==> picture [483 x 85] intentionally omitted <==

Annual Report 2011–12

Contents
Letter from the Chairman	3
Linguet	6
The Market Opportunity	8
The Linguet Development Program	9
Imugene: Intellectual Property	13
Linguet IP	14
Animal Health IP	15
Animal Health Product Portfolio	17
FULL YEAR STATUTORY ACCOUNTS	19
Corporate Information	20
Directors’ Report	21
Review of Operations	25
Lingual Consegna Acquisition	27
Independent Auditor’s Report	40
Consolidated Statement of Comprehensive Income	43
Notes to the Consolidated Financial Statements	45
31 August 2012 Additional information required by ASX	81
Corporate Governance Statement	84

ISSN 2201-1986

This work is copyright. Apart from any use as permitted under the Copyright Act 1968, no part may be produced by any process without prior written permission from Imugene Limited.

ABN: 99 009 179 551

==> picture [118 x 109] intentionally omitted <==

Letter from the Chairman

Dear Shareholders

As the new Chairman of your Company, I would like to welcome you to Imugene Ltd and our 2012 Annual Report. Thank you for investing in what I sincerely believe has the potential to become an outstanding and successful business. This Annual Report is our opportunity to encapsulate what has transpired in the last year and moreover share with you our plans for the future.

Doubtless you will be aware of the significant changes that the Company has undergone during this time. These changes are not only reflected in the new and exciting asset portfolio that we have acquired, but also the new board and management that complements this dynamic shift toward drug delivery technologies. Underpinning the new Imugene is a team which has a longstanding and proven track record in monetising life science deals. I believe we have amassed the ingredients for a very exciting year ahead with the combination of this outstanding team, promising technology and sound commercial strategy.

Since the acquisition of Lingual Consegna Pty Ltd in August 2012, we have focused our efforts on developing and implementing a strategy that should yield cash flow to your Company in the 2013/2014 financial year. This strategy simply revolves around enabling technologies for better delivery of existing drugs. Allow me to explain.

Imugene will use its proprietary drug delivery technology to improve the efficacy and safety of a diverse number of prescription and over the counter medicines. Its platform technology, known as Linguet[TM] enables the active ingredient of drugs to be absorbed straight into the bloodstream when placed inside the cheek (via the buccal mucosa) or under the tongue (sublingual). Linguet’s novel action is to facilitate the controlled and precise delivery of the drug into the bloodstream, whilst bypassing the digestive system, which can enhance the performance and tolerability of drugs that are usually poorly absorbed or tolerated when administered orally.

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

Each new drug formulation being developed by Imugene addresses an unmet market need and uses well characterised molecules that have known and proven regulatory routes. Our focus is on advancing selected opportunities with the potential to generate near term revenues, as opposed to a traditional biotech platform technology model that focuses on a single opportunity licensing deal far into the future.

The first product to be developed by applying this technology is a new formulation of Vitamin D. This target has been selected as the Linguet technology can deliver a significant improvement over existing products and it addresses a rapidly growing market. Vitamin D deficiency is a therapeutic area that has seen rapid growth in sales over the past five years, and has become one of the fastest growing nutrients worldwide. According to Euromonitor data, US Vitamin D sales have grown from $141.1m in 2005 to $366.3m in 2009, with CARG growth expected to be 11.2 per cent in the US between 2009 and 2014.

A key benefit of the Linguet technology is that it’s an oral delivery form with kinetics approaching an injection (if desired). Hence it is particularly useful for drugs where “on demand” dosing such as for migraine, acute pain, allergic reactions, erectile dysfunction, and acute seizures are desired.

Over the next 12 months pharmaceutical product development programs are scheduled to be initiated targeting Parkinson’s Disease (dopamine agonist), pain (a specific NSAID), men’s health (erectile dysfunction) and status epilepticus. The in-house knowledge and patent position on Linguet formulations incorporating NSAID’s is very strong and will be leveraged by the experience of the board and management team to develop and partner these new drug formulations.

This creates opportunities for Imugene as our patented delivery technologies have the potential to extend patent life and market exclusivity for such drugs. Accordingly, we will aggressively seek to license our intellectual property to pharmaceutical companies seeking to differentiate their products to preserve brand equity.

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

Discussions were also undertaken with interested parties to determine the level of commercial interest in progressing the animal health technology. These discussions have now been terminated. It is our intention to terminate the license agreements associated with our animal health technology. Other animal health patents owned and developed by Imugene will be discontinued and no further development of these animal health technologies is anticipated.

I very much look forward to all of us sharing in the upside that should arise out of the preparatory process we have been through internally this last year. Historically, I have found a major component of success to not only include good product and great minds, but also the development of an immediate, medium and long term goal driven plan, that becomes a process of execution rather than an ad hoc administration. I believe we have all these components in place as I write this letter and it is now time to get the job done.

It is my intention to get to know as many of you as possible moving forward and I would urge you to contact me at our office in Melbourne 03 9417 5001 at your convenience. We also plan on having regular shareholder updates during the course of next year. I trust you might spend the time reading about your assets and I look forward to personally answering any of your questions you may have, as indeed will any of the Imugene team.

As a final note, I would like to thank our team and the retiring board members, in particular, your previous Chairman, Graham Dowlan for the marvelous effort and application they have shown in building this new enterprise and wish everyone a happy and prosperous forthcoming holiday season and 2013. Again, I am grateful for your investment and belief in our company, and I remain,

Yours faithfully

==> picture [92 x 59] intentionally omitted <==

Fabio Pannuti Chairman Imugene Limited

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

Linguet[TM]

Linguet is a proprietary drug delivery technology that improves the efficacy and safety of a diverse number of prescription and over the counter medicines. The platform technology enables the active ingredient of drugs to be absorbed straight into the bloodstream when placed inside the cheek (via the buccal mucosa) or under the tongue (sublingual).

Through the Linguet buccal and sublingual tablet technology, many drugs that are usually poorly absorbed or tolerated by oral administration can be delivered to the bloodstream more effectively. Most importantly, the key to the Linguet platform is that the amount and rate of drug to be delivered through the oral mucosa directly to the bloodstream can be precisely controlled.

This approach also potentially allows for lower doses of the active drug, while achieving a better result. With conventional orally administered tablets, there is frequently loss of drug through enzymatic degradation in the stomach and metabolism in the liver (the so-called hepatic first pass effect). This has the effect of reducing the amount of drug available to the site of action. As a consequence, higher doses of the active drug are required to compensate for the amount of the drug that is lost in the stomach and liver. This raises the risk of side effects as well as increasing the cost of the product.

A further advantage of the Linguet technology is that it utilises excipients that are currently used in ingested tablets, albeit in different proportions, to modulate release and absorption rates and to assist in taste masking of unpalatable drugs. All components of the Linguet drug formulation are blended in a normal dry powder process and compressed in standard tableting machines, meaning that manufacturing costs are minimised. Products manufactured using the Linguet technology can be packed in conventional pharmaceutical product packaging.

6 Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

Possible applications for Linguet include pharmaceuticals due to come off patent in the near future. Linguet offers the potential for extending market exclusivity or patent “evergreening” through development of new and patented dosage forms.

At the same time, many generics companies are seeking to differentiate their products with meaningful added value while not becoming exposed to the high costs and risks associated with development of novel chemical entities. Novel delivery platforms such as Linguet address this opportunity by facilitating competitive advantage with low risk and low cost.

Accordingly, market opportunities for Linguet lie with innovator pharmaceutical companies as well as with their generic counterparts.

LINGUET TECHNOLOGY PLATFORM

==> picture [487 x 62] intentionally omitted <==

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

CNS
Psychiatric conditions conditions – Vaginal
PectorisAngina Insomnia Nausea – Bipolar disorder, Parkinson’s Epilepsy, Disease, Pain including paliative care, migraine infl ammitory diseaseAnti- DysfunctionSexual and Bacterial (Candiasis infections Vaginitis
Anxiety, Alzheimer’s Vaginosis
Schizophrenia Disease
----- End of picture text -----

Linguet is able to be used in a wide range of therapeutic applications enabling a rich hunting ground to create world-class products that meet the commercial need.

Such breadth of choice allows for a de-risked business model.

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

The Market Opportunity

Linguet is targeted at those drugs which:

Show poor oral bioavailability (e.g. progesterone, testosterone)

Require rapid onset of action (e.g. analgesics, erectile dysfunction, acute seizure products)
Cause gastrointestinal irritation (e.g. NSAIDs, bisphosphonates & statins)
Are degraded in the gastrointestinal tract and require dose compensation (e.g. hormone replacement formulations)
Are adversely affected by high first-pass metabolism in the liver and thus rely on massive over dosing in order to deliver the correct therapeutic outcome (e.g. pain relief)

Ideal candidates for Linguet delivery are those drugs that exhibit some or all of these characteristics.

In executing its commercial strategy for Linguet, Imugene will target those companies with products in these categories.

The rapid onset of action that is a characteristic of the Linguet technology is particularly relevant to products in, for example, pain relief (both over-the-counter and prescription) and in the treatment of erectile dysfunction. Imugene will actively target potential licensees with products in these categories during the commercialisation phase of Linguet.

8 Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

The Linguet Development Program

While the Linguet technology has a potentially broad application, Imugene has selected four priority targets initially. Each new drug formulation is chosen to provide a solution to a current market opportunity and uses well characterised molecules that have known and proven regulatory routes. The focus is on pushing early revenue generating products, rather than a classic drug delivery model that focuses on a single opportunity licensing deal far into the future. We are targeting pharmaceutical products that do not need significant clinical investment to gain regulatory approval. This ensures the most cost effective and most rapid path to market. This is how the Linguet model differs from the classic drug delivery model. See diagram below.

