Group has not otherwise, during or since the financial year, indemnified or agreed to indemnify an officer or auditor of the Group or of any related body corporate against a liability incurred as such an officer or auditor

Annual Report 2011

Imugene Limited

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DIRECtORS’ REPORt

For the year ended 30 June 2011

Auditor’s Independence Declaration

The auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is included on page 27 of the financial report.

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

On behalf of the Directors

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Graham Dowland Non-Executive Chairman

Perth, Western Australia 29 August 2011

Imugene Limited

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AUDItOR’S INDEPENDENCE DECLARAtION

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Annual Report 2011

Imugene Limited

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INDEPENDENt AUDIt REPORt

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Imugene Limited

Annual Report 2011

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INDEPENDENt AUDIt REPORt

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Annual Report 2011

Imugene Limited

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For the year ended 30 June 2011

CONSOLIDAtED StAtEMENt OF COMPREHENSIVE INCOME

Note Revenue from continuing operations (5) Other income (6) Research and development (7) Business development (7) Commercialisation expenses (7) Amortisation expense (7) Unrealised foreign exchange loss (7) Corporate and administration expenses (7) Proft / (loss) before income tax Income tax beneft (8) Net proft / (loss) for the year Other comprehensive income Total comprehensive income attributable to equity holders of Company Earnings / (loss) per share Basic earnings / (loss) per share (cents per share) (24) Diluted earnings / (loss) per share (cents per share) (24)	Note s (5) (6) (7) (7) (7) (7) (7) ses (7) (8)	Consolidated
		2011 2010 $ $
		2,237,275 44,018 (39,138) 312,117 (491,687) (522,337) (151,378) (151,592) (335,251) (488,940) (341,140) (341,140) (132,520) (56,823) (566,622) (560,344)
		179,539 (1,765,041)
		236,000 230,000

		415,539 (1,535,041)
		- -
		415,539 (1,535,041)
		0.29 (1.1) 0.29 (1.1)

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

Imugene Limited

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CONSOLIDAtED StAtEMENt OF FINANCIAL POSItION

As at 30 June 2011

Note Current assets Cash and cash equivalents (9) Trade and other receivables (10) Tax assets (11) Total current assets Non-current assets Property, plant and equipment (12) Intangible assets (13) Total non-current assets Total assets Current liabilities	Consolidated
	2011 2010 $ $
	1,905,942 793,062 53,223 180,508 466,000 520,000
	2,425,165 1,493,570
	2,213 4,226 2,259,745 2,600,885
	2,261,958 2,605,111
	4,687,123 4,098,681

Trade and other payables (14) Provisions (15) Total liabilities Net assets Equity Contributed equity (16) Reserves (17) Accumulated losses (17) Total equity	338,351 195,481 141,926 111,893
	480,277 307,374
	4,206,846 3,791,307
	14,907,453 14,907,453 966,003 966,003 (11,666,610) (12,082,149)
	4,206,846 3,791,307

The above consolidated statement of financial position should be read in conjunction with the accompanying notes.

Annual Report 2011

Imugene Limited

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CONSOLIDAtED StAtEMENt OF CHANGES IN EqUIty

For the year ended 30 June 2011

Balance at 1 July 2009 (Loss) for the year Other comprehensive income Total comprehensive income for the year Transactions with owners, in their capacity as owners Balance at 30 June 2010 Proft for the year Other comprehensive income Total comprehensive income for the year Transactions with owners, in their capacity as owners Balance at 30 June 2011	r the year eir	Contributed Equity Share Based Payment Reserve Accumulated Losses Total $ $ $ $
		14,907,453 966,003 (10,547,108) 5,326,348 - - (1,535,041) (1,535,041) - - - -
		- - (1,535,041) (1,535,041)
		- - - -
		14,907,453 966,003 (12,082,149) 3,791,307
		- - 415,539 415,539 - - - -

		- - 415,539 415,539
		- - - - 14,907,453 966,003 (11,666,610) 4,206,846

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

Imugene Limited

Annual Report 2011

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CONSOLIDAtED StAtEMENt OF CASH FLOWS

For the year ended 30 June 2011

Note Cash fows from operating activities Receipts from customers Payments to suppliers and employees Other income Net cash infow / (outfow) from operating activities (23) Cash fows from investing activities Payments for property, plant and equipment Interest received Net cash infow from investing activities Net increase / (decrease) in cash and cash euivalents	Consolidated
	2011 2010 $ $
	2,840,303 164,703 (1,749,896) (1,907,513) - -
	1,090,407 (1,742,810)
	- (3,241) 11,174 44,018
	11,174 40,777
	1101581 (1702033)
q Cash and cash equivalents at the beginning of the year Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the end of the year (9)	,, ,, 793,062 2,487,316 11,299 7,779
	1,905,942 793,062

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

Annual Report 2011

Imugene Limited

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NOtES tO tHE FINANCIAL StAtEMENtS

For the year ended 30 June 2011

1. Corporate information

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 statements consist of consolidated financial statements for 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 these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

a) Basis of preparation

These financial statements are general-purpose financial statements, which have 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.

Statement of compliance

The consolidated financial statements comply with Australian Accounting Standards, which include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial statements of Imugene Limited comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

Going concern

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

Historical cost convention

These financial statements have been prepared on a historical cost basis.

Critical accounting estimates

The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements, disclosed in note 4.

b) Principles of consolidation

Subsidiaries

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Imugene Limited as at 30 June 2011 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.

Imugene Limited

Annual Report 2011

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NOtES tO tHE FINANCIAL StAtEMENtS

For the year ended 30 June 2011

2. Summary of significant accounting policies (continued)

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) Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer.

d) Foreign currency

Functional and presentation currency

Items included in the financial statements of the Group are measured using the currency of the primary economic environment in which the Group operates (‘the functional currency’ ). The consolidated financial statements are presented in Australian dollars, which is Imugene’s functional and presentation currency.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions.

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.

e) 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, license 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 2011

Imugene Limited

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NOtES tO tHE FINANCIAL StAtEMENtS

For the year ended 30 June 2011

2. Summary of significant accounting policies (continued)

f) Government grants

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 profit or loss over the period necessary to match them with the costs that they are intended to compensate.

g) 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 income 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 liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the 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 in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

Tax consolidation

Imugene Limited and all its wholly-owned Australian controlled 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 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.

Imugene Limited

Annual Report 2011

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NOtES tO tHE FINANCIAL StAtEMENtS

For the year ended 30 June 2011

2. Summary of significant accounting policies (continued)

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.

h) 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 (cashgenerating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

An impairment loss is recognised immediately in profit or loss.

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 (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

i) 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.

j) Financial assets

Investments in subsidiaries are measured at cost.

Other financial assets only consist of ‘loans and receivables’. The classification of financial assets depends on the nature and purpose for which the financial assets were acquired and is determined at the time of initial recognition.

Annual Report 2011

Imugene Limited

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For the year ended 30 June 2011

2. Summary of significant accounting policies (continued)

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.

Recognition and derecognition

Purchases and sales of financial assets are recognised on trade-date – the date on which the Group commits to purchase or sell the asset. Financial assets 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.

