Opthea Ltd — Interim / Quarterly Report 2017

Feb 20, 2017

21 February 2017

==> picture [211 x 52] intentionally omitted <==

31 December 2016 half-year financial report & operational performance

No. of Pages: 20

In accordance with Listing Rule 4.2A, we enclose the Half-Year Financial Report (reviewed) on the consolidated results of Opthea Limited (‘Opthea’ or ‘Group’) for the half-year ended 31 December 2016. The previous corresponding periods are the financial year ended 30 June 2016 and the half year ended 31 December 2015.

Information in relation to the operational performance, financial performance, cash flows and financial position is included in the attached Appendix 4D Half-Year Financial Report.

This Half Year Financial Report should be read in conjunction with the Company’s Annual Report for the year ended 30 June 2016.

==> picture [116 x 57] intentionally omitted <==

Mike Tonroe

Company Secretary

==> picture [206 x 51] intentionally omitted <==

==> picture [506 x 718] intentionally omitted <==

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

APPENDIX 4D
Half-Year Financial Report
Name of entity: Opthea Limited
ABN: 32 006 340 567
Reporting period: Half-Year Ended 31 December 2016
Previous corresponding period: Half-Year Ended 31 December 2015
INDEX
1. Results for announcement to the market
2. Financial Report:
- Directors’ Report
- Auditor’s Independence Declaration
- Financial Statements
- Directors’ Declaration
- Independent Review Report
This half-year report is to be read in conjunction with the Company’s 2016
Annual Report
Note:
The financial figures provided are in Australian dollars, unless specified
otherwise.
----- End of picture text -----

Opthea Limited and controlled entities

==> picture [70 x 17] intentionally omitted <==

Results for announcement to the market

The consolidated results of Opthea Limited for the six months ended 31 December 2016 are as follows:

Revenues and Results from Ordinary Activities

	Change	compared to:
		31/12/2015		31/12/2016
		%		$
Revenues from ordinary activities	decreased	65.1	to	179,731
Loss from ordinary activities before	Loss has increased	91.9	to	(4,968,221)
tax
Loss from ordinary activities after	Loss has increased	32.7	to	(2,297,240)
tax attributable to members

An explanation of the figures reported above are contained in the Directors’ Report under the heading ‘Financial performance ’.

Shareholder Distributions

No dividends have been paid or declared by the entity since the beginning of the current reporting period.

	Consolidated	Consolidated
NTA backing	31/12/2016	30/06/2016
Net tangible asset backing per ordinary security	$0.09	$0.10

Status of review of accounts

The financial report for the half-year ended 31 December 2016 has been reviewed. The review report is included with the financial report.

1

==> picture [218 x 52] intentionally omitted <==

Opthea Limited and controlled entities

ABN 32 006 340 567

Condensed Financial Report Half year ended 31 December 2016

2

Opthea Limited and controlled entities

==> picture [70 x 17] intentionally omitted <==

Contents

Directors’ report	4
Auditor’s independence declaration	7
Condensed consolidated statement of proft or loss and other comprehensive income	8
Condensed consolidated statement of fnancial position	9
Condensed consolidated statement of changes in equity	10
Condensed consolidated statement of cash fows	11
Notes to the condensed consolidated fnancial statements	12
Directors’ declaration	16
Independent auditor’s review report	17

3

Opthea Limited and controlled entities

==> picture [70 x 17] intentionally omitted <==

Opthea Limited and Controlled Entities

Directors’ report

The directors of Opthea Limited submit herewith the financial report of Opthea Limited and its subsidiaries (Opthea, the Company and the Group) for the half-year ended 31 December 2016. In order to comply with the provisions of the Corporations Act 2001, the directors report as follows:

Directors

The names of the Company’s directors in office during the half-year and until the date of this report are as below:

Geoffrey Kempler Chairman, Non-Executive Director Megan Baldwin Chief Executive Officer and Managing Director Michael Sistenich Non-Executive Director

Review of operations

Financial performance

For the half year ended 31 December 2016, the Company’s net loss attributable to members is $2,297,240 (31 December 2015: $1,731,722). The increased loss compared to 2015 is mainly due to the increase in research and development (R&D) spending by the Group, which can be attributed to the expenditure incurred in 2016 on progressing our Phase 1/2A clinical trials with OPT-302 in wet AMD patients.

