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CRC for Mental Health Ltd

Financial Report

For the year ended 30 June 2013

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Contents Page

Directors’ report 4

Auditor’s Independence declaration 12

Statement of comprehensive income 13

Statement of financial position 14

Statement of changes in equity 15

Statement of cash flows 16

Notes to the financial statements 17

Directors’ declaration 29

Independent auditor’s audit report 30

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Corporate Information ABN 80-151-016-492 Directors

The Hon Dr Michael Wooldridge MBA, MMBS, BSc (Non-executive Chairman) Professor Ian Cooke BSc (Hons), PhD, M IP Law, MBA (Director and Chief Executive Officer) Professor Ralph Martins BSc, PhD, GAICD Graeme Prior BCom, CA Dr Daniel Grant M.Sc, PhD, MBA Dr Kathryn Taylor MBBS MPH GAICD Donna Staunton BA LLB, GAICD

Company Secretary Simone Quin BCom, CA, GCert ST&C, ACSA Registered Office Level 2, 161 Barry Street, Carlton, VIC, 3053

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Directors’ Report The directors of CRC for Mental Health Ltd (CRCMH) submit their report for the year ended 30 June 2013. Directors The names and details of the company’s directors in office during the financial year and until the date of this report are as follows. Directors were in office for this entire period unless otherwise stated. Qualifications, experience and special responsibilities The Hon Dr Michael Wooldridge MBA, MMBS, BSc (Non-executive Chairman) The Hon Dr Michael Wooldridge has extensive experience as a strategic and regulatory advisor to a large range of Australian and overseas companies and organisations in the healthcare, technology and biotechnology fields. He has proven corporate governance skills and Board experience across government, business and health in leading Board and senior management teams, and representing the health concerns of Australian people at a Government level. Dr Wooldridge is trained as a medical practitioner and was formerly the Federal Minster for Health from 1996 until 2001 and a member of the Australian Parliament from 1987 to 2001. Since that time Dr Wooldridge has acted as an adviser within the health industry in a number of capacities including the Federal Government Ministerial Advisory Committee on AIDS, sexual health and hepatitis and Australia21’s think tank on decriminalising drugs. Dr Wooldridge also served as a director on the following companies during the year:

Australian Pharmaceutical Industries Ltd Resonance Health Ltd Oral Health CRC (as the Chair) Centre for Eye Research Australia Aspen Health Care.

Dr Wooldridge is also an Adjunct Professor in the Faculty of Medicine, Nursing and Health Sciences at Monash University and an Adjunct Associate Professor in the Faculty of Medicine, University of Melbourne. Dr Ian Cooke BSc (Hons), PhD, M IP Law, MBA (Director and Chief Executive Officer) Dr Ian Cooke is the Chief Executive Officer. Prior to taking up this position in February 2012 he held joint appointments as Professorial Fellow in the Monash University Centre for Science and Wealth Creation and Chief Executive Officer of Foursight Associates Pty Ltd, a science and technology consulting company based in Melbourne. He is also a non-executive director of Human Genome Sciences Pacific Pty Ltd. Dr Cooke’s previous appointments include roles as Managing Director and CEO of CNSBio Pty Ltd (now Relevare Pharmaceuticals Inc), a clinical-stage venture capital-backed company spun out of Monash University in 2005 to commercialise novel therapies for the treatment of severe pain, and Associate Director (R&D) of the Macfarlane Burnet Institute for Medical Research and Public Health in Melbourne, an independent infectious diseases research institute. Prior to joining the Burnet Institute he was Associate Professor of Biology at Deakin University, following research fellowships in neuroscience at Princeton University and AT&T Bell Laboratories in the USA and a Queen Elizabeth II Research Fellowship at Monash University. Dr Cooke holds BSc (Hons), PhD and M IP Law degrees from the University of Melbourne and an MBA degree from Monash University. Dr Cooke is also a member of the Research Management Committee.

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Professor Ralph Martins, AO BSc, PhD, Professor Ralph Martins is the Foundation Chair of Ageing and Alzheimer’s Disease at Edith Cowan University, and Research Director at the McCusker Alzheimer’s Research Foundation. Professor Martins was the first to propose and demonstrate that the Alzheimer brain was under oxidative stress, which is now widely recognized by the Alzheimer research community. In 1989 he joined Professor Colin Masters at the University of Melbourne where he was the first to isolate and characterize the molecular components of the neuropathological hallmarks of Alzheimer’s disease. This led to the creation of new intellectual property and formation of a spin-off company, Alzhyme Pty Ltd. Professor Martins established the Sir James McCusker Alzheimer’s Research Unit at Hollywood Hospital, whose research is directed at the cause(s) and development of diagnostics and treatments. He received the UWA "Excellence in Teaching Award - Post Graduate Research" for 2002 and in 2003 was appointed Senior Editor of the Journal of Alzheimer’s Disease and Editorial Board Member of Current Drug Targets CNS & Neurological Disease. Edith Cowan University appointed him to the Inaugural Chair of Ageing and Alzheimer’s Disease in 2004. He has Adjunct Professorial positions and close ties with clinical academics with both the University of Western Australia and Thomas Jefferson University’s Farber Neurosciences Institute. He is instigator and director of the state government funded Centre of Excellence for Alzheimer’s Disease Research and Care composed of researchers from four universities, three hospitals and two healthcare providers and the Western Australian of the year in 2010. Professor Martins was appointed a member in the Order of Australia in 2013 for distinguished service to medicine in the field of psychiatry through leadership in the research into Alzheimer’s disease and the development of early diagnosis and treatment programs, and to the community of Perth. Professor Martins is also a member of the Research Management Committee. Graeme Prior BCom, CA Mr Prior is the Chief Executive Officer of the Hall and Prior Residential Health and Aged Care Organisation (Hall & Prior) which he established with Michael Hall. Hall & Prior provides care to around 1,200 high care residential clients and 80 community clients in Perth and Sydney and employs around 1,300 people. Mr Prior is also a:

Member of the International Federation of Ageing (IFA) Member of the Curtin Aged Care Advisory Group Expert Panel member for the National Evidence Based Aged Care Unit (NEBACU) at Adelaide

University Founding member of the Centre of Excellence for Alzheimer’s Disease Research and Care in

Western Australia Member of Advisory Committee for Wounds West Active Member of Rotary International Past president and Board member of the Aged Care Association Australia – Western Australia

(ACAA-WA) – now known as Leading Aged Services Australia (LASA).

In addition, Mr Prior holds a Bachelor of Commerce, is a member of the Institute of Chartered Accountants Australia, a Fellow of the Australian Taxation Institute, a Fellow of the Australian Institute of Management and has previously been employed as an accountant and business advisor at Arthur Anderson, senior taxation manager for Ernst & Young and founding partner of both Golding Partners Chartered Accountants and Forrest Partners Chartered Accountants. Mr Prior is also Chair of the Audit & Risk Committee.

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Dr Daniel Grant M.Sc, PhD, MBA Dr Grant is the Head of External Research and Development Innovation (ERDI) for Pfizer Australia and a member of the Medical Department’s leadership team. Working with his colleagues in Pfizer’s ERDI team, he is responsible for identifying, evaluating and managing collaborative opportunities that arise from Australia’s research landscape and that align with Pfizer’s strategic direction. Prior to joining Pfizer, Dr Grant was a senior business development manager at Melbourne Ventures a member of the Investment Committee for Uniseed and a Senior Business Development Manager for Biocomm Services. In these roles he was responsible for technology evaluation, commercialisation and spin-out company formation. Dr Grant also spent 10 years as a Senior Scientist and Senior Research Fellow at the Ritchie Centre for Baby Health Research at Monash University.

Dr Grant has sat on the board of a number of biotechnology spin-out companies and is a past Director of Research Australia. He holds a PhD in Cardiovascular Physiology, an M.Sc in Respiratory Physiology and an MBA He has more than 15 years experience in applied biomedical research and has published 37 book chapters, journal articles, and invited reviews. Dr Grant is also a member of the Research Management Committee. Dr Kathryn Taylor MBBS MPH GAICD Dr Taylor has extensive experience in corporate strategy, business plan development and evaluation, new business building and corporate social responsibility. Dr Taylor is an Australian medical doctor and public health specialist and is a graduate of the Australian Institute of Company Directors. She is currently a visiting fellow at the Nossal Institute for Global Health. Dr Taylor is a former Fullbright scholar and has trained as an opthamologist before working with McKinsey management consultants, the World Economic Form as Director of the Global Health Initiative, GlaxoSmithKline Biologicals as Vice President of Global Vaccine Policy and Public Health Partnerships. She is currently a visiting fellow at the Nossal Institute for Global Health. Dr Taylor chairs the Biobanks Committee and is also a member of the Audit & Risk Committee. Donna Staunton BA LLB, GAICD Ms Staunton has extensive corporate and government experience in both the public and private sectors, in listed and unlisted companies and in the not-for-profit area. Ms Staunton originally trained as a lawyer and spent a number of years working at the associate level with one of the largest law firms in Australia. After leaving her law practice (and before establishing The Strategic Counsel), Ms Staunton moved into roles on the Senior Management Teams of a Fortune 500 Company; an ASX Top 20 Company; and CSIRO, the largest Non-Government research organisation in Australia. She was also the first woman to sit on the Business Council of Australia. Ms Staunton has served on the boards of Workcover NSW, The National Breast Cancer Centre, The Global Foundation, CSIRO Publishing and The Institute of Public Affairs. She is also a member of The Australian Institute of Company Directors. In her current role as Managing Director of The Strategic Counsel, Ms Staunton provides strategic advice to help her clients succeed in the highly regulated and complex healthcare marketplace. Her company provides insight, advice and assistance relating to politics, healthcare and regulation to clients in Australia and overseas.

Ms Staunton is also CEO of the Hearing Care Industry Association and is a member of the Audit & Risk Committee.

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Key Management Personnel Chief Financial Officer and Company Secretary Simone Quin BCom, CA, GCert ST&C, ACSA

Ms Simone Quin has a Bachelor of Commerce from the University of Melbourne and a Graduate Certificate in Science and Technology Commercialisation from Adelaide University, a Graduate Diploma in Applied Corporate Governance and is a member of the Institute of Chartered Accountants and the Institute of Chartered Secretaries.