Subsequent measurement

Loans and receivables are subsequently recorded at amortised cost, using the effective interest method, less impairment.

Impairment

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

If there is evidence of impairment for any of the Consolidated Entity’s financial assets carried at amortised cost, the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flow, excluding future credit losses that have not been incurred. The cash flows are discounted at the financial asset’s original effective interest rate. The loss is recognised in the profit or loss.

k) Property, Plant and equipment

Plant and equipment and fixtures and fittings are stated at historical cost less accumulated depreciation and impairment. Historical 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.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing proceeds with carrying amount. These are included in the profit or loss.

Imugene Limited

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For the year ended 30 June 2011

2. Summary of significant accounting policies (continued)

l) Intangible assets

Patents, trademarks and licenses

Patents, trademarks and licences previously recognised as an asset upon the acquisition of Vectogen Pty Limited have a finite useful life and are carried at cost less accumulated amortisation and impairment losses. 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.

Subsequent expenditure on patents is recognised as an expense in the period in which it is incurred.

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 when it is probable that the project will, after considering its commercial and technical feasibility, be completed and generate future economic benefits and its costs can be measured reliably. The expenditure capitalised comprises all directly attributable costs, including costs of materials, services, direct labour and an appropriate proportion of overheads.

Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

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.

m) Trade and other payables

These amounts 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.

n) Provisions

Provisions are recognised when the Consolidated Entity has a present obligation as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses.

Provisions are measured at the present value of the management’s best estimate of the expenditure required to settle the present obligation at the reporting date. The discount rate used to determine the present value reflects the current market assessments of the time value of money and the risks specific to the liability.

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Imugene Limited

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For the year ended 30 June 2011

2. Summary of significant accounting policies (continued)

o) 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.

p) Defined contribution superannuation plans

Contributions to defined contribution superannuation plans are recognised as an expense as they become payable.

q) 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 non-market 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 profit and loss with a corresponding adjustment to equity.

r) Contributed equity

Ordinary shares are classified as equity.

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

Imugene Limited

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For the year ended 30 June 2011

2. Summary of significant accounting policies (continued)

s) 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 income 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.

t) 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 statement of financial position. Cash flows are included in the statement of cash flows 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.

u) New accounting standards and interpretations

The Group has chosen not to early-adopt any accounting standards that have been issued, but are not yet effective. Set out below is a summary of issued accounting standards, relevant to the Consolidated Entity, which are not yet effective and a description of their expected effect on the Group’s financial statements (if any).

AASB 2010-4 Amendments to Australian Accounting Standards – Financial Instruments: Disclosures [AASB 7] (effective 1 January 2011)

In June 2010 the AASB issued an amendment to AASB 7 Financial Instruments: Disclosures , which deletes various disclosures relating to credit risk, renegotiated loans and receivables and the fair value of collateral held. There will be no impact on initial adoption to amounts recognised in the financial statement as the amendments result in fewer disclosures only.

AASB 2010-4 Amendments to Australian Accounting Standards – Presentation of Financial Statements [AASB 101] (effective 1 January 2011)

In June 2010 the AASB issued an amendment to AASB 101 Presentation of Financial Statements , which allows that a detailed reconciliation of each item of other comprehensive income may be included in the statement of changes in equity or in the notes to the financial statements. There will be no impact on initial adoption of this amendment as a detailed reconciliation of each item of other comprehensive income has always been included in the statement of changes in equity.

Annual Report 2011

Imugene Limited

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NOtES tO tHE FINANCIAL StAtEMENtS

For the year ended 30 June 2011

2. Summary of significant accounting policies (continued)

Revised AASB 124 Related Party Disclosures and AASB 2009-12 Amendments to Australian Accounting Standards (effective from 1 January 2011)

In December 2009 the AASB issued a revised AASB 124 Related Party Disclosures . It is effective for accounting periods beginning on or after 1 January 2011 and must be applied retrospectively. The amendment removes the requirement for government-related entities to disclose details of all transactions with the government and other government-related entities and clarifies and simplifies the definition of a related party. The Group will apply the amended standards from 1 July 2011. When the amendments are applied, the group and the parent will need to disclose any transaction between its subsidiaries. However, it has yet to put systems in place to capture the necessary information. It is therefore not possible to disclose the financial impact, if any, of the amendment to the related party disclosures.

AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 [AASB 1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 120, 121, 127, 128, 131, 132, 136, 137, 139, 1023 & 1038 and Interpretations 2, 5, 10, 12, 19 & 127] (effective from Periods commencing on or after 1 January 2013)

Issued December 2010, the following requirements have generally been carried forward unchanged from AASB 139 Financial Instruments: Recognition and Measurement into AASB 9. These include the requirements relating to:

Classification and measurement of financial liabilities; and
Derecognition requirements for financial assets and liabilities.

However, AASB 9 requires that gains or losses on financial liabilities measured at fair value are recognised in profit or loss, except that the effects of changes in the liability’s credit risk are recognised in other comprehensive income.

The entity does not have any financial liabilities measured at fair value through profit or loss. There will therefore be no impact on the financial statements when these amendments to AASB 9 are first adopted.

AASB 2010-6 Amendments to Australian Accounting Standards – Disclosures on Transfers of Financial Assets (effective from annual reporting periods commencing on or after 1 July 2011)

Issued November 2010 requires additional disclosures for entities that transfer financial assets, including information about the nature of financial assets involved and the risks associated with them. As this is a disclosure standard only, there will be no impact on amounts recognised in the financial statements.

IFRS 13 Fair Value Measurement (effective from 1 January 2013)

Issued May 2011 requires additional disclosures for items measured at fair value in the statement of financial position, as well as items merely disclosed at fair value in the notes to the financial statements. Extensive additional disclosure requirements for items measured at fair value that are ‘level 3’ valuations in the fair value hierarchy that are not financial instruments, for example land and buildings and investment properties.

When this standard is adopted for the first time on 1 July 2012, additional disclosures will be required about fair values.

Imugene Limited

Annual Report 2011

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NOtES tO tHE FINANCIAL StAtEMENtS

For the year ended 30 June 2011

2. Summary of significant accounting policies (continued)

IFRS 10 Consolidated Financial Statements (effective for annual reporting periods commencing on or after 1 January 2013)

Issued May 2011, IFRS 10 introduces a single ‘control model’ for all entities, including special purpose entities (SPEs), whereby all of the following conditions must be present:

Power over investee (whether or not power used in practice)
Exposure, or rights, to variable returns from investee
Ability to use power over investee to affect the entity’s returns from investee.

When this standard is first adopted for the year ended 30 June 2014, there will be no impact on transactions and balances recognised in the financial statements because the entity does not have any special purpose entities.

AASB 1054 Australian Additional Disclosure (effective annual report periods commencing on or after 1 July 201)

Issued May 2011, AASB 1054 moves additional Australian specific disclosure requirements for for-profit entities from various Australian Accounting Standards into this Standard as a result of the Trans-Tasman Convergence Project. This standard removes the requirement to disclose each class of capital commitment and expenditure commitment contracted for at the end of the reporting period (other than commitments for the supply of inventories).

