IMUGENE LIMITED - Annual Report 2011

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ASX ANNOUNCEMENT

29 AUGUST 2011

2011 FINANCIAL REPORT

Imugene’s audited Financial Report for the year ended 30 June 2011 is attached herein together with the Appendix 4E statement.

Imugene is pleased to report a net profit after tax of $415,539 for the 2011 year. Net cash inflow from operations was $1,090,407.

The Company strengthened its financial position during the year following the execution of a global agreement with one of the world’s leading international animal health companies, to commercialise its vaccines for pigs and poultry.

This agreement gives our alliance partner exclusive global rights to all of Imugene's technologies and intellectual properties. The agreement provides exclusive rights to commercialise Imugene’s 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 Imugene's 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.

About Imugene

Imugene specialises in the development and commercialisation of novel animal health products for pigs and poultry. Our range of products under development includes vaccines to prevent important livestock diseases and productivity enhancers to improve the economics of raising commercial livestock.

Imugene’s biologically based vaccines are safer and easier to use than chemical based products. They have the potential to improve the health and welfare of these animals and address some of the major diseases and health issues threatening pig and poultry production worldwide.

ABN 99 009 179 551

Registered Office Level 20, Allendale Square, 77 St Georges Terrace, Perth WA 6000 Tel +61 8 9440 2660 Fax +61 8 9440 2699

www.imugene.com

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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

For more information please visit the Imugene Website www.imugene.com or contact:

Dr Warwick Lamb Mr Graham Dowland Kyahn Williamson Managing Director Chairman Investor Relations Buchan Consulting +61 2 9870 7330 +61 8 9440 2660 +61 (0) 40 1018 828

Appendix 4E Preliminary final report Year ended 30 June 2011

Rule 4.3A

Appendix 4E

Preliminary final report Year ended 30 June 2011

Name of entity IMUGENE LIMITED

ABN 99 009 179 551	Financial year ended (“current year”)
	30 June 2011
	Comparativeyear ended(“prioryear”)
	30 June 2010

Statement

This report is based on information extracted from the Annual Financial Report of Imugene Limited (Company) and the entities it controlled at the end of, or during the year ended 30 June 2011 (Consolidated Entity or Group).

Results for announcement to the market

	2011	2010	CHANGE	% CHANGE
	$’000	$’000	$’000
Revenues from ordinary activities	2,237	44	2,193	4,984%

Revenue from ordinary activities for the year has increased as a result of Imugene entering into a global agreement with one of the world’s leading animal health companies to commercialise its vaccines for pigs and poultry. During the year ended 30 June 2011, Imugene received payments totalling US$2.25 million for research fees and sublicensing costs.

Refer to the summary review of operations in the directors’ report attached for further information.

Profit / (Loss) from ordinary activities after tax	416	(1,535)	1,951	127%
attributable to members.

Net profit / (loss) for the period attributable to	416	(1,535)	1,951	127%
members

No dividends have been paid during or are proposed in respect of the financial year ended 30
June 2011.

			2011	2010
			¢	¢

			2011	2010
			¢	¢
Net Tangible	Assets per	Security	1.35	0.83

30/6/2011

Appendix 4E Page 1

Appendix 4E Preliminary final report Year ended 30 June 2011

Appendix 4E – Contents and checklist of requirements For the year ended 30 June 2011


