A N N U A L R E P O R T
3
0
J U N E
2
0
0
0
S T A R P H A R M A P O O L E D D E V E L O P M E N T L I M I T E D
A C N 0 7 8 5 3 2 1 8 0
Contents
SECTION 1
COMPANY PARTICULARS
SECTION 2
DIRECTORS’ REPORT
SECTION 3
CORPORATE GOVERNANCE STATEMENT
SECTION 4
PROFIT AND LOSS STATEMENTS
SECTION 5
BALANCE SHEETS
SECTION 6
STATEMENTS OF CASH FLOWS
SECTION 7
NOTES TO THE FINANCIAL STATEMENTS
SECTION 8
DIRECTORS’ DECLARATION
SECTION 9
INDEPENDENT AUDIT REPORT TO THE MEMBERS
1
2
11
13
14
15
16
31
32
STARPHARMA POOLED DEVELOPMENT LIMITED
Directors
ACN 078 532 180
COMPANY PARTICULARS
R J D Oliver AM (Chairman)
P M Colman BSc (Hons), PhD, FAA, FTSE
R Dobinson B Bus (Acc)
P J Jenkins MB, BS (Melb), FRACP
L Gorr B Juris, LLB, M.Admin
J W Raff Dip Ag Sc, BSc, PhD
Chief Executive Officer
J W Raff Dip Ag Sc, BSc, PhD
Secretary
B P Rogers
Registered Office
Notice of annual
general meeting
Share Register
343 Royal Parade
Parkville Vic 3052
(03) 9662 7123
The annual general meeting of Starpharma Pooled Development Limited
ASX Theatrette (530 Collins Street, Melbourne)
will be held at:
4pm
time:
Thursday 16 November 2000
date:
Computershare Registry Services Pty Ltd
Level 12
565 Bourke Street
Melbourne Vic 3000
Telephone:
Facsimile:
(03) 9615 5970
(03) 9611 5710
Stock exchange listing:
Starpharma Pooled Development Ltd shares are listed on an exempt stock
market operated by:
Austock Management Ltd
Level 1, 350 Collins Street
Melbourne Vic 3000
Telephone:
(03) 8601 2000
Auditor
Solicitors
PricewaterhouseCoopers
333 Collins Street
Melbourne Vic 3000
Herbert Geer & Rundle
Level 21, 385 Bourke Street
Melbourne Vic 3000
Bankers
Commonwealth Bank of Australia
[15/08/00] Page
1
STARPHARMA POOLED DEVELOPMENT LIMITED
AND CONTROLLED ENTITIES
DIRECTORS’ REPORT
The directors present their report on the consolidated accounts of Starpharma Pooled Development Limited
(the company) and the entities it controlled at the end of, or during, the ended 30 June 2000.
Directors
The following persons were directors of Starpharma Pooled Development Limited during the whole of the
financial year and up to the date of this report:
R J D Oliver (Chairman)
P M Colman
R Dobinson
P J Jenkins
J W Raff was an alternate for P M Colman from the commencement of the financial year until 5 April 2000,
and was a director from his appointment on 5 April 2000 until the date of this report.
L Gorr was appointed to the office of director on 1 May 2000.
Principal activities
During the year the principal activity of the consolidated entity constituted by Starpharma Pooled
Development Limited and the entities it controlled consisted of management and funding of pharmaceutical
research and development. Through the controlled entity, Starpharma Limited, the consolidated entity has
licensed commercialisation rights to technology from the Biomolecular Research Institute Limited and has
entered into research contracts with a number of Australian and overseas research organisations to further
develop the technology.
Review of operations and consolidated results
For the year ended 30 June 2000 the consolidated entity incurred an operating loss after income tax of
$1,772,014. Expenditure on direct research activities was $1,422,154.
Capital Raising
The company issued a prospectus dated 1 September 1999, which was lodged with the Australian Securities
and Investments Commission on 14 September 1999. This prospectus related to an offer of ordinary shares
to existing shareholders of the company.
[15/08/00] Page
2
DIRECTORS’ REPORT (continued)
The company offered existing shareholders the right to subscribe for one new share for every 4 existing
shares at the price of $2.50 per new share. The new shares were issued partly paid to 1 cent per share, with
the balance of $2.49 per new share payable within 21 days after a call by the company. The issue was fully
subscribed and raised a total of $7,812,500, to be used to continue with the consolidated entity’s drug
development programs in the areas of virology and angiogenesis, and also to meet ongoing working capital
requirements.
Exempt Stock Market Listing
The company engaged Austock Management Ltd to establish and operate a stock market in the shares of the
company, declared to be exempt under section 771 of the Corporations Law. This market opened on
Monday 15 November 1999.
ASX Listing and Capital Raising
The objective of working towards a listing of the company’s securities on the Official List of the Australian
Stock Exchange Ltd (ASX) was announced by the Chairman at the annual general meeting of members held
on 25 November 1999.
On 9 February 2000 the company announced its intention to proceed with an ASX listing, and planning
commenced for an initial public offer (IPO) to raise approximately $20 million. UBS Warburg Australia
Limited was appointed as lead manager and underwriter for the IPO, with a target date for listing during
June 2000.
However, following a period of volatility in overseas and local equity markets, the Board decided on 5 June
2000 to postpone the proposed ASX listing and capital raising until market conditions were more
favourable.
Subdivision of Shares and Adoption of a new constitution
A General Meeting of members held on 5 April 2000 approved two resolutions as part of the preparations
for the ASX listing:
1.
2.
Subdivision of shares - Each of the 15,625,000 issued shares in the capital of the company was
subdivided into 4 shares making a total of 62,500,000 issued shares.
New Constitution – To prevent any delays in the application process for ASX listing a new
constitution was adopted, ensuring compliance with current Listing Rules.
Research Programs
The consolidated entity’s research activities are managed by the controlled entity Starpharma Limited.
Two significant issues in the development of the technology have been scale-up synthesis and the
development of assay systems for purity determination and detection of compounds in tissue. Major
progress has been achieved in both of these areas in collaboration with IDT Australia Ltd and Viridae
Clinical Sciences (Canada).