When this Standard is adopted for the first time for the year ended 30 June 2012, the financial statements will no longer include disclosures about capital and other expenditure commitments as these are no longer required by AASB 1054

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 provides written 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.

A written policy has been adopted for overall risk management.

The Group holds the following financial instruments:

Financial assets Cash and cash equivalents Loans and receivables Financial liabilities Trade and other payables	Consolidated
	2011 2010 $ $
	1,905,942 793,062 53,233 180,508
	1,959,175 973,570
	338,351 195,481

Annual Report 2011

Imugene Limited

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NOtES tO tHE FINANCIAL StAtEMENtS

For the year ended 30 June 2011

3. Financial risk management (continued)

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 carrying amounts of the Groups financial assets and liabilities are denominated in Australian dollars except as set out below:

Financial assets Cash and cash equivalents	Consolidated
	2011 2010 US$ US$
	1,769,262 208,956

Group sensitivity

Based on the financial instruments held at 30 June 2011, had the Australian dollar weakened / strengthened by 10% against the US dollar with all the other variables held constant, the Group’s profit for the year would have been $167,000 lower / higher (2010 - $22,200 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 results are more sensitive to movements in the Australian dollar / US dollar exchange rates in 2011 than 2010 because of the increased amount of US dollar denominated cash and cash equivalents. A 10% movement represents management’s assessment of the reasonably possible change in Australian dollar / US dollar exchange rates. The Group’s exposure to other 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:

Financial assets Cash and cash equivalents Floating rate*	Consolidated
	2011 2010 $ $
	1,905,942 793,062

Weighted average effective interest rate 0.32% (2010: 2.59%)

Imugene Limited

Annual Report 2011

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NOtES tO tHE FINANCIAL StAtEMENtS

For the year ended 30 June 2011

3. Financial risk management (continued)

Group sensitivity

At 30 June 2011, if interest rates had changed by -/+ 100 basis points from the year end rates with all other variables held constant, the profit for the year would have been $19,059 lower / higher (2010 – change of 100 basis points: $8,000 lower / higher), mainly as a result of lower / higher interest income from cash and cash equivalents.

The 100 basis points movement represents management’s assessment of the reasonably possible change in interest rates.

(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 43.

(i) Cash at bank and short-term bank deposits AA Rated	Consolidated
	2011 2010 $ $
	1,905,942 793,062

(ii) Trade and other receivables

All trade and other receivables outstanding have good credit history with the group. There are no allowances for credit losses and no collateral is held for security for trade and other receivables (parent and group). No trade or other receivables are past due or have been renegotiated.

c) Liquidity risk

Prudent liquidity risk management involves the maintenance of sufficient cash 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.

Maturities of financial liabilities

As at the reporting date the Group have total financial liabilities of $338,351 (2010: $195,481), comprised of non interest-bearing trade creditors and accruals with a maturity of 1 - 3 months.

Annual Report 2011

Imugene Limited

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NOtES tO tHE FINANCIAL StAtEMENtS

For the year ended 30 June 2011

3. Financial risk management (continued)

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. There are no long term financial assets or liabilities which are subject to fair value estimation.

e) Capital risk management

The Group manages its capital, which includes cash and receivables, 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.

a) 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:

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 and royalty income, market penetration, milestone achievement dates and production profiles.

As at 30 June 2011, the carrying value of patents, licences and other rights is $2,259,745 (2010: $2,600,885).

5. Revenue

Sub-license / contract research fees Interest	Consolidated
	2011 2010 $ $
	2,227,028 - 10,247 44,018
	2,237,275 44,018

Imugene Limited

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For the year ended 30 June 2011

6. Other Income

Government grants Other	Consolidated 2011 2010 $ $ (50,437) 304,338 11,299 7,779 (39,138) 312,117

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

Imugene applied for, and was awarded funding from the Export Market Development Grant (EMDG) during the year ended 30 June 2011. The EMDG scheme reimburses up to 50% of expenses incurred on eligible promotion of Imugene’s technologies outside Australia, above a $10,000 threshold.

As at balance sheet date, an amount of $52,500 has been classified as accrued income in relation to the EMDG grant application for eligible expenditure paid between 1 July 2010 and 30 June 2011 (1 July 2009 to 30 June 2010: $179,000) (refer to note 10). EMDG grant income received during the year relating to the 30 June 2010 accrued grant income totalled $76,063 (2010: $125,338). The over accrual at 30 June 2010 has therefore resulted in Government grant income for the year ended 30 June 2011 of ($50,437).

7. Expenses

Profit before income tax includes the following specific expenses:

Research and development Employee benefts Business development Employee benefts Amortisation of intangibles Amortisation expense	Consolidated
	2011 2010 $ $
	345,627 350,669
	151,378 151,592
	341,140 341,140

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For the year ended 30 June 2011

7. Expenses (continued)

Expenses(continued	)
Commercialisation expens Patent expenses Employee benefts Corporate and administrat Depreciation of tangible fxed Unrealised foreign exchan	es ion expense assets ge loss	Consolidated
		2011 2010 $ $
		119,276 280,826 215,975 208,114
		335,251 488,940
		2,013 1,868
		132,520 56,823

Imugene recognised a significant unrealised foreign exchange loss during the year ended 30 June 2011 in relation to the translation of US dollar cash and cash equivalents to Australian dollars.

8. Income tax

Current tax 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 proft / (loss) before tax from continuing operations Tax at the Australian statutory income tax rate of 30% (2010: 30%) Tax effect of amounts which are not deductible /(taxable) in calculating taxable income Add tax effect of: Research & development expenses (claimed under Tax Concession) Amortisation of intangibles Sundry other Revenue losses not recognized Less tax effect of: Patent costs Research & Development Tax Concession Current Year Under provision recognised in prior year Income tax beneft		Consolidated

		2011 2010 $ $
		236,000 230,000
		179,539 (1,765,041)
		53,862 (529,512) 189,036 186,635 102,342 102,342 19,642 7,862 (269,369) 275,320 95,513 42,647
		- - 236,000 230,000 - -
		236,000 230,000

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For the year ended 30 June 2011

8. Income tax (continued)

(i) Deferred tax assets not recognised Arising from temporary differences attributable to: Carried forward tax losses Intangible assets Share issue expenses Employee benefts Other Deferred tax asset not yet brought to account	Consolidated
	2011 2010 $ $
	1,774,576 2,139,366 284,775 182,433 6,219 14,959 42,578 33,568 21,473 29,415
	2,129,621 2,399,741 (2,129,621) (2,399,741)
	- -

9. Cash and cash equivalents

Cash at bank and in hand – AUS dollars Cash at bank and in hand – US dollars	Consolidated
	2011 2010 $ $
	236,378 549,144 1,669,564 243,918
	1,905,942 793,062

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

Foreign exchange and Interest rate risk exposure

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

10. trade and other receivables

trade and other receivables
Accrued income Other	Consolidated
	2011 2010 $ $
	52,500 179,000 723 1,508
	53,223 180,508

a) Fair value

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

b) Credit risk – refer to note 3

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Imugene Limited

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For the year ended 30 June 2011

10. trade and other receivables (continued)

c) Impaired trade receivables

No Group trade receivables were past due or impaired as at 30 June 2011 (2010: nil) and there is no indication that amounts recognised as trade and other receivables will not be recovered in the normal course of business.