Set out below are other factors affecting financial performance:

• The total investment in R&D was $3,711,307 (31 December 2015: $1,943,136). Direct R&D spending (excluding personnel and R&D support costs) was $2,757,748 (31 December 2015: $1,247,188).

• The net income tax benefit for the half year is $2,670,981 (31 December 2015: $856,625).

• Basic earnings per share were a loss of 1.53 cents (31 December 2015: loss of 1.14 cents).

Financial position

The cash position as at 31 December 2016 was $13,144,174 (30 June 2016: $14,486,403). Other points to note on the Company’s financial position are:

• The 2016 Research and Development (R&D) tax incentive claim of $2,643,553, was received from the Australian Tax Office during October 2016. A benefit of $1,614,418 (31 December 2015: $874,411) has been recognised in relation to the R&D tax incentive spend in the current period and included in current tax assets.

• As at 31 December 2016, the Net Tangible Asset backing per share was 9 cents; down from 10 cents as at 30 June 2016.

Corporate restructuring

Simplification of Opthea’s corporate structure through deregistration or liquidation of several of our whollyowned subsidiaries has been completed. This process is critical to articulation of a clear corporate strategy and provides greater efficiencies in our accounting and reporting processes.

Our ophthalmology program/s are conducted under the public ASX listed entity Opthea Limited. At the completion of the corporate restructure, one wholly-owned subsidiary of Opthea, Vegenics Pty Ltd, now remains. Opthea’s extensive intellectual property related to VEGF-C, VEGF-D and VEGFR-3 will continue to be recognised within Vegenics Pty Ltd.

4

Opthea Limited and controlled entities

==> picture [70 x 17] intentionally omitted <==

OPT-302: A potent inhibitor of VEGF-C and VEGF-D for the treatment of wet AMD

Opthea has continued to execute its plans to focus on the development of its lead molecule OPT-302 as an eye disease therapy.

OPT-302 is a soluble form of VEGFR-3 that acts as a VEGF-C/VEGF-D ‘trap’. Blockade of VEGF-C and VEGF-D by OPT-302 inhibits blood and lymphatic vessel development, as well as vessel leakage. These are characteristics of several eye diseases, including neovascular (‘wet’) age-related macular degeneration (wet AMD).

Wet AMD is a disease characterised by loss of vision in the middle of the visual field caused by degeneration of the central portion of the retina (the macula). Abnormal growth of blood vessels below and within the retina, and the leakage of fluid and protein from the vessels, cause retinal degeneration and lead to severe and rapid loss of vision if left untreated.

Approved therapies for wet AMD include Eylea[®] and Lucentis[®] which block the activity of VEGF-A, the first member of the VEGF family of proteins to be discovered and a signal that causes blood vessels to grow and leak. The approved therapies target VEGF-A but not VEGF-C or VEGF-D which are alternate members of the same family of molecules. VEGF-C and VEGF-D can stimulate blood vessel growth and leakage through the same pathway as VEGF-A, as well as through pathways that are independent of VEGF-A. Annual worldwide sales of current approved therapies are in excess of US$7 billion.

Our plan is to address the unmet medical need that remains for wet AMD patients. Approximately half of the people receiving the existing therapies do not experience a significant gain in vision and/or have persistent fluid at the back of the eye. Wet AMD is the leading cause of blindness in the developed world and one that is increasing in prevalence as the population ages.

OPT-302 is being developed for use in combination with existing approved inhibitors of VEGF-A (Lucentis[®] / Eylea[®] ) in order to achieve a more complete blockade of the VEGF pathway and block mechanisms of ‘escape’ from VEGF-A inhibition. Combined inhibition of VEGF-A, together with VEGF-C and VEGF-D, may more effectively control aberrant blood vessel development and leakage than VEGF-A alone. Such an approach has the potential to improve visual acuity in previously untreated (treatment naïve) and prior treated patients that respond suboptimally to the currently approved therapies for the disease.

