SILEX SYSTEMS LIMITED — Annual Report 2015

Sep 24, 2015

==> picture [165 x 57] intentionally omitted <==

Silex Systems Limited & its subsidiaries ABN 69 003 372 067

Concise Financial Report for the year ended 30 June 2015

Company Directory

Directors

Dr L M McIntyre – Chair Dr M P Goldsworthy – CEO/MD Mr R A R Lee Mr C D Wilks

Audit Committee

Mr R A R Lee – Chair Dr L M McIntyre Mr C D Wilks

People & Remuneration Committee

Dr L M McIntyre – Chair Mr R A R Lee Mr C D Wilks

Company Secretary Ms J E Ducie

Registered Office and Principal Place of Business

Suite 8.03, Level 8 56 Clarence Street Sydney NSW 2000, Australia

Postal address: PO Box 364, Sydney NSW 2001, Australia

Phone: +61 2 9704 8888 Fax: +61 2 9279 1051 Email: investor.relations@silex.com.au Website: www.silex.com.au

Share Registry

Computershare Registry Services Pty Limited Level 5, 115 Grenfell Street, Adelaide, South Australia 5000, Australia GPO Box 1903 Adelaide SA 5001, Australia

Enquiries within Australia: 1300 556 161 Enquiries outside Australia: +61 8 8236 2300 Email: web.queries@computershare.com.au Website: www.computershare.com.au

Stock Exchange Listed on the Australian Stock Exchange, Ticker: SLX Listed on the OTCQX International, Ticker: SILXY

Auditors

PricewaterhouseCoopers

Solicitors

Baker & McKenzie

Bankers

Australia and New Zealand Banking Group Limited

American Depository Receipts (ADR) Information

Silex Systems Limited’s ADRs may be purchased on the US OTCQX market. Details are as follows: Ratio: 1 ADR = 5 ordinary shares Symbol: SILXY CUSIP: 827046 10 3 9414F102 Exchange: OTCQX Country: Australia

IMPORTANT NOTICE:

Forward Looking Statements and Business Risks:

Silex Systems is a research and development company whose assets are its proprietary rights in various technologies, including, but not limited to, the SILEX Technology, Solar Systems technology, and Translucent technology. Several of the Company’s technologies are in the development stage and have not been commercially deployed, and therefore are high-risk. Accordingly, the statements in this announcement regarding the future of the Company’s technologies and commercial prospects are forward looking and actual results could be materially different from those expressed or implied by such forward looking statements as a result of various risk factors.

Some risk factors that could affect future results and commercial prospects include, but are not limited to: results from the SILEX uranium enrichment commercialisation program; the demand for enriched uranium; the outcomes of the Company’s interests in the development of various semiconductor, photonics and alternative energy technologies; the time taken to develop various technologies; the development of competing technologies; the potential for third party claims against the Company’s ownership of Intellectual Property associated with its numerous technologies; the potential impact of government regulations or policies; and the outcomes of various commercialisation strategies undertaken by the Company.

Silex Systems Limited Directors’ Report 30 June 2015

DIRECTORS’ REPORT

Your directors present their report on the consolidated entity consisting of Silex Systems Limited (Silex or the Company) and the entities it controlled at the end of, or during the year ended 30 June 2015.

1. Directors and company secretary

The following persons were directors of Silex Systems Limited during the whole of the financial year and up to the date of this report:

Dr L M McIntyre Dr M P Goldsworthy Mr C D Wilks

Mr R A R Lee was appointed as a director on the 1 July 2015 and continues in office as at the date of this report. Mr A S Stock was a director from the beginning of the financial year until his retirement on 31 August 2015.

The Company secretary is Ms J E Ducie BBus, CA, GAICD. Ms Ducie was appointed to the position of Company secretary in 2010. Before joining Silex, Ms Ducie held a senior finance position in the Construction industry in the Middle East and prior to that worked as a Senior Associate with a Chartered Accounting Practice.

2. Principal activities

During the year the principal continuing activities of the consolidated entity consisted of the commercialisation of the Company’s foundation technology – the laser isotope separation process for uranium enrichment known as the ‘SILEX Technology’. In addition, a restructure as a result of the strategic review of the entire business in June 2014 was implemented and is nearing completion at the time of writing. The restructure resulted in the following activities for our subsidiary business interests:

• i) Solar Systems: Following a rigorous but unsuccessful global process to attract new investment for Solar Systems, the Silex Board announced the cessation of business operations on 30 July 2015. The pursuit of opportunities to realise value for the sale of assets and intellectual property surrounding the unique ‘Dense Array’ concentrated photovoltaic (CPV) system for utility-scale solar power stations was continuing at the time of writing. Solar Systems Pty Ltd is a wholly owned subsidiary of Silex.

• ii) Translucent: The pursuit of business development options for Translucent’s novel semiconductor materials for application to the manufacturing of next generation devices in the semiconductor and power electronics industries accelerated during the year with technical due diligence undertaken by several third parties. This process culminated in the signing of an exclusive License and Assignment Agreement with UK-based IQE Plc on 15 September 2015. As a result of the Agreement, the Translucent technology will be transferred to IQE Plc for the completion of product development and commercialisation activities during the 30-month license period. Meanwhile, the Translucent facility in Palo Alto, California will be closed down by the end of December 2015. Translucent Inc will remain a Californian-based company (in which Silex has a 99% fully diluted interest) in order to service the abovementioned Agreement.

3. Dividend

No dividend payments were made during the year. No dividend has been recommended or declared by the Board.

4 | P a g e

Silex Systems Limited Directors’ Report 30 June 2015 (continued)

4. Review of operations and activities

Information on the operations and financial position of the consolidated entity and its business strategies and prospects is set out below and in section 8 ‘Likely developments and expected results of operations’.

Trading Results

A summary of consolidated revenue and results is set out below:

Trading Results A summary of consolidated revenue and results is set out below:
Revenue from continuing operations (Loss) before income tax expense Income tax expense Net (loss) from continuing operations Net (loss) from discontinued operations Net (loss) for the year Net (loss) is attributable to: Owners of Silex Systems Limited Non-controlling interests	2015 2014 $ $
	3,674,860 7,113,672
	(2,284,993) (1,253,137) - -
	(2,284,993) (1,253,137) (33,659,803) (28,378,323)
	(35,944,796) (29,631,460)
	(35,944,796) (29,488,786) - (142,674)
	(35,944,796) (29,631,460)

Key information about the consolidated operations, results and financial position

Comments on the operations and the results of those operations are set out below:

The focus of the Company in FY 2015 has been the implementation of the outcomes of the major strategic review announced by the Silex Board on 30 June 2014 that will result in the return of the Company’s focus to the development of the Company’s foundation technology and core asset – the ‘SILEX’ laser uranium enrichment technology. The resulting restructure has seen a number of significant changes completed, including, a full operational review with a significant reduction in headcount, the closure of the ChronoLogic business, and in parallel, a rigorous global search for business development options to accelerate the transition to market for subsidiaries Solar Systems and Translucent. The implementation of the restructure is nearing completion.

The announcement of the strategic review was followed soon after by SILEX Technology Licensee, GE-Hitachi Global Laser Enrichment LLC (‘GLE’), announcing its own restructure in July 2014. GLE’s restructure resulted in the slowdown of the commercialisation project in response to adverse conditions in the nuclear fuel markets, largely precipitated by the shutdown of the Japanese nuclear industry after the Fukushima disaster. GLE has completed its restructure, resulting in a significant reduction of funding for activities in its US operations, which have now been consolidated in Wilmington, North Carolina. Additionally, Silex took over funding of activities at its Lucas Heights facility in Sydney, which continues to progress with the development of commercial-scale plant laser systems and providing ongoing support to the GLE team in Wilmington.

Following a rigorous search for new investment for Solar Systems which was ultimately unsuccessful, the Silex Board announced on 30 July 2015 the immediate cessation of the Solar Systems business operations. However, given the considerable interest shown in the Solar Systems technology, the IP and associated expertise has been retained to pursue residual opportunities. The pursuit of business development options for Translucent continued during the year with several interested parties advancing technical due diligence. The due diligence resulted in a License and Assignment Agreement for the Translucent technology being signed on 15 September 2015, under which the transfer of the technology to IQE Plc will occur over a 30-month license period. Both businesses have been reported as held for sale and discontinued operations in these accounts.

We expect to complete the restructure of the Company in the coming months and thereafter focus solely on our core ‘SILEX’ laser uranium enrichment technology. Accordingly, these financial statements have been presented to show the financial impact of the restructure. We continue to believe that the medium to long term outlook for uranium and enrichment services will return to positive growth and therefore view the SILEX Technology - the only third generation laser enrichment technology being commercialised in the world - as our key asset and the best path forward to deliver value to our shareholders.

5 | P a g e

Silex Systems Limited Directors’ Report 30 June 2015 (continued)

Financial review

A summary of our consolidated income statement is set out below:

A summary of our consolidated income statement is set out below:
Revenue from continuing operations Other income Research and development materials Employee benefits expense Consultants and professional fees Other expenses Income tax expense Net (loss) from continuing operations Net (loss) from discontinued operations Net (loss) for the year	2015 2014 $ $
	3,674,860 7,113,672 42,475 569 (154,296) (560,854) (4,017,953) (5,552,858) (642,304) (817,515) (1,187,775) (1,436,151) - -
	(2,284,993) (1,253,137) (33,659,803) (28,378,323)
	(35,944,796) (29,631,460)

The net loss from ordinary activities of $35.9m increased by $6.3m compared to the prior year. The net loss is comprised of the loss from continuing operations of $2.3m (an increase of $1.0m compared to the prior year) and the loss from discontinued operations of $33.7m (an increase of $5.3m compared to the prior year). The increase in loss from continuing operations is in line with expectations as a result of Silex now funding the Lucas Heights activities following GLE’s restructure announced in July 2014.