[15/08/00] Page
3
DIRECTORS’ REPORT (continued)
The two established major projects, the Vaginal Microbicide Program and Angiogenesis Inhibitors
Program, are successfully progressing through preclinical development. An expanded range of therapeutic
applications is arising from both projects. For example, in vitro studies have demonstrated inhibition of
Human Papilloma Virus (HPV) and angiogenesis inhibition activity for the same compound, and this
provides a potential for topical treatment of cervical cancer.
The anti-toxin research program is being established as a third major project area and initial applications
will focus on diseases of the gut which involve toxins, for example inflammatory bowel disease, ulcerative
colitis and Crohn’s disease.
Research results from collaborating organisations have demonstrated other potential applications for the
technology, and as a result the company has been planning to raise additional capital to fund future
development efforts in these new disease areas.
Extension of R&D Start Grant
In September 1997 the consolidated entity, through Starpharma Ltd, entered into a contract with the
Industry Research and Development (IR&D) Board for a R&D Start grant for a project entitled
“Development of Novel Dendrimer Compounds as Pharmaceuticals”. This grant was originally approved
for the period ending 31 March 2000. However following an application in March 2000, the IR&D Board
approved a two year extension to the program, with the new completion date of 31 March 2002.
Additional R&D Start Grant
During the year Starpharma Ltd entered into a second contract with the IR&D Board for a R&D Start grant
for a project entitled “Angiogenesis Inhibitors”. This project, for which funding approval was given on 23
June 1999, provides funding of up to $2,950,000 on the basis of reimbursement of 50% of eligible project
costs incurred during the period 1 April 1999 to 31 March 2002.
US NIH Grant to Assist Starpharma Project
Viridae Clinical Sciences (USA) Inc of Cincinnati Ohio, have advised that they (Viridae) have been
awarded a US National Institutes of Health (NIH) grant for a project entitled “Development of Dendrimers
as Vaginal Microbicides”. This project was developed in collaboration with Starpharma Ltd and will use
compounds for which the consolidated entity has a worldwide exclusive commercialisation licence.
The goal of the project is to develop a dendrimer based vaginal microbicide to reduce the risk of
transmission of viral sexually transmitted infections. A grant of $US600,000 has been awarded following
an application by Viridae under the Small Business Innovation Research Program of the United States
Department of Health and Human Services.
Viridae is committed to spending these funds exclusively on the Starpharma Vaginal Microbicide Project,
and this funding will assist with taking Starpharma compounds to the point of readiness for filing of an
Investigational New Drug Application (IND) with the FDA for phase I clinical trials in the United States.
[15/08/00] Page
4
DIRECTORS’ REPORT (continued)
Executive and Employee Share Option Plan
An executive and employee share option plan was approved by members at the Annual General Meeting
held on 25 November 1999. On 31 January 2000 the Directors resolved to invite applications for the grant
of 590,000 share options, to be issued under the terms of the Starpharma Pooled Development Limited
Executive and Employee Share Option Plan ("Plan"). In accordance with the Plan the exercise price was
determined to be $3.75 per share, the market value on the date of the resolution. All invitations were
accepted, and share options were issued accordingly. The options were issued prior to the subdivision of
capital effective on 6 April 2000 and in accordance with the Plan, the options were subdivided in the same
ratio as the shares and the exercise price amended accordingly.
Dividends
No dividend has been paid or declared since the end of the previous financial year, and the directors do not
recommend the declaration of a dividend.
Significant changes in the state of affairs
Significant changes in the state of affairs during the financial year were as follows:
An increase in share capital from $5,000,000 to $12,279,472 as a result of:
Rights issue of 3,125,000 partly paid ordinary shares at $0.01 each
Final call of $2.49 per share on 3,125,000 ordinary shares
Less: Issue costs
Net increase in share capital:
2000
$
31,250
7,781,250
7,812,500
(533,028)
7,279,472
In the opinion of the directors there were no other significant changes in the state of affairs of the
consolidated entity that occurred during the financial year under review not otherwise disclosed in this
report or in the financial statements.
Matters subsequent to the end of the financial year
ASX Listing and Capital Raising
Since the end of the financial year the directors have resolved to resume working towards an initial public
offering to raise approximately $20 million together with a listing of the company’s securities on the
Official List of the ASX.
[15/08/00] Page
5
DIRECTORS’ REPORT (continued)
Employment of Chemistry Team
With effect from 1 July 2000 Starpharma Limited has arranged to directly employ five research chemists
who were previously contracted to work on the consolidated entity’s research and development programs
under an arrangement with the BRI. The leader of this team is Dr Barry Matthews, one of the co-inventors
of the technology licensed from the BRI.
No other matter or circumstance has arisen since 30 June 2000 that has significantly affected, or may
significantly affect:
(a)
(b)
(c)
the consolidated entity’s operations in future financial years, or
the results of the operations in future financial years, or
the consolidated entity’s state of affairs in future financial years.
Likely developments and expected results of operations
In the opinion of the directors, the consolidated entity will continue its activities as described. Further
information on likely developments in the operations of the consolidated entity and the expected results of
operations have not been included in this report because the directors believe it would be likely to result in
unreasonable prejudice to the consolidated entity.
Information on Directors
DIRECTOR
QUALIFICATIONS
AND EXPERIENCE
SPECIAL
RESPONSIBILITIES
Non-executive
Chairman,
Chairman of
Remuneration Committee
RJD OLIVER AM
PM COLMAN FAA
Non-executive director for 3 years
Former Executive Chairman,
Willis Corroon International Pty Ltd, and
Willis Corroon Richard Oliver Pty Ltd, a
global risk management consulting group
that he had established in 1972. Also
business interests in the UK and Argentina.
BSc(Hons), PhD, FAA, FTSE
Non-executive director for 3 years
Executive Director, Biomolecular Research
Institute. Published widely in the field of
structural biology. In 1983 his Laboratory
determined the structure of the surface proteins
of influenza virus, and a major result of that work
was the discovery of Relenza. One of the
founding directors of Biota Holdings Ltd.