Classic Drug Delivery Model	LINGUET Model
Long initial development time prior to frst commercialisation;	Short initial development time prior to frst commercialisation;
High cash burn;	Low cash burn;
Requirement for licensing partners to deliver milestones and royalties;	Ability to launch our own product in certain markets if necessary as well as ability to
	partner;
High levels of technology patents;	Focus on getting products licensed / approved with using technology patents to
	support the commercial activities;
Licensing partners are able to direct the development program and delay key	Not reliant on classical licensing partners;
milestones;
Target therapeutic areas that need signifcant clinical investment to require regulatory	Streamlined development program targeted at known molecules preventing need for
approval; and	signifcant clinical trial investment to gain
	regulatory approval; and
Focus only on products that can be used using narrow platforms.	Target products that can generate cash & revenues regardless of platform or
	therapeutic area.

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

First Target: Vitamin D

The initial product development is for the treatment of Vitamin D deficiency, a therapeutic area that has seen rapid growth in sales over the past five years, and has become one of the fastest growing nutrients worldwide. According to Euromonitor data, US Vitamin D sales have grown from $141.1m in 2005 to $366.3m in 2009, with CARG growth expected to be 11.2 per cent in the US between 2009 and 2014.

Vitamin D deficiency has been linked to a wide range of conditions including prediabetes (metabolic syndrome), osteoporosis, cardiovascular health, Alzheimer’s and as reported recently in the peer-reviewed Journal of Clinical Endocrinology and Metabolism , there is a significant association of Vitamin D deficiency with the rate of progress of low-risk prostate cancer under active surveillance.[1]

The major source of Vitamin D for humans derives from sun exposure however this is not recommended due to the increased risk of skin cancer. This combined with increased use of high factor sun creams and other lifestyle and demographic changes has led to a significant increase in Vitamin D deficiency in the UK and other geographic markets. With increased awareness, and more accurate assay methods, the level of Vitamin D deficiency and its role in a number of therapeutic areas, it has become more important to formulate effective treatments. In the first seven months of 2012, 100 new international clinical trials on the use and impact of Vitamin D were registered.[2]

The Imugene Linguet product uses a specific form of Vitamin D which has been shown to be five times more effective in raising blood serum levels of Vitamin D than the usual colecalciferol form of the vitamin that has been traditionally used as a supplement.

Four additional targets

As noted above, a key benefit of the Linguet technology is that it’s an oral delivery form with kinetics almost as fast as an injection (if desired). Hence it is particularly useful for drugs where an immediate effect from dosing such as for migraine, acute pain, allergic reactions, erectile dysfunction, acute seizures are desired.

In addition to Vitamin D, over the next 12 months a further four specific pharmaceutical product programs are scheduled for development. The target areas selected are Parkinson’s Disease (dopamine agonist), pain (a specific NSAID), men’s health (erectile dysfunction) and status epilepticus, a life threatening brain condition where the patient experiences seizures lasting longer than 30 minutes at at time. The in-house knowledge and patent position on Linguet formulations incorporating NSAID’s is very strong and will be leveraged by the experience of the board and management team to develop and partner these new drug formulations.

10 Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

The development program will use outsource partners to minimise internal overheads enabling maximum effort in generating products and early revenues. Importantly, an EU approved pharmaceutical manufacturer has been engaged to conduct formulation development and subsequent scale-up. Combined with leading EU-based Contract Research Organisation’s and specialist regulatory and ‘freedom to operate’ experts in the pharmaceutical space, Imugene is now initiating its fast-track drug development program.

==> picture [441 x 376] intentionally omitted <==

ABN: 99 009 179 551

The Linguet product development program should focus upon simple selection criteria as below:

==> picture [411 x 188] intentionally omitted <==

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

Low Cost
Low Risk
A: Fast to market products, technically simple, low
Low IP
hanging fruit. Large range, limited value. EU focused.
Short time to
commercialisation
B: Require more clinical data with longer timelines
and higher cost than A molecules. Less opportunities.
Transfer of A molecules to US – increased IP
required
High Cost
High Risk C: US focused, high value high risk
High IP developments. High Reward, requires strong
Long time to IP family. Limited opportunities
commercialisation
----- End of picture text -----

The Linguet pharmaceutical development plan is based on three pillars of time to market, risk and return. Our first specific formulation of Vitamin D has been selected based on our ability to bring it to market quickly (Q1 2014) and at very low cost by industry standards (less than A$500K), and is EU focused where the expertise of the development team resides. Generic pharmaceutical products focusing on Parkinson’s Disease and status epilepticus are planned for release later in 2014, also in the EU initially. The second and third pillars relate to launching products with progressively higher risk and clinical cost in the US and elsewhere, but with greater return on investment. These include pharmaceutical products targeting pain and erectile dysfunction.

Vitamin D3 Supplementation at 4000 international units per day for one year results in a decrease of positive cores at repeat biopsy in subjects with low-risk prostate cancer under active surveillance. Marshall DT, et al J Clin Endocrinol Metab. 2012 Jul;97(7):231524.
Source WHO – International Clinical Registry

12 Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

Imugene: Intellectual Property

Imugene currently has rights to a family of patents/patent applications and Trademarks that protect the core drug delivery platform technology (Linguet). The future competitive position of Imugene will depend on its ability to obtain and maintain patent protection of existing and future intellectual property, including its platform technology, improvements, products, clinical uses and production processes.

A family of patents and patent applications protects the Linguet technology, as follows:

‘Buccal Delivery System’, granted in Australia (AU 2006 230,820), Russia (2,406,480) and New Zealand (NZ 563,311), with applications proceeding in other designated countries (PCT/AU2006/000472), namely Canada, the USA, Europe, China, Japan, Hong Kong and India;

‘Buccal and/or Sublingual Therapeutic Formulation’ (PCT/AU2010/000594), has entered national/regional phase of examination in Australia, Brazil, Canada, China, Japan, Mexico, New Zealand, Europe and the USA;

The Linguet trademark has been registered under Class 05 in Australia (renewal 2016) and New Zealand (renewal 2017), and internationally under the Madrid Protocol[TM] (renewal 2017).

A key activity for Imugene is to obtain maximum protection of its Linguet technology and to retain a position of exclusivity for this approach. Prosecution of the current patent applications is continuing with granted patents in Australia, New Zealand and Russia and pending patents in other jurisdictions. However, Imugene will also focus on strengthening its position by identifying potential vulnerabilities in these patent applications, undertaking research to address these issues and applying for new patents to protect the research outcomes.

Imugene will also seek patent protection for new intellectual property, including improvements to the platform technology, specific Linguet candidates and their applications. As a minimum, patent applications will be made in the US, the European Union, Canada, China, Japan, Australia and New Zealand and most other English-speaking countries.

It is Imugene’s intention that the animal health patents it owns and developed will be discontinued and no further development of these animal health technologies is anticipated.

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

Buccal Delivery System

Country/Jurisdiction	Patent/Application No.	Status
Australia	2006 230820	Granted
Canada	2,603,649	Pending
China (People’s
Republic)	200680010802.4	Pending
European Patent
Convention	067213584.6	Pending
HongKong	08103009.5	Pending
India	7718/DELNP.2007	Pending
Japan	2008-504582	Pending
New Zealand	562311	Granted
Patent Cooperation
Treaty	AU2006/000472	Expired
Russian Federation	2007141365	Granted
United States of
America	11/910,902	Abandoned
United States of
America	13/021,578	Pending
Buccal and/or Sublingual Therapeutic Formulation
Country/Jurisdiction	Patent/Application No.	Status
Australia	AU2010/000594	Pending
Brazil	P1 1012170-6	Pending
Canada	2,761,538	Pending
Europe	10788488.4	Pending
China	201180002128.6	Pending
New Zealand	596183	Pending
Japan	2012-511094	Pending
Mexico	MX/a/2011/012078	Pending
India	8161/DELNP/2011	Pending
USA	13/256,844	Pending

14 Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

Pig Adenovirus Patents (PAV)

(19813, 19814 and 19819 Families)

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

Poultry Adenovirus Patents (FAV)

(19821 Family)
Country/Jurisdiction	Patent/Application No.	Status
Australia	676042	Granted
United States	6296852	Granted
New Zealand	263772	Granted
Europe	690912	Granted; Validated in Belgium,
		Germany, France, Great Britain,
		Italy,The Netherlands
Europe	5076351.5	Inactive
Japan	3606870	Granted

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

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

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

Methods and Compositions for Increasing Titer of Recombinant Porcine Adenovirus-3 Vectors

(22718 Family)

(22718 Family)
Country/Jurisdiction	Patent/Application No.	Status
Argentina	20100104482	Published
Taiwan	99142223	Published
United States	61/266,541	Expired
United States	12/956,099	Published
PCT	PCT/AU2010/001627	Published

Porcine Adenovirus 3-based PRRSV Vaccines (23323 Family)

(23323 Family)
Country/Jurisdiction	Patent/Application No.	Status
Argentina	20110101841	Pending
Taiwan	100118732	Published
United States	61/348,925	Expired
United States	13/109,714	Published
PCT	PCT/AU2011/000648	Published

16 Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

Animal Health Product Portfolio

Following the termination of the exclusive global license agreement covering the rights to all of Imugene’s animal health technology and intellectual property, Imugene completed a review of its vaccine products and intellectual property portfolio during the final quarter of calendar year 2011. Due to the shorter patent lives of the poultry products and the significant amount of further development required for the cocci vaccine, the development of all poultry vaccines was placed on hold. These poultry vaccine projects will now be terminated due to lack of commercial viability.

New approaches were considered and reviewed for delivering certain vaccines to maximize the efficacy of these vaccines, concentrating on the Porcine Reproductive and Respiratory Syndrome (PRRS) vaccine initially. Discussions were also undertaken with interested parties to determine the level of commercial interest in progressing the animal health technology. These discussions have now been terminated. Imugene intends to terminate the license agreements granting it the rights to commercialise products using the Fowl Adenovirus, Fowl Gamma Interferon and Porcine Adenovirus. Other animal health patents owned and developed by Imugene will be discontinued and no further development of these animal health technologies is anticipated.