The net loss from discontinued operations includes the operations of Solar Systems and Translucent as well as a small loss for the ChronoLogic operation that ceased in September 2014. Significant expenses for the period included impairment of the carrying value of property, plant and equipment, and intangibles of $19.3m held by Solar Systems and Translucent combined, in accordance with Australian Accounting Standards. In addition, the net loss included the anticipated costs associated with the dismantling and decommissioning of various facilities, further write downs of inventory holdings and employee termination payments made during the year.

The above noted factors are the key drivers of the increased net loss from ordinary activities (after tax) attributable to members. Further commentary on the results from our operations is provided below.

Continuing Operations - Silex Systems

The Silex Systems segment result was a $2.3m loss in the current year compared to $1.3m loss in the previous year. The increased loss was largely due to a reduction of $3.0m in revenue from Recoverable projects costs in the Uranium Enrichment Project. Interest income also decreased to $2.2m in the current year compared to $2.6m in the previous year as a result of lower interest rates and lower average cash / term deposit holdings in the current year. In addition, there was a reduction in expenses from continuing operations of $2.4m compared to the prior year, including a decrease in employee benefits expense of $1.5m and a decrease in research and development materials costs of $0.4m.

Discontinued Operations – Solar Systems, Translucent, ChronoLogic and Silex Solar

The $33.7m loss from discontinued operations ($28.4m loss in the prior year) includes operating losses of $11.0m ($15.7m in the prior year) from the Solar Systems, Translucent, ChronoLogic and Silex Solar businesses. The loss was also impacted by the impairment of the carrying value of property, plant and equipment and intangible assets of $19.3m ($12.4m in the prior year) held by Solar Systems and Translucent, a provision for the dismantling and decommissioning of the Companies’ various facilities of $1.8m ($0.3m of restructuring provisions in the prior year) and $0.8m of inventory write-downs, taking the carrying value of Solar Systems inventory to $nil. Losses on derecognition of non-controlling interest in discontinued activities was $0.8m ($nil in the prior year).

The Silex Board announced the immediate cessation of the Solar Systems business operation on 30 July 2015 following a rigorous search for new investment which was ultimately unsuccessful. Given the considerable interest shown in the Solar Systems technology throughout the process, the IP and associated expertise has been retained to pursue residual opportunities.

6 | P a g e

Silex Systems Limited Directors’ Report 30 June 2015 (continued)

Third party technical due diligence activities conducted during the year in relation to Translucent’s technology resulted in the signing of a License and Assignment Agreement with UK-based IQE Plc on 15 September 2015. The scale of Translucent’s operations was reduced during the year with an emphasis on conversion of business development opportunities.

The closure of the ChronoLogic business was completed in September 2014. ChronoLogic was derecognised as a subsidiary during the year for accounting purposes and an adjustment of $0.8m has been processed on consolidation to clear the accumulated losses attributable to the minority shareholding. This had the effect of increasing the loss from discontinued operations by $0.8m.

Balance sheet

A summary of our balance sheet is set out below:

ASSETS Total current assets Total non-current assets Total assets LIABILITIES Total current liabilities Total non-current liabilities Total liabilities Net assets EQUITY Total equity	30 June 2015 30 June 2014 $ $
	61,951,409 97,343,949 67,451 119,311
	62,018,860 97,463,260
	4,451,614 5,266,206 113,110 111,971
	4,564,724 5,378,177
	57,454,136 92,085,083
	57,454,136 92,085,083

As at 30 June 2015, total assets were $62m. Significant assets are cash holdings of $55.2m (cash and term deposits), trade and other receivables of $5.2m and assets held for sale of $1.6m. Total liabilities were $4.6m and included liabilities associated with our discontinued operations of $3.1m. The Company does not have any borrowings (e.g. bank debt).

5. Earnings per share

5. Earnings per share
Earnings per share for (loss) from continuing operations attributable to the ordinary equity holders of the Company Basic earnings per share Diluted earnings per share Earnings per share for (loss) attributable to the ordinary equity holders of the Company Basic earnings per share Diluted earnings per share	2015 Cents 2014 Cents
	(1.3) (0.7) (1.3) (0.7) (21.1) (17.3) (21.1) (17.3)

6. Significant changes in state of affairs

The implementation of the Company’s strategic review, as announced in June 2014 is nearing completion, with the business returning its sole focus to the core SILEX Technology. Whilst the strategic review implementation will deliver financial and operational benefits to Silex in future years, the current year result has been impacted by asset impairments, provisions for the dismantling and decommissioning of various facilities, further write downs of inventory holdings and employee termination payments made during the year.

7 | P a g e

Silex Systems Limited Directors’ Report 30 June 2015 (continued)

Following a rigorous search for new investment which was ultimately unsuccessful, the Silex Board announced on 30 July 2015 the immediate cessation of the Solar Systems’ business operations. Given the considerable interest shown in the Solar Systems’ technology, the IP and associated expertise has been retained to pursue residual opportunities.

On 15 September 2015, the Silex Board announced the signing of an agreement for the license and assignment of subsidiary Translucent’s unique semiconductor technology with UK-based IQE Plc. The agreement provides for the transfer of the Translucent technology to IQE during the 30-month license period to complete product commercialisation and will result in the closure of the Translucent facility at Palo Alto, California.

Additionally, as reported previously, all ChronoLogic activities ceased in September 2014. There were no other significant changes in the state of affairs of the Company during the financial year not otherwise dealt with in this report.

7. Matters subsequent to the end of the financial year

Solar Systems

On 30 July 2015, Silex announced the immediate cessation of Solar Systems’ business operations. The announcement followed a rigorous extended global process to attract new investment in Solar Systems which ultimately was unsuccessful. As the process revealed considerable interest in Solar Systems’ unique ‘Dense Array’ concentrating dish technology during the divestment process, the Company has retained the IP and associated expertise to pursue residual opportunities.

The resulting financial effect of the 30 July 2015 decision, which is largely staff redundancy costs, has not been brought to account in the financial statements for the year ended 30 June 2015. Redundancy costs of approximately $1.0m are expected to be brought to account in the financial statements for the year ended 30 June 2016.

Translucent

On 15 September 2015, Silex announced the signing of a License and Assignment Agreement with UK-based IQE Plc for Translucent’s technology. The agreement grants IQE an exclusive 30-month license to complete product development and commercialisation activities, with an option exercisable at any time during the 30-month license period, for IQE to acquire Translucent’s technology. If successfully commercialised the agreement also provides for a perpetual royalty on the sale of products incorporating the Translucent technology.

As a result of the agreement, the Translucent facility at Palo Alto, California will no longer be required and will be closed down by the end of December 2015. The services of two key engineers will be retained for 12 months to facilitate the transfer of the technology to IQE. The financial effect of the 15 September 2015 announcement, including a maximum license fee of USD$1.5m (minimum of USD$1.415m) payable by 15 March 2016 and a small amount of staff redundancy costs, have not been brought to account in the financial statements for the year ended 30 June 2015 and will be brought to account in the financial statements for the year ended 30 June 2016. Should the option be exercised by IQE for the acquisition of the technology, a further payment of USD$5m would be due to Translucent.

Other

The consolidated entity is not aware of any other matters or circumstances which are not otherwise dealt with in the financial statements that have significantly, or may significantly, affect the operations of the consolidated entity, the results of its operations or the state of the consolidated entity in subsequent years other than those referred to above.

8. Likely developments and expected results of operations Silex is a technology company with its primary asset being the ‘SILEX’ laser uranium enrichment technology which is currently licensed exclusively to GE-Hitachi Global Laser Enrichment LLC (‘GLE’). The Company’s future prospects remain largely dependent on the outcomes of the phased commercialisation program and a recovery in the accessible markets for both uranium and enrichment services.

Business strategies and future prospects – Silex Systems

Silex invented a novel method for enriching uranium using lasers in the mid-1990’s, and after conducting development and demonstration activities in Australia, is currently supporting the commercialisation of the SILEX Technology in Wilmington, North Carolina, USA under an exclusive Technology Commercialisation and License Agreement with GLE – a business venture owned by GE (51%), Hitachi (25%) and Cameco (24%).

8 | P a g e

Silex Systems Limited Directors’ Report 30 June 2015 (continued)

On 24 July 2014, GLE announced that they would slow the pace of the commercialisation program for the SILEX laser uranium enrichment technology to align with adverse market conditions being experienced in the uranium and enrichment services markets primarily as a result of the shut-down of the Japanese nuclear power industry after the Fukushima accident. While these changes have resulted in the consolidation of GLE operations, importantly, Phase II technology commercialisation work is continuing at the Test Loop facility in Wilmington, North Carolina under GLE funding, and also at the laser development facility in Lucas Heights, Sydney under Silex funding. Meanwhile, Silex has been informed that negotiations with the US Department of Energy (DOE) concerning the establishment of the Paducah Laser Enrichment Facility (PLEF) are nearing completion with an outcome likely in the next few months.

GLE and Silex continue to conduct a stage-gated approach to commercialisation of the SILEX laser enrichment technology, albeit at reduced pace, with the following three phases:

Phase	Objectives	Status
Phase I	Test Looptechnologydemonstration and NRC commercialplant license approval	Completed
PhaseII	Economic and engineeringvalidation fortheinitialcommercialproduction module	Commencedin 2012
Phase III	Construction of the first full-scale commercialproduction facility	Yet to commence

The successful completion of the Test Loop Program Phase I Milestone (technology validation) resulted in a USD$15m milestone payment to Silex in July 2013.

The market for nuclear fuel, including natural and enriched uranium, remains depressed, with both the uranium and enrichment markets continuing to experience a challenging pricing environment. The global nuclear industry is still suffering the impacts of the Fukushima event in 2011 and the shutdown of the entire Japanese nuclear power plant fleet for much longer than anticipated. As a result, the demand for natural and enriched uranium has been slower to recover than expected and remain in significant oversupply. The price of uranium remains down, however has started to show signs of recovery, having increased by ~30% since June 2014. Unfortunately downward pricing pressure continues to be witnessed in the enrichment market with prices down over 50% since the events of Fukushima.