[15/08/00] Page
6
R DOBINSON
L GORR
PJ JENKINS
JW RAFF
DIRECTORS’ REPORT (continued)
B. Bus (Acc)
Non-executive director for 3 years
Merchant banker with a background in investment
banking and stockbroking. Has acted as corporate
director for two leading stockbrokers, and was an
executive director of the NAB’s corporate advisory
subsidiary. Later headed the Corporate advisory
Division of Dresdner Australia Ltd. Managing Director
of Acrux Ltd and Technology Structuring Ltd.
B. Juris, LLB, M.Admin
Non-executive director since May 2000
Senior Partner, Herbert Geer & Rundle. 28 years’
experience as a solicitor. Extensive experience
in providing advice on the negotiation and
interpretation of technology licensing agreements.
Clients include investors in, and advisors to the
Biotechnology industry.
MB, BS (Melb), FRACP
Non-executive director for 3 years
Consultant physician and gastroenterologist.
Holds a number of clinical and research positions
with the Alfred Hospital and has held clinical
positions with the Baker Medical Research
Centre. Foundation director of Anadis Ltd, a listed
bio-pharmaceutical company. Judge of the Australian
Technology Awards for the past three years.
Dip. Ag. Sc., BSc. PhD
Previously General Manager of the Biomolecular
Research Institute. Co-founder, director and major
shareholder of a technology based agricultural seed
company with subsidiary operation in India.
Also founder and investor in a number of other
start-up technology companies.
Chairman of Audit
Committee,
member of
Remuneration Committee
Member of Audit
Committee
Chief Executive Officer
[15/08/00] Page
7
DIRECTORS’ REPORT (continued)
Directors’ meetings
The number of meetings of the company’s directors held during the year ended 30 June 2000, and the
numbers of meetings attended by each director were:
Number of meetings held:
Number of Meetings attended by:
Full meeting
of directors
16
Meetings of Committees
Audit
2
Remuneration
2
Mr Richard Oliver
Dr Peter Colman
Mr Ross Dobinson
15
14
16
2
2
2
Mr Leon Gorr (Appointed 1 May 2000
– 1 full meeting held while a director)
1
2
Dr John Raff (Appointed 5 April 2000
– 2 meetings held while a director)
Dr Peter Jenkins
2
15
Retirement, election and continuation in office of Directors
In accordance with the Constitution Dr Peter Jenkins retires by rotation as director at the annual general
meeting and, being eligible, offers himself for re-election.
In accordance with the Constitution Mr Richard Oliver retires by rotation as director at the annual general
meeting and, being eligible, offers himself for re-election.
Dr John Raff was appointed a director on 5 April 2000 as an addition to the existing directors, to hold office
until the next annual general meeting following his appointment. Dr Raff retires as director at the annual
general meeting and, being eligible, offers himself for re-election.
Mr Leon Gorr was appointed a director on 1 May 2000 as an addition to the existing directors, to hold
office until the next annual general meeting following his appointment. Mr Gorr retires as director at the
annual general meeting and, being eligible, offers himself for re-election.
Share options
Share Options Granted to Directors and Most Highly Remunerated Officers
Options over unissued ordinary shares of Starpharma Pooled Development Limited granted during or since
the end of the financial year to any of the directors or the 5 most highly remunerated officers of the
company and consolidated entity as part of their remuneration were as follows:
[15/08/00] Page
8
DIRECTORS’ REPORT (continued)
Directors
RJD Oliver, Chairman
PM Colman
L Gorr
R Dobinson
P Jenkins
JW Raff, Chief Executive Officer
Other Executives
BP Rogers, Company Secretary
Options Issued
90,000
70,000
70,000
70,000
70,000
150,000
Post Share Split
360,000
280,000
280,000
280,000
280,000
600,000
70,000
280,000
The options were granted under the Plan on 31 January 2000.
The exercise price of the shares under option was $3.75 each prior to the 4 for 1 subdivision effective 6
April 2000. Post subdivision the exercise price was reduced to $0.9375. The Exercise Period of the options
is not before 1 February 2002 and subject to the expiry date up to two years after the company lists on the
ASX. The expiry date of the options is 31 January 2005.
Shares Issued on the Exercise of Options
No shares in Starpharma Pooled Development Limited have been issued on the exercise of options.
Insurance of officers
During the financial year Starpharma Pooled Development Limited and officers of the company and related
bodies corporate arranged through Willis Australia Ltd for a Directors’ and Officers’ Liability insurance
policy with HIH Casualty and General Insurance Ltd to indemnify certain officers of the company and
related bodies corporate.
It is a condition of the policy that the company not publish details of the nature of the liabilities insured by
the policy or the amount of the premium paid.
The officers of the company covered by the insurance policy include the directors PM Colman, R
Dobinson, L Gorr, PJ Jenkins, RJD Oliver and JW Raff (Chief Executive Officer) and the Secretary, BP
Rogers.
Environmental regulations
The economic entity has complied with all applicable environmental regulations.
[15/08/00] Page
9
DIRECTORS’ REPORT (continued)
Auditor
PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Law.
This report is made in accordance with a resolution of the Directors:
R J D Oliver
Director
16 August 2000
Melbourne
[15/08/00] Page 10
CORPORATE GOVERNANCE STATEMENT
A description of the company’s main corporate governance practices is set out below.
The Board of Directors and its committees
The Board is responsible for the overall corporate governance of the company and its controlled entities,
including development of corporate strategies, establishing goals for management and monitoring progress
towards the achievement of these goals.
Composition of the Board
The constitution of the company requires that one third of directors (or if their number is not a multiple of
three then the number nearest to one third) retire at every annual general meeting and be eligible for re-
election. The minimum number of directors is three and the maximum is fifteen unless the company passes
a resolution varying that number.
The chairman is an independent non-executive director who is elected by the full Board.
At the date of signing the directors’ report the board consisted of five non-executive directors and one
executive director, Dr J W Raff. Details of the directors at the date of this statement are set out in the
directors’ report under the heading “Information on Directors”.
Independent professional advice
Directors have the right, in connection with their duties and responsibilities as directors, to seek
independent professional advice at the company’s expense. Prior approval of the Chairman is required, but
this will not be unreasonably withheld.