The laboratory facility at La Trobe University in Melbourne was closed down at the end of October 2011.

Imugene Annual Report for the Year Ended 30 June 2012

Full Year Statutor Accounts y For The Year Ended 30 June 2012

ABN: 99 009 179 551

Corporate Information

Directors

Mr Fabio Pannuti – Executive Chairman Dr Warwick Lamb – Managing Director Mr Roger Steinepreis – Non-Executive Director Mr Steve Harris – Non-Executive Director

Company Secretary

Mr Justyn Stedwell

7/21 Northumberland Street Collingwood, Melbourne Victoria, 3066 Telephone: (61 3) 9416 0032 Facsimile: (61 3) 8080 0796

Patent Attornies

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

Griffith Hack Level 10, 161 Collins Street Melbourne Victoria Australia 3000

Auditor

BDO Audit (WA) Pty Ltd 38 Station Street Subiaco, WA 6008

Share Register

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

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

Bankers

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

Securities Exchange Listing

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

Solicitors

Steinepreis Paganin Level 4, 16 Milligan Street Perth WA 6000

Website and Email

www.imugene.com [email protected]

20 Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

Directors’ Report

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 2012.

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 (resigned July 31 2012) Dr Warwick Lamb Mr Roger Steinepreis Mr Fabio Pannuti (appointed July 31 2012) Mr Steve Harris (appointed August 1 2012)

Current Directors

Dr. Warwick Lamb – Managing Director

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.

Other Current Directorships

None

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

Special Responsibilities Managing Director

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

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

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) Eureka Energy Limited (appointed June 2012)

Former Directorships of Australian Listed Public Companies in the last three 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

Mr Fabio Pannuti – Executive Director and Chairman (appointed 27 July 2012)

Mr Pannuti is Managing Director of Consegna Group Limited. He has an extensive experience building companies across a number of industries including the biomedical and drug delivery markets, HR and labour hire, telephony, property development, mineral resources, agriculture and construction. He has had direct experience in many mergers and outdoor media agency in Eastern Europe. Many of the assets have been listed on public markets on North American, European and Australian Exchanges.

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

Other Current Directorships of Australian Listed Public Companies Consegna Group Limited

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

Nil

Mr Steve Harris – Non-Executive Director (appointed 30 July 2012)

Mr Harris served as a Director of Development and Licensing with Medeva plc and brings over 48 years of commercial experience in the pharmaceutical industry, having worked for ICI Pharmaceuticals (now Astra Zeneca), Merck, Eli Lilly, Boots, Reckitt and Colman (now Reckitt Benckiser) and Gensia.

Mr Harris currently serves as non-executive Chairman of Proteome Sciences plc and Cyprotex plc. He has previously held numerous non-executive directorships and consultancies, many of which have been in the drug delivery sector.

He has been a fellow of the Royal Pharmaceutical Society of Great Britain since 2000. Mr Harris graduated with a B.Sc. in Pharmacy from the University of London in 1964.

Other Current Directorships of Australian Listed Public Companies Nil

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

Company Secretary

Mr Justyn Stedwell (appointed 30 July 2012)

Mr Stedwell is a professional Company Secretary with over six years experience as a Company Secretary in ASX listed companies within various industries including IT & Telecommunications, Biotechnology, and Mining.

He is currently also the Company Secretary of ASX listed companies Consegna Group Limited, Anittel Group Limited, Fortis Mining Limited, Motopia Limited and Solagran Limited.

He has completed a Bachelor of Business & Commerce (Management & Economics) at Monash University, a Graduate Diploma of Accounting and Deakin University, a Graduate Diploma in Applied Corporate Governance with Chartered Secretaries Australia and Graduate Certificate of Applied Finance with Kaplan Professional.

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

Ms Julie Foster (resigned 30 July 2012)

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 2012 (2011: nil).

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

Review of Operations

For the year ending 30 June 2012 the Group recorded a net loss after tax of $3,133,433 (2011: net profit after tax $415,539) and a net cash outflow from operations of $965,922 (2011: net cash inflow of $1,090,407).

By December 2011, Imugene completed a review of its vaccine products and intellectual property portfolio to determine the most appropriate path to follow after the termination of the global license agreement with Novartis was effected late September 2011. The review included some information from our former licensee, including the results of two trials that were undertaken by them.

The review considered both the commercial and scientific aspects of our vaccine products and intellectual property portfolio. The key conclusions are that there are components of our technology that have strong commercial prospects, particularly the pig vaccines. The strong trial results we have generated over the years seem not to always be reproducible when our protocols for determining vaccine concentrations and doses are not followed precisely. Additionally, Imugene has no control over the commercial parameters set or chosen for the successful progression of the vaccines through a partners product development program.

We are considering new approaches for delivering certain vaccines to maximise the efficiency of these vaccines, concentrating on the Porcine Reproductive and Respiratory Syndrome (PRRS) vaccine initially. We are undertaking discussions with interested parties to determine the level of commercial interest in progressing our technology.

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

The cocci vaccine program has been placed on hold following the review of trial results. Whilst the original vaccine showed great promise against the main strain of coccidiosis seen commercially, an effective vaccine would also need to protect against at least two other strains. This was not achieved in the trial and the time to make the additional components of the vaccine to provide that protection would not be commercially viable.

Given the shorter patent lives of the poultry products and the significant amount of further development required for the cocci vaccine, we are placing the development of all poultry vaccines on hold at this time.

The recoverable amount of intellectual property was reviewed and it was agreed by the board of directors to impair the carrying value of the intellectual property to nil. The directors of Imugene believe that this does not represent an inability to commercialise the intellectual property

The Group took a prudent approach to all expenditure, research and overhead expenses. The laboratory development work has been completed and the laboratory facility at La Trobe University in Melbourne was closed down at the end of October 2011.

26 Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

Lingual Consegna Acquisition

After gaining shareholder approval at the EGM on 17 July 2012, Imugene finalised the acquisition of 100% of Lingual Consegna Pty Ltd from Consegna Group Limited on 31 July 2012 for 100,000,000 ordinary fully paid shares as consideration for the asset. Lingual Consegna Pty Ltd owns the family of patents and patent applications that protect the core drug delivery platform technology called Linguet.

The Linguet platform is a technology which allows tablets to be dissolved under the tongue or through the Buccal cavity in the mouth (cheek) to release the active drug, which is absorbed immediately into the blood stream via the mucosa (lining) of the mouth. The active drug thereby bypasses the gastrointestinal tract and is able to reach its target more rapidly and in the process, significantly lowering side effects.

With a relatively short runway to commercialisation, the technology will be of particular interest to both multinational research based and generic pharmaceutical companies as they seek to identify new strategic differentiators. In addition, as it enhances the clinical benefits of existing pharmaceuticals, one of the key outcomes will be its ability to extend the period of exclusivity and patent life of existing products of major pharmaceuticals.

The vision for Linguet is to utilise the existing IP and build additional know-how to create revenue generating commercial solutions within the pharmaceutical and healthcare global markets through:

use of known molecules that have known and proven regulatory routes;
low cost development with rapid and identifiable commercialisation programs; and
opportunities with nutritional, over the counter and prescription medicine markets.
improved patient compliance and management (by targeting those populations who find it difficult to swallow oral medicines such as the young and the elderly);
a reduction in the need to overmedicate which should result in lower side effects; and
a reduction in costs associated with lower concentrations of an active drug required in sublingual or Buccal presentation, up to tenfold and therefore result in significantly lower costs of production.

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

Management considered in its due diligence that Linguet was at the stage of its development whereby entry to market can be achieved quickly and relatively low additional financial investment.

Further, compared to traditional drug development platforms, the Linguet IP affords Imugene the ability to target markets that do not need significant clinical investment to acquire regulatory approval.

Consolidated results

Consolidated results
Consolidated (loss)/proft before income tax beneft Income tax beneft Net (loss)/proft	2012 2011 $ $
	(3,133,433) 179,539 — 236,000
	(3,133,433) 415,539

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.

There are no matters or circumstances, which have arisen since 30 June 2012 other than as those disclosed in note 26 in the financial report 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.

28 Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

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

Greenhouse gas and energy data reporting requirements

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

Meetings of directors

The following table sets out the number of meetings of the Company’s directors held during the year ended 30 June 2012, 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	3	3
Warwick Lamb	3	3
Roger Steinepreis	3	3
Audit committee meetings
Graham Dowland	2	2
Warwick Lamb	2	2
Roger Steinepreis	2	2
Remuneration committee meetings
Graham Dowland	—	—
Warwick Lamb	—	—
Roger Steinepreis	—	—

Share Options

There are no share options on issue and no share options were granted during the year. 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.

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

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

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.

30 Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

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 a General Meeting. The Company’s policy is to remunerate nonexecutive directors at market rates (for comparable companies) for time commitment and responsibilities. Fees for nonexecutive 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.

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

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

Executive pay

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

Base pay

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

Short-term incentives

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

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

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 of 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 considered the appropriate targets and key performance indicators (KPIs) to link the STI plan and the level of payout if targets were met. For the 2011 calendar year, the KPIs linked to the STI plan were based on individual commercial and operational targets. The maximum target bonus opportunity was $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 2012, short-term incentives paid or payable to key management personnel of the Group were Nil (2011: $132,500):

Performance Related Cash Bonus

Executive Directors Graham Dowland Warwick Lamb Other Key Management Personnel Michael Sheppard	Contractual Discretionary performance performance Grant bonus bonus Total Paid Forfeited date $ $ $ Mar 11 — 45,000 45,000 100% — Mar 11 — 65,000 65,000 100% —
	Mar 11 — 22,500 22,500 100% —

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

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 Imugene’s Strategic Alliance Partner. The achievement of this significant milestone was considered to be directly linked to an increase in the value of the Group’s portfolio of assets.

The bonuses paid took into account the significant effort that the small and dedicated management team have applied in the development of the Groups intellectual property assets over the past seven 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. There were no bonuses paid in 2012.