A key contributing factor to the expected recovery of the nuclear fuel markets is the restart of nuclear reactors in Japan, which have been largely shutdown since 2011. The first reactor restart occurred on 11 August 2015 at the Sendai nuclear power plant, with the second Sendai unit expected to restart before the end of 2015. At the time of writing another 24 reactors were in the restart approval process, according to the World Nuclear Association (WNA) (world-nuclear.org). Japan recently confirmed its commitment to nuclear power generation detailing a program setting out a target to produce around one fifth of its power from nuclear energy by 2030.

Meanwhile, the construction of new nuclear power plants around the world is accelerating again as Governments continue to focus on energy security and low emissions electricity generation. For example, the US Environmental Protection Agency’s recently released Clean Power Plan allows new nuclear reactors to be counted towards meeting federal carbon emissions limits. This initiative effectively confirms the commitment of the US to nuclear power. This is in addition to China and India both moving ahead with significant nuclear power expansion programs.

According to the WNA, at the time of writing there were 436 operable reactors around the world with ~380 GWe generating capacity. Another 67 reactors are under construction in 14 countries, including 25 in China, 6 in India, and 5 in the USA. A further 166 reactors are on order or planned and 322 reactors are proposed to be built. Under the New Policies Scenario in the International Energy Agency’s World Energy Outlook 2014, global nuclear capacity is predicted to grow to 624 GWe by 2040. Under the low-carbon ‘450 Scenario’, nuclear generating capacity could more than double to 862 GWe by 2040.

Whichever scenario prevails, significant expansion of global nuclear capacity is likely over the next two decades and beyond. If so, this will ensure growing demand for both natural and enriched uranium, and potentially a positive outlook for Silex, subject to successful commercialisation of the SILEX laser enrichment technology by GLE over the coming years. However, the risks surrounding nuclear industry growth prospects and the related nuclear fuel market conditions, most of which are beyond our control, could impact the Phase II and Phase III commercialisation programs outlined above.

9 | P a g e

Silex Systems Limited Directors’ Report 30 June 2015 (continued)

Silex Systems Restructure

On 30 June 2014, Silex announced the completion of a strategic review of the entire business, resulting in a major restructure of the Company in order to refocus efforts on our primary economic asset, the SILEX laser enrichment technology. At the time of writing the restructure was largely complete. The Silex Board announced the cessation of Solar Systems’ business operations on 30 July 2015, following a rigorous but unsuccessful global process to attract new investment. The Company has retained the IP and associated expertise to pursue residual opportunities. The Silex Board also announced a License and Assignment Agreement for the Translucent technology on the 15 September 2015 following a period of positive third party technical due diligence activities being conducted. The agreement provides for the licensing of Translucent’s technology to IQE over a 30-month period during which a product development and commercialisation program will be completed. Consequently, the Translucent facility in Palo Alto, California will be closed by the end of the calendar year.

9. Information on Directors

a) Directors' profiles

The following information is current as at the date of this report:

Dr Lisa McIntyre BSc(Hons), PhD, GAICD. Chair – Independent non-executive director	Dr Lisa McIntyre BSc(Hons), PhD, GAICD. Chair – Independent non-executive director	Dr Lisa McIntyre BSc(Hons), PhD, GAICD. Chair – Independent non-executive director
Experience and expertise	Independent non-executive director for three years and Chair for one year. Extensive experience in strategy, commercialisation and performance issues as a senior partner of global strategy firm L.E.K. Consulting for 20 years. Director of numerous companies including HCF, Cover-More Group Limited, GenesisCare and Your Tutor Pty Ltd.
Other current listed company directorships	Non-executive director of Cover-More Group Limited since November 2013.
Former listed company directorships in last 3 years	None
Special responsibilities	Chair of the Board Member of Audit Committee Chair of People & Remuneration Committee
Interests in shares and options	Ordinary shares – Silex Systems Limited	48,230
	Options over ordinary shares – Silex Systems Limited	Nil

Dr Michael Goldsworthy BSc(Hons), MSc, PhD, FAIP, GAICD. Chief Executive Officer/Managing Director	Dr Michael Goldsworthy BSc(Hons), MSc, PhD, FAIP, GAICD. Chief Executive Officer/Managing Director	Dr Michael Goldsworthy BSc(Hons), MSc, PhD, FAIP, GAICD. Chief Executive Officer/Managing Director
Experience and expertise	CEO/MD for twenty three years. Founder of the Company and co-inventor of the SILEX uranium enrichment technology.
Other current listed company directorships	None
Former listed company directorships in last 3 years	None
Special responsibilities	Chief Executive Officer / Managing Director
Interests in shares and options	Ordinary shares – Silex Systems Limited	5,979,055
	Options over ordinary shares – Silex Systems Limited	1,102,207

10 | P a g e

Silex Systems Limited Directors’ Report 30 June 2015 (continued)

MrChristopher Wilks BComm, FAICD.Non-executive director	MrChristopher Wilks BComm, FAICD.Non-executive director	MrChristopher Wilks BComm, FAICD.Non-executive director
Experience and expertise	Non-executive director for twenty seven years. Finance director and CFO of Sonic Healthcare Limited. Various directorships held on the boards of a number of public companies over the last twenty years.
Other current listed company directorships	Finance director of Sonic Healthcare Limited since 1989
Former listed company directorships in last 3 years	None
Special responsibilities	Business development and corporate strategy Member of Audit Committee Member of People & Remuneration Committee
Interests in shares and options	Ordinary shares – Silex Systems Limited	2,814,021
	Options over ordinary shares – Silex Systems Limited	367,035

Mr Robert Lee BSc MBA.Independent non-executive director	Mr Robert Lee BSc MBA.Independent non-executive director	Mr Robert Lee BSc MBA.Independent non-executive director
Experience and expertise	Independent non-executive director from 1 July 2015. Experienced company director, corporate adviser and former Executive Director of Macquarie Group Limited.
Other current listed company directorships	None
Former listed company directorships in last 3 years	None
Special responsibilities	Chair of Audit Committee Member of People & Remuneration Committee
Interests in shares and options	Ordinary shares – Silex Systems Limited	Nil
	Options over ordinary shares – Silex Systems Limited	Nil

The following individual is a former director of the Silex Board:

Mr Andrew Stock BEng (Chem) (Hons), FIE Aust, GAICD.Independent non-executive director until 31 August 2015	Mr Andrew Stock BEng (Chem) (Hons), FIE Aust, GAICD.Independent non-executive director until 31 August 2015	Mr Andrew Stock BEng (Chem) (Hons), FIE Aust, GAICD.Independent non-executive director until 31 August 2015
Experience and expertise	Non-executive director for 2 years
Other current listed company directorships	Non-executive director of Horizon Oil Limited (director since 2011)
Former listed company directorships in last 3 years	Non-executive director of Geodynamics Limited (2003 to	2015)
Special responsibilities	Chair of Audit Committee Member of People & Remuneration Committee
Interests in shares and options	Ordinary shares – Silex Systems Limited	Nil
	Options over ordinary shares – Silex Systems Limited	Nil

11 | P a g e

Silex Systems Limited Directors’ Report 30 June 2015 (continued)

10. Meetings

The number of directors’ meetings held during the financial year and the number of meetings attended by each director are set out in the following table:

the following table:
	Directors’		Audit	Committee	People & Remuneration
	Meetings		Meetings		Committee Meetings
	Number	Number	Number	Number	Number	Number
Director’s name	Held	Attended	Held	Attended	Held	Attended
Dr L M McIntyre	15	15	2	2	2	2
Dr M P Goldsworthy	15	15	*	*	*	*
Mr A M Stock	15	13	2	2	2	2
Mr C D Wilks	15	15	2	2	2	2

* Not a member of the relevant committee at the time the scheduled meetings were held

12 | P a g e

Silex Systems Limited Directors’ Report 30 June 2015 (continued)

11. Remuneration Report

Dear Shareholders,

I am pleased to present to you the Silex Systems Limited Remuneration Report for the year ended 30 June 2015.

As you are aware, throughout the year, the Company the Board and Management progressed with the implementation of the Company’s 2014 major strategic review that will result in the return of the Company’s focus to the development of our core asset, the SILEX laser enrichment technology. This restructure is now largely complete and has resulted in significant changes, including the closure of the ChronoLogic business completed in September 2014, a reduction of 50% in corporate headcount, a License and Assignment Agreement being signed for the Translucent technology in September 2015 and the pursuit of residual business development options for Solar Systems.

The restructure included a full operational review, with various roles combined to streamline operations and reduce costs where possible. Some difficult decisions were made which impacted the Company’s Key Management Personnel (KMP), which included the Board’s decision that no remuneration increases be awarded for FY 2015 and more recently for FY 2016. It has now been 3 years since a total remuneration increase was awarded to KMP.

In addition, substantial changes were implemented to the remuneration package of our CEO/MD, with an agreed reduction from 1 January 2015 of approximately 55% to Total Maximum Potential Remuneration. This included a reduction of 31% in Total Fixed Remuneration.

As the restructure of the Company draws to a conclusion, it is likely that a further review of the structure and value of KMP remuneration will take place, with a continued aim to align remuneration to changing role responsibilities, business size and structure. The People & Remuneration Committee remains committed to an ongoing review of our remuneration policies and practices taking into account shareholders perspectives and good governance.

As Chair of the People & Remuneration Committee, I can assure you that the Committee remains mindful of shareholder concern that any long-term equity based remuneration is linked to growth in shareholder value. Therefore, as the Company returns its focus to the core SILEX Technology and implements the resulting restructure, it has again been determined that no long-term incentives will be granted to the CEO/MD and CFO/Company Secretary during FY 2016.

Further details on our remuneration approach and the remuneration for the 2015 financial year are set out within this Remuneration Report. On behalf of the Board, I invite you to review the full report and thank you for your continued interest. I look forward to answering any questions you may have at our Annual General Meeting in November 2015.