Administrative structure and internal control framework
Board meetings are held on a monthly basis, or more frequently if required. A detailed management report
is prepared by senior management and distributed with board papers prior to each meeting. The Chief
Executive Officer and the Company Secretary attend all Board meetings.
The Board reviews and approves the investment plans and annual budget for the company and oversees the
research & development plans of investee companies.
Ethical standards
The directors are committed to the principles underpinning best practice in corporate governance, with a
commitment to the highest standards of legislative compliance and financial and ethical behaviour.
Trading in company securities
The purchase and sale of company securities by directors, executives and employees is only permitted
during the thirty day period following the annual general meeting and the release of the half yearly and
annual financial results to the market, unless prior approval is given to each transaction by the Chairman.
[15/08/00] Page 11
CORPORATE GOVERNANCE STATEMENT (Continued)
Committees
The Board has established the following committees to assist in the discharge of its responsibilities:
Audit committee
The Audit committee consists of Mr Ross Dobinson (Chairman) and Mr Leon Gorr. The
committee meets at least twice a year, and has direct access to the company’s auditors. The charter
of the Audit Committee is:
•
•
•
•
to review and report to the Board on the annual report and financial statements, and to review
the adequacy of external audit arrangements, particularly the scope and quality of the audit.
to provide assurance to the Board that it is receiving adequate, up to date and reliable
information;
to assist the Board in reviewing the effectiveness of the organisation’s internal control
environment covering:
- effectiveness and efficiency of operations
- reliability of financial reporting
- compliance with applicable laws and regulations;
to assist the board in the development and monitoring of risk management, statutory
compliance and ethics programs.
Remuneration committee
The Remuneration committee advises the Board on remuneration policies and practices. This
committee consists of:
Mr Richard Oliver
Mr Ross Dobinson
The committee members have been chosen on the basis of their expertise and the composition of the
committees is reviewed annually by the Board.
[15/08/00] Page 12
STARPHARMA POOLED DEVELOPMENT LIMITED
PROFIT AND LOSS STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2000
Operating revenue
Operating profit/(loss) before abnormal items
Abnormal items before income tax
Operating profit/(loss) before income tax
Income tax attributable to operating profit/(loss)
Consolidated
Parent Entity
Notes
2000
$
1999
$
2000
$
1999
$
2
3
4
1,609,750
896,625
199,464
84,584
(1,772,014)
(1,169,167)
136,442
46,172
-
-
-
-
(1,772,014)
(1,169,167)
136,442
46,172
-
-
-
-
Operating profit/(loss) after income tax
(1,772,014)
(1,169,167)
136,442
46,172
Retained profits/(accumulated losses) at the beginning of
the financial year
(2,439,964)
(1,270,797)
59,111
12,939
Retained profits/(accumulated losses) at the end
of the financial year
12
(4,211,978)
(2,439,964)
195,553
59,111
The above profit and loss statements should be read in conjunction with the accompanying notes
[15/08/00] Page 13
STARPHARMA POOLED DEVELOPMENT LIMITED
BALANCE SHEETS
AS AT 30 JUNE 2000
Consolidated Parent Entity
Notes
2000
1999
2000
1999
$
$
$
$
5
6
7
8
14
9
10
11
11
12
7,225,730
2,712,983
5,431,807
1,013,540
698,237
225,976
10,340
99,617
3,251
3,895
67,804
95,637
8,149,943
2,822,940
5,502,862
1,113,072
116,832
22,352
-
-
-
-
7,000,006
4,000,006
116,832
22,352
7,000,006
4,000,006
8,266,775
2,845,292
12,502,868
5,113,078
159,854
266,367
27,843
53,967
39,427
18,889
-
-
199,281
285,256
27,843
53,967
199,281
285,256
27,843
53,967
8,067,494
2,560,036
12,475,025 5,059,111
12,279,472
5,000,000
12,279,472
5,000,000
-
-
-
-
(4,211,978)
(2,439,964)
195,553
59,111
ASSETS
CURRENT ASSETS
Cash
Receivables
Other
Total Current Assets
NON-CURRENT ASSETS
Property, plant and equipment
Investments
Total Non Current Assets
TOTAL ASSETS
LIABILITIES
CURRENT LIABILITIES
Accounts payable
Provisions
Total Current Liabilities
TOTAL LIABILITIES
NET ASSETS
SHAREHOLDERS' EQUITY
Share capital
Share premium reserve
Retained profits (Accumulated losses)
TOTAL SHAREHOLDERS’ EQUITY
8,067,494
2,560,036
12,475,025
5,059,111
The above balance sheets should be read in conjunction with the accompanying notes.
[15/08/00] Page 14
STARPHARMA POOLED DEVELOPMENT LIMITED
STATEMENTS OF CASH FLOWS
AS AT 30 JUNE 2000
Consolidated Parent Entity
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from trade and other debtors
$
-
Notes
2000
1999
$
55
Grant income
517,141
293,354
2000
$
-
-
1999
$
5
-
Payments to suppliers and employees
(3,437,974)
(1,815,409)
(61,313)
(80,082)
Interest received
263,902
165,426
200,108
92,887
Net cash flows from operating activities
17
(2,656,931)
(1,356,574)
138,795
12,810
CASH FLOWS FROM INVESTING ACTIVITIES
Payments to acquire subsidiaries
-
-
(3,000,000)
(2,100,005)
Payments for property, plant and equipment
(109,794)
(5,886)
-
-
Net cash flows from investing activities
(109,794)
(5,886)
(3,000,000)
(2,100,005)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares
Share issue transaction costs
Net cash flows from financing activities
7,812,500
(533,028)
7,279,472
-
-
-
7,812,500
(533,028)
7,279,472
-
-
-
NET INCREASE IN CASH HELD
4,512,747
(1,362,460)
4,418,267
(2,087,195)
Cash at the beginning of the financial year
2,712,983
4,075,443
1,013,540
3,100,735
CASH AT THE END OF THE FINANCIAL YEAR
7,225,730
2,712,983
5,431,807
1,013,540
The above statements of cash flows should be read in conjunction with the accompanying notes.