11. tax assets

Research and Development Tax Concession receivable Property, plant & equipment Plant and equipment At cost Accumulated depreciation Total plant and equipment A reconciliation of movements in property, plant and equipment is as follows: Plant and Equipment Carrying amount at beginning of year Additions Depreciation expense Carrying amount at end of year Intangible assets Patents, licenses and other rights Opening cost Closing cost Accumulated amortisation 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	ax Concession receivable uipment	Consolidated
		2011 2010 $ $
		466,000 520,000
		Consolidated
		2011 2010 $ $

		24,089 24,089 (21,876) (19,863)
		2,213 4,226
		4,226 2,853 - 3,241 (2,013) (1,868)
		2,213 4,226
		Consolidated
		2011 2010 $ $
		5,117,095 5,117,095
		5,117,095 5,117,095 (2,516,210) (2,175,070) (341,140) (341,140)
		(2,857,350) (2,516,210) 2,600,885 2,942,025
		2,259,745 2,600,885

12. Property, plant & equipment

13. Intangible assets

Imugene Limited

Annual Report 2011

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For the year ended 30 June 2011

13. Intangible assets (continued)

The Group holds a range of intellectual property including patent applications, knowhow and licences to patents and patent applications. The intellectual property portfolio forms biological technologies that are being applied to disease prevention vaccines and biologically based productivity enhancers for the pig and poultry industry. There are no unfulfilled performance conditions in relation to the Group’s rights to use any part of the intellectual property portfolio, 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 the intellectual property and the vaccines and vaccine candidates derived from them.

The carrying amount of these patents and licences of $2,259,745 (2010: $2,600,885) will be fully amortised in 7 years (2010: 8 years).

The current carrying amount of intellectual property is considered recoverable based on the intellectual property’s ability to generate future cash inflows from the worldwide licensing of the Imugene intellectual property.

14. trade and other payables

trade and other payables
	Consolidated
	2011 2010
Trade payables Other payables	$ $
	73,591 169,067 264,760 26,414
	338,351 195,481

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 due to their short-term nature.

b) Foreign exchange risk exposure

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

15. Provision

Provision
Employee benefts - annual leave	Consolidated
	2011 2010 $ $
	141,926 111,893

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.

Annual Report 2011

Imugene Limited

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NOtES tO tHE FINANCIAL StAtEMENtS

For the year ended 30 June 2011

16. Contributed equity

Contributed equity
Fully paid ordinary shares		2011 2010 2011 2010 Shares Shares $ $
		143,637,220 143,637,220 14,907,453 14,907,453

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.

Movement in contributed equity during the current and prior year is as follows:

Opening balance Closing balance Closing balance		Date	Number of shares $
		01 July 2009 30 June 2010	143,637,220 14,907,453
			143,637,220 14,907,453

		30 June 2011	143,637,220 14,907,453

17. Reserves and accumulated losses

Reserves and accumulated losses
a) Share-based payment reserve Opening balance Closing balance b) Accumulated losses Opening balance Net proft /(loss) for the year Closing balance	Consolidated
	2011 2010 $ $
	966,003 966,003
	966,003 966,003
	(12,082,149) (10,547,108) 415,539 (1,535,041)
	(11,666,610) (12,082,149)

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.

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. Any resulting expenses are included in the share based payment reserve.

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. No options were granted during the year ended 30 June 2011 (2010: nil).

Imugene Limited

Annual Report 2011

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NOtES tO tHE FINANCIAL StAtEMENtS

For the year ended 30 June 2011

18. Options

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

Unlisted performance options Type 10 Total	2011 2010 Exercise Expiry Number Number Price
	- 3,000,000 $ 0.20 31-Mar-11 - 3,000,000

The Type 10 options expired on 31 March 2011 and were not exercised.

Movement in the number of options on issue during the current and prior year is as follows:

Opening balance	2011 2010 Number Number
	3,000,000 7,350,000
Expired during the year: Unlisted performance options Type 9 Type 10 Closing balance	- (4,350,000) (3,000,000) -
	- 3,000,000

19. Parent information

The following details information related to the parent entity, Imugene Limited, at 30 June 2011. The information presented here has been prepared using accounting policies consistent with those presented in Note 2.

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----- Start of picture text -----

Company
2011 2010
$ $
Current assets 725,424 1,138,279
Non-current assets 3,880,494 3,226,321
Total assets 4,605,918 4,364,600
Current liabilities 747,096 573,293
Total liabilities 747,096 573,293
Contributed equity 14,907,453 14,907,453
Share-based payment reserve 966,003 966,003
Accumulated losses (12,014,634) (12,082,148)
Total equity 3,858,822 3,791,378
Profit / (loss) for the year 67,514 (1,535,041)
Other comprehensive income for the year - -
Total comprehensive (profit) / loss for the year 67,514 (1,535,041)
----- End of picture text -----

Annual Report 2011

Imugene Limited

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NOtES tO tHE FINANCIAL StAtEMENtS

For the year ended 30 June 2011

19. Parent information (continued)

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 2011 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. No allowance has been made for doubtful debts. At balance date amounts receivable from controlled entities totalled $2,376,361 (2010: $734,454).

b) Investments in Controlled Entities

b) Investments in Controlled Entities
Country of Incorporation Class of Shares Name of Entity	Equity Holding
	2011 2010 % %
Controlled Entities Brightsun Investments Pty Ltd Australia Ordinary Vectogen Pty Ltd Australia Ordinary BioMimic Technologies Pty Ltd Australia Ordinary Paragen PtyLtd Australia Ordinary	100 100 100 100 100 100 100 100

20. Key management personal disclosures

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

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

b) Other key management personnel and executives

Other than the Directors, Dr Michael Sheppard (Chief Scientific Officer) also had authority and responsibility for planning, directing and controlling certain activities of the Group, directly or indirectly during the current and prior financial years.

In addition, the Company Secretary, Ms Julie Foster, is deemed a Company executive under section 9 of the Corporations Act 2001.

Imugene Limited

Annual Report 2011

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NOtES tO tHE FINANCIAL StAtEMENtS

For the year ended 30 June 2011

20. Key management personal disclosures (continued)

c) Key management personnel compensation

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----- Start of picture text -----

Consolidated
2011 2010
$ $
Short - term employee benefits 615,484 619,901
Post-employment benefits 33,164 35,235
648,648 655,136
----- End of picture text -----

Detailed remuneration disclosures can be found in the section of the Directors Report headed “Remuneration Report”.

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.