1.	Reporting period and the previous corresponding period.	Refer Page 1 of this Appendix 4E
2.	Results for announcement to the market.	Refer Page 1 of this Appendix 4E
3.	Consolidated statement of comprehensive income with notes to the statement.	Refer Financial Report attached
4.	Statement of financial position with notes to the statement.	Refer Financial Report attached
5.	Consolidated statement of cash flows with notes to the statement.	Refer Financial Report attached
6.	Details of individual and total dividends or distributions and dividend or distribution payments.	No dividends or other distributions have been paid during or are proposed in respect of the financial year ended 30 June2011.
7.	Details of dividend or distribution reinvestment plans in operation and the last date for the receipt of an election notice for participation in any dividend or distribution reinvestment plan.	No dividends or other distributions plans are in operation in respect of the financial year ended 30 June 2011.
8.	Statement of changes in equity	Refer Financial Report attached
9.	Net tangible assets per security.	Refer Page 1 of this Appendix 4E
10.	Details of entities over which control has been gained or lost during the period.	Not applicable
11.	Details of joint venture entities and associated entities.	The Company has no material associated orjoint venture entities.
12.	Any other significant information needed by an investor to make an informed assessment of the entity’s financial performance and financial position	Refer Page 3 of this Appendix 4E
13.	Accounting standards used in compiling reports by foreign entities (e.g. International Accounting Standards).	Not applicable.
14.	A commentary on the results for the period.	Refer Page 3 of this Appendix 4E and the Directors’ Report in the attached Financial Report.
15.	A statement as to whether the report is based on accounts which have been audited or subject to review, are in the process of being audited or reviewed, or have not yet been audited or reviewed.	Refer Page 1 of this Appendix 4E. This report is based on accounts which have been audited.
16.	If the accounts have not yet been audited or subject to review and are likely to be subject to dispute or qualification, a description of the likely dispute or qualification.	Not applicable.
17.	If the accounts have been audited or subject to review and are subject to dispute or qualification, a description of the dispute or qualification	Not applicable.

30/6/2011

Appendix 4E Page 2

Appendix 4E Preliminary final report Year ended 30 June 2011

Commentary on results

For the year ended 30 June 2011

Trends in other income

Other income is $351,255 lower than 2010, a decrease of 112%. This decrease is due to a decline in grant income as a result of a decline in eligible research and development activities during the current financial year.

Other Significant Features of Operating Performance

Commercialisation spend has decreased by $153,689 (31%) in comparison to last year due to a Strategic Alliance being in place for most of the financial year which provided exclusivity of technology to the Alliance Partner.

Unrealised foreign exchange loss increased by $75,697 (133%) as a result of the translation of US dollar cash and cash equivalents into Australian dollars.

30/6/2011

Appendix 4E Page 3

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ABN 99 009 179 551
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Financial Report

For The Year Ended 30 June 2011

ABN 99 009 179 551

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	Page
Corporate Directory	1
Directors’ Report	2
Auditor’s Independence Declaration	15
Independent Review Report	16
Consolidated Statement of Comprehensive Income	18
Consolidated Statement of Financial Position	19
Consolidated Statement of Changes in Equity	20
Consolidated Statement of Cash Flows	21
Notes to the Consolidated Financial Statements	22
Directors’ Declaration	46

ABN 99 009 179 551

Corporate Directory

Directors

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

Company Secretary

Ms Julie Foster

Registered and Principal Office

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

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Solicitors

Steinepreis Paganin Level 4, 16 Milligan Street Perth WA 6000

Patent Attorney

McAndrews Held & Malloy Ltd 500 West Madison Street 34[th ] 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

Securities Exchange Listing

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

Website and Email

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

www.imugene.com [email protected]

Directors’ Report

ABN 99 009 179 551

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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.

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.

Directors’ Report

ABN 99 009 179 551

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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.

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).

Directors’ Report

ABN 99 009 179 551

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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.

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.

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.

Directors’ Report

ABN 99 009 179 551

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Consolidated results

Consolidated results
Consolidated profit / loss before income tax benefit Income tax benefit Net profit / (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.

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.

Directors’ Report

ABN 99 009 179 551

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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
RogerSteinepreis	5	5
Audit committee meetings
Graham Dowland	2	2
Warwick Lamb	2	2
RogerSteinepreis	2	2
Remuneration committee meetings
Graham Dowland	1	1
Warwick Lamb	1	1
RogerSteinepreis	1	1

Share Options

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

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

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

Directors’ Report

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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.

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. Non-executive directors do not receive share options.

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

Directors’ Report

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

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 salarysacrifice 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 performancerelated 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:

		Performance related cash	Performance related cash	bonus
		Contractual	Discretionary
	Grant	performance	performance
	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*
MichaelSheppard	Mar 11	-	22,500	22,500	100%	-

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.

Directors’ Report

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

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.