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.

There is currently no board policy in relation to the person granted the option limiting his or her exposure to risk in relation to the securities. The remuneration committee will review the policy if/when any long-term incentives are granted. There are currently no long-term incentives in place within the Group.

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

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.

Short-term benefts	Post- employment benefts	Share- based payment
Cash Non- salary Cash Monetary and fees bonus benefts $ $ $	Super- Retirement annuation benefts $ $	Options $	Performance Total related $ %
29,496 — — 45,413 — — 74,909 — —	— — 4,087 — 4,087 —	— — —	29,496 — 49,500 — 78,996 —
253,248 — — 253,248 — —	22,792 — 22,792 —	— —	276,040 — 276,040 —
76,026 — — 76,026 — — 404,183 — —	6,842 — 6,842 — 33,721 —	— — —	82,868 — 82,868 — 437,904 —

34 Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

Short-term benefts	Post- employment benefts	Share- based payment
Cash Non- salary Cash Monetary and fees bonus benefts $ $ $	Super- Retirement annuation benefts $ $	Options $	Performance Total related $ %
44,992 — — 40,138 — — 85,130 — —	— — 3,612 — 3,612 —	— — —	44,992 — 43,750 — 88,742 —
72,915 45,000 — 236,451 65,000 — 309,366 110,000 —	— — 21,588 — 21,588 —	— — —	117,915 38% 323,039 20% 440,954
88,488 22,500 — 7,964 — — 118,952 19% 88,488 22,500 — 7,964 — — 118,952 — 482,984 132,500 — 33,164 — — 648,648 —

Mr. Dowland was appointed non-executive chairman on 30 November 2010 (previously executive chairman). 2. Dr. Sheppard ceased employment with the Group on 22 March 2012.

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

follows.
	FIxed remuneration			At risk – STI*	At risk – LTI
	2012	2011	2012	2011	2012	2011
Directors of Imugene Limited
Graham Dowland	100%	72%	—	28%	—	—
Warwick Lamb	100%	80%	—	20%	—	—
Roger Steinepreis	100%	100%	—	—	—	—
Other key management personnel of the Group
Michael Sheppard	100%	81%	—	19%	—	—

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 2012.

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

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 directors.

Remuneration and other terms of agreement with the Chairman, Managing Director and 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.

Dr Warwick Lamb, Managing Director

Base salary, inclusive of superannuation of $275,000, to be reviewed annually by the board.
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

Term of agreement – rolling annual, anniversary on 21 March, this was not renewed on 22 March 2012.
Base salary, inclusive of superannuation of $87,500.
Payment of three potential incentive bonuses for the successful achievement of three development and commercialisation milestones. The incentive bonuses have been paid in previous periods.
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.

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

D. Share-based compensation

Options

No options were granted to key management personnel during the year ended 30 June 2012 (2011: nil). No options provided as remuneration to directors or key management personnel as remuneration were exercised during the year (2011: nil).

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.

Name Directors of Imugene Limited Graham Dowland Warwick Lamb Roger Steinepreis Other key management personnel Michael Sheppard	A B C D Remuneration consisting of Value at grant Value at Value at lapse options date exercise date date % $ $ $
	— — — — — — — — — — — — of the Group — — — —

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 Sharebased Payment of options granted / cancelled during the year as part of remuneration.
C = The value at exercise date of options that were granted as part of remuneration and were exercised during the year, being the intrinsic value of the options at that date.
D = The value at lapse date of options that were granted as part of remuneration that lapsed during the year because a vesting condition was not satisfied.

Relationship between the remuneration policy and Group performance

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

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

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 2012:

Revenue Net (loss)/proft before tax Net (loss)/proft after tax	30 June 2012 30 June 2011 30 June 2010 30 June 2009 30 June 2008 $ $ $ $ $
	244,591 2,237,275 44,018 3,024,028 92,214 (3,133,433) 179,539 (1,765,041) 252,500 (2,149,664) (3,133,433) 415,539 (1,535,041) 650,286 (1,910,925)

Share price at start of year Share price at end of year Basic earnings/(loss) per share (cents) Diluted earnings/(loss) per share (cents)	30 June 2012 30 June 2011 30 June 2010 30 June 2009 30 June 2008
	$0.03 $0.03 $0.07 $0.07 $0.25 $0.01 $0.03 $0.03 $0.07 $0.07 ($2.18) 0.29 (1.1) 0.5 (1.4) ($2.18) 0.29 (1.1) 0.4 (1.4)

Use of remuneration consultants

There were no remuneration consultants used during the year. Voting and comments made at the Company’s 2011 Annual General Meeting (“AGM”) Imugene Limited received 90% of votes for the remuneration report for the 2011 financial year. The Company did not receive any specific feedback at the AGM or throughout the year on its remuneration practices.

End of audited remuneration report -

38 Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

Non-Audit Services

No non-audit services were provided to the Group by the auditor during the year (or by another person or fi rm on the auditor’s behalf) and accordingly the directors are satisfi ed that the auditor has complied with the general standard of independence for auditors imposed by the Corporations Act 2001.

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 offi cer 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 fi nancial year, indemnifi ed or agreed to indemnify an offi cer or auditor of the Group or of any related body corporate against a liability incurred as such an offi cer or auditor

Auditor’s Independence Declaration

The auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is included on page 42 of the fi nancial 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

==> picture [160 x 45] intentionally omitted <==

DR WARWICK LAMB Chief Executive Offi cer Melbourne, Victoria 31 August 2012

Imugene Annual Report for the Year Ended 30 June 2012

Tel: +8 6382 4600 Fax: +8 6382 4601 www.bdo.com.au

38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF IMUGENE LIMITED

Report on the Financial Report

We have audited the accompanying fi nancial report of Imugene Limited, which comprises the consolidated statement of fi nancial position as at 30 June 2012, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash fl ows for the year then ended, notes comprising a summary of signifi cant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the fi nancial year.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation of the fi nancial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the fi nancial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 2(a), the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements , that the fi nancial statements comply with International Financial Reporting Standards .

Auditor’s Responsibility

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

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

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001 . We confi rm that the independence declaration required by the Corporations Act 2001 , which has been given to the directors of Imugene Limited, would be in the same terms if given to the directors as at the time of this auditor’s report.

Opinion

BDO Audit (WA) Pty Ltd ABN 79 112 284 787 is a member of a national association of independent entities which are all members of BDO (Australia) Ltd ABN 77 050 110 275, an Australian company limited by guarantee. BDO Audit (WA) Pty Ltd and BDO (Australia) Ltd are members of BDO International Ltd, a UK company limited by guarantee, and form part of the international BDO network of independent member fi rms. Liability limited by a scheme approved under Professional Standards Legislation (other than for the acts or omissions of fi nancial services licensees) in each State or Territory other than Tasmania.

Tel: +8 6382 4600 38 Station Street Fax: +8 6382 4601 Subiaco, WA 6008 www.bdo.com.au PO Box 700 West Perth WA 6872 Australia

In our opinion:

(a)
(i) giving a true and fair view of the consolidated entity’s fi nancial position as at 30 June 2012 and of its performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) the fi nancial report also complies with International Financial Reporting Standards as disclosed in Note 2(a).

Report on the Remuneration Report

We have audited the Remuneration Report included in the directors’ report for the year ended 30 June 2012. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Opinion

In our opinion, the Remuneration Report of Imugene Limited for the year ended 30 June 2012 complies with section 300A of the Corporations Act 2001.

BDO Audit (WA) Pty Ltd

Peter Toll Director Perth, Western Australia, Dated this 31st day of August 2012

Tel: +8 6382 4600 Fax: +8 6382 4601 www.bdo.com.au

38 Station Street Subiaco, WA 6008 PO Box 700 West Perth WA 6872 Australia

31 August 2012

Board of Directors The Grain Store 7/21 Northumberland St, Collingwood MELBOURNE VIC 3066

Dear Sirs,

DECLARATION OF INDEPENDENCE BY PETER TOLL TO THE DIRECTORS OF IMUGENE LIMITED

As lead auditor of Imugene Limited for the year ended 30 June 2012, I declare that, to the best of my knowledge and belief, there have been no contraventions of:

�� and

��

This declaration is in respect of Imugene Limited and the entities it controlled during the period.

Peter Toll Director BDO Audit (WA) Pty Ltd Perth, Western Australia

==> picture [213 x 178] intentionally omitted <==

==> picture [283 x 107] intentionally omitted <==

ABN: 99 009 179 551

Consolidated Statement of Comprehensive Income

Consolidated Statement of Comprehensive Income
Notes Revenue from continuing operations (5) Other income (6) Research and development Business development (7) Commercialisation expenses (7) Amortisation expense (7) Unrealised foreign exchange gain/(loss) Corporate and administration costs Impairment charge (14) Proft/(loss) before income tax Income tax beneft (8) Net proft/(loss) for the year Other comprehensive income Total comprehensive income attributable to equity holders of Company Earnings/(loss) per share Basic earnings/(loss) per share (cents per share) (25) Diluted earnings/(loss) per share (cents per share) (25)	Consolidated 2012 2011 $ $
	244,591 2,237,275 46,446 (39,138) (285,436) (491,687) (84,102) (151,378) (488,248) (335,251) (170,570) (341,140) 68,049 (132,520) (374,988) (566,622) (2,089,175) —
	(3,133,433) 179,539
	— 236,000
	(3,133,433) 415,539
	— —
	(3,133,433) 415,539
	(2.18) 0.29 (2.18) 0.29

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

Consolidated statement of fnancial position
Notes Current assets Cash and cash equivalents (9) Trade and other receivables (10) Tax assets (11) Other assets (12) Total current assets Non-current assets Property, plant and equipment (13) Intangible assets (14) Total non-current assets Total assets	Consolidated 2012 2011 $ $
	1,016,748 1,905,942 — 53,223 266,672 466,000 34,291 —
	1,317,711 2,425,165
	676 2,213 — 2,259,745
	676 2,261,958
	1,318,387 4,687,123