Operational update

A Phase 1/2A clinical trial of OPT-302 in patients with wet AMD is currently in progress under an FDA approved IND at 14 clinical sites in the USA ( ClinTrials.gov ID#: NCT02543229 ). The first-in-human dose-escalation and dose-expansion trial is investigating OPT-302 administered alone or in combination with Lucentis[®] on a monthly basis for three months. The primary endpoint of the study is the assessment of the safety of OPT-302 administered via ocular (intravitreal) injection as a monotherapy and in combination with Lucentis[®] . Secondary endpoints of the trial include preliminary measures of clinical activity, including evaluation of visual acuity using eye charts as well as changes in wet AMD lesions, including fluid and thickness of the tissue at the back of the eye, using advanced imaging techniques.

The primary safety objective of the Phase 1 trial was successfully met. OPT-302 administered by intravitreal injection as a monotherapy or in combination with Lucentis[®] was safe and well tolerated at all dose levels in 20 patients with wet AMD. In addition, encouraging results from the Phase 1 trial suggest clinical activity of OPT-302 in both treatment naïve and patients previously treated with standard of care.

Following positive results from the Phase 1 dose escalation study of OPT-302 in patients with wet AMD, enrolment of a further 31 patients in the Phase 2A dose expansion cohorts was completed in November 2016. We expect to report the primary analysis of the Phase 2A trial by April 2017. Concurrently with the completion of the Phase 1/2A clinical study, we are currently planning to initiate a larger, randomized and controlled Phase 2B clinical trial investigating OPT-302 + Lucentis[®] versus Lucentis[®] alone in wet AMD patients in the second half of 2017.

In August 2016 the company presented at the Ophthalmology Innovation Summit (OIS) in San Francisco. Dr Megan Baldwin, CEO presented in the “Emerging approaches to combination therapies in AMD and Diabetic

5

Opthea Limited and controlled entities

==> picture [70 x 17] intentionally omitted <==

Macular Edema”section of the conference. The OIS was a timely opportunity to present data from the Phase 1 dose escalation trial of OPT-302 in wet AMD to an international expert audience. Phase 1 data was also presented at European Society of Retina Specialists (EURETINA) congress held in Copenhagen, Denmark in September 2016. The EURETINA congress is the largest gathering of specialist retinal ophthalmologists and associated healthcare professionals in Europe.

In addition, in January 2017, Opthea attended the 35[th] Annual J.P. Morgan Conference in San Francisco. The conference attracts investors as well as pharmaceutical and biotechnology executives from around the world and is one of the industry’s largest healthcare investment conferences.

Outlook

Opthea will continue to focus the Company’s capital and resources on the significant opportunity represented in the OPT-302 program.

The key objectives of the Company over the next 12 months are to:

• Complete the Phase 1/2A clinical trial of OPT-302 in wet AMD patients;

• Report primary data from the Phase 2A cohorts by April 2017;

• Publish the outcomes of the Phase 1/2A clinical trial of OPT-302 in wet AMD patients in a peer reviewed journal;

• Initiate a randomised controlled Phase 2B clinical study of OPT-302 in wet AMD patients;

• Continue to raise Opthea’s profile through awareness of the unmet medical need for wet AMD and rationale for OPT-302 use in this setting and presentation of clinical data at international ophthalmology conferences.

Auditor’s Independence Declaration

The Directors have obtained a declaration of independence from Deloitte Touche Tohmatsu, the Company’s auditor, which is attached to this report.

Signed in accordance with a resolution of directors made pursuant to s.306 (3) of the Corporations Act 2001.

For and on behalf of the Board:

==> picture [156 x 57] intentionally omitted <==

Geoffrey Kempler Chairman

Melbourne 21 February 2017

6

==> picture [129 x 34] intentionally omitted <==

Deloitte Touche Tohmatsu ABN. 74 490 121 060

550 Bourke Street Melbourne VIC 3000 GPO Box 78 Melbourne VIC 3001 Australia

Tel: +61 (0) 3 9671 7000 Fax: +61 (0) 3 9671 7001 www.deloitte.com.au

The Board of Directors Opthea Limited Suite 403, Level 4 650 Chapel Street South Yarra VIC 3141

21 February 2017

Dear Board Members

Opthea Limited

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

As lead audit partner for the review of the financial statements of Opthea Limited for the half year ended 31 December 2016, I declare that to the best of my knowledge and belief, there have been no contraventions of:

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

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

Yours faithfully

DELOITTE TOUCHE TOHMATSU

Samuel Vorwerg Partner Chartered Accountants

Liability limited by a scheme approved under Professional Standards Legislation. Member of Deloitte Touche Tohmatsu Limited

7

Opthea Limited and controlled entities

==> picture [70 x 17] intentionally omitted <==

Condensed consolidated statement of profit or loss and other comprehensive income for the half-year ended 31 December 2016

Revenue Finance revenue Other revenue Total Revenue Other income Research and development expenses Patent and intellectual property expenses Administrative expenses Occupancy expenses Impairment losses on available-for-sale fnancial assets Gain on disposal of subsidiary Net fnance income Loss before income tax Income tax beneft Loss for period Other comprehensive income Items that maybe subsequently reclassifed to proft or loss: Net unrealised gains/(losses) on non-current listed investments for the period Reclassifcation adjustment due to impairment of available-for- sale fnancial assets held Reclassifcation adjustment due to available-for-sale fnancial assets disposed of in the period Other comprehensive income for the period, net of tax Total comprehensive loss for the period Loss for the period is attributable to: Non-controlling interest Owners of the parent Total comprehensive loss for the period is attributable to: Non-controlling interest Owners of the parent Earnings per share for loss attributable for the ordinary equity holders of the parent: Basic and diluted loss per share (cents)	31 December
	2016 $ 2015 $
	147,999 229,825 31,732 285,331
	179,731 515,156
	1,065 7,105 (2,757,748) (1,247,188) (149,246) (261,995) (2,230,208) (1,479,438) (52,633) (52,890) - (247,913) 2,521 168,083 38,297 10,733
	(4,968,221) (2,588,347)
	2,670,981 856,625
	(2,297,240) (1,731,722)
	548,062 (757,220) - 247,913 - 198,451
	548,062 (310,856)
	(1,749,178) (2,042,578)
	- (24,354) (2,297,240) (1,707,368)
	(2,297,240) (1,731,722)
	- (101,631) (1,749,178) (1,940,947)
	(1,749,178) (2,042,578)
	(1.53) (1.14)

Notes to the financial statements are included on pages 12 to 15.

8

Opthea Limited and controlled entities

==> picture [70 x 17] intentionally omitted <==

Condensed consolidated statement of financial position as at 31 December 2016

Current Assets Cash and cash equivalents Current tax assets Investment in subsidiary Receivables Prepayments Total Current Assets Non-current Assets Available-for-sale fnancial assets Plant and equipment Total Non-current Assets Total Assets Current Liabilities Payables Provisions Financial liabilities Total Current Liabilities Non-current Liabilities Provisions Other liabilities Total Non-current Liabilities Total Liabilities Net Assets Equity Contributed equity Accumulated losses Reserves Total Equity	Note	31 December 2016 $ 30 June 2016 $
	4 5 6 7	13,144,174 14,486,403 1,614,418 1,586,990 - 169,101 191,176 221,010 125,740 182,036
		15,075,508 16,645,540
		863,972 315,910 80,681 91,150
		944,653 407,060
		16,020,161 17,052,600
		1,797,234 1,629,976 356,097 361,206 - 21,004
		2,153,331 2,012,186
		21,445 16,826 35,283 45,434
		56,728 62,260
		2,210,059 2,074,446
		13,810,102 14,978,154
		53,853,396 53,844,979 (44,352,103) (42,054,863) 4,308,809 3,188,038
		13,810,102 14,978,154

Notes to the financial statements are included on pages 12 to 15.

9

Opthea Limited and controlled entities

==> picture [71 x 17] intentionally omitted <==

Condensed consolidated statement of changes in equity for the half-year ended 31 December 2016