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.

in the following tables.
	Short-term benefits			Post-employment benefits		Share- based payment
	Cash		*Non-
2011	salary and fees	Cash bonus	monetary benefits	Super- annuation	Retirement benefits	Options	Total	Performance related
	$	$	$	$	$	$	$	%
*Non-executive*
*directors*
Roger Steinepreis	44,992	-	-	-	-	-	44,992	-
Graham Dowland1	40,138			3,612			43,750	-
Sub-total non-
executive directors	85,130	-	-	3,612	-	-	88,742
*Executive directors*
Graham Dowland1	72,915	45,000	-	-	-	-	117,915	38%
Warwick Lamb	236,451	65,000	-	21,588	-	-	323,039	20%
Sub-total executive
directors	309,366	110,000 -		21,588	-	-	440,954
*Other executives*
Michael Sheppard2	88,488	22,500	-	7,964	-	-	118,952	19%
JulieFoster3	-	-	-	-	-	-	-	-
Sub-total other
executives	88,488	22,500	-	7,964	-	-	118,952
Total – key
management
personnel	482,984	132,500	-	33,164	-	-	648,648

ABN 99 009 179 551

Directors’ Report

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B. Details of remuneration (continued)

Short-term benefits Post-employment benefits Share- based payment	Short-term benefits Post-employment benefits Share- based payment
2010 Cash salary and fees Cash bonus *Non- monetary benefits Super- annuation $ $ $ $	Retirement benefits Options Total Performance related $ $ $ %
*Non-executive* *directors* Roger Steinepreis 50,000 - - -	- - 50,000 -
Sub-total non- executive directors 50,000 - - -	- - 50,000
*Executive directors* Graham Dowland 175,000 - - - Warwick Lamb 230,590 - 27,174 22,893	- - 175,000 - - - 280,657 -
Sub-total executive directors 405,590 - 27,174 22,893	455,657
*Other executives* Michael Sheppard2 137,137 - - 12,342 Julie Foster3 - - - -	- - 149,479 - - - - -
Sub-total other executives 137,137 - - 12,342	- - 149,479
Total – key management personnel 592,727 - 27,174 35,235	- - 655,136

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).
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.

	Fixed remuneration At risk –STI At risk - LTI*
	2011 2010 2011 2010 2011 2010
Directors of Imugene Limited Graham Dowland Warwick Lamb RogerSteinepreis	72% 100% 28% - - - 80% 100% 20% - - - 100% 100% - - - -
Other key management personnel MichaelSheppard	of the Group 19% 100% 81% - - -

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.

Directors’ Report

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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.

Directors’ Report

ABN 99 009 179 551

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

	A	B	C	D
	Remuneration
	consisting of	Value at grant	Value at	Value at lapse
Name	options	date	exercise date	date
	%	$	$	$
Directors of Imugene Limited
Graham Dowland	-	-	-	-
Warwick Lamb	-	-	-	-
RogerSteinepreis	-	-	-	-
Other key management personnel of the Group
MichaelSheppard	-	-	-	-

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.

Directors’ Report

ABN 99 009 179 551

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E. Additional Information (continued)

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.

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:

	30 June 2011 30 June 2010 30 June 2009 30 June 2008 30 June 2007 $ $ $ $ $
Revenue Net profit / (loss) before tax Net (loss) / profit after tax	2,237,275 44,018 3,024,028 92,214 165,534 179,539 (1,765,041) 252,500 (2,149,664) (2,561,309)
	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 2011	30 June 2010	30 June 2009	30 June 2008	30 June 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)

- 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

Directors’ Report

ABN 99 009 179 551

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Auditor’s Independence Declaration

The auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is included on page 15 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

ABN 99 009 179 551

Auditor’s Independence Declaration

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Independent Audit Report

ABN 99 009 179 551

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Independent Audit Report

ABN 99 009 179 551

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ABN 99 009 179 551

Consolidated statement of comprehensive income

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For the year ended 30 June 2011

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) Profit / (loss) before income tax Income tax benefit (8) Net profit / (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)	Consolidated	Consolidated
	2011 $ 2,237,275 (39,138) (491,687) (151,378) (335,251) (341,140) (132,520) (566,622) 179,539 236,000 415,539 - 415,539 0.29 0.29	2010 $
		44,018 312,117 (522,337) (151,592) (488,940) (341,140) (56,823) (560,344)
		(1,765,041)
		230,000
		(1,535,041)
		-
		(1,535,041)
		(1.1) (1.1)

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

ABN 99 009 179 551

Consolidated statement of financial position

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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 Trade and other payables (14) Provisions (15) Total liabilities Net assets Equity Contributed equity (16) Reserves (17) Accumulated losses (17) Total equity	Consolidated	Consolidated
	2011 $ 1,905,942 53,223 466,000 2,425,165 2,213 2,259,745 2,261,958 4,687,123 338,351 141,926 480,277 4,206,846 14,907,453 966,003 (11,666,610) 4,206,846	2010 $
		793,062 180,508 520,000
		1,493,570
		4,226 2,600,885
		2,605,111
		4,098,681
		195,481 111,893
		307,374
		3,791,307
		14,907,453 966,003 (12,082,149)
		3,791,307

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

Consolidated statement of changes in equity

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ABN 99 009 179 551

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 Profit 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	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.