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

Current liabilities
Trade and other payables	(15)	138,758	338,351
Provisions	(16)	106,216	141,926
Total liabilities		244,974	480,277
Net assets		1,073,413	4,206,846
Equity
Contributed equity	(17)	14,907,453	14,907,453
Reserves	(18)	966,003	966,003
Accumulated losses	(18)	(14,800,043)	(11,666,610)
Total equity		1,073,413	4,206,846

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

Consolidated statement of changes in equity

Balance at 1 July 2010 Proft for the year Other comprehensive income Total comprehensive income for the year Transactions with owners, in their capacity as owners Balance at 30 June 2011 (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 2012	Contributed Share Based Equity Payment Accumulated Reserve Losses Total $ $ $ $
	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 — — (3,133,433)(3,133,433) — — — —
	— — — (3,133,433)
	— — — —
	14,907,453 966,003 (14,800,043) 1,073,413

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

44 Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

Notes Cash fows from operating activities Receipts from customers Payments to suppliers and employees Other income Net cash infow/(outfow) from operating activities Cash fows from investing activities Interest received Net cash infow 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 2012 2011 $ $
	235,913 2,840,303 (1,500,109) (1,749,896) 298,274 —
	(965,922) 1,090,407
	8,679 11,174
	8,679 11,174
	(957,243) 1,101,581 1,905,942 793,062 68,049 11,299
	1,016,748 1,905,942

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

Notes to the Consolidated Financial Statements

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.

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, Interpretations and the Corporations Act 2001.

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

Statement of compliance

The consolidated financial statements comply with International Financial Reporting Standards as adopted in Australia. Compliance with these standards 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 realisation of assets and the settlement of liabilities in the normal course of business.

Historical cost convention

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 2012 and the results of all subsidiaries for the year then ended.

Subsidiaries are all those entities over which the Group has the power to govern the financial and operating policies, generally accompanying a shareholding of more than one-half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

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

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

46 Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

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.

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

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.

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.

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

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 Consolidated Statement of Comprehensive Income, 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

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

amounts receivable from or payable to other entities in the Group and amounts are determined by reference to amounts recognised in the financial records of members in the Group.

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

h) Impairment of assets

Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.

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

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.

h) Cash and Cash equivalents

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

50 Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

i) 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.

j) 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.

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

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.

k) 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.

52 Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

Intangible assets acquired in a business combination

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

l) 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.

m) 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.

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.

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

o) 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.

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

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 an appropriate 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. Nonmarket 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.

p) Contributed Equity

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

q) 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.

54 Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

r) 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.

s) New Accounting Standards and Interpretations

The following new/amended accounting standards and interpretations have been issued, but are not mandatory for financial years ended 30 June 2012. They have not been adopted in preparing the financial statements for the year ended 30 June 2012 and are expected to impact the Group in the period of initial application. In all cases the entity intends to apply these standards from application date as indicated below.

AASB 9 Financial Instruments (effective 1 January 2015)

Issued December 2009 and amended December 2010, AASB 9 Amends the requirements for classification and measurement of financial assets. The available-for-sale and held-to-maturity categories of financial assets in AASB 139 have been eliminated. Under AASB 9, there are three categories of financial assets:

Amortised cost

Fair value through other comprehensive income.

Adoption of AASB 9 is only mandatory for the year ending 30 June 2016. The entity has not yet made an assessment of the impact of these amendments. 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.

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

AASB 10 – Consolidated Financial Statements (effective 1 January 2013)

Issued August 2011, AASB 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 11 – Joint Arrangements (effective 1 January 2013)

Issued August 2011 - joint arrangements will be classified as either ‘joint operations’ (where parties with joint control have rights to assets and obligations for liabilities) or ‘joint ventures’ (where parties with joint control have rights to the net assets of the arrangement).

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 Imugene has not entered into any joint arrangements.

AASB 12 – Disclosure of Interests in Other Entities (effective 1 January 2013)

Issued August 2011 - AASB 12 combines existing disclosures from AASB 127 Consolidated and Separate Financial Statements, AASB 128 Investments in Associates and AASB 131. Interests in Joint Ventures. Introduces new disclosure requirements for interests in associates and joint arrangements, as well as new requirements for unconsolidated structured entities.

As this is a disclosure standard only, there will be no impact on amounts recognised in the financial statements. However, additional disclosures will be required for interests in associates and joint arrangements, as well as for unconsolidated structured entities.

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

Issued September 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 2013, additional disclosures will be required about fair values.

56 Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

Currently, fair value measurement requirements are included in several Accounting Standards. AASB 13 establishes a single framework for measuring fair value of financial and non-financial items recognised at fair value in the statement of financial position or disclosed in the notes in the financial statements. The entity has yet to conduct a detailed analysis of the differences between the current fair valuation methodologies used and those required by AASB 13. However, when this standard is adopted for the first time for the year ended 30 June 2014, there will be no impact on the financial statements because the revised fair value measurement requirements apply prospectively from 1 July 2013.

AASB 2011-9 Amendments to Australian Accounting Standards – Presentation of Items of Other Comprehensive Income (effective for annual reporting periods commencing on or after 1 January 2012)

Issued September 2011, Amendments to align the presentation of items of other comprehensive income (OCI) with US GAAP. Various name changes of statements in AASB 101 as follows: statement of comprehensive income – to be referred to as ‘statement of profit or loss and other comprehensive income’
statements – to be referred to as ‘statement of profit or loss’ and ‘statement of comprehensive income’. OCI items must be grouped together into two sections: those that could subsequently be reclassified into profit and loss and those that cannot.

When this standard is first adopted for the year ended 30 June 2013, there will be no impact on amounts recognised for transactions and balances for 30 June 2013 (and comparatives). However, the statement of comprehensive income will include name changes and include subtotals for items of OCI that can subsequently be reclassified to profit or loss in future (e.g. foreign currency translation reserves) and those that cannot subsequently be reclassified (e.g. fixed asset revaluation surpluses).

The following are standards that are likely to have a disclosure impact only

IRFS 9 Mandatory Effective Date and Transition Disclosures (effective for

annual reporting periods commencing on or after 1 January 2015)

Entities are no longer required to restate comparatives on first time adoption. Instead, additional disclosures on the effects of transition are required. As comparatives are no longer required to be restated, there will be no impact on amounts recognised in the financial statements. However, additional disclosures

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

will be required on transition, including the quantitative effects of reclassifying financial assets on transition.

IAS 1 Presentation of Financial Statements – (effective for annual reporting

periods commencing on or after 1 January 2013)

Minimum comparative information

Only one year’s comparative information (i.e. for the preceding period)

Narrative information provided in preceding period’s financial statements that continues to be relevant in current period.

There will be no impact when this amendment is first adopted as the entity only includes comparatives for the preceding period.

IAS 32 – Financial Instruments: Presentation (effective for annual reporting periods commencing on or after 1 January 2013)

Clarifies that the following are required to be accounted for under IAS 12 Income Taxes:

Income tax relating to distributions to holders of equity instruments Income tax relating to transaction costs of an equity instrument.

There will be no impact when this amendment is first adopted because the entity has always accounted for income taxes relating to distributions to holders of equity instruments and transaction costs of issuing an equity instrument consistent with this clarification. This means that depending on the circumstances, income tax might be recognised in either profit or loss or equity.

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

58 Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

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.

Financial assets Cash and cash equivalents Loans and receivables Financial liabilities Trade and other payables	Consolidated 2012 2011 $ $
	1,016,748 1,905,942 — 53,233
	1,016,748 1,959,175
	138,758 338,351

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.

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

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

The carrying amounts of the Groups fnancial assets and liabilities are denominated in Australian dollars except as set out below:
Financial Assets Cash and Cash Equivalents	Consolidated 2012 2011 US$ US$
	970,268 1,769,262

Group Sensitivity

Based on the financial instruments held at 30 June 2012, 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 $97,027 lower/higher (2011 - $167,000 lower/higher) mainly as a result of foreign exchange gains/losses on translation of US dollar denominated financial instruments as detailed in the above table. The results are more sensitive to movements in the Australian dollar / US dollar exchange rates in 2011 than 2012 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:

rates. The Group’s exposure to interest rate risk and the effective weighted average interest rate for each class of fnancial assets and liabilities is set out below:
Financial Assets Cash and Cash Equivalents Floating rate*	Consolidated 2012 2011 $ $
	1,016,748 1,905,942

Weighted average effective interest rate 0.55% (2011: 0.32%)

Group Sensitivity

At 30 June 2012, if interest rates had changed by -/+ 50 basis points from the year end rates with all other variables held constant, the profit for the year would have been $5,084 lower/higher (2011 – change of 100 basis points: $9,530 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.

60 Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

(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 51.

(i) Cash at Bank and Short-Term Bank Deposits

AA- Rated

Consolidated 2012 2011 $ $ 1,016,748 1,905,942

(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 $138,758 (2011: $338,351), comprised of non interest-bearing trade creditors and accruals with a maturity of 1 - 3 months.

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

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.

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 2012, the carrying value of patents, licences and other rights is Nil (2011: $2,259,745).

62 Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

5. Revenue

5. Revenue
Sub-license/contract research fees Interest	Consolidated 2012 2011 $ $
	235,912 2,227,028 8,679 10,247
	244,591 2,237,275

On 13 October 2010, Imugene entered into a Global Agreement with Novartis Animal Health, giving Novartis exclusive global rights to all of Imugene’s technologies and intellectual properties, including vaccines and productivity enhancers. During the year ended 30 June 2011 Imugene received an initial payment of US$1.75 million for reimbursement of past research fees, ongoing research fees and a licensing fee. Prior to receiving notification of termination of the Global Agreement with Novartis Animal Health, Imugene earned quarterly research fees of US$250,000 during the year ended 30 June 2012.