==> picture [74 x 25] intentionally omitted <==

Dr Lisa McIntyre Chair, People & Remuneration Committee

13 | P a g e

Silex Systems Limited Directors’ Report 30 June 2015 (continued)

The Directors present the Remuneration Report for the year ended 30 June 2015, outlining key aspects of our remuneration policy and framework and remuneration awarded for the Company’s non-executive directors, executive directors and other executive key management personnel.

The report contains the following sections:

• a) Directors and KMP disclosed in this report

• b) Remuneration governance

• c) Linking remuneration structure to company performance

• d) Voting and comments made at the Company’s 2014 Annual General Meeting

• e) Executive KMP remuneration structure

• f) Link between FY 2015 remuneration and performance

• g) Non-executives directors’ remuneration

• h) Director’s and KMP remuneration

• i) Details of share-based compensation and bonuses

• j) Shares under option

a) Directors and KMP disclosed in this report

The 2015 Remuneration Report has been prepared in accordance with the requirements of section 300A of the Corporations Act 2001 and accounting standard requirements and applies to KMP of the Company. KMP are defined as those persons who have authority and responsibility for planning, directing and controlling the activities of the Company.

Name	Position
Non-executive and executive directors
Dr L M McIntyre	Chair and Non-executive director
Dr M PGoldsworthy	CEO/ManagingDirector – Executive director
Mr A MStock	Non-executive director(until31 August2015)
Mr C D Wilks	Non-executive director
Other Executive KMP
Ms JE Ducie	CFO/Company Secretary
MrCR Murray	CEO–SolarSystems (until31 August2015)

b) Remuneration governance

Board oversight

The Silex Board is ultimately responsible for ensuring that the Company’s remuneration structure is equitable and aligned with the long-term interests of shareholders. The Board and its advisors are independent of Management when making decisions affecting employee remuneration.

People & Remuneration Committee structure

The People & Remuneration Committee is a committee of the Board currently comprised of a majority of independent non-executive directors. Its role is to make recommendations to the Board regarding the Company’s remuneration policies and practices, including those applicable to the Company’s KMP.

14 | P a g e

Silex Systems Limited Directors’ Report 30 June 2015 (continued)

Members of the People & Remuneration Committee were as follows:

Committee members	Dr L M McIntyre – Chair Mr A M Stock (until 31 August 2015) Mr C D Wilks
Committee secretary	Ms A N Scott
Number of meetings in FY 2015	2
Other individuals who regularly attended meetings	Dr M P Goldsworthy – CEO/MD Mr C M Murray – CEO – Solar Systems Ms J E Ducie – CFO/CompanySecretary

The role of the People & Remuneration Committee is to:

• Review and recommend to the Board the appropriate remuneration policies and practices that are competitive and reasonable for the Company and its specific application to KMP, as well as the general application to all employees;

• Determine remuneration levels of the CEO/MD and other KMP;

• Manage the incentive plans which apply to executive directors and senior executives (the executive team), including key performance indicators and performance hurdles; and

• Review and make recommendations to the Board regarding the remuneration of non-executive directors.

The role and responsibilities of the People & Remuneration Committee are set out in the People & Remuneration Committee Charter, which is available on the Company’s website at www.silex.com.au/about/corporate-governance.

Use of remuneration consultants

Following the engagement of AON Hewitt in FY 2014 to conduct a thorough review of KMP and Board remuneration and structure, the recommendations from that review were fully implemented during FY 2015 and it was not deemed necessary to engage a remuneration consultant for the FY 2015 remuneration review. The Company continues to access market data and industry remuneration surveys and reports on a regular basis.

Once the strategic review’s implementation has been finalised it is envisioned that a further full review of KMP remuneration will be conducted, with a third party remuneration consultant engaged to assist in the completion of the review.

c) Linking remuneration structure to company performance

Remuneration strategy, policy and framework

In determining executive KMP remuneration, the Board aims to ensure that remuneration practices are designed to attract, motivate and retain highly qualified personnel, whilst having regard for contemporary market practice, good governance and alignment to changing business circumstances and strategy execution as we work towards commercialisation of our technologies. The Company aims to reward executive KMP with a level and mix of remuneration commensurate with their position and responsibilities within the Company that is competitive within the market in which they were recruited. Those executive KMP who have a greater ability to influence outcomes have a greater portion of their overall remuneration package ‘at risk’.

Remuneration for executive KMP is reviewed annually and considers market data, insights into remuneration trends, the performance of the Company and the individual, and the broader economic environment. This review is conducted in consultation with independent remuneration consultants where appropriate.

The executive KMP remuneration framework has two components:

• Total fixed remuneration; and

• At-risk incentives.

15 | P a g e

Silex Systems Limited Directors’ Report 30 June 2015 (continued)

Element	Purpose	Performance Metrics	Potential Value
Total Fixed Remuneration (TFR)	Provide competitive market salary, including superannuation and non- monetary benefits.	Reference to role, market and experience.	Positioned at median market rate.
At Risk Incentives – Short-term Incentive (STI)	Reward executive’s performance, representative of their contribution to achievement of Company and/or divisional outcomes, as well as divisional Key Performance Indicators (KPIs).	Linked to key performance hurdles that may include financial metrics such as operating cash flow and non- financial measures, such as commercial deliverables, and other specific operational and strategic deliverables for the Company.	Rewards are generally based on a percentage of the executive’s Total Fixed Remuneration (TFR).

Long-term Incentives (LTI) were not offered to the CEO/MD or CFO/Company Secretary in FY 2015. LTIs will not be offered as part of the KMP remuneration structure until completion of the major strategic review.

Assessing performance and claw-back of remuneration

The People & Remuneration Committee is responsible for assessing performance against KPIs and determining the incentive awards to be paid. To assist in this assessment, the Committee receives detailed reports on performance from management which are based on independently verifiable data such as financial measures, market information and data from independently run surveys. At all times the Board has the discretion to make a final determination based on share price performance or other factors.

In the event of serious misconduct or a material misstatement in the Company’s financial statements the Board can cancel or defer performance-based remuneration and may also claw back performance-based remuneration paid in previous financial years.

d) Voting and comments made at the Company’s 2014 Annual General Meeting

Silex Systems Limited received more than 97% of “yes” votes on its remuneration report for the 2014 financial year.

e) Executive KMP remuneration structure

For FY 2015, executive KMP remuneration packages included a mix of total fixed remuneration (TFR) and at-risk incentives.

Total Fixed Remuneration (TFR)

TFR is comprised of base salary, superannuation and packaged benefits. TFR is reviewed annually, or on promotion. It is benchmarked against market data for comparable roles in companies in a similar industry and with similar market capitalisation. The Committee aims to position executives at or near the median, with flexibility to take into account capability, experience, and value to the organisation and performance of the individual.

In FY 2015, the TFR for the Silex CEO/MD was significantly reduced by mutual agreement, effective from 1 January 2015. The TFR for all other KMP remained unchanged for FY 2015, with no increases awarded.

16 | P a g e

Silex Systems Limited Directors’ Report 30 June 2015 (continued)

Short-term Incentives (STI)

	CEO/Managing Director	CFO/Company Secretary	CEO – Solar Systems
Composition	Awards may be delivered in cash or Restricted Silex Systems Limited ordinary shares subject to shareholder approval.	Awards are currently paid in cash. A portion of the payment may also be delivered in Restricted Silex Systems Limited ordinary shares.	Awards are currently paid in cash. A portion of the payment may also be delivered in Restricted Silex Systems Limited ordinary shares.
Assessment	Award is subject to the achievement of agreed performance criteria comprising financial metrics and specific key strategic and commercial objectives.*	Award is subject to the achievement of divisional and Company financial performance, supplemented by strategic and commercial measures specific to business unit deliverables.*	Award is subject to the achievement of Solar Systems financial performance, supplemented by strategic and commercial measures specific to the Solar Systems business.*
Total Maximum Opportunity	$200,000**	$80,000	$160,000
At Risk	Yes	Yes	Yes

*For commercially sensitive reasons, short-term incentive targets for executive KMP are not published within this Remuneration Report, however the People & Remuneration Committee believe that all targets are set appropriately and align with shareholder expectations. At all times the Board has the discretion to make a final determination based on share price performance or other factors.

** Total Maximum STI Opportunity reduced from $400,000 to $200,000 from 1 July 2014.

- Long term Incentive (LTI)

No long-term incentives were granted during FY 2015 to the CEO/MD or CFO/Company Secretary.

The LTI/Success Fee Bonus for the CEO – Solar Systems, was not time-bound and remained an ongoing potential incentive throughout FY 2015. The maximum incentive opportunity was in-line with the objectives of the Board’s major strategic review and was tied to the financial close of a transaction for the Solar Systems business or assets and the value secured for Silex shareholders, after taking into account Silex’s investment to date. As a result of the announcement of the cessation of the Solar Systems’ business operations on 30 July 2015 and redundancy of the CEO, no long-term incentive was payable and the LTI was terminated.

The People & Remuneration Committee and Silex Board remain mindful of shareholder concern that any long-term incentive remuneration be linked to growth in shareholder value. Therefore, as the Company returns its focus to the core SILEX Technology, it has been determined that no long-term incentives will be granted to the CEO/MD or CFO/Company Secretary during FY 2016.

f) Link between FY 2015 remuneration and performance

FY 2015 performance and impact on remuneration

Throughout FY2015, the Company continued to implement the outcomes of the major strategic review. The Company underwent significant strategic changes, with a full operational restructure and significant reduction in headcount as the business looked to focus on the development of the Company’s foundation technology and core asset - the SILEX laser uranium enrichment technology.

The STI performance criteria for FY 2015 for the Silex CEO/MD and Solar Systems CEO were heavily focussed on the deliverables resulting from the strategic review. Key performance criteria met included the delivery of operational cost reductions in all areas of the Company, strategic initiatives to secure third party interest in the Solar Systems and Translucent businesses and achievement of significant progress in the commercialisation of the SILEX Technology against a backdrop of difficult market conditions. As a result, the Board awarded the Silex CEO/MD and the Solar Systems CEO 70% and 64% respectively of the maximum short-term incentives available. These incentives were paid in cash after satisfying the required service and performance conditions. The Board believes that the achievements made under the STI deliverables in FY 2015 will set the Company on a path to rebuilding long-term value.