ABN 99 009 179 551

Consolidated statement of cash flows

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For the year ended 30 June 2011

Note Cash flows from operating activities Receipts from customers Payments to suppliers and employees Other income Net cash inflow / (outflow) from operating activities (23) Cash flows from investing activities Payments for property, plant and equipment Interest received Net cash inflow from investing activities Net increase / (decrease) in cash and cash equivalents 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)	Consolidated	Consolidated
	2011 $ 2,840,303 (1,749,896) - 1,090,407 - 11,174 11,174 1,101,581 793,062 11,299 1,905,942	2010 $
		164,703 (1,907,513) -
		(1,742,810)
		(3,241) 44,018
		40,777
		(1,702,033) 2,487,316 7,779
		793,062

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

Notes to the consolidated financial statements

ABN 99 009 179 551

For the year ended 30 June 2011

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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 deconsolidated from the date that control ceases.

Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries are consistent with the policies adopted by the Group. Investments in subsidiaries are accounted for at cost in the individual financial statements of Imugene Limited.

Notes to the consolidated financial statements

ABN 99 009 179 551

For the year ended 30 June 2011

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2. Summary of significant accounting policies (continued)

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.

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.

Notes to the consolidated financial statements

ABN 99 009 179 551

For the year ended 30 June 2011

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2. Summary of significant accounting policies (continued)

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.

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.

Notes to the consolidated financial statements

ABN 99 009 179 551

For the year ended 30 June 2011

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2. Summary of significant accounting policies (continued)

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash- generating units). Non-financial assets other than goodwill that suffered 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.

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.

ABN 99 009 179 551

For the year ended 30 June 2011

Notes to the consolidated financial statements

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2. Summary of significant accounting policies (continued)

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.

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.

Notes to the consolidated financial statements

ABN 99 009 179 551

For the year ended 30 June 2011

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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 cost-effective 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.

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.

ABN 99 009 179 551

For the year ended 30 June 2011

Notes to the consolidated financial statements

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2. Summary of significant accounting policies (continued)

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.

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.

Notes to the consolidated financial statements

ABN 99 009 179 551

For the year ended 30 June 2011

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2. Summary of significant accounting policies (continued)

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.

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

Notes to the consolidated financial statements

ABN 99 009 179 551

For the year ended 30 June 2011

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3. Financial risk management

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

Imugene’s board of directors (Board) performs the duties of a risk management committee in identifying and evaluating sources of financial and other risks. The Board 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	Consolidated
	2011 $ 1,905,942 53,233 1,959,175 338,351	2010 $
		793,062 180,508
		973,570
		195,481

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	Consolidated
	2011 US$ 1,769,262	2010 US$
		208,956

Notes to the consolidated financial statements

ABN 99 009 179 551

For the year ended 30 June 2011

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3. Financial risk management (continued)

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	Consolidated
	2011 $ 1,905,942	2010 $
		793,062

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

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 30.

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

ABN 99 009 179 551

Notes to the consolidated financial statements

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For the year ended 30 June 2011

3. Financial risk management (continued)

(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.

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).