			Share-based	Equity	Unrealised		Attributable	Non-
	Contributed	Options	payments	reserve	gains	Accumulated	to owners of	controlling
	equity	reserve	reserve	parent	reserve	losses	the parent	interests	Total equity
	$	$	$	$	$	$	$	$	$
As at 1 July 2016	53,844,979	1,989,067	1,198,971	-	-	(42,054,863)	14,978,154	-	14,978,154
Other comprehensive income	-	-	-	-	548,062	-	548,062	-	548,062
Loss for the period	-	-	-	-	-	(2,297,240)	(2,297,240)	-	(2,297,240)
Total comprehensive income and
expense for the period	-	-	-	-	548,062	(2,297,240)	(1,749,178)	-	(1,749,178)
Cost of share based payment	-	-	572,709	-	-	-	572,709	-	572,709
Issue of ordinaryshares	8,417	-	-	-	-	-	8,417	-	8,417
Balance as at 31 December 2016	53,853,396	1,989,067	1,771,680	-	548,062	(44,352,103)	13,810,102	-	13,810,102
As at 1 July 2015	53,840,767	1,989,067	388,040	(7,172,143)	233,579	(28,375,300)	20,904,010	817,602	21,721,612
Other comprehensive income	-	-	-	-	(233,579)	-	(233,579)	(77,277)	(310,856)
Loss for theperiod	-	-	-	-	-	(1,707,368)	(1,707,368)	(24,354)	(1,731,722)
Total comprehensive income and
expense for the period	-	-	-	-	(233,579)	(1,707,368)	(1,940,947)	(101,631)	(2,042,578)
Change in interest in subsidiary	-	-	-	-	-	-	-	(715,971)	(715,971)
Cost of share based payment	-	-	37,709	-	-	-	37,709	-	37,709
Issue of ordinaryshares	2,052	-	-	-	-	-	2,052	-	2,052
Balance as at 31 December 2015	53,842,819	1,989,067	425,749	(7,172,143)	-	(30,082,668)	19,002,824	-	19,002,824

Notes to the financial statements are included on pages 12 to 15.

10

Opthea Limited and controlled entities

==> picture [70 x 17] intentionally omitted <==

Condensed consolidated statement of cash flows for the half-year ended 31 December 2016

Cash fows from operating activities Interest received Royalty and licence income received Sales of reagents Income tax refunded Payments to suppliers, employees and for research and development and intellectual property costs (inclusive of GST) Net cash fows used in operating activities Cash fows from investing activities Distribution received on disposal of subsidiary Cash outfow on disposal of subsidiary Purchase of plant and equipment Proceeds from sale of investments Net cash fows provided by / (used in) investing activities Cash fows from fnancing activities Proceeds from issues of ordinary shares Net cash fows provided by fnancing activities Net decrease in cash and cash equivalents Net foreign exchange differences Cash and cash equivalents at beginning of the period Cash and cash equivalents at end of the period	31 December
	2016 $ 2015 $
	141,109 256,166 39,030 63,922 1,065 8,338 2,643,553 3,094,502 (4,361,241) (3,944,003)
	(1,536,484) (521,075)
	171,622 - - (204,910) (3,077) - - 13,439
	168,545 (191,471)
	8,417 2,052
	8,417 2,052
	(1,359,522) (710,494) 17,293 32,626 14,486,403 18,435,637
	13,144,174 17,757,769

Notes to the financial statements are included on pages 12 to 15.

11

Opthea Limited and controlled entities

==> picture [70 x 17] intentionally omitted <==

Notes to the condensed consolidated financial statements For the half-year ended 31 December 2016

1. Corporate information

The consolidated financial report of Opthea Limited for the half-year ended 31 December 2016 was authorised for issue in accordance with a resolution of the directors on 21 February 2017.

Opthea Limited (the parent) is a company limited by shares incorporated in Australia whose shares are publicly traded on the Australian Securities Exchange (ASX).

2. Basis of preparation and accounting policies

(a) Basis of preparation

This condensed consolidated financial report has been prepared in accordance with AASB 134 Interim Financial Reporting and the Corporations Act 2001 . The half-year financial report has been prepared on a historical cost basis, except for investments classified as available-for-sale, which are carried at fair value.

The half-year financial report does not include all notes of the type normally included within the annual financial report and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the consolidated entity as the full financial report.

It is recommended that the half-year financial report be read in conjunction with the annual financial report for the year ended 30 June 2016 and considered together with any public announcements made by Opthea Limited during the half-year ended 31 December 2016 in accordance with the continuous disclosure obligations of the ASX listing rules.

The financial report is presented in Australian dollars.

(b) Changes in accounting policy

The accounting policies and methods of computation are consistent with those which have been adopted in the most recent annual financial report, except for the impact of the New Standards and Interpretations as set out in note 2(c) below. These accounting policies are consistent with Australian Accounting Standards and International Financial Reporting Standards.