She was previously a Senior Manager at PricewaterhouseCoopers in the tax group. She has also worked at Melbourne Ventures, the University of Melbourne’s technology commercialisation arm, the CRC for Innovative Dairy Products, the Victorian Government and Victoria University of Technology. Simone also provides consulting services in research programs. Simone is a director of the Villa Alba Museum in Kew, Victoria.

Chief Scientific Officer Professor Ashley Bush MB BS, DPM, FRANZCP, PhD, FTSE Professor Ashley Bush is a psychiatrist and translational neuroscientist and the Chief Scientific Officer of the CRC for Mental Health. Professor Bush heads the Oxidation Biology Laboratory at the Mental Heath Research Institute and The University of Melbourne, is co-director of Biomarker Discovery within the Australian Imaging Biomarker Lifestyle Flagship Study of Ageing (AIBL), is a lecturer in psychiatry at Massachusetts General Hospital (MGH) at Harvard Medical School and an adjunct professor of neuroscience at Cornell University. He is the recipient of numerous awards including the Beeson Award from the American Federation of Aging Research, the Senator John T. Hatfield Award from the US Alzheimer’s Association, the Potamkin Prize for Alzheimer's disease research, the Schering-Plough Senior Research Award from the Australian College of Psychiatrists, and in 2011, the Australia Fellowship from the National Health and Medical Research Council (NHMRC). Professor Bush has authored over 250 publications, with over 18,000 citations, 21 patents and has founded 4 biotechnology companies. After training in medicine and psychiatry, he received his PhD in Colin Masters’ laboratory at the University of Melbourne in 1993, performed post-doctoral studies with Rudy Tanzi at MGH, directed a laboratory at MGH from 1995-2005, whereupon he was appointed as ARC Federation Fellow and Professor of Pathology at his current location. He discovered the interaction of beta-amyloid with zinc as a major factor in Alzheimer’s disease pathogenesis, and focuses on the neurobiology of metal ions in neurodegenerative disorders. Communications and Education Manager Melanie Carew BAppSc(Hons), BBA(Management), Grad. Cert (Arts)

Melanie has experience in communication and project management within Cooperative Research Centres as well as with large multi-disciplinary research teams in State Government. She has previously been employed as Communications Manager at both the Oral Health CRC and the Molecular Plant Breeding CRC, and has also undertaken a short-term consultancy role with the AutoCRC. Melanie’s career as a science communicator and educator has included engaging various audiences on diverse topics including biotechnology, genetically modified crops, evidence based dental techniques, cleaner production for the dairy industry, environmental flows, and Victorian State Government drought contingency plans.

Short and long term objectives and strategy The objective of the company is to conduct world class programs of biomedical research, education and training that will make a substantial contribution to improving the treatment and prevention of mental illness in Australia and internationally. The company is funded for a seven-year term ending on 30 June 2018 by the Commonwealth Department of Innovation, Industry, Climate Change, Science, Research and Tertiary Education (DIICCSRTE) under the Cooperative Research Centres Program. In addition, the company receives

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substantial cash and in-kind contributions from its Participants that are used to support the company’s principal activities. Principal activities The company conducts collaborative, multi-disciplinary research and development programs that are designed to improve the treatment and prevention of different forms of mental illness, including dementias, psychoses and mood disorders. Additionally, the company is engaged in the training of postgraduate research students in the biomedical sciences and in the development and implementation of novel education and training programs for aged care workers. The company is responsible for the protection and commercialisation of new intellectual property that may arise from the research program. The company commenced activities on 1 July 2011 and there have been no significant changes in the nature of the company’s activities since that time. Operating and financial review

The company’s financial position is strong with most budgeted contributions from partners being received. The company’s surplus for the year was $985,550. The Statement of Cash Flows illustrates that there was an increase in the cash balance to $2,540,648 as at 30 June 2013.

The CRCMH is incorporated as a not for profit company limited by guarantee and the head office is based on level 2 of the Alan Gilbert Building at 161 Barry Street, Carlton, Victoria. It is a public company for the purposes of the Corporations Act 2001. The company has an income tax exempt status and is therefore not required to prepare or lodge income tax returns with the Australia Taxation Office (ATO). The CRCMH also has DGR (deductible gift recipient) status as a health promotion charity which enables those that make charitable contributions to the CRCMH to deduct them for tax purposes. The company retains a separate bank account to hold and manage charitable contributions for funds. The CRCMH will be governed by the Australian Charities and Not for Profit Commission from 1 July 2013.

If the company is wound up, the Constitution states that each member is required to contribute to a maximum of $10 towards any outstanding obligations of the company. At 30 June 2013 the number of members was ten and as such the combined total amount that members of the company are liable to contribute if the company is wound up is $100.

The company is entitled to receive financial contributions from the following participants:

The Florey Institute of Neuroscience and Mental Health

McCusker Alzheimer’s Research Foundation

Hall & Prior Aged Care

Edith Cowan University

The University of Western Australia

Austin Health

Alzhyme Pty Ltd

Pfizer Inc

Oceanic Medical Imaging Pty Ltd

Nucleus Network Ltd

Parsemus Foundation

Lawley Pharmaceuticals Pty Ltd.