ABN 99 009 179 551

Notes to the consolidated financial statements

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For the year ended 30 June 2011

5. Revenue

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

6. Other Income

Government grants Other	Consolidated	Consolidated
	2011 $ (50,437) 11,299 (39,138)	2010 $
		304,338 7,779
		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 benefits Business development Employee benefits Amortisation of intangibles Amortisation expense	Consolidated	Consolidated
	2011 $ 345,627 151,378 341,140	2010 $
		350,669
		151,592
		341,140

ABN 99 009 179 551

Notes to the consolidated financial statements

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For the year ended 30 June 2011

7. Expenses (continued)

Expenses (continued)
Commercialisation expenses Patent expenses Employee benefits Corporate and administration expense Depreciation of tangible fixed assets Unrealised foreign exchange loss	Consolidated
	2011 $ 119,276 215,975 335,251 2,013 132,520	2010 $
		280,826 208,114
		488,940
		1,868
		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

Income Tax
	Consolidated
	2011	2010
	$	$
Current tax	236,000	230,000
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 profit / (loss) before tax from continuing operations	179,539	(1,765,041)
Tax at the Australian statutory income tax rate of 30% (2010: 30%)	53,862	(529,512)
Tax effect of amounts which are not deductible /(taxable) in calculating
taxable income
Add tax effect of:
Research & development expenses (claimed under Tax Concession)	189,036	186,635
Amortisation of intangibles	102,342	102,342
Sundry other	19,642	7,862
Revenue losses not recognized	(269,369)	275,320
Less tax effect of:
Patent costs	95,513	42,647
	-	-
Research & Development Tax Concession
Current Year	236,000	230,000
Under provision recognised in prior year	-	-
Income tax benefit	236,000	230,000

ABN 99 009 179 551

Notes to the consolidated financial statements

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For the year ended 30 June 2011

8. Income Tax (continued)

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 benefits Other Deferred tax asset not yet brought to account	Consolidated
	2011 $ 1,774,576 284,775 6,219 42,578 21,473 2,129,621 (2,129,621) -	2010 $
		2,139,366 182,433 14,959 33,568 29,415
		2,399,741 (2,399,741)
		-

9. Cash and cash equivalents

Cash and cash equivalents
Cash at bank and in hand – AUS dollars Cash at bank and in hand – US dollars	Consolidated
	2011 $ 236,378 1,669,564 1,905,942	2010 $
		549,144 243,918
		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 $ 52,500 723 53,223	2010 $
		179,000 1,508
		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

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.

ABN 99 009 179 551

Notes to the consolidated financial statements

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For the year ended 30 June 2011

11. Tax assets Research and Development Tax Concession receivable 12. 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	Consolidated	Consolidated
	2011 2010 $ $ 466,000 520,000 Consolidated	2010 $
		520,000
	2011 $ 24,089 (21,876) 2,213 4,226 - (2,013) 2,213	2010 $
		24,089 (19,863)
		4,226
		2,853 3,241 (1,868)
		4,226

ABN 99 009 179 551

Notes to the consolidated financial statements

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For the year ended 30 June 2011

13. Intangible assets

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	Consolidated
	2011 $ 5,117,095 5,117,095 (2,516,210) (341,140) (2,857,350) 2,600,885 2,259,745	2010 $
		5,117,095
		5,117,095 (2,175,070) (341,140)
		(2,516,210) 2,942,025
		2,600,885

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
Trade payables Other payables	Consolidated
	2011 $ 73,591 264,760 338,351	2010 $
		169,067 26,414
		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.

ABN 99 009 179 551

Notes to the consolidated financial statements

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For the year ended 30 June 2011

15. Provision

Provision
Employee benefits - annual leave	Consolidated
	2011 $ 141,926	2010 $
		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.

16. Contributed equity

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

Date	Number of shares	$
01 July 2009 30 June 2010 30 June 2011	143,637,220 143,637,220 143,637,220	14,907,453
		14,907,453
		14,907,453

ABN 99 009 179 551

Notes to the consolidated financial statements

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For the year ended 30 June 2011

17. Reserves and accumulated losses

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

18. Options

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

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

ABN 99 009 179 551

For the year ended 30 June 2011

Notes to the consolidated financial statements

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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.

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

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

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

ABN 99 009 179 551

For the year ended 30 June 2011

Notes to the consolidated financial statements

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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.

c) Key management personnel compensation

Key management personnel compensation
Short - term employee benefits Post-employment benefits	Consolidated
	2011 $ 615,484 33,164 648,648	2010 $
		619,901 35,235
		655,136

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.

					Balance	Balance
	Balance at	Granted as			when	at the
	start of the	compen-		Other	ceased to	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 - - - - - - - -

ABN 99 009 179 551

Notes to the consolidated financial statements

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For the year ended 30 June 2011

20. Key management personal disclosures (continued)

					Balance	Balance
	Balance at	Granted as			when	at the
	start of the	compen-		Other	ceased to	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
MichaelSheppard	1,250,000	-	-	(1,250,000)	-	-	-	-

(ii) Share holdings

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

	Balance at start			Balance at the
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
RogerSteinepreis	-	-	-	-
Other key management personnel of the Group
MichaelSheppard	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
MichaelSheppard	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.