17 | P a g e

Silex Systems Limited Directors’ Report 30 June 2015 (continued)

The FY 2015 STI for the CFO/Company Secretary was cancelled and a retainer equal to the maximum STI opportunity put in place in November 2014. This was in light of the significant restructure that resulted from the major strategic review and the considerable absorption of duties following a 50% headcount reduction in corporate resources. This retainer is time bound and expires on 30 September 2015; with payment to be made in October 2015 should the eligibility criteria be satisfied.

Statutory performance indicators

We aim to align KMP remuneration to our strategic and business objectives and the creation of shareholder wealth. The below table shows measures of the Company’s financial performance over the last five years as required by the Corporations Act 2001. However, as a pre-revenue company, the below measures are generally not the measures used in determining the variable amounts of remuneration to be awarded to KMPs. As a consequence, there is no direct correlation between the statutory key performance measures and the variable remuneration awarded.

Year ended 30 June	EPS Cents	KMP STI award $	Share price at 30 June $
2011 2012 2013 2014 2015	(19.6) (21.6) (0.1) (17.3) (21.1)	13,761 304,000 140,000 76,000 322,400*	2.92 3.20 2.20 1.16 0.46

• Includes CFO/Company Secretary Retainer based bonus of $80,000 with eligibility criteria expiring 30 September 2015. This bonus, if awarded, will be payable in FY 2016.

Contractual arrangements with executive KMPs

Component	CEO/MD	CFO/Company Secretary	CEO - Solar Systems
Total Fixed Remuneration	$550,000*	$ 288,500	$400,000
Contract duration	Ongoing Common Law Contract	Ongoing Common Law Contract	Ongoing Common Law Contract
Notice by the individual or Company	6 months	6 months	6 months
Termination of employment (without cause)	Partial payment for pro-rata STI may be applicable at the Board’s discretion	Partial payment for pro-rata STI may be applicable at the Board’s discretion	Partial payment for pro-rata STI may be applicable at the Board’s discretion
Termination of employment (with cause) or by the individual	STI/LTI not awarded	STI/LTI not awarded	STI/LTI not awarded

*Total Fixed Remuneration reduced from $800,000 to $550,000 from 1 January 2015.

g) Non-executive directors’ remuneration

Non-executive directors receive a board fee and fees for chairing or participating on board committees. They do not receive performance-based pay or retirement allowances. The fees are exclusive of superannuation.

The aggregate directors’ fees are reviewed annually by the Board taking into account comparable roles and market data provided by the Board’s independent remuneration consultant. The director’s fees remain well within the limits of the shareholder approved aggregate directors fee pool maximum of $750,000, as approved by shareholders at the 2011 AGM and have in aggregate significantly reduced over the period. During the period, the process of Board renewal continued with one director retiring from the Board. The Silex Board comprises of three non-executive directors and an executive director. The current Board size is deemed appropriate in light of the re-focused activities of the Company.

18 | P a g e

Silex Systems Limited Directors’ Report 30 June 2015 (continued)

The current fee structure is outlined below:

	Chair	Member
Board	100,000	80,000
Committee	8,000	6,000

Additional fees may be payable to non-executive directors should they undertake specific consulting projects for the Company in the areas of their expertise.

19 | P a g e

Silex Systems Limited Directors’ Report 30 June 2015 (continued)

h) Directors’ and KMP remuneration

The table below has been prepared in accordance with the requirements of the Corporations Act 2001 and relevant accounting regulations in Australia. This table details the remuneration for the Company’s KMP for the current and previous financial year.

		Short-term employee	Short-term employee	benefits	Post- employment benefits	Long term benefits	Share basedpayments	Share basedpayments
Name	Year	Cash salary and fees * $	Cash bonus $	Non - monetary benefits $	Super annuation $	Long service leave $	Options $	Deferred rights $	Total $
Executive directors	2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
Dr M P Goldsworthy		631,293	140,000	16,554	34,983	(1,189)	100,797	125,981	1,048,419
		789,754	-	19,035	24,975	4,561	231,390	116,320 - - - -	1,186,035
Non-executive directors
Dr L M McIntyre Mr A M Stock (from 1/8/2013)		114,000 94,159 94,000 83,833	- - - -	- - - -	10,830 8,710 8,930 7,755	- - - -	- - - -		124,830
									102,869
									102,930
									91,588
Mr C D Wilks		132,625	-	-	12,599	-	33,566	-	178,790
		145,095	-	-	13,422	-	77,053	- - - - - - -	235,570
Prof S W R Burdon		-	-	-	-	-	-		-
(until 25/6/2014)		112,000	-	-	10,360	-	-		122,360
Mr R P Campbell		-	-	-	-	-	-		-
(until 30/9/2013)		23,500	-	-	2,174	-	-		25,674
Dr C S Goldschmidt		-	-	-	-	-	-		-
(until 2/5/2014)		72,318	-	-	6,689	-	-		79,007
Other key management personnel and Company executives
Ms J E Ducie		265,190	80,000**	-	29,983	4,361	-	2,962	382,496
		266,400	20,000	-	24,975	4,152	387	1,801	317,715
Mr C R Murray (from 6/1/2014)		352,368 179,073	102,400	14,626 454	37,012 29,387	682 454	- -	- -	507,088
			56,000						265,368
Total executive directors and other KMP’s	2015 2014	1,248,851 1,235,227	322,400 76,000	31,180 19,489	101,978 79,337	3,854 9,167	100,797 231,777	128,943 118,121	1,938,003
									1,769,118
Total NED remuneration	2015 2014	340,625 530,905	- -	- -	32,359 49,110	- -	33,566 77,053	- -	406,550
									657,068
Total KMP	2015	1,589,476	322,400	31,180	134,337	3,854	134,363	128,943	2,344,553
remuneration	2014	1,766,132	76,000	19,489	128,447	9,167	308,830	118,121	2,426,186

• Inclusive of movement in annual leave accruals.

• ** Retainer based bonus with eligibility criteria expiring 30 September 2015. This bonus, if awarded, will be payable in FY 2016.

20 | P a g e

Silex Systems Limited Directors’ Report 30 June 2015 (continued)

The relative proportions of remuneration that are linked to performance and those that are fixed are as follows:

Name	Fixed remuneration	Fixed remuneration	At risk- STI	At risk- STI	**At risk - LTI ***	**At risk - LTI ***
	2015	2014	2015	2014	2015	2014
Directors
Dr L M McIntyre Dr M P Goldsworthy Mr A M Stock Mr C D Wilks	100.0% 65.0% 100.0% 81.2% - - -	100.0% 70.7% 100.0% 67.3% 100.0% 100.0% 100.0%	N/A 13.4% N/A N/A - - -	N/A 0.0% N/A N/A N/A N/A N/A	N/A 21.6% N/A 18.8% - - -	N/A 29.3% N/A 32.7% N/A N/A N/A
Prof S W R Burdon
Mr R P Campbell
Dr C S Goldschmidt
Other Executive KMP
Ms J E Ducie Mr C R Murray	78.3% 79.8%	93.0% 78.9%	20.9% 20.2%	6.3% 21.1%	0.8% 0.0%	0.7% N/A

• This relates to options and deferred shares issued on a LTI basis with the percentages based on the value of amounts expensed during the year.

i) Details of share-based compensation and bonuses

Options

The terms and conditions of each grant of options affecting remuneration in the current or a future reporting period are as follows:

Grant date	Expiry date	Exercise price	Value per option at grant date	Date exercisable (subject to share price hurdle)	Share price hurdle
5 July 2011 8 December 2011	4 July 2016 7 December 2016	$2.92 $2.04	$1.18 $0.63	100% after 5 July 2013 100% after 8 December 2014	$3.05 $2.13

Options granted under the plan carry no dividend or voting rights.

Details of options over ordinary shares in the Company provided as remuneration to KMP are shown below. When exercisable, each option is convertible into one ordinary share of Silex Systems Limited. Vesting of the options following the vesting date is subject to meeting the share price hurdle.

The exercise price of the options is based on the volume weighted average price of the shares for the 5 trading days preceding the date of issue.

Name	Year of grant	Years in which options may vest	Number of options granted	Vested %	Number of options forfeited **during the year **	Maximum total value of grant to vest ($)
Dr M P Goldsworthy	Y/E 30/06/2012 Y/E 30/06/2012 Y/E 30/06/2012	Y/E 30/06/2015 Y/E 30/06/2015 Y/E 30/06/2014	1,102,207 367,035 60,000	- - 100	- - -	- - N/A
Mr C D Wilks
Ms J E Ducie

*The options issued to Dr M P Goldsworthy and Mr C D Wilks were subject to a Total Shareholder Return (TSR) vesting condition which was not met as at the end of the performance period being 30 June 2015.

21 | P a g e

Silex Systems Limited Directors’ Report 30 June 2015 (continued)

The assessed fair value at grant date of options granted to individuals is allocated equally over the period from grant date to vesting date, and the amount is included in the remuneration tables above. Fair values on grant date are independently determined using a binomial 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 volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.

The Employee Share Option Plan (No. 1) under which the above options were issued to Ms J E Ducie was terminated by a resolution of the Silex Board in accordance with the plan rules on 24 October 2013. There were no options granted or any options exercised by any individual during FY 2015.

Bonuses and rights to deferred shares

For each award of deferred shares, the percentage of bonus awarded or forfeited in the financial year is set out below. All shares issued were subject to an escrow period ending 30 June 2015.