[15/08/00] Page 15
STARPHARMA POOLED DEVELOPMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2000
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This general purpose financial report has been prepared in accordance with Accounting Standards, other
authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group
Consensus Views and the Corporations Law.
It is prepared in accordance with the historical cost convention. The accounting policies adopted are
consistent with those of the previous year. Comparative information is reclassified where appropriate to
enhance comparability.
(a)
Principles of consolidation
The consolidated financial statements incorporate the assets and liabilities of all entities controlled by
Starpharma Pooled Development Limited (the ‘company’ or ‘parent entity’) as at 30 June 2000 and the
results of all controlled entities for the year then ended. Where control of an entity is obtained during the
financial year, its results are included in the consolidated profit and loss account from the date on which
control commences. Starpharma Pooled Development Limited and its controlled entities together are
referred to in this financial report as the consolidated entity. The effects of all transactions between entities
in the consolidated entity are eliminated in full.
(b)
Operating revenue
Operating revenue represents payments under the Federal Government R&D START grant, interest income
on short term deposits and sundry items.
(c)
Income tax
Tax effect accounting procedures are followed whereby the income tax expense in the profit and loss
account is matched with the accounting profit after allowing for permanent differences. The future tax
benefit relating to tax losses is not carried forward unless the benefit is virtually certain of realisation.
(d)
Acquisition of assets and their recoverable amounts
The cost method of accounting is used for all acquisitions regardless of whether shares or other assets are
acquired. Cost is determined as the fair value of the assets given up, shares issued or liabilities undertaken
at the date of acquisition plus costs incidental to the acquisition. The recoverable amount of an asset is the
net amount expected to be recovered through the net cash inflows arising from its continued use and
subsequent disposal. Where the carrying amount of a non-current asset is greater than its recoverable
amount, the asset is revalued to its recoverable amount. In assessing recoverable amounts the relevant cash
flows have not been discounted to their present value.
[15/08/00] Page 16
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2000
(e)
Depreciation and amortisation of property, plant and equipment
Depreciation is calculated on a straight line basis to write off the net cost or revalued amount of each item
of property, plant and equipment over its expected useful life to the consolidated entity. The expected
useful life of items of property, plant and equipment ranges from 4 to 8 years.
(f)
Employee entitlements
Employee entitlements have been calculated in accordance with AASB 1028, Accounting for Employee
Entitlements.
(g)
Superannuation
The consolidated entity contributes to employee superannuation on the basis of legal and contractual
requirements, with contributions being charged against income.
(h)
Research expenditure
Research expenditure is charged against income when incurred.
(i)
Revenue recognition
Grant funding is provided under the consolidated entity’s agreements with the Commonwealth of Australia.
Grant funding is equivalent to 50% of the consolidated entity’s spend on eligible research. Grant revenue is
recognised when eligible research expenditure has been incurred.
(j)
Trade and other creditors
These amounts represent liabilities for goods and services provided to the consolidated entity prior to the
end of the financial year which are unpaid. These amounts are unsecured and are paid in accordance with
supplier terms.
(k)
Cash
For the purpose of the statements of cash flows, cash includes deposits at call which are readily convertible
to cash on hand and are subject to an insignificant risk of changes in value.
(l)
Transaction costs arising in relation to the issue of equity
Transaction costs in relation to the future issue of equity are deferred and recognised directly as a reduction
against the proceeds of the future capital raising to which they relate.
[15/08/00] Page 17
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2000
(m)
Investments
Investments in controlled entities are accounted for in the consolidated financial statements in the manner
set out in Note 1(a).
(n)
Year 2000 software modification costs
Costs relating to the modification of computer software for year 2000 compatibility are charged as expenses
as incurred.
NOTE 2: OPERATING REVENUE
Operating revenue
Government grants
Interest revenue
Other
NOTE 3: OPERATING PROFIT/LOSS
(i) Operating expenses
Operating profit/loss for the year includes the
following items:
Depreciation (plant & equipment)
Employee entitlements
Research and development expense
Rental expense on operating leases
Management fees paid to subsidiary
(ii) Auditors' remuneration
Amounts received, or due and receivable, by the
auditor of the consolidated entity for:
Auditing and preparing the financial statements
Taxation services, other support
Consolidated Parent Entity
2000
$
1999
$
2000
$
1999
$
1,344,173
265,577
-
737,687
158,883
55
-
199,464
84,579
-
5
1,609,750
896,625
199,464
84,584
Consolidated Parent Entity
2000
$
1999
$
2000
$
1999
$
15,314
20,538
4,915
7,981
1,422,154
1,182,869
63,828
30,276
-
-
23,250
44,240
15,000
30,070
-
-
-
-
-
-
-
-
-
-
-
29,438
-
-
[15/08/00] Page 18
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2000
NOTE 4: INCOME TAX
The aggregate amount of income tax attributable to the financial year differs from the amount calculated on
the operating profit/(loss) as follows:
2000
$
1999
$
Current
Operating profit/(loss) before income tax
(1,772,014)
(1,169,167)
Income tax expense/(benefit) @ 36%
(637,925)
(420,900)
Tax effect of permanent differences:
2000
$
136,442
49,119
1999
$
46,172
16,622
-
-
-
-
-
-
-
1,911
2,991
(21,524)
276
-
1,310
-
-
-
1,041
9,467
2,991
-
(636,339)
(84,224)
(407,401)
(159,003)
-
-
49,119
-
(49,119)
720,563
566,404
-
-
-
-
-
-
-
-
-
Brokerage fees
Entertainment
Legal expenses
Other
Utilisation of group tax losses
Income tax expense/(benefit) adjusted for
permanent differences
Under/(over) provision arising in prior year
Less loss transferred to controlling entity
Future income tax benefits written off/not
brought to account
Income tax expense/(benefit) attributable to
operating profit/loss
Future income tax benefits
Potential future income tax benefits of $1,262,329 (1999: $777,928) attributable to tax losses carried
forward by controlled entities have not been brought to account in the accounts at balance date because the
directors do not believe it appropriate to regard the realisation of the future income tax benefits as virtually
certain. A deferred income tax liability attributable to timing differences of $225,075 has been netted off
against gross future tax benefits (valued at 30%) of $1,487,404 at 30 June 2000 on the basis that these
timing differences will reverse out in periods in which carried forward tax losses are available.