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Balance
Balance at Granted as when Balance at
start of the compen- Other ceased to the end of Vested and
2011 year sation Exercised changes hold office the year exercisable Unvested
Directors of
Imugene Limited
Graham Dowland - - - - - - - -
Warwick Lamb - - - - - - - -
Roger Steinepreis - - - - - - - -
Other key
management
personnel of the
Group
Michael Sheppard - - - - - - - -
Balance
Balance at Granted as when Balance at
start of the compen- Other ceased to the end of Vested and
2010 year sation Exercised changes hold office the year exercisable Unvested
Directors of
Imugene Limited
Graham Dowland 500,000 - - (500,000) - - - -
Warwick Lamb 2,500,000 - - (2,500,000) - - - -
Roger Steinepreis - - - - - - - -
Other key
management
personnel of the
Group
Michael Sheppard 1,250,000 - - (1,250,000) - - - -
----- End of picture text -----

Annual Report 2011

Imugene Limited

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NOtES tO tHE FINANCIAL StAtEMENtS

For the year ended 30 June 2011

20. Key management personal disclosures (continued)

(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.

granted during the reporting period	as compensation.
	Balance at start			Balance at the
2011	of the year	Acquired	Other changes	end of the year
Directors of
Imugene Limited
Graham Dowland	7,667,576	-	-	7,667,576
Warwick Lamb	8,670,002	-	-	8,670,002
Roger Steinepreis	-	-	-	-
Other key management
personnel of the Group
Michael Sheppard	272,248	-	-	272,248
2010
Directors of Imugene Limited
Graham Dowland	7,667,576	-	-	7,667,576
Warwick Lamb	7,670,002	1,000,000	-	8,670,002
Roger Steinepreis	1,808,270	-	(1,808,270)	-
Other key management
personnel of the Group
Michael Sheppard	272,248	-	-	272,248

(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

The aggregate amount recognised as an expense in relation to these transactions is $42,000 (2010: $42,000).

During the year, Vetspec Pty Ltd, a company 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 2011, the Group paid $42,000 (2010: $42,000) to Vetspec Pty Ltd and this has been recognised in the financial statements as an expense.

Imugene Limited

Annual Report 2011

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NOtES tO tHE FINANCIAL StAtEMENtS

For the year ended 30 June 2011

21. Remuneration of auditors

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

BDO Audit (WA) Pty Ltd for: Audit and other assurance services Audit and review of fnancial statements Other assurance services Total auditors’ remuneration	Consolidated 2011 2010 $ $ 39,000 43,086 - - 39,000 43,086

22. Segment information

Management has determined, based on the reports reviewed by the CEO that are used to make strategic decisions, that the Group has one reportable segment being the research, development and commercialisation of animal health technologies.

The CEO reviews internal management reports on a monthly basis that are consistent with the information provided in the statement of comprehensive income, statement of financial position and statement of cash flows. As a result no reconciliation is required, because the information as presented is used by the CEO to make strategic decisions.

Reportable segment revenue

Revenue, including interest income, is disclosed below based on the reportable segment:

Revenue from research, development and commercialisation Revenue from other corporate activities Reportable segment assets Assets are disclosed below based on the reportable segment: Asset from research, development and commercialisation Assets from other corporate activities: Cash and cash equivalents Other corporate assets Reportable segment profit / (loss) Proft / (loss) is disclosed below based on the reportable segment: Proft / (loss) from research, development and commercialisation (Loss) from other corporate activities	2011 2010 $ $
	2,176,591 304,338 21,547 51,797
	2,198,138 356,135
	2011 2010 $ $
	2,778,245 3,299,885 1,905,942 793,062 2,936 5,734
	4,687,123 4,098,681
	857,135 (1,199,672) (677,596) (565,369)
	179,539 (1,765,041)

Annual Report 2011

Imugene Limited

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NOtES tO tHE FINANCIAL StAtEMENtS

For the year ended 30 June 2011

23. Reconciliation of profit / (loss) after income tax to net cash inflows / outflows from operation activities

Proft / (loss) for the year Depreciation and amortization Interest income Provision for employee benef Net exchange differences Decrease in receivables Increase in payables Net cash infow / (outfow) fro	ts m operating activities	Consolidated
		2011 2010 $ $
		415,539 (1,535,041) 343,153 343,008 (10,247) (44,018) 30,033 (6,992) (11,299) (7,779) 180,358 (369,635) 142,870 (122,353)
		1,090,407 (1,742,810)

24. Earnings / (loss) per share

Basic earnings / (loss) per share Proft / (loss) attributable to the ordinary equity holders of the Company Diluted earnings / (loss) per share Proft / (loss) attributable to the ordinary equity holders of the Company Proft / (loss) used in calculation of basic / diluted earnings / (loss) per share Proft / (loss) Weighted average number of ordinary shares / potential ordinary shares used as the denominator in calculating basic earnings / (loss) per share Weighted average number of ordinary shares / potential ordinary shares used as the denominator in calculating diluted earnings / (loss) per share		Consolidated

		2011 2010 Cents Cents
		0.29 (1.1) 0.29 (1.1) $ $
		415,539 (1,535,041) Number Number
		143,637,220 143,637,220 143,637,220 143,637,220

Imugene Limited

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NOtES tO tHE FINANCIAL StAtEMENtS For the year ended 30 June 2011

25. Subsequent events

26. Contingencies

The Consolidated Entity has no contingent assets or liabilities at balance date (2010: none).

27. Related party transactions

There have been no transactions with related parties during the year ended 30 June 2011 other than as disclosed elsewhere in the financial report (2010: none).

Annual Report 2011

Imugene Limited

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DIRECtORS’ DECLARAtION

In the Directors’ opinion:

(a) the financial statements and the accompanying notes set out on pages 30 to 59, are in accordance with the Corporations Act 2001, including:
(i) complying with Accounting Standards and the Corporations Regulations 2001 and other mandatory professional reporting requirements; and
(ii) giving a true and fair view of the Consolidated Entity’s financial position as at 30 June 2011 and of their performancefor the financial period ended on that date.
(b) there are reasonable grounds to believe that the Consolidated Entity will be able to pay its debts as and when they become due and payable.
(c) the financial statements and accompanying notes are prepared in compliance with IFRS and interpretations adopted by the International Accounting Standards Board.
(d) the remuneration disclosures included on pages 18 and 25 of the Directors’ Report (as part of the audited Remuneration Report), for the year ended 30 June 2011 comply with section 300A of the Corporations Regulations 2001 .

The Directors have been given the declaration by the chief executive officer and chief financial officer required by s.295A of the Corporations Act 2001.

This declaration is made in accordance with a resolution of the Board of Directors.

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Graham Dowland Non-Executive Chairman

Perth, Western Australia 29 August 2011

Imugene Limited

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ADDItIONAL SECURItIES ExCHANGE INFORMAtION

Corporate Governance Statement

Imugene Limited (“Company”) has made it a priority to adopt systems of control and accountability as the basis for the administration of corporate governance. Some of these policies and procedures are summarised in this statement. Commensurate with the spirit of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations 2nd edition (“Principles & Recommendations”), the Company has followed each recommendation where the Board has considered the recommendation to be an appropriate benchmark for its corporate governance practices. Where the Company’s corporate governance practices follow a recommendation, the Board has made appropriate statements reporting on the adoption of the recommendation. Where, after due consideration, the Company’s corporate governance practices depart from a recommendation, the Board has offered full disclosure and reason for the adoption of its own practice, in compliance with the “if not, why not” regime.