The funds received are directed toward the research and education objectives outlined in the Commonwealth Agreement and as determined by the Board.

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Risk Management

The company takes a proactive approach to risk management. The Board is responsible for ensuring that risks and opportunities are identified on a timely basis and that the company’s objectives and activities are being aligned with the risks and opportunities identified. The Board has a number of mechanisms in place to manage risk. These include:

An Audit & Risk Committee to oversee risk management monitoring for the CRC.

The development of a Board Charter to articulate the role of the Board and its directors.

The ongoing review of the Risk Management Plan, to identify the risks and strategies to deal with those risks.

The implementation of a policy and process to deal with conflicts of interest.

Establishment of an Intellectual Property and Commercialisation Committee of the Board to obtain the input of experts to important patenting and licensing decisions.

The establishment of a Biobanks Committee of the Board to oversee the management of the various biobanks generated out of CRC research activities.

The Board approval of a budget setting procedure and board monitoring of progress against budgets.

Significant changes in the state of affairs

There were no significant changes in the company’s state of affairs during the financial year, other than those referred to elsewhere in this report.

Significant events after balance date

No matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the company, the results of those operations, or the state of affairs of the company in future financial years.

Likely developments and expected results

The company expects to maintain the present status and level of operation.

Directors meetings The number of meetings of directors (including meetings of Committees of directors) held during the year and the number of meetings attended by each director were as follows:

Director Director’s meeting

Research Management Committee

Education Committee

Audit & Risk

Committee

IP & C* Committee

Biobanks Committee

No of meetings held:

6 4 2 3 1 1

No of meetings attended:

The Hon Dr Michael Wooldridge

6 N/A N/A N/A N/A N/A

Dr Ian Cooke 6 4 2 3 1 1

Dr Daniel Grant 6 4 N/A N/A N/A N/A

Professor Ralph Martins 5 3 N/A N/A N/A N/A

Mr Graeme Prior 6 N/A N/A 3 N/A N/A

Dr Kathryn Taylor 5 N/A N/A 3 N/A 1

Ms Donna Staunton 5 N/A N/A 3 N/A N/A

* Intellectual Property & Commercialisation

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Committee membership As of the date of this report, the company had an Audit & Risk Committee, a Research Management Committee, an Intellectual Property and Commercialisation Committee, a Biobanks Committee and an Education Committee of the Board of directors. The Audit & Risk Committee provides a general oversight of CRC for Mental Health’s affairs in the areas of financial accounting and reporting, risk management and the underlying internal control environment for the CRC.

The Research Management Committee is chaired by the CRC for Mental Health’s Chief Scientific Officer, Professor Ashley Bush. The Committee oversees the day to day running of the research programs, including ensuring that projects have appropriate resources and are progressing satisfactorily. The Committee is responsible for:

Developing scientific directions; Monitoring progress and identifying roadblocks; Conducting annual reviews; and Making scientific recommendations to the Board.

The Intellectual Property and Commercialisation Committee was established on 11 February 2013 to assist the CRC in decisions relating to the protection and commercialisation of CRC intellectual property.

The Biobanks Committee was established on 15 April 2013 as a formal sub-committee of the Board, and will meet formally at least once every 6 months. The Committee will oversee the operations of the various CRCMH Biobanks to ensure that the CRCMH cohort studies are conducted ethically and that the data and materials encompassed with each CRCMH biobank are utilised equitably and in a manner that is consistent with the goals of the CRCMH and with the general objective of maximizing the overall utility of the biobank to researchers within and external to the CRCMH.

The Biobanks Committee will keep itself informed of new developments relevant to the legal and ethical responsibilities of organisations that establish, maintain and provide access to biobanks and will advise the Board of the CRC for Mental Health on any developments that have implications for the Board or, more broadly, for the CRC for Mental Health.

An Education Committee has been established to review CRC studentship and scholarship applications as well as additional opportunities for students and to help facilitate the translation of research findings into the clinic and health care facilities.

Members acting on the Committees of the board held during the year were: Audit & Risk Committee

Mr Graeme Prior (Chair) Ms Donna Staunton Dr Kathryn Taylor

The Committee is also attended by invitation by Paul Gower for the auditors, Ernst & Young and the CEO. Education Committee

Dr Ian Cooke (Chair) Ms Melanie Carew (CRCMH) Professor Fran McInerney (Mercy Health) Professor Ashley Bush (CRCMH / Florey), Associate Professor Simon Laws (CRCMH / ECU)

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Statement of Comprehensive Income FOR THE YEAR ENDED 30 June 2013

Notes 2013 $

2012 $

Contributions from the Commonwealth 3,850,000 2,618,000Contributions from Participants (received) 2,598,542 2,364,605Interest 4 31,987 23,514Other 4 45,500 41,250Grants 4 3,000 7,303Total Income 6,529,029 5,054,672 Program expenses 4,523,952 3,903,644Administrative expenses 4 269,490 430,105Employment expenses 4 747,885 578,934Depreciation expense 2,152 1,042Total Expenses 5,543,479 4,913,725 Total surplus for the period 985,550 140,947

The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

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Statement of Financial Position As at 30 June 2013