ABN 99 009 179 551

For the year ended 30 June 2011

Notes to the consolidated financial statements

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20. Key management personal disclosures (continued)

(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.

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 financial statements Other assurance services Total auditors’ remuneration	Consolidated	Consolidated
	2011 $ 39,000 - 39,000	2010 $
		43,086 -
		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	2011 $ 2,176,591 21,547 2,198,138	2010 $
		304,338 51,797
		356,135

ABN 99 009 179 551

Notes to the consolidated financial statements

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For the year ended 30 June 2011

22. Segment information (continued)

*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)* Profit / (loss) is disclosed below based on the reportable segment: Profit / (loss) from research, development and commercialisation (Loss) from other corporate activities	2011 $ 2,778,245 1,905,942 2,936 4,687,123 857,135 (677,596) 179,539	2010 $
		3,299,885 793,062 5,734
		4,098,681
		(1,199,672) (565,369)
		(1,765,041)

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

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

ABN 99 009 179 551

Notes to the consolidated financial statements

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For the year ended 30 June 2011

24. Earnings / (loss) per share

Basic earnings / (loss) per share Profit / (loss) attributable to the ordinary equity holders of the Company Diluted earnings / (loss) per share Profit / (loss) attributable to the ordinary equity holders of the Company Profit / (loss) used in calculation of basic / diluted earnings / (loss) per share Profit / (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	Consolidated
	2011 Cents 0.29 0.29 $ 415,539 Number 143,637,220 143,637,220	2010 Cents
		(1.1) (1.1) $
		(1,535,041) Number
		143,637,220 143,637,220

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).

ABN 99 009 179 551

Directors’ Declaration

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In the Directors’ opinion:

(a) the financial statements and the accompanying notes set out on pages 18 to 45, 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 performance for 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 7 and 13 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

AI assistant

IMUGENE LIMITED — Annual Report 2011

65124_rns_2011-08-28_be2bfd31-5eeb-4dd8-bcc6-4963f8b86a97.pdf

ASX ANNOUNCEMENT

29 AUGUST 2011

2011 FINANCIAL REPORT

About Imugene

Appendix 4E

Name of entity IMUGENE LIMITED

Statement

Results for announcement to the market

Commentary on results

Trends in other income

Other Significant Features of Operating Performance

Financial Report

Corporate Directory

Directors

Company Secretary

Registered and Principal Office

Solicitors

Patent Attorney

Auditor

Laboratory

Bankers

Share Register

Securities Exchange Listing

Website and Email

Directors

Current Directors

Mr. Graham Dowland – Non-Executive Chairman Qualifications - B.Com, CA

Special responsibilities

Dr. Warwick Lamb - Managing Director

Qualifications – BVSc, M Vet Clin Stud, FACVSc

Mr Roger Steinepreis - Non-Executive Director

Qualifications - B.Juris LLB

Other Current Directorships of Australian Listed Public Companies

Special responsibilities

Company Secretary

Ms Julie Foster

Principal activities

Dividends

Review of operations

Consolidated results

Significant changes in the state of affairs

Post balance date events

Likely developments

Environmental regulation

Greenhouse gas and energy data reporting requirements

Meetings of Directors

Share Options

Remuneration report (audited)

Details of key management personnel

(a) Directors

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

Non-executive directors

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

Retirement benefits and allowances

Other benefits

Executive pay

Base pay

Short-term incentives

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

Long-term incentives

B. Details of remuneration

Amounts of remuneration

Directors’ Report

B. Details of remuneration (continued)

C. Service agreements

Mr Graham Dowland - Non – Executive Chairman

Dr Warwick Lamb, Managing Director

D. Share-based compensation

Options

E. Additional Information

Share –based compensation: Options

E. Additional Information (continued)

Relationship between the remuneration policy and Group performance

- End of audited remuneration report -

Non-Audit Services

Insurance and Indemnity of Officers and Auditors

Auditor’s Independence Declaration

IMUGENE LIMITED Annual Report 2011