6. Other Income

6. Other Income
Government grants Other	Consolidated 2012 2011 $ $
	(11,715) (50,437) 58,161 11,299
	46,446 (39,138)

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 30 June 2011, 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 (refer to note 10). EMDG grant income received during the year ended 30 June 2012 totalled $40,875 (2011: $76,063), however EMDG grant income recognised and accrued at 30 June 2011 totalled $52,500. As a result of this over accrual at 30 June 2011, government grant income for the year ended 30 June 2012 is ($11,715) (2011:($50,437)).

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

7. Expenses

7. Expenses Proft before income tax includes the following specifc expenses:
Research and development Employee benefts Business development Employee benefts Amortisation of intangibles Amortisation expense Impairment of patents, licences and other rights Impairment expense Commercialisation expenses Patent expenses Employee benefts Corporate and administration costs Depreciation of tangible fxed assets Superannuation Expense Deferred contribution superannuation expense	Consolidated 2012 2011 $ $
	243,504 345,627 84,102 151,378 170,570 341,140 2,089,175 — 373,688 119,276 114,560 215,975 1,537 2,013 38,553 41,576

Unrealised foreign exchange

During the year ended 30 June 2012 Imugene incurred a significant unrealised foreign exchange gain (2011: loss) in relation to the translation of US dollar cash and cash equivalents into Australian dollars.

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

8. Income Tax

8. Income Tax
Current tax A reconciliation between tax expense and the product of accounting result before income tax multiplied by the Group’s applicable income tax rate is as follows: Accounting proft/(loss) before tax from continuing operations Tax at the Australian statutory income tax rate of 30% (2011: 30%) Tax effect of amounts which are not deductible /(taxable) in calculating taxable income Add tax effect of: Research & development expenses (claimed under Tax Concession) Amortisation of intangibles Sundry other Revenue losses not recognised Less tax effect of: Patent costs Research & Development Tax Concession Current Year Under provision recognised in prior year Income tax beneft (i) Deferred tax assets not recognised Arising from temporary differences attributable to: Carried forward tax losses Intangible assets Share issue expenses Employee benefts Other Deferred tax asset not yet brought to account	Consolidated 2012 2011 $ $
	— 236,000 (3,133,433) 179,539 (940 030) 53,862 — 189,036 51,171 102,342 (43,776) 19,642 (951,825) (269,369) 19,990 95,513
	— 236,000 30,672 —
	— 236,000
	2,727,522 1,774,576 (962,699) 284,775 6,040 6,219 31,865 42,578 10,192 21,473
	1,784,241 2,129,621 (1,784,241) (2,129,621)
	— —

The utilisation of the carry forward tax losses is dependent upon passing the Same Business and the Continuity of Ownership Test given the acquisition of Lingual Consegna Pty Ltd subsequent to year end.

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

9. Cash and cash equivalents

9. Cash and cash equivalents
Cash at bank and in hand – AUS dollars Cash at bank and in hand – US dollars	Consolidated 2012 2011 $ $
	46,480 236,378 970,268 1,669,564
	1,016,748 1,905,942

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

10. Trade and other receivables
Accrued income Other	Consolidated 2012 2011 $ $
	— 52,500 — 723
	— 53,223

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 2012 (2011:

nil) and there is no indication that amounts recognised as trade and other receivables will not be recovered in the normal course of business.

11. Tax assets

11. Tax assets
Research and Development Tax Concession receivable 12. Other Assets Share placement – prepaid costs	Consolidated 2012 2011 $ $
	266,672 466,000
	Consolidated 2012 2011 $ $
	34,291 —

66 Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

13. Property, plant & equipment

13. 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 2012 2011 $ $
	24,089 24,089 (23,413) (21,876)
	676 2,213
	2,213 4,226 — — (1,537) (2,013)
	676 2,213

14. Intangible assets

14. Intangible assets
		Consolidated
	2012	2011
	$	$
Patents, licenses and other rights
Opening cost	5,117,095	5,117,095
Impairment charge	(2,089,175)	—
Closing cost	3,027,920	5,117,095
Accumulated amortisation
Accumulated amortisation at the start of the year	(2,857,350)	(2,516,210)
Amortisation charge	(170,570)	(341,140)
Accumulated amortisation at the end of the year	(3,027,920)	(2,857,350)
Opening net book amount	2,259,745	2,600,885
Closing net book amount	—	2,259,745

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.

In the absence of readily available market prices, the recoverable amounts of assets are determined using estimates of the present value of future cashflows using asset-specific discount rates. In reviewing the recoverable amount of intellectual property, the board has considered the following indicators of impairment:

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

�� year period, with our initial interpretation that the results did not satisfy Novartis’ requirements for commercial progression.
�� ability to raise additional funding to progress intellectual properties through development stages.

It was agreed by the board of directors to impair the carrying value of the intellectual property to nil due to those factors outlined above. The directors of Imugene believe that this does not represent an inability to commercialise the intellectual property.

As at 30 June 2012, the carrying value of these patents and licences is nil (30 June 2011: $2,259,745).

15. Trade and other payables

15. Trade and other payables
Trade payables Other payables	Consolidated 2012 2011 $ $
	116,879 73,591 21,879 264,760
	138,758 338,351

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.

1. Fair value

The carrying amount of trade payables is a reasonable approximation of fair value due to their short-term nature.

2. Foreign exchange risk exposure

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

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

16. Provision

16. Provision
Employee benefts – annual leave	Consolidated 2012 2011 $ $
	106,216 141,926

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.

17. Contributed equity Fully paid ordinary shares	2012 2011 2012 2011 Shares Shares $ $
	143,637,220 143,637,220 14,907,453 14,907,453

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

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

	Date	Number of shares	$
Opening balance	30 June 2011	143,637,220	14,907,453
Closing balance	30 June 2012	143,637,220	14,907,453

Refer to Note 3 (e) for capital risk management note.

18. Reserves and accumulated losses

18. Reserves and accumulated losses
a) Share-based payment reserve Opening balance Closing balance b) Accumulated losses Opening balance Net proft/(loss) for the year Closing balance	Consolidated 2012 2011 $ $
	966,003 966,003
	966,003 966,003
	(11,666,610) (12,082,149) (3,133,433) 415,539
	(14,800,043) (11,666,610)

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

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 2012 (2011: nil).

19. Options

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

Unlisted performance options Type 10 Total	2012 2011 Exercise Expiry Number Number Price
	— — — —

The Type 10 options lapsed 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 10 Closing balance	2012 2011 Number Number
	— 3,000,000 — (3,000,000)
	— —

70 Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

20. Parent Entity Financial Information

The following details information related to the parent entity, Imugene Limited, at 30 June 2012. 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 Proft/(loss) for the year Other comprehensive income for the year Total comprehensive (proft)/loss for the year	Company 2012 2011 $ $
	358,220 725,424 1,217,525 3,880,494
	1,575,745 4,605,918
	502,332 747,096
	502,332 747,096
	14,907,452 14,907,453 966,003 966,003 (14,800,883) (12,014,634)
	1,073,413 3,858,822
	(2,785,410) 67,514 — —
	(2,785,410) 67,514

Parent entity contingent liability

The parent entity had no contingent liabilities at reporting date.

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 2012 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 reporting date amounts receivable from controlled entities totalled $1,942,237 (2011: $2,376,361).

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

b) Investments in Controlled Entities

b) Investments in Controlled Entities
Country of Class of Name of Entity Incorporation Shares	EquityHolding
	2012 2011 % %
Controlled Entities Brightsun Investments Pty Ltd Australia Ordinary Vectogen Pty Ltd Australia Ordinary BioMimic Technologies Pty Ltd Australia Ordinary Paragen Pty Ltd Australia Ordinary	100 100 100 100 100 100 100 100

21. Key management personal disclosures

c) 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

d) 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.

e) Key management personnel compensation

e) Key management personnel compensation
Short-term employee benefts Post-employment benefts		Consolidated 2012 2011 $ $
		404,183 615,484 33,721 33,164
		437,904 648,648

Detailed remuneration disclosures can be found in the section of the Directors Report headed “Remuneration Report”.21.

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

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	Granted				Balance	Balance
	at start of	as				when	at the	Vested
	the year	compen-		Other	ceased to		end of	and
2012		sation	Exercised	changes	hold offce		theyear	exercisable	Unvested
Directors of Imugene Limited
Graham Dowland	—	—	—	—		—	—	—	—
Warwick Lamb	—	—	—	—		—	—	—	—
Roger Steinepreis	—	—	—	—		—	—	—	—
Other key management personnel of the Group
Michael Sheppard(*)	—	—	—	—		—	—	—	—
(*): Contract was not renewed on 22 March 2012.
	Balance	Granted				Balance	Balance
	at start of	as				when	at the	Vested
	the year	compen-		Other	ceased to		end of	and
2011		sation	Exercised	changes	hold offce		theyear	exercisable	Unvested
Directors of Imugene Limited
Graham Dowland	—	—	—	—		—	—	—	—
Warwick Lamb	—	—	—	—		—	—	—	—
Roger Steinepreis	—	—	—	—		—	—	—	—
Other key management personnel of the Group
Michael Sheppard	— —	—	—	—	—	—	—

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

(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
2012	of theyear	Acquired	Other changes	end of theyear
Directors of Imugene Limited
Graham Dowland	7,667,576	—	—	7,667,576
Warwick Lamb	8,670,002	—	—	8,670,002
Roger Steinepreis	-	—	—	—
Other key management personnel	of the Group
Michael Sheppard (*)	272,248	—	—	272,248

(*): Contract was not renewed on 22 March 2012.

	Balance at start			Balance at the
2011	of theyear	Acquired	Other changes	end of theyear
Directors of Imugene Limited
Graham Dowland	7,667,576	—	—	7,667,576
Warwick Lamb	8,670,002	—	—	8,670,002
Roger Steinepreis	—	—	—	—
Other key management personnel	of the Group
Michael Sheppard	272,248	—	—	272,248

(iii) Loans to key management personnel

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

(iv) Other transactions with key management personnel

The aggregate amount recognised as an expense in relation to these transactions is $21,000 (2011: $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 2012, the Group paid $21,000 (2011: $42,000) to Vetspec Pty Ltd and this has been recognised in the financial statements as an expense.