Further information about the Company’s corporate governance practice may be found on the Company’s website at www.imugene.com, under the section marked “Investor Relations & Media – Corporate Governance”.

The Company reports below on how it has followed (or otherwise departed from) each of the Principles & Recommendations during the 2010/2011 financial year (“Reporting Period”). The principles and recommendations were amended in 2010, and these amendments apply to the Company’s first financial year commencing on or after 1 January 2011. Accordingly, disclosure against the Principles & Recommendations as amended in 2010 will be made in relation to the Company’s financial year ending 30 June 2012. The report below is made against the Principles & Recommendations prior to their amendments in 2010.

Board of Directors

Role of the Board (Recommendations: 1.1 & 1.3)

The Company has established the functions reserved to the Board, and those delegated to senior executives and has set out these functions in its Board Charter.

The Board is collectively responsible for promoting the success of the Company through its key functions of overseeing the management of the Company, providing overall corporate governance of the Company, monitoring the financial performance of the Company, engaging appropriate management commensurate with the Company’s structure and objectives, involvement in the development of corporate strategy and performance objectives and reviewing, ratifying and monitoring systems of risk management and internal control, codes of conduct and legal compliance.

Senior executives are responsible for supporting the Managing Director and assisting the Managing Director in implementing the running of the general operations and financial business of the Company, in accordance with the delegated authority of the Board. Senior executives are responsible for reporting all matters which fall within the Company’s materiality thresholds at first instance to the Managing Director or, if the matter concerns the Managing Director, then directly to the Chair or the lead independent director, as appropriate.

The Company’s Board Charter is available on the Company’s website.

Skills, Experience, Expertise and period of office of each Director (Recommendation: 2.6)

A profile of each director containing their skills, experience and expertise is set out in the Directors’ Report.

The period of appointment for each director is as follows:

Name	Appointed	Term
Graham Dowland (Chair)	30/08/2002	Indefnitely
Roger Steinepreis	29/01/2002	Indefnitely
Warwick Lamb	30/08/2002	Indefnitely

Annual Report 2011

Imugene Limited

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ADDItIONAL SECURItIES ExCHANGE INFORMAtION

Director independence (Recommendations: 2.1, 2.2, 2.3 & 2.6)

The Board does not have a majority of directors who are independent. The Board considers that its current composition is adequate for the Company’s current size and operations and includes an appropriate mix of skills and expertise relevant to the Company’s investments and stage of development.

The sole independent director of the Company is Roger Steinepreis. Mr Steinepreis is independent as he is a non-executive director who is not a member of management and who is free of any business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with, the independent exercise of his judgment.

The Board considers the independence of directors having regard to the relationships listed in Box 2.1 of the Principles & Recommendations and the Company’s materiality thresholds. The Board has agreed on the following guidelines, as set out in the Company’s Board Charter, for assessing the materiality of matters:

Balance sheet items are material if they have a value of more than 10% of pro-forma net asset.
Profit and loss items are material if they will have an impact on the current year operating result of 10% or more.
Items are also material if they impact on the reputation of the Company, involve a breach of legislation, are outside the ordinary course of business, could affect the Company’s rights to its assets, if accumulated would trigger the quantitative tests, involve a contingent liability that would have a probable effect of 10% or more on balance sheet or profit and loss items, or will have an effect on operations which is likely to result in an increase or decrease in net income or dividend distribution of more than 10%.
Contracts will be considered material if they are outside the ordinary course of business, contain exceptionally onerous provisions in the opinion of the Board, impact on income or distribution in excess of the quantitative tests, there is a likelihood that either party will default and the default may trigger any of the quantitative or qualitative tests, are essential to the activities of the Company and cannot be replaced or cannot be replaced without an increase in cost which triggers any of the quantitative tests, contain or trigger change of control provisions, are between or for the benefit of related parties, or otherwise trigger the quantitative tests.

The non-independent directors of the Company are Graham Dowland and Warwick Lamb.

The non-independent Chair of the Board is Mr Dowland. The Chair is not independent because of his previous role as an executive director. Notwithstanding this, the Board considers that Mr Dowland’s extensive experience as both a director and chair of various listed companies make him the most qualified Board member for the role at this stage of the Company’s development. In situations that present a possible conflict of interest, the Board has appointed Mr Roger Steinepreis as the lead independent director to act as Chair.

The Managing Director is Mr Warwick Lamb who is not also Chair of the Board.

Independent professional advice (Recommendation: 2.6)

To assist directors with independent judgement, it is the Board’s policy that if a director considers it necessary to obtain independent professional advice to properly discharge the responsibility of their office as a director then, provided the director first obtains approval from the Chair for incurring such expense, the Company will pay the reasonable expenses associated with obtaining such advice.

Imugene Limited

Annual Report 2011

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ADDItIONAL SECURItIES ExCHANGE INFORMAtION

Selection and (Re)Appointment of Directors (Recommendation: 2.6)

In determining candidates for the Board, the Nomination Committee (or equivalent) follows a prescribed procedure whereby it evaluates the skills, experience and expertise of the existing Board. In particular, the Nomination Committee (or equivalent) is to identify the particular skills that will best increase the Board’s effectiveness. Consideration is also given to the balance of independent directors. Potential candidates are identified and, if relevant, the Nomination Committee (or equivalent) recommends an appropriate candidate for appointment to the Board. Any appointment made by the Board is subject to ratification by shareholders at the next general meeting.

The Board recognises that Board renewal is critical to performance as well as the impact of Board tenure on succession planning. Each director other than the Managing Director, must not hold office (without re-election) past the third annual general meeting of the Company following the Director’s appointment or three years following that director’s last election or appointment (whichever is the longer). However, a Director appointed to fill a casual vacancy or as an addition to the Board must not hold office (without re-election) past the next annual general meeting of the Company. At each annual general meeting a minimum of one director or a third of the total number of directors must resign. A director who retires at an annual general meeting is eligible for re-election at that meeting and there-appointment of directors is not automatic.

The Company’s Policy and Procedures for the Selection and (Re)Appointment of Directors is available on the Company’s website.

Board Committees

Nomination Committee (Recommendation: 2.4 & 2.6)

The Board has not established a separate Nomination Committee. Due to the relatively infrequent level of appointments, the full Board carries out the duties which would otherwise be undertaken by the nomination committee in accordance with the Company’s Nomination Committee Charter which describes the role, composition, operations and responsibilities of the Nomination Committee. The Board deals with any conflicts of interest that may occur when convening in the capacity of the Nomination Committee by ensuring that the director with the conflict of interest is not party to the relevant discussion.

The full Board, in its capacity as the Nomination Committee, held 1 meeting during the Reporting Period. All Board members were in attendance.

The Company’s Nomination Committee Charter is available on the Company’s website.