Similarly future income tax benefits attributable to timing differences of $nil (1999: $60,470) have not been
brought to account as the directors do not believe it appropriate to regard the realisation of such benefits as
virtually certain.
These benefits will only be obtained if:
i.
ii.
iii.
the consolidated entity derives future assessable income of a nature and of an amount sufficient to
enable the benefit from the deduction for the loss to be realised; or
the consolidated entity continues to comply with the conditions for deductibility imposed by the
law; and
no changes in tax legislation adversely affect the consolidated entity in realising the benefit from
the deductions for the loss.
NOTES TO THE FINANCIAL STATEMENTS (continued)
[15/08/00] Page 19
FOR THE YEAR ENDED 30 JUNE 2000
NOTE 4: INCOME TAX (continued)
Adjustment to deferred income tax balances
Legislation reducing the company tax rate from 36% to 34% in respect of the 2000-2001 income tax year
and then to 30% from the 2001-2002 income tax year was announced on 21 September 1999 and received
Royal Assent on 10 December 1999. As a consequence, future income tax benefits attributable to carried
forward losses, net of a provision for deferred income tax liability, have been revalued at 30% on the basis
that the consolidated entity is not expected to be in a tax payable position until the year ended 30 June 2002
at the earliest.
NOTE 5: CURRENT ASSETS - CASH
Cash at bank and on hand
Deposits at call
Consolidated Parent Entity
2000
1999
2000
1999
$
$
$
$
3,129,124
2,712,983
1,335,201
1,013,540
4,096,606
-
4,096,606
-
7,225,730
2,712,983
5,431,807
1,013,540
NOTE 6: CURRENT ASSETS - RECEIVABLES
Interest receivable
Other receivables
NOTE 7: CURRENT ASSETS – OTHER
Prepayments
Deferred (future) share issue costs
Consolidated Parent Entity
2000
1999
2000
1999
$
$
$
$
12,015
10,340
3,251
3,895
686,222
698,237
-
-
-
10,340
3,251
3,895
Consolidated Parent Entity
2000
1999
2000
1999
$
$
158,172
67,804
225,976
99,617
-
99,617
$
-
67,804
67,804
$
95,637
-
95,637
[15/08/00] Page 20
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2000
NOTE 8: NON-CURRENT ASSETS – PROPERTY, PLANT AND EQUIPMENT
Plant and equipment (at cost)
Less: Accumulated depreciation
Consolidated Parent Entity
2000
1999
2000
1999
$
$
140,329
(23,497)
116,832
30,535
(8,183)
22,352
$
-
-
-
$
-
-
-
NOTE 9: CURRENT LIABILITIES – ACCOUNTS PAYABLE
Trade creditors
Prepaid research grant
Consolidated Parent Entity
2000
$
159,854
-
1999
$
125,557
140,810
2000
1999
$
$
27,843
53,967
-
-
159,854
266,367
27,843
53,967
NOTE 10: CURRENT LIABILITIES – PROVISIONS
Consolidated Parent Entity
2000
$
39,427
1999
$
18,889
2000
$
-
1999
$
-
Employee entitlements
NOTE 11: SHAREHOLDERS EQUITY
(i) Share Capital
Consolidated Parent Entity
(a) Paid-up capital
Ordinary shares - fully paid
62,500,000
12,500,000
12,279,472
5,000,000
2000
Shares
1999
Shares
2000
$
1999
$
[15/08/00] Page 21
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2000
(b) Movements in ordinary share capital of the company during the past two years were as follows:
Date
Details
1 July 1998
Opening balance
1 July 1998
Transfer from share premium account
1 July 1999
Opening balance
Rights issue of 3,125,000 partly paid
ordinary shares at $0.01 each.
Final call of $2.49 per share on 3,125,000
ordinary shares.
Issue costs in relation to the rights issue
and final call.
$
2,500,000
2,500,000
5,000,000
31,250
7,781,250
(533,028)
12,279,472
(ii) Share Premium Account
Premium on shares issued
- 5,000 x $0.80
Promoter shares issued
- 7,500,000 x $0.20
Transfer to share capital
Balance at end of the year
Consolidated
Parent Entity
2000
$
1999
$
2000
$
1999
$
-
-
-
-
4,000,000
(1,500,000)
(2,500,000)
-
-
-
-
-
4,000,000
(1,500,000)
(2,500,000)
-
In accordance with section 1446 of the Corporations Law, the amounts standing to the credit of the share
premium account on 1 July 1998 became part of share capital. This was a consequence of the abolition of
par values of shares which took effect on 1 July 1998. As all of the share premium account related to
ordinary shares, the balance was allocated to ordinary share capital on that date.
[15/08/00] Page 22
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2000
NOTE 12: RETAINED PROFITS/(ACCUMULATED LOSSES)
Retained profits/accumulated losses) at
beginning of the year
Net profit/(loss) for the year
Retained profits/(accumulated losses) at end
of the year
Consolidated Parent Entity
2000
$
1999
$
2000
1999
$
$
(2,439,964)
(1,772,014)
(1,270,797)
(1,169,167)
59,111
136,442
12,939
46,172
(4,211,978)
(2,439,964)
195,553
59,111
NOTE 13: COMMITMENTS FOR EXPENDITURE
Lease commitments
Commitments in relation to leases contracted for at
the reporting date but not recognised as liabilities,
payable:
Consolidated Parent Entity
2000
1999
$
$
2000
$
74,092
40,853
-
114,945
21,416
5,182
-
26,598
114,945
26,598
-
-
-
-
-
1999
$
-
-
-
-
-
Not later than one year
Later than one year and not later than five
years
Later than five years
Representing
Cancellable operating leases
Research contract commitments
Biomolecular Research Institute (BRI)
The controlled entity Starpharma Limited has licensed its core technology from the Biomolecular Research
Institute (BRI). Starpharma Limited has also entered into a retainer agreement with BRI under which BRI
will provide ongoing scientific research expertise to Starpharma Limited in return for a contract fee of
$3,000,000 over a 3 year period which commenced 1 April 1997 and which would have expired on 31
March 2000 but for an agreement to extend its operation to 30 June 2000.