74 Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

During the year, Steinepreis Paganin, a company of which Mr Roger Steinepreis is a Partner provided legal services to the Company. For the year ended 30 June 2012, the Group paid $23,126.50 (2011: Nil) to Steinepreis Paganin and this has been recognised in the financial statements as a pre-acquisition cost of the Consegna Group.

During the year, Aurora Oil and Gas Limited, a company of which Mr Graham Dowland is a Director, provided a serviced office (in Perth) and other administration services to the Company. For the year ended 30 June 2012, the Group incurred $90,000 (2011: Nil) and this has been recognised in the financial statements as an expense.

22. 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:

the auditor of the Group, its related practices and non-related audit frms:
BDO Audit (WA) Pty Ltd for: Audit and other assurance services Audit and review of fnancial statements Other assurance services Total auditors’ remuneration	Consolidated 2012 2011 $ $
	41,363 39,000 — —
	41,363 39,000

23. Segment information

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

Reportable segment revenue

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

segment:
Revenue from research, development and commercialisation Revenue from other corporate activities	2012 2011 $ $
	224,198 2,176,591 66,840 21,547
	291,038 2,198,138

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

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 proft/(loss) Proft/(loss) is disclosed below based on the reportable segment: Proft/(loss) from research, development and commercialisation (Loss) from other corporate activities	2012 2011 $ $
	266,672 2,778,245 1,016,748 1,905,942 676 2,936
	1,284,096 4,687,123
	(2,835,171) 857,135 (298,262) (677,596)
	(3,133,433) 179,539

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

24. Reconciliation of proft/(loss) after income tax to net cash outfows from operation activities
Proft/(loss) for the year Depreciation and amortisation Impairment expense Interest income Provision for employee benefts Net exchange differences Decrease in receivables Increase in payables Net cash infow / (outfow) from operating activities	Consolidated 2012 2011 $ $
	(3,133,433) 415,539 172,106 343,153 2,089,175 — (8,679) (10,247) (35,710) 30,033 (68,049) (11,299) 218,260 180,358 199,593 142,870
	(965,923) 1,090,407

76 Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

25. Earnings/(loss) per share

25. Earnings/(loss) per share
Basic earnings/(loss) per share (Loss)/proft attributable to the ordinary equity holders of the Company Diluted earnings/(loss) per share (Loss)/proft attributable to the ordinary equity holders of the Company (Loss)/proft used in calculation of basic/diluted earnings/(loss) per share (Loss)/proft 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 2012 2011 Cents Cents
	2.18 0.29 2.18 0.29 $ $
	(3,133,433) 415,539 Number Number
	143,637,220 143,637,220 143,637,220 143,637,220

26. Subsequent Events

On July 17th 2012, at a General Meeting shareholders approved (a) the acquisition of the Lingual Consegna Limited by the Company and to issue 100,000,000 shares to Consegna Group as consideration, (b) to allot and issue 100,000,000 shares at an issue price of $0.01 per share to raise up to $1,000,000 and (c) to allot and issue 50,000,000 options at an issue price of $0.001 to the Forrest Capital and CPS Securities for assisting in and managing the placement and associated corporate advice.

(a) Acquisition of Lingual Consegna Pty Ltd

On July 31 2012, Imugene Limited acquired 100% of the issued share in Lingual Consegna Pty Ltd, (a drug delivery technology company which holds the Linguet Patented Buccal Delivery intellectual property), for consideration of 100,000,000 shares in Imugene Limited.

The financial effects of this transaction have not been brought to account at 30 June 2012. The operating results and assets and liabilities of the company will be consolidated from July 31 2012.

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

Purchase consideration Fair value of shares issued as consideration (*) Total purchase consideration	2012 $
	1,400,000
	1,400,000

(*) The purchase price is based on the closing share price of Imugene Limited share quoted on ASX on date of acquisition.

The provisionally determined fair values of the asset and liabilities of Lingual Consegna Pty Ltd, as at the date of acquisition are as follows:

Cash and cash equivalents Total current assets Non-current assets Intangible assets Total-non current assets Current liabilties Trade and other payables Total Liabilities Net identifable assets acquired	Book Fair value value adjustments Total $ $ $
	— — — — — —

	841,100 607,391 1,448,491 841,100 607,391 1,448,491 48,491 — 48,491
	48,491 — 48,491
	792,609 607,391 1,400,000

Contingent liability

On 15th August 2011, Consegna Group Limited through its subsidiary Lingual Consegna Pty Ltd acquired the Linguet Patented Buccal Delivery intellectual property from OzPharma Pty Limited. Under the terms of the agreement, part of the consideration was to pay 15% of future sales from the Linguet platform to OzPharma Pty Ltd.

At the time these financial statements were authorised for issue, the Group had not yet completed the accounting for the acquisition of Lingual Consegna Ltd. In particular, the fair values of the assets and liabilities disclosed above have only been determined provisionally. The finalisation of the accounting may result in material movements from the amounts stated above.

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

(b) Share placement of 100,000,000 shares

On 17th July 2012, a resolution was approved for the Directors to allot and issue up 100,000,000 shares at an issue price of $0.01 per share to raise up to $1,000,000. The shares were issued on 3rd August, 2012 and $1,000,000 was received as part of the share placement.

(c) Grant of options

On 3rd August 2012, 50,000,000 options were granted to CPS Securities and Forest Capital. The options have an exercise price of $0.02 and expire on 31 December 2015.

(d) Appointment of Executive Director

On 31st July 2012, Mr Fabio Pannuti, was appointed as an Executive Director of Imugene Limited.

(e) Resignation of Non – Executive Director

On 31st July 2012, Mr Graham Dowland resigned as a Non-Executive Director of Imugene Limited.

(f) Appointment of Executive Director

On August 1 2012, Mr Steve Harris was appointed as Executive Director of Imugene Limited.

27. Contingencies

The Consolidated Entity has no contingent assets or liabilities at reporting date. (2011: none).

The Consolidated Entity has no commitments at reporting date. (2011: none).

28. Related party transactions

There have been no transactions with related parties during the year ended 30 June 2012 other than as disclosed in note 21 in the financial report.

In the Directors’ opinion:

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 2012 and of its performance for the financial period ended on that date.
b. there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

c. the fi nancial statements and accompanying notes are prepared in compliance with IFRS and interpretations adopted by the International Accounting Standards Board.

d. the remuneration disclosures included in the Directors’ Report (as part of the audited Remuneration Report), for the year ended 30 June 2012 comply with section 300A of the Corporations Regulations 2001.

The Directors have been given the declaration by the chief executive offi cer and chief fi nancial offi cer required by s.295A of the Corporations Act 2001.

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

==> picture [211 x 59] intentionally omitted <==

DR WARWICK LAMB Chief Executive Offi cer MELBOURNE, VICTORIA

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

31 August 2012 Additional information required by ASX

The information set out below was applicable at 30 September 2012.

Distribution of equitable securities

Analysis of number of shareholders by size of holding:

Number of holders of ordinaryshares	Number of holders of ordinaryshares	Number of ordinaryshares
1 to 1,000	539	150,869
1,001 to 5,000	282	924,838
5,001 to 10,000	297	2,245,724
10,001 to 100,000	639	22,731,004
100,001 and over	218	317,584,785
Total	1975	343,637,220

Holding less than a marketable parcel: 1472 holders of ordinary shares based on a share price of $0.017.

Analysis of number of option holders (unquoted) by size of holding:

Number of holders of ordinaryshares	Number of holders of ordinaryshares	Number of ordinaryshares
1 to 1,000	0	0
1,001 to 5,000	0	0
5,001 to 10,000	0	0
10,001 to 100,000	0	0
100,001 and over	5	50,000,000
Total	5	50,000,000

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

Equity security holders

The names of the twenty largest security holders of quotes equity securities are listed below:

		Units at
Rank	Name	30 Sep 2012	% of Units
1.	CONSEGNA GROUP LIMITED	100,000,000	29.10
2.	MR JASON PETERSON + MRS LISA PETERSON
		15,000,000	4.37
3.	WAINFORD HOLDINGS LIMITED	12,835,207	3.74
4.	BARNABY INVESTMENTS PTY LTD	10,500,000	3.06
5.	DENLIN NOMINEES PTY LTD	10,000,000	2.91
6.	ELMSWOOD HOLDINGS PTY LTD	10,000,000	2.91
7.	JK NOMINEES PTY LTD	10,000,000	2.91
8.	DR WARWICK LAMB	8,395,002	2.44
9.	CELTIC CAPITAL PTY LTD	6,000,000	1.75
10.	FREDERICK ERINI PTY LTD	5,000,000	1.46
11.	MS JEANETTE HAHN	5,000,000	1.46
12.	MHBIAT PTY LTD	5,000,000	1.46
13.	TISIA NOMINEES PTY LTD	5,000,000	1.46
14.	YAMBALI PTY LTD	5,000,000	1.46
15.	MRS TREFFINA DOWLAND	4,913,002	1.43
16.	KEYFIN PTY LTD	4,250,000	1.24
17.	MR STEPHEN JAMES MOYLE + MRS CHRISTINE
	MAREE MOYLE	3,025,000	0.88
18.	MCRAE INVESTMENTS PTY LTD	2,718,833	0.79
19.	GRANT THOMAS PATERSON	2,500,000	0.73
20.	TECHSTART AUSTRALIA PTY LTD	2,387,738	0.69
Totals:	Top 20 holders of ORDINARY FULLY PAID SHARES (TOTAL)	227,524,782	66.23
Total Remaining Holders Balance		116,112,438	33.77

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

Substantial holders

Substantial holders in the Company are set out below:

	Units at
Name	30 Sep2012	% of Units
CONSEGNA GROUP LIMITED	100,000,000	29.10

Holders of more than 20% of unquoted options

Holders of more than 20% of unquoted options are set out below:

		Units at
Name	30 Sep2012	% of Units
MR JASON PETERSON & MS LISA PETERSON
	23,750,000	47.50

Voting rights

The voting rights attached to ordinary shares and unquoted options are set out below:

Ordinary Shares

On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote.