Audit Committee (Recommendations: 4.1, 4.2, 4.3 & 4.4)

The Board has not established a separate Audit Committee and therefore it is not structured in compliance with Recommendation 4.2. The full Board carries out the duties that would otherwise be undertaken by the Audit Committee. The Board believes that the Company is not of a sufficient size to warrant a separate Audit Committee. Mr Roger Steinepreis, an independent nonexecutive director, has been appointed as Chair of the Audit Committee which in the opinion of the Board assists the ability of the Audit Committee to exercise independent judgement. Mr Steinepreis is a qualified corporate lawyer and has extensive experience in the ASX listed company sphere. Mr Dowland is a qualified accountant and Dr Lamb has extensive experience and expertise in the animal biotechnology industry thus ensuring that the Board, acting in its capacity as Audit Committee, is able to discharge its responsibilities pursuant to the Audit Committee Charter. The Board deals with any conflicts of interest that may occur when convening in the capacity of the Audit Committee but ensuring that the director with conflicting interests is not party to the relevant discussions.

The full Board, in its capacity as the Audit Committee, held 2 meetings during the Reporting Period. Details of attendance at the Audit Committee meetings are set out in the Directors’ Report. To assist the Board to fulfil its function as the Audit Committee, the Company has adopted an Audit Committee Charter which describes the role, composition, functions and responsibilities of the Audit Committee.

Annual Report 2011

Imugene Limited

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ADDItIONAL SECURItIES ExCHANGE INFORMAtION

Details of each of the director’s qualifications are set out in the Directors’ Report.

Both Mr Dowland and Dr Lamb consider themselves to be financially literate and have industry knowledge. Mr Dowland is a qualified accountant and Dr Lamb has extensive experience and expertise in the animal biotechnology industry. Mr Steinepreis is a qualified corporate lawyer and has extensive experience in the ASX listed company sphere.

The Company has established procedures for the selection, appointment and rotation of its external auditor. The Board is responsible for the initial appointment of the external auditor and the appointment of a new external auditor when any vacancy arises, as recommended by the Audit Committee (or its equivalent). Candidates for the position of external auditor must demonstrate complete independence from the Company through the engagement period. The Board may otherwise select an external auditor based on criteria relevant to the Company’s business and circumstances. The performance of the external auditor is reviewed on an annual basis by the Audit Committee (or its equivalent) and any recommendations are made to the Board.

The Company’s Audit Committee Charter and the Company’s Procedure for Selection, Appointment and Rotation of External Auditor are available on the Company’s website.

Remuneration Committee (Recommendations: 8.1, 8.2 & 8.3)

The Board has not established a separate Remuneration Committee. The full Board carries out the duties which would otherwise be undertaken by the Remuneration Committee in accordance with the Remuneration Committee Charter. The Board considers that no efficiencies or other benefits could be gained by establishing a separate committee. Mr Graham Dowland has been appointed to act as Chair when the Board meets as the Remuneration Committee. The Board deals with any conflict of interest that may occur when convening in the capacity of the Audit Committee by ensuring that the director with conflicting interests is not party to the relevant discussion.

The full Board, in its capacity as the Remuneration Committee, held one meeting during the Reporting Period. Details of attendance at the Remuneration Committee meeting are set out in the Directors’ Report. To assist the Board to fulfil its function as the Remuneration Committee, the Company has adopted a Remuneration Committee Charter which describes the role, composition, function and responsibilities of the Remuneration Committee.

Details of remuneration, including the Company’s policy on remuneration, are contained in the “Remuneration Report” which forms part of the Directors’ Report. Non-executive directors are remunerated at a fixed fee for time, commitment and responsibilities. Remuneration for non-executive directors is not linked to individual performance.

Pay and rewards for executive directors and senior executives consists of a base salary and performance incentives. Long term performance incentives may include options granted at the discretion of the Board and subject to obtaining the relevant approvals. Executives are offered a competitive level of base pay at market rates and are reviewed annually to ensure market competitiveness.

There are no termination or retirement benefits for non-executive directors (other than for superannuation).

The Company’s Remuneration Committee Charter includes a statement of the Company’s policy on prohibiting transactions in associated products which limit the risk of participating in unvested entitlements under any equity based remuneration schemes.

The Company’s Remuneration Committee Charter is available on the Company’s website.

Imugene Limited

Annual Report 2011

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ADDItIONAL SECURItIES ExCHANGE INFORMAtION

Performance evaluation

Senior executives (Recommendations: 1.2 & 2.6)

The Chair and Managing Director are responsible for evaluating the performance of senior executives. The evaluations are carried out by conducting formal interviews with the senior executives annually.

During the Reporting Period an evaluation of senior executives took place in accordance with the process disclosed above.

Board, its committees and individual directors (Recommendations: 2.5 & 2.6)

The Chair is responsible for evaluation of the Board and, where deemed appropriate, Board committees and individual directors. The full Board in its capacity of the Nomination Committee is responsible for evaluating the Managing Director. These evaluations are undertaken informally as required. The practice in this area is considered sufficient as the Company has a very small Board with little change in membership.

During the Reporting Period an evaluation of the Board, its committees, and individual directors took place in accordance with the process disclosed above.

Ethical and responsible decision making

Code of Conduct (Recommendations: 3.1 & 3.3)

The Company has establish a Code of Conduct as to the practices necessary to maintain confidence in the Company’s integrity, the practices necessary to take into account its legal obligations and the reasonable expectations of its stakeholders and the responsibility and accountability of individuals for reporting and investigating reports of unethical practices.

The Company’s Code of Conduct is available on the Company website.

Policy for Trading in Company Securities (Recommendations: 3.2 & 3.3)

The Company has established a policy concerning trading in the Company’s securities by directors, senior executives and employees, and their “connected persons” (which includes spouses and controlled entities).

A copy of the Company’s Policy for Trading in Company Securities can be found on the Company’s website.

Continuous Disclosure (Recommendation 5.1 & 5.2)

The Company has established written policies and procedures designed to ensure compliance with ASX Listing Rule requirements and accountability at a senior executive level for that compliance.

The Company’s Policy on Continuous Disclosure and a summary of the Company’s Compliance Procedures are available on the Company’s website.

Shareholder communication

(Recommendations 6.1 & 6.2)

The Company has designed a communications policy for promoting effective communication with shareholders and encouraging shareholder participation at general meetings.

The Company’s Shareholder Communication Policy is available on the Company’s website.

Annual Report 2011

Imugene Limited

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ADDItIONAL SECURItIES ExCHANGE INFORMAtION

Risk management

(Recommendations: 7.1, 7.2, 7.3 & 7.4)

The Board has adopted a Risk Management Policy, which sets out the Company’s risk profile. Under the policy, the Board is responsible for approving the Company’s policies on risk oversight and management and satisfying itself that management has developed and implemented a sound system of risk management and internal control.

Under the policy, the Board delegates day-to-day management of risk to the Managing Director, who is responsible for identifying, assessing, monitoring and managing risks. The Managing Director is also responsible for updating the Company’s material business risks to reflect any material changes, with the approval of the Board.