Name	Awarded %	Forfeited %	Performance period	Yeargranted	Number granted	Value per share $	Value of shares issued $ 100,000 9,999
Dr M P Goldsworthy Ms J E Ducie	25% 80%	75% 20%	Y/E 30/06/2013 Y/E 30/06/2013	Y/E 30/06/2014 Y/E 30/06/2014	44,843 3,759	2.23 2.66

Equity instruments held by KMP

The below table shows the number of ordinary shares in the Company that were held during the financial year by KMP of the Company, including by entities related to them:

2015	Balance at the start of theyear	Received during the year on the exercise of options	Received on vesting of rights to shares	Other changes during theyear	Balance at the end of theyear
Directors
Dr L M McIntyre Dr M P Goldsworthy Mr A M Stock MrCD Wilks	8,230 5,979,055 - 2,814,021	- - - -	- - - -	40,000 - - -	48,230 5,979,055 - 2,814,021
Other Executive KMP
Ms J E Ducie Mr C R Murray	3,759 -	- -	- -	- -	3,759 -

The below table shows the number of options over ordinary shares in the Company that were held during the financial year by KMP of the Company, including by entities related to them:

2015 Name	Balance at the start of theyear	Granted during the year as compensation	Lapsed during theyear	Forfeited during theyear	Exercised during theyear	Balance at the end of the year	Vested and exercisable at the end of theyear	Unvested
Directors
Dr M P Goldsworthy Mr C D Wilks	1,102,207 367,035	- -	- -	- -	- -	1,102,207 367,035	- -	1,102,207 367,035
Other Executive KMP
Ms J E Ducie	100,000	-	-	-	-	100,000	60,000	-

22 | P a g e

Silex Systems Limited Directors’ Report 30 June 2015 (continued)

j) Shares under option

Unissued ordinary shares of Silex Systems Limited under option at the date of this report are as follows:

Number of options	Issue Price of shares	Grant date	Expiry date
40,000 100,000 1,469,242	$5.28 $2.92 $2.04	15th October 2010 5th July 2011 8th December 2011	14th October 2015 4th July 2016 7th December 2016
1,609,242

No option holder has any right under the options to participate in any other share issue of the Company or any other entity.

Share Trading Policy

The Silex Share Trading Policy applies to all staff including KMP. It prohibits staff from buying or selling Silex securities at times when they are in possession of inside information. In addition, KMP are only permitted to trade in Silex securities during certain open periods. The policy applies other restrictions with regard to hedging arrangements. KMP must not enter into any hedging arrangements.

23 | P a g e

Silex Systems Limited Directors’ Report 30 June 2015 (continued)

12. Indemnification and insurance of directors

The Company has entered into agreements to indemnify the directors of the Company against all liabilities to persons (other than the Company or related body corporate) which arise out of the performance of their normal duties as directors or executive officers unless the liability relates to conduct involving lack of good faith. The Company has agreed to indemnify the directors and executive officers against all costs and expenses incurred in defending an action that falls within the scope of the indemnity.

The Directors' & Officers' Liability Insurance provides cover against all costs and expenses involved in defending legal actions and any resulting payments arising from a liability to persons (other than the Company) incurred in their position as a director or executive officer unless the conduct involves a wilful breach of duty or an improper use of inside information or position to gain advantage. The insurance policy does not allow specific disclosure of the nature of the liabilities insured against or the premium paid under the policy.

13. Environmental regulation

The parent entity is subject to the environmental and health and safety regulations applicable to tenants of the Lucas Heights Science and Technology Centre. The parent entity is also bound by the rules and regulations set out in the Australian Radiation Protection and Nuclear Safety Act, 1998, and is a licensee under the Act. Solar Systems is subject to a number of regulations including VIC Occupational Health and Safety Act 2004, VIC Occupational Health and Safety Regulations 2007, VIC Dangerous Goods Act 1985, VIC Dangerous Goods (Storage and Handling) Interim Regulations 2011.

To the best of the Directors' knowledge, all environmental and health and safety regulatory requirements have been met and there have been no claims made during the financial year.

14. Non-audit services

The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Company and/or the consolidated entity are important.

Details of the amounts paid or payable to the auditor (PricewaterhouseCoopers) for non-audit services provided during the year are set out below.

The Board of Directors has considered the position and, in accordance with the advice received from the Audit Committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 . The directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:

• all non-audit services have been reviewed by the Audit Committee to ensure they do not impact the impartiality and objectivity of the auditor

• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants.

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

Other assurance services PricewaterhouseCoopers Australian firm Audit of government grants Total remuneration for other assurance services Other services Corporate services Total remuneration for other services Total remuneration for non-audit services	2015 2014 $ $
	5,000 10,000
	5,000 10,000
	20,400 75,400
	20,400 75,400
	25,400 85,400

24 | P a g e

Silex Systems Limited Directors’ Report 30 June 2015 (continued)

15. Auditors

PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001 .

16. Auditors’ independence declaration

A copy of the auditors’ independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 26.

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

==> picture [86 x 75] intentionally omitted <==

==> picture [99 x 65] intentionally omitted <==

Dr M P Goldsworthy Mr C D Wilks CEO/MD Director Sydney, 25 September 2015

25 | P a g e

Silex Systems Limited Directors’ Report 30 June 2015 (continued)

==> picture [132 x 111] intentionally omitted <==

Auditor’s Independence Declaration

As lead auditor for the audit of Silex Systems Limited for the year ended 30 June 2015, I declare that, to the best of my knowledge and belief, there have been:

• a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b) no contraventions of any applicable code of professional conduct in relation to the audit.

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

==> picture [86 x 43] intentionally omitted <==

Stephen Humphries Partner PricewaterhouseCoopers

Sydney 25 September 2015

==> picture [493 x 89] intentionally omitted <==

26 | P a g e

Silex Systems Limited Corporate Governance Statement 30 June 2015

CORPORATE GOVERNANCE STATEMENT

Silex Systems Limited (the Company) and the Board are committed to achieving and demonstrating the highest standards of corporate governance. The Company Limited has reviewed its corporate governance practices against the Corporate Governance Principles and Recommendations (3[rd] edition) published by the ASX Corporate Governance Council.

The 2015 Corporate Governance Statement is dated as at 30 June 2015 and reflects the corporate governance practices in place throughout the 2015 financial year. The 2015 Corporate Governance Statement was approved by the Board on 22 September 2015. A description of the Company's current corporate governance practices is set out in the Company's Corporate Governance Statement which can be viewed at www.silex.com.au/about/corporate-governance.

27 | P a g e

Silex Systems Limited ABN 69 003 372 067

Concise financial report – 30 June 2015

Contents
	Page
Financial statements
Consolidated income statement	29
Consolidated statement of comprehensive income	30
Consolidated balance sheet	31
Consolidated statement of changes in equity	32
Consolidated statement of cash flows	33
Notes to the financial statements	34
Directors’ declaration	39
Independent auditor’s report to the members	40

Relationship of the concise financial report to the full financial report

The concise financial report is an extract from the full financial report for the year ended 30 June 2015. The financial statements and specific disclosures included in the concise financial report have been derived from the full financial report.

The concise financial report cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of Silex Systems Limited and its subsidiaries as the full financial report. Further financial information can be obtained from the full financial report.

The full financial report and auditor’s report will be sent to members on request, free of charge. Please call +61 2 9704 8888 and request a copy of the full financial report (or email enquiries@silex.com.au). Alternatively, you can access both the full financial report and the concise report via the internet on our website: www.silex.com.au.

28 | P a g e

Silex Systems Limited Consolidated income statement for the year ended 30 June 2015

Note Revenue from continuing operations 3 Other income 4 Research and development materials Finance costs Depreciation and amortisation expense Employee benefits expense Consultants and professional fees Printing, postage, freight and stationery Rent, utilities and property outgoings Net foreign exchange losses Other expenses from continuing activities (Loss) before income tax expense Income tax expense Net (loss) from continuing operations Net (loss) from discontinued operations 5 Net (loss) for the year Net (loss) is attributable to: Owners of Silex Systems Limited Non-controlling interests Earnings per share for (loss) from continuing operations attributable to the ordinary equity holders of the Company Basic earnings per share Diluted earnings per share Earnings per share for (loss) attributable to the ordinary equity holders of the Company Basic earnings per share Diluted earnings per share	2015 2014 $ $
	3,674,860 7,113,672 42,475 569 (154,296) (560,854) (349) (529) (59,821) (81,287) (4,017,953) (5,552,858) (642,304) (817,515) (55,462) (80,911) (474,107) (473,459) - (37,665) (598,036) (762,300)
	(2,284,993) (1,253,137) - -
	(2,284,993) (1,253,137) (33,659,803) (28,378,323)
	(35,944,796) (29,631,460)
	(35,944,796) (29,488,786) - (142,674)
	(35,944,796) (29,631,460)
	2015 Cents 2014 Cents
	(1.3) (0.7) (1.3) (0.7) (21.1) (17.3) (21.1) (17.3)

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

29 | P a g e

Silex Systems Limited Consolidated statement of comprehensive income for the year ended 30 June 2015

Net (loss) for the year Other comprehensive income Items that may be reclassified to profit or loss: Exchange differences on translation of foreign operations Other comprehensive income for the year, net of tax Total comprehensive income for the year Attributable to: Owners of Silex Systems Limited Non-controlling interest Total comprehensive income for the year Total comprehensive income for the period attributable to owners of Silex Systems Limited arises from: Continuing operations Discontinued operations

2015 2014 $ $ (35,944,796) (29,631,460) 275,747 (295,336) 275,747 (295,336) (35,669,049) (29,926,796) (35,669,049) (29,784,122) - (142,674) (35,669,049) (29,926,796) (2,284,993) (1,253,137) (33,384,056) (28,530,985)

(35,669,049) (29,784,122)