Notes 2013 $

2012 $

ASSETS Current assets Cash and short term deposits 6 2,540,648 1,527,953Trade and other receivables 7 33,547 128,219Total current assets 2,574,195 1,656,172 Non-current assets Property, plant and equipment 8 6,334 8,486Total non-current assets 6,334 8,486TOTAL ASSETS 2,580,529 1,664,658 LIABILITIES Current liabilities Trade and other payables 9 1,414,786 1,501,918Provisions 10 39,246 21,793Total current liabilities 1,454,032 1,523,711 Non-current liabilities - -TOTAL LIABILITIES 1,454,032 1,523,711 NET ASSETS 1,126,497 140,947 ACCUMULATED FUNDS Current year surplus 985,550 140,947Retained surplus 140,947 -TOTAL ACCUMULATED FUNDS 1,126,497 140,947

The above Statement of Financial Position should be read in conjunction with the accompanying notes.

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Statement of Changes in Equity FOR THE YEAR ENDED 30 June 2013

2013 $

2012 $

Retained Surplus 140,947 -Current year surplus 985,550 140,947 Total Accumulated Funds 1,126,497 140,947

The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.

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Statement of Cash Flows FOR THE YEAR ENDED 30 June 2013

Notes 2013 $

2012 $

Cash flows from operating activities Receipts from Commonwealth (inclusive of GST) 4,235,000 2,879,800Receipts from participants (inclusive of GST) 2,858,396 2,558,569Payments to suppliers and personnel (inclusive of GST) (6,166,038) (3,977,810)Interest received 31,987 23,514Receipt of government grants and other payments 53,350 53,408Net cash flows from / (used in) operating activities 6 (b) 1,012,695 1,537,481 Cash flows from investing activities Purchase of property, plant and equipment - (9,528)Net cash flows from / (used in) investing activities - (9,528) Net increase / (decrease) in cash and cash equivalents 1,012,695 1,527,953Cash and cash equivalents at beginning of period 1,527,953 -Cash and cash equivalents at end of period 6 (a) 2,540,648 1,527,953

The above Statement of Cash Flows should be read in conjunction with the accompanying notes.

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Notes to the Financial Statements FOR THE YEAR ENDED 30 June 2013 1. CORPORATE INFORMATION The financial report of the CRC for Mental Health Ltd for the year ended 30 June 2013 was authorised for issue in accordance with a resolution of the directors on 16 October 2013. The CRC for Mental Health Ltd is a company limited by guarantee incorporated in Australia and has no ordinary shares issued. If the Company is wound up, the Constitution states that each member is required to contribute a maximum of $10 each towards meeting any outstanding obligations of the Company. At 30 June 2013 the number of members was ten. The nature of the operations and principal activities of the Company are described in the Directors’ Report. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of preparation The financial report is a general purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report has also been prepared on a historical cost basis.

The financial report is presented in Australian dollars.

(b) New Accounting Standards and Interpretations

The following standards and interpretations have been issued by the AASB but are not yet effective for the period ended 30 June 2013:

Reference Title Summary Application

date of standard

AASB 13 Fair Value Measurement

AASB 13 establishes a single source of guidance for determining the fair value of assets and liabilities. AASB 13 does not change when an entity is required to use fair value, but rather, provides guidance on how to determine fair value when fair value is required or permitted. Application of this definition may result in different fair values being determined for the relevant assets. AASB 13 also expands the disclosure requirements for all assets or liabilities carried at fair value. This includes information about the assumptions made and the qualitative impact of those assumptions on the fair value determined. Consequential amendments were also made to other standards via AASB 2011-8.

1 July 2013

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Reference Title Summary Application

date of standard

AASB 119 Employee Benefits

The main change introduced by this standard is to revise the accounting for defined benefit plans. The amendment removes the options for accounting for the liability, and requires that the liabilities arising from such plans is recognised in full with actuarial gains and losses being recognised in other comprehensive income. It also revised the method of calculating the return on plan assets. The revised standard changes the definition of short-term employee benefits. The distinction between short-term and other long-term employee benefits is now based on whether the benefits are expected to be settled wholly within 12 months after the reporting date. Consequential amendments were also made to other standards via AASB 2011-10.

1 July 2013

AASB 2011-4

Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements [AASB 124]

This amendment deletes from AASB 124 individual key management personnel disclosure requirements for disclosing entities that are not companies. It also removes the individual KMP disclosure requirements for all disclosing entities in relation to equity holdings, loans and other related party transactions.

1 July 2013

AASB 1053 Application of Tiers of Australian Accounting Standards

This standard establishes a differential financial reporting framework consisting of two tiers of reporting requirements for preparing general purpose financial statements: (a) Tier 1: Australian Accounting Standards (b) Tier 2: Australian Accounting Standards -

Reduced Disclosure Requirements Consequential amendments to other standards to implement the regime were introduced by AASB 2010-2, 2011-2, 2011-6, 2011-11, 2012-1, 2012-7 and 2012-11.