In fulfilling the duties of risk management, the Managing Director may have unrestricted access to Company employees, contractors and records and may obtain independent expert advice on any matter they believe appropriate, with the prior approval of the Board.

In addition, the following risk management measures have been adopted by the Board to manage the Company’s material business risks:

the Board has established financial control procedures to manage expenditure commitments and approval of payments for both capital and operational expenditure;
preparation and approval of an annual budget;
the Board has adopted a compliance procedure for the purpose of ensuring compliance with the Company's continuous disclosure obligations; and
the Board has adopted a corporate governance manual which contains other policies to assist the Company to establish and maintain its governance practices

The Company has in place a formal system of managing its material business risks. This system includes a risk register which is prepared by management to identify the Company's material business risks and risk management strategies for these risks. The risk register is reviewed quarterly and updated, as required. Management reports to the Board on material business risks at each board meeting.

The categories of risk identified as part of the Company’s risk management system:

Financial reporting
Operational
Technological
Reputation
Legal and compliance

The Board has required management to design, implement and maintain risk management and internal control systems to manage the Company's material business risks. The Board also requires management to report to it confirming that those risks are being managed effectively. Further, the Board has received a report from management as to the effectiveness of the Company's management of its material business risks.

The Managing Director and the Chief Financial Officer (or equivalent) have provided a declaration to the Board in accordance with section 295A of the Corporations Act and have assured the Board that such declaration is founded on a sound system of risk management and internal control and that the system is operating effectively in all material respects in relation to financial risk.

The Company’s Risk Management Policy is available on the Company’s website.

Imugene Limited

Annual Report 2011

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ADDItIONAL SECURItIES ExCHANGE INFORMAtION

Shareholder information

The shareholder information set out below was applicable as at 30 September 2011.

1. Twenty largest shareholders

Ordinary shares Wainford Holdings Ltd Dr Warwick Lamb Yambali Pty Ltd Mrs Treffna Dowland Mcrae Investments Pty Ltd Techstart Australia Pty Ltd Greenfeld Company Ltd Lawrence Crowe Consulting Pty Ltd Mr Mladen Marusic	Number Percentage
	12,835,207 8.94% 8,395,002 5.84% 5,000,000 3.48% 4,913,002 3.42% 2,718,833 1.89% 2,387,738 1.66% 2,358,831 1.64% 2,276,000 1.58% 2,216,611 1.54%
Mr Anthony Brendon Cope Mr Bradley Allan Sully Jadig Superannuation Pty Ltd Mr Henry Wiechecki Yambali Pty Ltd Mr Stephen James Moyle & Mrs Christine Maree Moyle Eurasia Pty Ltd Donwillow Pty Ltd Mr Joseph Levi Mr Peter John Graves Lost Ark Nominees Pty Ltd	2,032,840 1.42% 2,003,841 1.40% 2,000,000 1.39% 2,000,000 1.39% 1,950,000 1.36% 1,925,000 1.34% 1,833,334 1.28% 1,660,000 1.16% 1,619,000 1.13% 1,550,000 1.08% 1,500,000 1.04%
Total top 20	63,175,239 43.98%
Other	80,461,981 56.02%
Total ordinary shares on issue	143,637,220 100%

2. Distribution of equity securities

1 - 1,000 1,001 – 5,000 5,001 - 10,000 10,001 - 100,000 100,001 - and over	Ordinary shares Unlisted options
	549 - 296 - 320 - 676 - 193 -
	2,034 -

Annual Report 2011

Imugene Limited

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ADDItIONAL SECURItIES ExCHANGE INFORMAtION

3. Unquoted securities

Nil

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:

company:
Dominic Wainford Warwick Lamb Graham Dowland		Number held Percentage of issued shares
		12,655,207 8.81% 8,670,002 6.04% 7,667,576 5.34%

5. Voting rights

See Note 16 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.

7. Company secretary, registered and principal administrative office and share registry

Details can be found in the Corporate Directory at the beginning of the Annual Report.

Imugene Limited

Annual Report 2011

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==> picture [114 x 22] intentionally omitted <==

ABN 99 009 179 551

Level 20, Allendale Square 77 St Georges Terrace Perth WA 6000 Telephone: (61 8) 9440 2660 Facsimile: (61 8) 9440 2699

AI assistant

IMUGENE LIMITED — Annual Report 2011

65124_rns_2011-10-25_6d99b808-d5fa-40ef-948d-8b03e5190aae.pdf

Annual Report 2011

Contents

Corporate Directory

Directors

Solicitors

Company Secretary

Registered and Principal Office

Patent Attorney

Auditor

Laboratory

Bankers

Share Register

Securities Exchange Listing

Website and Email

Highlights

a Steady financial result

a PRRS vaccine development progresses

a Laboratory work completed

a Patent portfolio strengthened

Dear Shareholders

Global licensing agreement

About Imugene’s vaccines

Product pipeline

Porcine Reproductive and Respiratory Syndrome (PRRS) vaccine

About porcine respiratory and reproductive syndrome (PRRS)

The market

Other products in development

Imugene’s platform technology

Benefits

Intellectual Property and Patent Portfolio

Imugene’s Product Portfolio

Poultry

Pigs

a Coccidiosis preventative vaccine

a Porcine Reproductive &

Respiratory Disease preventative vaccine

a Avian Flu (H5N1) preventative vaccine & Diagnostic

a Avian Flu (H7 & H9) preventative vaccine

a Chicken Anemia Virus preventative vaccine

a Porcine Circovirus disease - preventative vaccine

a Classical Swine Fever preventative vaccine

a Swine Flu (H3 & H1) preventative vaccine

a Immune system boosting ‘Porcine Productivity Enhancer’

Pig Adenovirus Patents (PAV) (19813, 19814 and 19819 Families)

Poultry Adenovirus Patents (FAV) (19821 Family)

Methods and Compositions for Increasing tissue tropism of Recombinant Vectors (19822 Family)

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

PCV 2-Based Methods and Compositions for the treatment of Pigs (19823 Family)

Methods and Compositions for Use of a Coccidiosis Vaccine (20026 Family)

Methods and Compositions for Increasing titer of Recombinant Porcine Adenovirus-3 Vectors (22718 Family)

Porcine Adenovirus 3-based PRRSV Vaccines (23323 Family)

Directors

Current Directors

Mr. Graham Dowland – Non-Executive Chairman

Qualifications - B.Com, CA

Other Current Directorships of Australian Listed Public Companies

Special responsibilities

Dr. Warwick Lamb - Managing Director

DIRECtORS’ REPORt

Other Current Directorships of Australian Listed Public Companies

Special responsibilities

Mr Roger Steinepreis - Non-Executive Director

Other Current Directorships of Australian Listed Public Companies

Special responsibilities

Company Secretary

Ms Julie Foster

Appointed 29 May 2008

Principal activities

Dividends

Review of operations

DIRECtORS’ REPORt

Consolidated results

Significant changes in the state of affairs

Post balance date events

Likely developments

Environmental regulation

Greenhouse gas and energy data reporting requirements

IMUGENE LIMITED Annual Report 2011