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

30 | P a g e

Silex Systems Limited Consolidated balance sheet as at 30 June 2015

Note ASSETS Current assets Cash and cash equivalents Held to maturity investments - term deposits Trade and other receivables Inventories Assets classified as held for sale 6 Total current assets Non-current assets Property, plant and equipment Deferred tax assets Intangible assets Total non-current assets Total assets LIABILITIES Current liabilities Trade and other payables Provisions Liabilities associated with discontinued operations 5 Total current liabilities Non-current liabilities Provisions Total non-current liabilities Total liabilities Net assets EQUITY Contributed equity Reserves Accumulated losses Capital and reserves attributable to owners of: Silex Systems Limited Non-controlling interest Total equity	30 June 2015 30 June 2014 $ $
	987,777 3,178,811 54,173,451 60,756,039 5,214,694 2,571,418 - 18,498
	60,375,922 66,524,766 1,575,487 30,819,183
	61,951,409 97,343,949
	64,061 110,226 2,702 2,491 688 6,594
	67,451 119,311
	62,018,860 97,463,260
	968,673 1,469,740 425,919 1,237,149
	1,394,592 2,706,889 3,057,022 2,559,317
	4,451,614 5,266,206
	113,110 111,971
	113,110 111,971
	4,564,724 5,378,177
	57,454,136 92,085,083
	231,753,076 231,671,231 10,296,433 9,882,811 (184,595,373) (148,650,577)
	57,454,136 92,903,465 - (818,382)
	57,454,136 92,085,083

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

31 | P a g e

Silex Systems Limited Consolidated statement of changes in equity for the year ended 30 June 2015

Balance at 30 June 2013 Net (loss) for the year Exchange differences on translation of foreign operations Total comprehensive income for the year Transactions with owners in their capacity as owners Transaction costs from the issue of shares Employee shares and options - value of employee services Transfer from share-based payments reserve Deferred tax recognised directly in equity Balance at 30 June 2014 Net (loss) for the year Exchange differences on translation of foreign operations Total comprehensive income for the year Transactions with owners in their capacity as owners Transfer of non-controlling interest on derecognition Transaction costs from the issue of shares Employee shares and options - value of employee services Transfer from share-based payments reserve Deferred tax recognised directly in equity Balance at 30 June 2015	Attributable to owners of Silex Systems Limited Contributed equity Reserves Accumulated losses Total Non- controlling interests Total $ $ $ $ $ $
	231,417,226 9,744,529 (119,161,791) 121,999,964 (675,708) 121,324,256 - - (29,488,786) (29,488,786) (142,674) (29,631,460) - (295,336) - (295,336) - (295,336)
	- (295,336) (29,488,786) (29,784,122) (142,674) (29,926,796) (4,966) - - (4,966) - (4,966) - 696,178 - 696,178 - 696,178 262,560 (262,560) - - - - (3,589) - - (3,589) - (3,589)
	254,005 433,618 - 687,623 - 687,623
	231,671,231 9,882,811 (148,650,577) 92,903,465 (818,382) 92,085,083
	- - (35,944,796) (35,944,796) - (35,944,796) - 275,747 - 275,747 - 275,747
	- 275,747 (35,944,796) (35,669,049) - (35,669,049) - - - - 818,382 818,382 (3,228) - - (3,228) - (3,228) - 222,737 - 222,737 - 222,737 84,862 (84,862) - - - - 211 - - 211 - 211
	81,845 137,875 - 219,720 818,382 1,038,102
	231,753,076 10,296,433 (184,595,373) 57,454,136 - 57,454,136

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

32 | P a g e

Silex Systems Limited Consolidated statement of cash flows for the year ended 30 June 2015

Note Cash flows from operating activities Receipts from customers and government grants (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Interest received Interest paid Net cash (outflows)/inflows from operating activities Cash flows from investing activities Payments for held to maturity investments - term deposits Proceeds from held to maturity investments - term deposits Payments for property, plant and equipment Payments for intangibles Proceeds from sale of property, plant and equipment Net cash inflows/(outflows) from investing activities Cash flows from financing activities Transaction costs from issue of shares Net cash (outflows) from financing activities Net (decrease) in cash held Cash and cash equivalents at the beginning of the financial year Effects of exchange rate changes on cash Cash and cash equivalents at end of year Non-cash financing and investing activities Held to maturity investments excluded from Cash and cash equivalents	2015 2014 $ $
	14,506,671 30,060,966
	(24,718,382) (28,773,788)
	2,284,445 1,971,167
	(1,805) (529)
	(7,929,071) 3,257,816
	- (5,092,196)
	6,582,588 -
	(215,990) (708,533)
	(651,570) (2,935,502)
	14,636 6,773
	5,729,664 (8,729,458)
	(3,228) (4,966)
	(3,228) (4,966)
	(2,202,635) (5,476,608)
	3,178,811 8,720,156
	11,601 (64,737)
	987,777 3,178,811
	- - 54,173,451 60,756,039

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

33 | P a g e

Silex Systems Limited Notes to the financial statements 30 June 2015

Note 1 Significant changes in the current accounting period

The financial position and performance of the Company was particularly affected by the implementation of the outcomes of the strategic review announced by the Board on 30 June 2014 that will result in the return of the Company’s focus to the development of the Company’s foundation technology and core asset – the SILEX laser enrichment technology. The resulting restructure has seen a number of significant changes completed, including a full operational review with a significant reduction in headcount, the closure of the ChronoLogic business, and in parallel, a rigorous search for business development options to accelerate the transition to market for subsidiaries Solar Systems and Translucent. The implementation of the restructure is nearing completion.

Solar Systems and Translucent have been shown as discontinued operations in the income statement with the prior year comparatives adjusted. The result of the discontinued operations was impacted by the impairment of the carrying value of property, plant and equipment and intangible assets of $19,316,583 ($12,379,766 in the prior period).

In July 2014, SILEX Technology Licensee GE-Hitachi Global Laser Enrichment LLC (‘GLE’) announced its own restructure, resulting in the slowdown of the commercialisation project in response to adverse conditions in the nuclear fuel markets, largely precipitated by the shutdown of the shutdown of the Japanese nuclear industry after the Fukushima disaster. As a result, Silex made redundancies and has taken over funding of activities at its Lucas Heights facility in Sydney.

Note 2 Segment information

Total segment revenue Revenue from external customers Segment result	Silex Systems Total 2015 2015 $ $ 3,674,860 3,674,860 3,674,860 3,674,860 (2,284,993) (2,284,993) 59,794,515 59,794,515 1,507,702 1,507,702	Silex Systems Total 2014 2014 $ $
		7,113,672 7,113,672
		7,113,672 7,113,672
		(1,253,137) (1,253,137)
		64,764,354 64,764,354
Total segment assets
		2,064,813 2,064,813
Total segment liabilities

(i) Segment result

The Board of Directors assess the performance of the operating segment based on a result that excludes exchange gains and losses on intercompany loans which eliminate on consolidation and impairment of intangibles on consolidation. Solar Systems, Translucent, ChronoLogic and Silex Solar have been disclosed as discontinued operations and not as reportable segments. A reconciliation of the segment result to Net (loss) from continuing operations is provided as follows.

Segment result Net (loss) before income tax from continuing operations	2015 2014 $ $
	(2,284,993) (1,253,137)
	(2,284,993) (1,253,137)

34 | P a g e

Silex Systems Limited Notes to the financial statements 30 June 2015 (continued)

Note 3 Revenue From continuing operations Recoverable project costs from GLE Interest income From discontinued operations (note 5) Sale of goods Services Interest income Note 4 Other income From continuing operations Foreign currency exchange gains (net) Profit on sale of property, plant and equipment Other From discontinued operations (note 5) Research and development tax incentive Government grants Profit on sale of property, plant and equipment	2015 2014 $ $
	1,493,766 4,540,761 2,181,094 2,572,911
	3,674,860 7,113,672
	132,924 233,608 35,168 1,582 14,921 62,866
	183,013 298,056
	2015 2014 $ $
	42,475 - - 455 - 114
	42,475 569
	4,508,336 16,000,440 668,276 9,080,315 14,636 6,318
	5,191,248 25,087,073

(i) Government grants

Government solar project grants of $602,603 (2014: $9,030,904), were recognised as Other income by Solar Systems during the financial year. The Company has met the conditions of the grants and the income has been recognised. Export Market Development Grant income of $65,673 (2014: $49,411) was recognised as Other income during the financial year by Solar Systems. There are no unfulfilled conditions attached to these grants.

(ii) Research and development tax incentive

Research and development tax incentive income of $4,508,336 (2014: $16,000,440) was recognised as Other income by the Company during the year. The Company has met the conditions of the tax incentive.

35 | P a g e

Silex Systems Limited Notes to the financial statements 30 June 2015 (continued)

Note 5 Discontinued operations

In accordance with the continued implementation of the outcome of the Company’s strategic review throughout FY 2015, the Solar Systems and Translucent businesses have been disclosed as discontinued operations as at 30 June 2015, with restatement of the comparative consolidated income statement and consolidated statement of comprehensive income to reflect this change. The Silex Solar and ChronoLogic operations have continued to be reported as discontinued with their activities ceasing in October 2012 and September 2014 respectively.

A summary of the results of the discontinued operations of Solar Systems, Translucent, ChronoLogic and Silex Solar is provided below.

Revenue (note 3) Other income (note 4) Expenses (Loss) before income tax Income tax expense (Loss) after income tax of the discontinued operations Net cash (outflows) from operating activities Net cash (outflows) from investing activities Net cash (outflows) from the discontinued operations Trade and other payables Provisions Total Liabilities associated with discontinued operations	2015 2014 $ $ 183,013 298,056 5,191,248 25,087,073 (39,034,064) (53,763,452) (33,659,803) (28,378,323) - - (33,659,803) (28,378,323) 2015 2014 $ $ (6,237,983) (12,129,534) (812,586) (3,621,541) (7,050,569) (15,751,075) 2015 2014 $ $
	(936,805) (1,905,028) (2,120,217) (654,289)
	(3,057,022) (2,559,317)

36 | P a g e

Silex Systems Limited Notes to the financial statements 30 June 2015 (continued)

Note 6 Assets held for sale

As previously reported, on 30 June 2014, in accordance with the Company’s strategic review, Silex commenced an accelerated transition to market for subsidiaries Solar Systems and Translucent. As a result, as at 30 June 2014 the assets and liabilities of these two businesses, net of cash and held to maturity investments, were reported as Held for Sale. As the implementation of the strategic review draws to a conclusion, Solar Systems and Translucent assets have continued to be reported as being Held for Sale as at 30 June 2015.