1 July 2013

AASB 2012-3

Amendments to Australian Accounting Standards - Offsetting Financial Assets and Financial Liabilities

AASB 2012-3 adds application guidance to AASB 132 Financial Instruments: Presentation to address inconsistencies identified in applying some of the offsetting criteria of AASB 132, including clarifying the meaning of "currently has a legally enforceable right of set-off" and that some gross settlement systems may be considered equivalent to net settlement.

1 January 2014

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Reference Title Summary Application

date of standard

AASB 9 Financial Instruments

AASB 9 includes requirements for the classification and measurement of financial assets. It was further amended by AASB 2010-7 to reflect amendments to the accounting for financial liabilities. These requirements improve and simplify the approach for classification and measurement of financial assets compared with the requirements of AASB 139. Consequential amendments were also made to other standards as a result of AASB 9, introduced by AASB 2009-11 and superseded by AASB 2010-7 and 2010-10.

1 July 2015

(c) Revenue recognition Revenue is recognised and measured at fair value of the consideration received or receivable to the extent it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

Interest Revenue is recognised as the interest accrues using the effective interest method. This is a method of calculating the amortised cost of a financial asset and allocating the interest income over the relevant period using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset.

(d) Government grants Government grants which are non-reciprocal in nature will be recognised at fair value of the contributions received or receivable when the Company obtains control of the contribution or the right to receive the contribution is established.

(e) Income and other taxes The Company is exempt from income tax pursuant to the provisions of subdivision 50-B of the Income Tax Assessment Act 1997 and receives GST concessions under division 176 of A New Tax System Act 1999 and FBT exemptions under section 123D of the Fringe Benefits Tax Assessment Act 1986.

Revenues, expenses and assets are recognised net of the amount of GST except:

when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

receivables and payables are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Statement of Financial Position.

(f) Property, plant and equipment

Property, plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows:

Computer equipment – over 3 - 6 years

The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted as appropriate, at each financial year end.

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Disposal An item of property, plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the Statement of Comprehensive Income in the year the item is derecognised.

(g) Impairment of non-financial assets

The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. When the carrying amount of an asset of CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair market indicators. Impairment losses of continuing operations, including impairment on inventories, are recognised in the Statement of Comprehensive Income in expense categories consistent with the function of the impaired asset, except for a property previously revalued and the revaluation was taken to Other Comprehensive Income. In this case, the impairment is also recognised in Other Comprehensive Income up to the amount of any previous revaluation.

(h) Cash and short-term deposits

Cash and short-term deposits in the Statement of Financial Position comprise cash at bank and in hand. For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and short-term deposits as defined above.

(i) Financial Instruments – initial recognition and subsequent measurement Initial recognition and measurement

Financial assets within the scope of AASB 139 are classified as financial assets at fair value through profit or loss, loss and receivables, held-to-maturity investments, available-for-sale financial assets, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Company determines the classification of its financial assets at initial recognition. All financial assets are recognised initially at fair value plus transaction costs, except in the case of financial assets recorded at fair value through profit or loss. Purchases of sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date the Company commits to purchase or sell the asset. The Company’s financial assets include cash and short-term deposits, trade and other receivables, loans and other receivables, quoted and unquoted financial instruments and derivative financial instruments. Subsequent measurement The subsequent measurement of financial assets depends on their classification as described below:

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Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss includes financial assets held for trading and financial assets designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Financial assets at fair value through profit or loss are carried in the Statement of Financial Position at fair value with net changes in fair value recognised in finance costs in the Statement of Comprehensive Income.

Financial assets designated upon initial recognition at fair value through profit or loss are designated at their initial recognition date and only if the criteria under AASB 139 are satisfied. The Company has not designated any financial assets at fair value through profit or loss. The Company evaluates its financial assets held for trading, other than derivatives, to determine whether the intention to sell them in the near term is still appropriate. When in rare circumstances the Company is unable to trade these financial assets due to inactive markets and management’s intention to sell them in the foreseeable future significantly changes, the Company may elect to reclassify these financial assets. The reclassification to loans and receivables, available-for-sale or held in maturity depends on the nature of the asset. This evaluation does not affect any financial assets designated at fair value through profit or loss using the fair value option at designation, these instruments cannot be reclassified after initial recognition. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the EIR method, less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the Statement of Comprehensive Income. The losses arising from impairment are recognised in the Statement of Comprehensive Income in finance costs for loans and in cost of sales or other operating expenses for receivables. Held-to-maturity Investments Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held-to-maturity when the Company has the positive intention and ability to hold them to maturity. After initial measurement, held-to-maturity investments are measured at amortised cost using the EIR, less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fess or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the Statement of Comprehensive Income. The losses arising from impairment are recognised in the Statement of Comprehensive Income in finance costs. The Company has not designated any financial assets as held-to-maturity. Available-for-sale financial Investments Available-for-sale financial investments include equity investments. Equity investments classified as available-for-sale are those that are neither classified as held for trading nor designated at fair value through profit or loss. After initial measurement, available-for-sale financial investments are subsequently measured at fair value with unrealised gains or losses recognised as Other Comprehensive Income in the available-for-sale reserve until the investment is de-recognised, at which time the cumulative gain or loss is recognised in other operating income, or the investment is determined to be impaired, when the cumulative loss is reclassified from the available-for-sale reserve to the Statement of Comprehensive Income in finance costs. Interest earned whilst holding available-for-sale financial investments is reported as interest income using the EIR method. The Company evaluates whether the ability and intention to sell its available-for-sale financial assets in the near term is still appropriate. When, in rare circumstances, the Company is unable