[15/08/00] Page 23
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2000
NOTE 13: COMMITMENTS FOR EXPENDITURE (Continued)
Viridae Clinical Sciences
On 28 June 2000 the controlled entity, Starpharma Limited entered into an agreement with Viridae Clinical
Sciences Inc, of Vancouver Canada to provide funding of US$300,000 per annum to be spent on specific
activities related to the vaginal microbicide research project. For disclosure purposes, this commitment has
been valued using the exchange rate prevailing at 30 June 2000.
Commitments under the retainer agreement in existence at the reporting date but not recognised as
liabilities, are payable as follows:
Consolidated Parent Entity
2000
$
1999
$
508,474
1,019,857
508,474
-
-
-
1,016,948
1,019,857
2000
$
-
-
-
-
1999
$
-
-
-
-
Not later than one year
Later than one year and not later than five
years
Later than five years
NOTE 14: CONTROLLED ENTITIES
Wholly-owned Group
The consolidated entity consists of Starpharma Pooled Development Limited and its controlled entities,
Starpharma Limited, Angiostar Limited and Viralstar Limited. Ownership interest in these controlled
entities is set out below.
Investments in Controlled Entities
Country of
Incorporation
Class of Shares
Equity Holding
Starpharma Limited
Australia
Ordinary
Angiostar Limited
Viralstar Limited
Australia
Ordinary
Australia
Ordinary
100%
100%
100%
Cost of Parent
Entity's
Investment
2,400,001
2,300,005
2,300,000
7,000,006
[15/08/00] Page 24
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2000
NOTE 15: REMUNERATION OF DIRECTORS
Directors of Entities Directors of
in the Economic Entity Parent Entity
1999
2000
1999
$
2000
$
$
$
Income paid or payable, or otherwise made
available, to directors of entities in the
consolidated entity in connection with the
management of affairs of the parent entity or
its controlled entities
300,006
84,263
300,006
67,410
The numbers of parent entity directors whose total income from the parent entity or related parties was
within the specified bands are as follows:
$
10,000
60,000
160,000
200,000
-
-
-
-
$
19,999
69,999
169,000
219,999
2000
1999
5
-
-
1
4
-
-
-
NOTE 16: REMUNERATION OF EXECUTIVES
Executive Officers of the
Consolidated Entity
Executive Officers of
the Parent Entity
2000
$
1999
$
2000
$
1999
$
Remuneration received, or due and receivable
from entities in the consolidated entity and
related parties by Australian based executive
officers (including directors) whose
remuneration was at least $100,000:
Executive officers of the parent entity
Executive officers of other entities in the
consolidated entity
215,744
154,599
215,744
154,599
-
-
-
-
[15/08/00] Page 25
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2000
NOTE 16: REMUNERATION OF EXECUTIVES (Continued)
The numbers of Australian based executive officers (including directors) whose remuneration from entities
in the consolidated entity and related parties was within the specified bands are as follows:
$
210,000
$
219,999
-
Executive Officers of the
Consolidated Entity
Executive Officers of
the Parent Entity
2000
$
1
1999
$
1
2000
$
1
1999
$
1
Comparative executive officers remuneration is disclosed notwithstanding that the parent entity was not a
disclosing entity in the previous year.
Options are granted to executive officers under the Starpharma Pooled Development Limited Executive and
Employee Share Option Plan, details of which are set out in Note 22.
A summary of options granted and exercised by Australian based executive officers (with income of at least
$100,000) during the year ended 30 June 2000 is set out below. No options have been granted in previous
years.
Granted
Exercised Outstanding
Australian based executive officers of the parent entity
600,000*
-
600,000
* Initially 150,000 share options were granted. Following the 4 for 1 share subdivision on 6 April 2000, the
number of options issued was increased on a similar basis.
The amounts disclosed as remuneration of executive officers in this note include the assessed fair value of
the options at the date they were granted to executive officers during the year ended 30 June 2000. On issue
of the options, the exercise price was equivalent to the share price on the date of issue. After taking this
into account and the earliest date on which the options may be exercised, namely 1 February 2002, the fair
value of the options at the date of issue has been assessed as $nil.
[15/08/00] Page 26
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2000
NOTE 17: CASH FLOW INFORMATION
Reconciliation of net cash flows from operating
activities to operating profit/(loss) after income tax
Consolidated Parent Entity
2000
$
2000
$
1999
$
1999
$
Operating profit/(loss) after income tax:
(1,772,014)
(1,169,167)
136,442
46,172
Depreciation and amortisation:
15,314
4,915
-
-
Change in operating assets and liabilities, net of
effects of acquisitions and disposals of entities
(Increase) decrease in receivables and other
assets
Increase (decrease) in trade creditors
(814,256)
137,753
28,477
(87,329)
(106,513)
(338,056)
(26,124)
53,967
Increase (decrease) in employee provisions
20,538
7,981
-
-
Net cash inflows/(outflows) from operating
activities
(2,656,931)
(1,356,574)
138,795
12,810
NOTE 18:
EVENTS SUBSEQUENT TO BALANCE DATE
On 21 July 2000, the controlled entity, Starpharma Limited entered into an agreement with the
Biomolecular Research Institute to provide staff, services and facilities for the period 1 July 2000 to 31
December 2000, at an estimated cost of $245,644, under the same conditions as the previous Retainer
Agreement, but with no commitment to meet a minimum amount.
On 10 August 2000, members were advised of the directors’ decision and intention to list the parent entity
on the Australian Stock Exchange (ASX). The company is currently preparing a prospectus to raise further
capital upon listing in late September or early October 2000.
As part of the process of listing on the ASX and in the interest of maintaining an orderly market, trading in
the company’s shares on the Austock Exempt Market will be suspended prior to the lodgement of the
prospectus with the Australian Securities and Investments Commission. Prospectus lodgement date is
expected to be Thursday 17 August 2000.