(c) New accounting standards and interpretations

The Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (the AASB) that are relevant to their operations and effective for the current half-year.

New and revised Standards and amendments thereof and Interpretations effective for the current half-year that are relevant to the Group include:

• AASB 2014-4 Amendments to Australian Accounting Standards – Clarification of Acceptable Methods of Depreciation and Amortisation

• AASB 2015-1 Amendments to Australian Accounting Standards – Annual Improvements to Australian Accounting Standards 2012-2014 Cycle

• AASB 2015-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 101

Impact of the application of AASB 2014-4 ‘Amendments to Australian Accounting Standards – Clarification of Acceptable Methods of Depreciation and Amortisation’: The amendments to AASB 116 Property, Plant and Equipment prohibit entities from using a revenue-based depreciation method for items of property, plant and equipment. As the Group already uses the straight-line method for depreciation of its property, plant and equipment, the application of these amendments has had no impact on the Group's consolidated financial statements.

12

Opthea Limited and controlled entities

==> picture [70 x 17] intentionally omitted <==

The Amendments to Australian Accounting Standards – Annual Improvements to Australian Accounting Standards 20122014 Cycle include a number of amendments to various Accounting Standards. Those that are relevant to the Group are summarised below:

• The amendments to AASB 119 Employee Benefits clarify that the rate used to discount post-employment benefit obligations should be determined by reference to market yields at the end of the reporting period on high quality corporate bonds. The assessment of the depth of a market for high qualify corporate bonds should be at the currency level (i.e. the same currency as the benefits are to be paid).

• The amendments to AASB 134 Interim Financial Reporting make provision for disclosures required by the Standard to be given either in the interim financial statements or incorporated by cross-reference from the interim financial statements to some other statement that is available to users of the financial statements on the same terms as the interim financial statements and at the same time.

The application of these amendments has had no effect on the Group's consolidated financial statements.

Impact of the application of AASB 2015-2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 101: The Group has applied these amendments for the first time in the current year. The amendments clarify that an entity need not provide a specific disclosure required by an AASB if the information resulting from that disclosure is not material, and give guidance on the bases of aggregating and disaggregating information for disclosure purposes. However, the amendments reiterate that an entity should consider providing additional disclosures when compliance with the specific requirements in AASB is insufficient to enable users of financial statements to understand the impact of particular transactions, events and conditions on the entity’s financial position and financial performance.

As regards the structure of the financial statements, the amendments provide examples of systematic ordering or grouping of the notes.

The application of these amendments has not had a material presentation impact on the financial performance or financial position of the Group.

3. Segment information

The consolidated entity operates mainly in one industry and one geographical segment, those being the medical technology and healthcare industry and Australia respectively. There is no seasonality or cyclicality in the operations of the business.

13

Opthea Limited and controlled entities

31 December 2016 30 June 2016 $ $

==> picture [70 x 17] intentionally omitted <==

4. Cash and cash equivalents

For the purpose of the half-year statement of cash fows, cash and cash equivalents are comprised of the following: Cash at bank and in hand Short term deposits	2,644,174 2,986,403 10,500,000 11,500,000
	13,144,174 14,486,403

Cash at bank earns interest at floating rates based on daily bank deposit rates.

Short term-deposits are with major Australian banks and are made for varying periods of between 30 days and 90 days, depending on the immediate cash requirements of the Group, and earn interest at a fixed rate for the respective short-term deposit periods. At period end, the average rate was 2.58% (2015 half-year: 3.00%).

5. Non-current assets – Available for sale financial assets

Listed investments Non-current investments Antisense Therapeutics Ltd Optiscan Imaging Ltd	Ownership interest	Fair value(1) Cost of investment
	31 Dec 2016 % 30 June 2016 %	31 Dec 2016 $ 30 June 2016 $ 31 Dec 2016 $ 30 June 2016 $
	6.31 5.77 2.21 2.66	366,863 315,910 3,106,944 3,106,944 497,109 - 786,131 786,131
		863,972 315,910 3,893,075 3,893,075

• (1) The fair value represents the share (bid) price at period end, and does not include any capital gains tax or selling costs that may be applicable on the disposal of these investments.