Revenue Other income Expenses (Loss) before income tax Income tax expense (Loss) after income tax of the held for sale businesses Impairment of goodwill on consolidation – Translucent Losses of other discontinued operations (Loss) after income tax of discontinued operations Trade and other receivables Inventories Property, plant & equipment Intangible assets Total assets of disposal group held for sale	2015 2014 $ $
	175,675 284,882 5,190,000 24,009,678 (37,899,886) (43,810,181)
	(32,534,211) (19,515,621) - -
	(32,534,211) (19,515,621) - (8,477,619) (1,125,592) (385,083)
	(33,659,803) (28,378,323)
	2015 2014 $ $
	320,658 10,699,722 18,228 885,924 1,236,601 9,475,930 - 9,757,607
	1,575,487 30,819,183

Note 7 Dividends

No dividends were declared or paid during the year or in the prior year.

Note 8 Events occurring after reporting date

Solar Systems

On 30 July 2015, Silex announced the immediate cessation of Solar Systems’ business operations. The announcement followed a rigorous extended global process to attract new investment in Solar Systems which ultimately was unsuccessful. However, as the process revealed considerable interest in the Solar Systems concentrating dish technology during the divestment process, the Company has retained the IP and associated expertise in the short-term to pursue residual opportunities.

The resulting financial effect of the 30 July decision, which is largely staff redundancy costs, has not been brought to account in the financial statements for the year ended 30 June 2015. Redundancy costs of approximately $1.0m are expected to be brought to account in the financial statements for the year ended 30 June 2016.

Translucent

On 15 September 2015, Silex announced the signing of a License and Assignment Agreement with UK-based IQE Plc for Translucent’s technology. The agreement grants IQE an exclusive 30-month license to complete product development and commercialisation activities, with an option exercisable at any time during the 30-month license period, for IQE to acquire Translucent’s technology. If successfully commercialised the agreement also provides for a perpetual royalty on the sale of products incorporating the Translucent technology.

37 | P a g e

Silex Systems Limited Notes to the financial statements 30 June 2015 (continued)

As a result of the agreement, the Translucent facility at Palo Alto, California will no longer be required and will be closed down by the end of December 2015. The services of two key engineers will be retained for 12 months to facilitate the transfer of the technology to IQE. The financial effect of the 15 September 2015 announcement, including a maximum license fee of USD$1.5m (minimum of USD$1.415m) payable by 15 March 2016 and a small amount of staff redundancy costs, have not been brought to account in the financial statements for the year ended 30 June 2015 and will be brought to account in the financial statements for the year ended 30 June 2016. Should the option be exercised by IQE for the acquisition of the technology, a further payment of USD$5m would be due to Translucent.

Other

The consolidated entity is not aware of any other matters or circumstances which are not otherwise dealt with in the financial statements that have significantly, or may significantly, affect the operations of the consolidated entity, the results of its operations or the state of the consolidated entity in subsequent years other than those referred to in this report.

Note 9 Basis of preparation

This concise financial report relates to the consolidated entity consisting of Silex Systems Limited and the entities it controlled at the end of, or during, the year ended 30 June 2015. The accounting policies have been consistently applied to all years presented, unless otherwise stated below.

The financial statements in this report are presented in Australian dollars.

38 | P a g e

Silex Systems Limited Directors’ declaration 30 June 2015

The directors declare that in their opinion, the concise financial report of the consolidated entity for the year ended 30 June 2015 as set out on pages 28 to 38 complies with Accounting Standard AASB 1039: Concise Financial Reports.

The concise financial report is an extract from the full financial report for the year ended 30 June 2015. The financial statements and specific disclosures included in the concise financial report have been derived from the full financial report.

The concise financial report 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, which is available on request.

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

==> picture [86 x 76] intentionally omitted <==

Dr M P Goldsworthy CEO/MD

==> picture [99 x 65] intentionally omitted <==

Mr C D Wilks Director

Sydney

25 September 2015

39 | P a g e

==> picture [112 x 94] intentionally omitted <==

Independent auditor’s report to the members of Silex Systems Limited

Report on the concise financial report

We have audited the accompanying concise financial report of Silex Systems Limited (the company), which comprises the consolidated balance sheet as at 30 June 2015, the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year ended on that date and related notes, derived from the audited financial report of the company for the year ended 30 June 2015 for Silex Systems Limited Group (the consolidated entity). The concise financial report does not contain all the disclosures required by the Australian Accounting Standards and accordingly, reading the concise financial report is not a substitute for reading the audited financial report.

Directors’ responsibility for the concise financial report

The directors of the company are responsible for the preparation of the concise financial report in accordance with Accounting Standard AASB 1039 Concise Financial Reports , and the Corporations Act 2001 , and for such internal control as the directors determine are necessary to enable the preparation of the concise financial report.

Auditor’s responsibility

Our responsibility is to express an opinion on the concise financial report based on our audit procedures which were conducted in accordance with Auditing Standard ASA 810 Engagements to Report on Summary Financial Statements . We have conducted an independent audit, in accordance with Australian Auditing Standards, of the financial report of the consolidated entity for the year ended 30 June 2015. We expressed an unmodified audit opinion on that financial report in our report dated 25 September 2015. The Australian Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report for the year is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the concise financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the concise financial 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 concise financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control.

Our procedures include testing that the information in the concise financial report is derived from, and is consistent with, the financial report for the year, and examination on a test basis, of audit evidence supporting the amounts and other disclosures which were not directly derived from the financial report for the year. These procedures have been undertaken to form an opinion whether, in all material respects, the concise financial report complies with AASB 1039 Concise Financial Reports .

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

Independence

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

==> picture [468 x 85] intentionally omitted <==

40 | P a g e

==> picture [112 x 95] intentionally omitted <==

We confirm that the independence declaration required by the Corporations Act 2001 , which has been given to the directors of Silex Systems Limited would be in the same terms if given to the directors as at the date of this auditor’s report.

Auditor’s opinion

In our opinion, the concise financial report of the consolidated entity for the year ended 30 June 2015 complies with Australian Accounting Standard AASB 1039 Concise Financial Reports .

Report on the remuneration report

The following paragraphs are copied from our report on the remuneration report for the year ended 30 June 2015.

We have audited the remuneration report included in pages 13 to 23 of the directors’ report for the year ended 30 June 2015. The directors of the company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001 . Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards.

Auditor’s opinion

In our opinion, the remuneration report of Silex Systems Limited for the year ended 30 June 2015 complies with section 300A of the Corporations Act 2001 .

==> picture [198 x 46] intentionally omitted <==

PricewaterhouseCoopers

==> picture [86 x 42] intentionally omitted <==

Stephen Humphries Partner

Sydney 25 September 2015

41 | P a g e

Silex Systems Limited Shareholders’ information 30 June 2015

Shareholders’ information

1. Information relating to shareholders as at 15 September 2015

(a) Distribution schedule

1-1,000 1,001-5,000 5,001-10,000 10,001-100,000 100,001 and over Total number of holders of each class of security Voting rights - on a show of hands - on a poll Percentage of total holding held by the largest 20 holders Number of total holding less than a marketable parcel of shares Substantial shareholders	2,141 2,769 952 1,178 124
	7,164
	57.53% 2,345 Ordinaryshares
Jardvan Pty Ltd M&G Investment (including M&G Investment Funds (3) & (12), M&G Investment Management Limited, M&G Limited, M&G Group Limited and Prudential plc) Global X Management Company	29,801,030 17,050,000 12,086,216

( b) Names of Twenty Largest Holders as at 15 September 2015

(b) Names of Twenty Largest Holders as at 15 September 2015
Name	Number of securities Percentage held
Jardvan Pty Ltd HSBC Custody Nominees (Australia) Limited Majenta Holdings Pty Ltd Polly Pty Ltd J P Morgan Nominees Australia Limited Citicorp Nominees Pty Limited National Nominees Limited Throvena Pty Ltd Hamlac Pty Ltd Mr Christopher David Wilks Quintal Pty Ltd Mr Paul Cozzi CS Fourth Nominees Pty Ltd Felson Holdings Pty Ltd Quadrangle Nominees Limited Mithena Holdings Pty Ltd UBS Wealth Management Australia Nominees Pty Ltd Mr Peter James Thomas + Ms Helen Thomas Hillboi Nominees Pty Ltd Mr Robert Bradfield	29,801,030 17.48% 29,620,163 17.38% 5,703,923 3.35% 4,073,863 2.39% 3,951,216 2.32% 3,347,512 1.96% 3,162,367 1.86% 2,978,203 1.75% 2,525,937 1.48% 2,405,070 1.41% 2,002,952 1.17% 2,000,000 1.17% 1,292,092 0.76% 1,000,000 0.59% 847,245 0.50% 817,139 0.48% 765,045 0.45% 627,000 0.37% 605,000 0.35% 540,000 0.32%
	98,065,757 57.53%

42 | P a g e

Silex Systems Limited Shareholders’ information 30 June 2015 (continued)

2. Interest of directors in shares as at 15 September 2015

	Ordinary shares	Interest held
Dr L M McIntyre	48,230	Beneficially
Dr M P Goldsworthy	5,979,055	Personally/Beneficially
Mr R A R Lee	-	N/A
Mr C D Wilks	2,814,021	Personally/Beneficially

3. Securities subject to voluntary escrow as at 15 September 2015

As at 15 September 2015, no securities were subject to voluntary escrow.

4. Unquoted equity securities as at 15 September 2015

Options issued under the Silex Systems Limited Employee Share Option Plan (No. 1) to take up ordinary shares Other options issued to take up ordinary shares *	Number on issue Number of holders
	140,000 3 1,469,242 2

* These are options to Dr M P Goldsworthy (1,102,207) and Mr C D Wilks (367,035).

43 | P a g e