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to trade these financial assets due to inactive markets and management’s intention to do so significantly changes in the foreseeable future, the Company may elect to reclassify these financial assets. Reclassification to loans and receivables is permitted when the financial assets meet the definition of loans and receivables and the Company has the intent and ability to hold these assets for the foreseeable future or until maturity. Reclassification to the held-to-maturity category is permitted only when the entity has the ability and intention to hold the financial asset accordingly. For a financial asset reclassified from the available-for-sale category, the fair value carrying amount at the date of reclassification becomes its new amortised cost and any previous gain or loss on the asset that has been recognised in equity is amortised to profit or loss over the remaining life of the investment using the EIR. Any difference between the new amortised cost and the maturity amount is also amortised over the remaining life of the asset using the EIR. If the asset is subsequently determined to be impaired, then the amount recorded in equity is reclassified to the Statement of Comprehensive Income. De-recognition A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is de-recognised when:

The rights to receive cash flows from the asset have expired The Company has transferred its rights to receive cash flows from the asset or has

assumed an obligation to pay the received cash flows in full without material delay to a third party under a “pass-through” arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership. When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of the asset, the asset is recognised to the extent of the Company’s continuing involvement in the asset. In that case, the Company also recognises an associated liability. The transferred asset and the associated liability are measured on a basis that reflects the rights and obligations that the Company has retained. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Company could be required to repay. Impairment of financial assets The Company assesses, at each reporting date, whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred “loss event”) and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and when observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. Financial assets carried at amortised cost For financial assets carried at amortised costs, the Company first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Company determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are

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not included in a collective assessment of impairment. If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current EIR.

The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the Statement of Comprehensive Income. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of finance income in the Statement of Comprehensive Income. When there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Company. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to finance costs in the Statement of Comprehensive Income. Available-for-sale financial investments For available-for-sale financial investments, the Company assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired. In the case of equity investments classified as available-for-sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. “Significant” is evaluated against the original cost of the investment and “prolonged” against the period in which the fair value has been below its original cost. When there is evidence of impairment, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the Statement of Comprehensive Income – is removed from Other Comprehensive Income and recognised in the Statement of Comprehensive Income. Impairment losses on equity investments are not reversed through the Statement of Comprehensive Income; increases in their fair value after impairment are recognised directly in other comprehensive income. In the case of debt instruments classified as available-for-sale, impairment is assessed based on the same criteria as financial assets carried at amortised cost. However, the amount recorded for impairment is the cumulative loss measured as the difference between the amortised cost and the current fair value, less any impairment loss on that investment previously recognised in the Statement of Comprehensive Income. Financial liabilities Initial recognition and measurement Financial liabilities within the scope of AASB 139 are classified as financial liabilities at fair value through profit or loss, loans and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Company determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognised initially at fair value plus, in the case of loans and borrowings, directly attributable transaction costs. The Company’s financial liabilities include trade and other payables, bank overdrafts, loans and borrowings, financial guarantee contracts, and derivative financial instruments. Subsequent measurement The measurement of financial liabilities depends on their classification, described as follows:

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Financial liabilities at fair value through profit or loss Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial instruments entered into by the Company that are not designated as hedging instruments in hedge relationships as defined by AASB 139. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognised in the Statement of Comprehensive Income. Financial liabilities designated upon initial recognition at fair value through profit and loss so designated at the initial date of recognition, and only if criteria of AASB 139 are satisfied. The Company has not designated any financial liability as at fair value through profit or loss. Loans and borrowings After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in the Statement of Comprehensive Income when the liabilities are derecognised as well as through the EIR amortisation process. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees for costs that are an integral part of the EIR. The EIR amortisation is included in finance costs in the Statement of Comprehensive Income. De-recognition A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the de-recognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the Statement of Comprehensive Income.

Fair value of financial instruments The fair value of financial instruments that are trades in active markets at each reporting date is determined by reference to quoted market prices or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for transaction costs. For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques. Such techniques may include:

Using recent arm’s length market transactions Reference to the current fair value of another instrument that is substantially the same A discounted cash flow analysis or other valuation models

An analysis of fair values of financial instruments and further details as to how they are measured are provided in Note 3.

(j) Provisions

Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Company expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognised as a separate asset but only when the

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reimbursement is virtually certain. The expense relating to any provision is presented in the Statement of Comprehensive Income net of any reimbursement. Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present obligation at the Statement of Financial Position date. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the time value of money and the risks specific to the liability. The increase in the provision resulting from the passage of time is recognised in finance costs.

(k) Employee leave benefits (i) Wages, salaries, annual leave, time-in-lieu and sick leave Liabilities for wages and salaries, including non-monetary benefits, annual leave and time-in-lieu are recognised in respect of employees’ services up to the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Expenses for non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable.

3. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Company’s principal financial instruments comprise receivables, payables and cash.