NOTE 19: RELATED PARTIES
Directors
The names of persons who were directors of Starpharma Pooled Development Limited at any time during
the financial year are as follows: P M Colman, R Dobinson, L Gorr, P J Jenkins, R J D Oliver and J W
Raff. All of these persons were also directors during the year ended 30 June 1999, except for J W Raff who
was appointed as an alternate for P M Colman on 17 June 1999 and appointed as a director on 5 April 2000,
and L Gorr who was appointed as a director on 1 May 2000.
Details of directors’ remuneration are set out in Note 15.
[15/08/00] Page 27
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2000
NOTE 19: RELATED PARTIES (continued)
Transactions of Directors and Director-related entities concerning shares or share options
Aggregate numbers of shares of Starpharma Pooled Development Limited issued to and held directly,
indirectly or beneficially by directors of the company or the economic entity or their director-related entities
at balance date:
Acquisitions
Ordinary shares
Disposals
Ordinary shares
Currently held
Ordinary shares
2000
Number
1999
Number
8,545,984*
8,197,840*
-
-
28,234,581* 5,851,235
*Total number of shares following a 4 for 1 share split effective from 6 April 2000.
Other transactions with Directors and Director-related Entities
A director, Dr P M Colman is the Managing Director of The Biomolecular Research Institute Limited,
which provides contract research and research management services to the consolidated entity. All such
dealings with the consolidated entity are in the ordinary course of business and on normal terms and
conditions.
Two directors, Mr R Dobinson and Mr L Gorr are directors of the company, Technology Structuring
Limited, which renders consulting services to the consolidated entity. All such dealings with the
consolidated entity are in the ordinary course of business and on normal terms and conditions.
A director, Mr L Gorr is a partner of Herbert Geer & Rundle, who have provided legal services to the
consolidated entity. All such dealings with the consolidated entity are in the ordinary course of business
and on normal terms and conditions.
Aggregate amounts of each of the above types of transactions with directors and their director-related
entities are:
Contract research and research management
services
Consulting services
Legal fees
Consolidated
Parent Entity
2000
$
1,090,039
167,562
164,501
1999
$
892,300
86,000
73,022
2000
$
1999
$
-
131,562
150,085
-
50,000
50,037
[15/08/00] Page 28
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2000
NOTE 19: RELATED PARTIES (continued)
Apart from the above no director has entered into a material contract with the consolidated entity since the
end of the previous financial year and there were no material contracts involving directors’ interests
subsisting at year end.
NOTE 20: FINANCIAL INSTRUMENTS
(a) Credit risk exposures
The credit risk on the financial assets (limited to interest receivable) of the company and consolidated entity
which have been recognised on the balance sheet is generally the carrying amount of those financial assets
net of any provisions where raised.
(b) Interest rate risk
The company’s and consolidated entity’s exposure to interest rate risk is limited to that exposure which
arises from the holding of cash balances and bills of exchange. Interest is earned on cash balances at the
prevailing floating rate, which at 30 June 2000 was 4.5% and on bills of exchange at 6.05%
(c) Reconciliation of net financial assets to net assets
The company’s and the consolidated entity’s balance sheet reflect net assets. All balances stated in these
balance sheets are, respectively, considered to form part of the company’s and the consolidated entity’s net
financial assets and liabilities with the exception of property, plant and equipment assets, other receivables,
employee entitlement liabilities and investments in subsidiary company (where included therein).
(d) Carrying amounts and net fair values of financial asset and liabilities
The carrying value of financial assets and liabilities as stated in the company’s and consolidated entity’s
balance sheets is equivalent to the net fair value of those financial assets and liabilities.
[15/08/00] Page 29
NOTES TO THE FINANCIAL STATEMENTS (continued)
FOR THE YEAR ENDED 30 JUNE 2000
NOTE 21: SEGMENT INFORMATION
The consolidated entity operates in the pharmaceutical research and development industry within Australia.
NOTE 22: EMPLOYEE ENTITLEMENTS
(i) Employee entitlement liabilities
Provision for employee entitlements current (Note
10)
39,427
18,889
-
-
Consolidated Parent Entity
2000
$
1999
$
2000
$
1999
$
(ii) Starpharma Pooled Development Limited Executive and Employee Option Plan
The establishment of the Starpharma Pooled Development Limited Executive and Employee Option Plan
was approved by members at the annual general meeting held on 25 November 1999.
Under the plan, directors of the parent entity may from time to time determine that an eligible person is
entitled to participate in the plan and will determine the number of employee options which may be granted
to that person or any associate of that person. In making these determinations the directors are required to
have regard to the person’s
−
−
−
length of service with the consolidated entity;
record of employment with the consolidated entity;
potential contribution to the future growth of the consolidated entity; and
to any other matters which tend to warrant the person’s participation in the plan.
Under the plan, eligible persons include employees of the consolidated entity, including directors and
consultants acting in management roles.
A total of 590,000 options were issued under the plan to 7 employees. Subsequent to the 4 for 1 share
subdivision on 6 April 2000, the number of options on issue was adjusted on a consistent basis, resulting in
2,360,000 options on issue.
The options were issued for no consideration and are capable of being exercised no earlier than 1 February
2002. The amount which may be received upon the exercising of these options post 1 February 2002 will
be recognised as issued capital at the date of issue of the underlying shares. Following the share
subdivision, the exercise price of the options was reduced from $3.75 to $0.9375. At 30 June 2000 the total
number of unissued shares under these options is 2,360,000. The market selling price per ordinary share at
30 June 2000 was $1.00.
[15/08/00] Page 30
STARPHARMA POOLED DEVELOPMENT LIMITED
AND CONTROLLED ENTITIES
DIRECTORS’ DECLARATION
The directors declare that the financial statements and notes set out on pages 14 to 31:
(a) Comply with Accounting Standards, the Corporations Regulations and other mandatory professional
reporting requirements; and
(b) Give a true and fair view of the Company’s and consolidated entity’s financial position as at 30 June
2000 and of their performance, as represented by the results of their operation and their cash flows, for
the financial year ended on that date.
In the directors opinion:
(a) the financial statements and notes are in accordance with the Corporations Law; and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable.
This statement is made in accordance with a resolution of the directors.
R J D Oliver
Director
16 August 2000
Melbourne
[15/08/00] Page 31