Unquoted Options

Unquoted options do not entitle the holder to any voting rights.

There are no other classes of equity securities.

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

Corporate Governance Statement

Imugene Limited (“Company”) has made it a priority to adopt systems of control and accountability as the basis for the administration of corporate governance. Some of these policies and procedures are summarised in this statement.

Commensurate with the spirit of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (“Principles & Recommendations”), the Company has followed each recommendation where the Board has considered the recommendation to be an appropriate benchmark for its corporate governance practices. Where the Company’s corporate governance practices follow a recommendation, the Board has made appropriate statements reporting on the adoption of the recommendation. Where, after due consideration, the Company’s corporate governance practices depart from a recommendation, the Board has offered full disclosure and reason for the adoption of its own practice, in compliance with the “if not, why not” regime.

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

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

84 Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

Board of Directors

Role of the Board

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

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

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

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

Skills, Experience, Expertise of each Director

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

Director independence

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

The sole independent director of the Company for the duration of the 2012 financial year was Roger Steinepreis. Mr. Steinepreis resigned as a director of the Company on 1 October 2012. Mr. Steinepreis was considered independent as he was a non-executive director who was not a member of management and who was free of any business or other relationship that could materially interfere with, or could reasonably be perceived to materially interfere with, the independent exercise of his judgment.

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

Steve Harris was appointed to the Board on 1 August 2012. Mr. Harris is an independent director and is currently the only independent director on the Board.

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

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

During the 2012 financial year the non-independent directors of the Company were Graham Dowland and Warwick Lamb.

Mr. Dowland acted as Chairman of the Company for the duration of the 2012 financial year. The Board considered that Mr. Dowland’s extensive experience as both a director and chair of various listed companies make him the most qualified Board member for the role of Chairman at that stage of the Company’s development.

86 Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

Mr. Dowland resigned as a director and Chairman on 31 July 2012 and was replaced by Fabio Pannuti who now acts as Executive Chairman and is therefore not independent.

Following Mr. Dowland’s resignation, Fabio Pannuti was considered the most appropriate director to Chair the Company. The Board considers it appropriate at this critical stage of the Company’s development that the Chairman be engaged as an executive of the Company and involved in its daily management. In situations that present a possible conflict of interest to the Chairman, the lead independent director will act as chair.

The role of the Managing Director/CEO and the Chairman are not exercised by the same individual.

Independent professional advice

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

Selection and (Re) Appointment of Directors

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

The Board recognises that Board renewal is critical to performance as well as the impact of Board tenure on succession planning. Each director other than the Managing Director, must not hold office (without re-election) past the third annual general meeting of the Company following the Director’s appointment or three years following that director’s last election or appointment (whichever is the longer).

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

However, a Director appointed to fill a casual vacancy or as an addition to the Board must not hold office (without re-election) past the next annual general meeting of the Company. At each annual general meeting a minimum of one director or a third of the total number of directors must resign. A director who retires at an annual general meeting is eligible for re-election at that meeting and there-appointment of directors is not automatic.

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

Board Committees

Nomination Committee

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

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

Audit Committee

The Board has not established a separate Audit Committee and therefore it is not structured in compliance with Recommendation 4.2. The full Board carries out the duties that would otherwise be undertaken by the Audit Committee. During the 2012 financial year, the Board believed that the Company was not of a sufficient size to warrant a separate Audit Committee. The Company will consider establishing an Audit Committee in the 2013 financial year.

To assist the Board to fulfill its function as the in carrying out duties that would otherwise be undertaken by the Audit Committee, the Company has adopted an Audit Committee Charter which describes the role, composition, functions and responsibilities of the Audit Committee for the Boards reference.

The Board is responsible for the initial appointment of the external auditor and the appointment of a new external auditor when any vacancy arises, as recommended by the Audit Committee (or its equivalent). Candidates for the position of external auditor must demonstrate complete independence from the Company through the engagement period. The Board may otherwise select an external auditor based on

88 Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

criteria relevant to the Company’s business and circumstances. The performance of the external auditor is reviewed on an annual basis by the Audit Committee (or its equivalent) and any recommendations are made to the Board.

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

Remuneration Committee

The Board has not established a separate Remuneration Committee. The full Board carries out the duties which would otherwise be undertaken by the Remuneration Committee in accordance with the Remuneration Committee Charter. During the 2012 financial year the Board considered that no efficiencies or other benefits could be gained by establishing a separate committee.

To assist the Board to fulfill functions delegated to a Remuneration Committee, the Company has adopted a Remuneration Committee Charter for the Boards reference.

Details of remuneration, including the Company’s policy on remuneration, are contained in the “Remuneration Report” which forms part of the Directors’ Report. Non-executive directors are remunerated at a fixed fee for time, commitment and responsibilities. Remuneration for non-executive directors is not linked to individual performance. Pay and rewards for executive directors and senior executives consists of a base salary and performance incentives. Long-term performance incentives may include options granted at the discretion of the Board and subject to obtaining the relevant approvals. Executives are offered a competitive level of base pay at market rates and are reviewed annually to ensure market competitiveness.

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

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

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

Performance evaluation

Senior executives

The Chair and Managing Director are responsible for evaluating the performance of senior executives. The evaluations are carried out by conducting formal interviews with the senior executives annually. During the Reporting Period an evaluation of senior executives took place in accordance with the process disclosed above.

Board, its committees and individual directors

The Chair is responsible for evaluation of the Board and, where deemed appropriate, Board committees and individual directors. The full Board in its capacity of the Nomination Committee (or equivalent) is responsible for evaluating the Managing Director. These evaluations are undertaken informally as required. The practice in this area is considered sufficient as the Company has a very small Board with little change in membership. During the Reporting Period an evaluation of the Board, its committees, and individual directors took place in accordance with the process disclosed above.

Ethical and responsible decision making

Code of Conduct

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

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

Diversity

The Company values the differences between its personnel and the valuable contribution that these differences can make to the Company.

At this stage, the Board does not consider it relevant to establish a diversity policy as the Company has no employees, but instead has administrative and technical services provided to it by consultants.

The Company will consider adopting a diversity policy in the 2013 financial year. As the Company’s grows and requires the services of permanent staff, the Company does intend to recruit personnel at all levels from as diverse a pool of qualified candidates as reasonably possible based on their skills, qualifications and experience.

90 Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

The Company does not have a diversity policy and therefore has not set any measurable objectives for achieving gender diversity. There are no employees in the organisation and there are no women in senior management positions or on the Board of Director’s.

Policy for Trading in Company Securities

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

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

Continuous Disclosure

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

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

Shareholder communication

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

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

Risk management

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

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

Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

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

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

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

The Company has in place a formal system of managing its material business risks. This system includes a risk register which is prepared by management to identify the Company’s material business risks and risk management strategies for these risks.

The risk register is reviewed and updated as required. Management reports to the Board on material business risks at each board meeting.

Financial reporting

Operational
Technological
Reputation Legal and compliance

92 Imugene Annual Report for the Year Ended 30 June 2012

ABN: 99 009 179 551

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

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

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

Imugene Annual Report for the Year Ended 30 June 2012 93

7/21 Northumberland Street Collingwood, Melbourne Victoria, 3066 Telephone: (61 3) 9416 0032 Facsimile: (61 3) 8080 0796 Email: [email protected] Website: www.imugene.com

AI assistant

IMUGENE LIMITED — Annual Report 2012

65124_rns_2012-10-28_5296e146-95c0-4bcd-824d-1227d9709acd.pdf

Annual Report 2011–12

Contents

ISSN 2201-1986

Letter from the Chairman

Dear Shareholders

Yours faithfully

Linguet[TM]

LINGUET TECHNOLOGY PLATFORM

The Market Opportunity

The Linguet Development Program

First Target: Vitamin D

Four additional targets

Imugene: Intellectual Property

Buccal Delivery System

Pig Adenovirus Patents (PAV)

Poultry Adenovirus Patents (FAV)

Animal Health Product Portfolio

Full Year Statutor Accounts y For The Year Ended 30 June 2012

Corporate Information

Directors

Company Secretary

Patent Attornies

Auditor

Share Register

Bankers

Securities Exchange Listing

Solicitors

Website and Email

Directors’ Report

Directors

Current Directors

Dr. Warwick Lamb – Managing Director

Other Current Directorships

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

Mr Roger Steinepreis - Non-Executive Director

Other Current Directorships of Australian Listed Public Companies

Special responsibilities

Mr Fabio Pannuti – Executive Director and Chairman (appointed 27 July 2012)

Mr Steve Harris – Non-Executive Director (appointed 30 July 2012)

Company Secretary

Mr Justyn Stedwell (appointed 30 July 2012)

Ms Julie Foster (resigned 30 July 2012)

Appointed 29 May 2008

Principal activities

Dividends

Review of Operations

Lingual Consegna Acquisition

Consolidated results

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. Principles used to determine the nature and amount of remuneration

Non-executive directors

Executive pay

Base pay

Short-term incentives

Performance Related Cash Bonus

Long-term incentives

B. Details of remuneration

Amounts of remuneration

C. Service agreements

Dr Warwick Lamb, Managing Director

D. Share-based compensation

Options

E. Additional information

Share–based compensation: Options

Relationship between the remuneration policy and Group performance

Use of remuneration consultants

Non-Audit Services

Auditor’s Independence Declaration

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF IMUGENE LIMITED

Report on the Financial Report

Directors’ Responsibility for the Financial Report

IMUGENE LIMITED Annual Report 2012