Financial Instruments 2013

$ 2012

$ Financial assets Cash and cash equivalents 2,540,648 1,527,953Trade and other receivables (current) 33,547 128,219Total financial assets 2,574,195 1,656,172 Financial liabilities Trade and other payables (current) 1,414,786 1,501,918Total financial liabilities 1,414,786 1,501,918

The Company does not enter into derivative transactions, including interest rate swaps and forward currency contracts. It is the Company’s policy that no trading in financial instruments shall be undertaken. The main risks arising from the Company’s financial instruments are liquidity risk and credit risk. The company’s processes for managing each of these risks are summarised below.

Liquidity risk Liquidity risk arises from the financial liabilities of the Company and the Company’s subsequent ability to meet their obligations to repay their financial liabilities as and when they fall due.

The Company manages its liquidity risk by monitoring the total cash inflows as budgeted and outflows expected on a quarterly basis. The company has established project and risk reporting covering its activities that reflect expectations of management of the anticipated project and activities receipts and payments.

There were no financial guarantees issued by the company as at 30 June 2013.

Liquid non-derivative assets comprising cash and receivables are considered in the Company’s overall liquidity risk. The Company ensures that sufficient liquid assets are available to meet all the required short-term cash payments and will mature within the next 12 months.

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<= 6 months

$

6-12 months

$

1-5 years

$

>5 years

$

Total

$ Year ended 30 June 2013 Financial assets Cash and cash equivalents 2,540,648 - - - 2,540,648Trade and other receivables 33,547 - - - 33,547

Financial liabilities Trade and other payables 1,414,786 - - - 1,414,786Net inflow/(outflow) 1,159,409 - - - 1,159,409

Credit risk Cash and cash equivalents, deposits and investments with banks and financial institutions are only placed with banks and financial institutions that are independently rated with a minimum rating of 'A'. Market Risk The Company is not materially exposed to foreign exchange risk.

4. REVENUES & EXPENSES

2013

$ 2012

$ (a) Other income Government grants 3,000 7,303Consulting income 45,500 -Other - 41,250 48,500 (b) Finance income/(costs) Interest income 31,987 23,514 (c) Administrative expenses Occupancy costs 25,079 10,262Communication costs 28,208 39,169Meeting costs 109,365 33,328Set-up expenses - 230,000Other expenses 106,838 117,346 269,490 430,105(d) Employment expense Management and board employment costs 747,885 578,934

5. DIVIDENDS PAID AND PROPOSED The Constitution of the Company does not allow for the payment of dividends. Therefore no dividends have been declared or paid during or after the financial period.

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6. CASH AND SHORT-TERM DEPOSITS

2013 $

2012 $

(a) Cash at bank and in hand 2,540,648 1,527,953Cash at bank earns interest at floating rates based on daily bank deposit rates

(b) Reconciliation of net surplus after tax to the net cash flows from operations

Net surplus/(deficit) 985,550 140,947 Adjustments for: Depreciation 2,152 1,042

Changes in assets and liabilities (Increase)/decrease in trade and other receivables 94,672 (128,219)(Decrease)/increase in trade and other payables (87,132) 1,501,918(Decrease)/increase in provisions 17,453 21,793Net cash from/(used in) operating activities 1,012,695 1,537,481

7. TRADE AND OTHER RECEIVABLES (CURRENT)

2013

$ 2012

$ Net GST payable/(receivable) (33,547) (128,219)

GST payable is remitted to the Australian Taxation Office on a quarterly basis.

8. PROPERTY, PLANT AND EQUIPMENT

Computer

Equipment $

Total

$ At 1 July 2011 - -Additions 9,528 9,528Disposals - -Depreciation charge for the year 1,042 1,042At 30 June 2012 8,486 8,486 At 1 July 2012 net of accumulated depreciation 8,486 8,486Additions - -Disposals - -Depreciation charge for the year 2,152 2,152At 30 June 2013 net of accumulated depreciation 6,334 6,334 At 30 June 2013 Cost or fair value 9,528 9,528Accumulated depreciation and impairment 3,194 3,194Net carrying amount 6,334 6,334

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9. TRADE AND OTHER PAYABLES (CURRENT)

2013 $

2012 $

Research expense accrual 1,323,375 1,395,578Accrued employee salaries 65,686 81,840Accrued audit expense 25,725 24,500 1,414,786 1,501,918

Trade payables are non-interest bearing and are normally settled on 30-day terms.

10. PROVISIONS

2013 $

2012 $

Employee entitlements 39,246 21,793

11. COMMITMENTS AND CONTINGENCIES

There are no commitments or contingencies outstanding at the reporting date.

12. RELATED PARTY DISCLOSURES

The following table provides the total amount that has been paid to related parties during the period:

Compensation of key management personnel 2013

$ 2012

$ Short term employment benefits 533,203 332,365Post term employment benefits 52,216 32,102 585,419 364,467

13. EVENTS AFTER THE REPORTING DATE

There were no significant events to disclose after the reporting date.

14. AUDITORS’ REMUNERATION

2013

$ 2012

$ Amounts received or due and receivable by Ernst & Young (Australia) for:

an audit of the financial report of the entity

20,600

19,500 an audit of the financial obligations identified in the

Commonwealth Agreement

5,125

5,000 25,725 24,500