Non-current investments in listed shares (which are not associates) are designated and accounted for as “available-for-sale” financial assets pursuant to AASB 139 Financial Instruments: Recognition and Measurement.

Contributed equity Ordinary shares fully paid: Balance at 1 July 2016 Issue of shares on exercise of options Balance at 31 December 2016	Number of shares Share capital $
	150,205,903 53,844,979 31,175 8,417
	150,237,078 53,853,396

6. Contributed equity

Issued capital at 31 December 2016 amounted to $53,853,396 (150,237,078 fully paid ordinary shares) net of share issue costs, tax and amounts taken to the options reserve. During the half-year, the Company issued 31,175 ordinary shares in respect of the exercise of quoted options issued in November 2014.

14

Opthea Limited and controlled entities

==> picture [70 x 17] intentionally omitted <==

7. Reserves Options reserve Share-based payments reserve1 Unrealised gains reserve2 Equity reserve parent Total reserves (1) Movements in share-based payments reserve: Opening balance Share-based payments expense Closing balance (2) Movements in unrealised gains reserve: Opening balance Unrealised gains/(losses) on available for sale assets Impairment of available for sale assets Disposal of available for sale assets	31 December 2016 $ 30 June 2016 $
	1,989,067 1,989,067 1,771,680 1,198,971 548,062 - - -
	4,308,809 3,188,038
	1,198,971 388,040 572,709 810,931
	1,771,680 1,198,971
	- 233,579 548,062 (1,327,838) - 895,808 - 198,451
	548,062 -

8. Events subsequent to reporting date

No matters or circumstances have arisen since the end of the reporting period, not otherwise disclosed in this report, which significantly affected, or may significantly affect, the operations of the Group, the results of those operations, or the state of affairs of the Group in future financial years.

15

Opthea Limited and controlled entities

==> picture [70 x 17] intentionally omitted <==

Directors’ declaration

In accordance with a resolution of the directors of Opthea Limited, we state that:

• 1) In the opinion of the directors:

• a) The financial report and the notes thereto are in accordance with the Corporations Act 2001 , including:

  • (i) Giving a true and fair view of the Group’s financial position as at 31 December 2016 and of its performance for the half-year ended on that date; and

  • (ii) Complying with Australian Accounting Standards and Corporations Regulations 2001 as disclosed in note 2(a) of the financial statements; and

• b) There are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

• 2) This declaration has been made after receiving the declarations required to be made to the directors in accordance with section 303(5) of the Corporations Act 2001 for the half-year ended 31 December 2016.

On behalf of the Board:

==> picture [156 x 57] intentionally omitted <==

Geoffrey Kempler Chairman

Melbourne 21 February 2017

16

==> picture [129 x 34] intentionally omitted <==

Deloitte Touche Tohmatsu ABN. 74 490 121 060

550 Bourke Street Melbourne VIC 3000 GPO Box 78 Melbourne VIC 3001 Australia

Tel: +61 (0) 3 9671 7000 Fax: +61 (0) 3 9671 7001 www.deloitte.com.au

Independent Auditor’s Review Report to the members of Opthea Limited

Report on the Half-Year Financial Report

We have reviewed the accompanying half-year financial report of Opthea Limited, which comprises the condensed consolidated statement of financial position as at 31 December 2016, and the condensed consolidated statement of profit or loss and other comprehensive income, the condensed consolidated statement of cash flows and the condensed consolidated statement of changes in equity for the half-year ended on that date, selected explanatory notes and, the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the end of the halfyear or from time to time during the half-year as set out on pages 8 to 16.

Directors’ Responsibility for the Half-Year Financial Report

The directors of the company are responsible for the preparation of the half-year financial 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 half-year financial report that givrs a true and fair view and is free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity , in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity’s financial position as at 31 December 2016 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . As the auditor of Opthea Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Auditor’s Independence Declaration

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

Liability limited by a scheme approved under Professional Standards Legislation.

17

Member of Deloitte Touche Tohmatsu Limited

Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Opthea Limited is not in accordance with the Corporations Act 2001 , including:

• (a) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2016 and of its performance for the half-year ended on that date; and

• (b) complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 .

==> picture [167 x 30] intentionally omitted <==

DELOITTE TOUCHE TOHMATSU Samuel Vorwerg Partner Chartered Accountants Melbourne, 21 February 2017

18