Santander Bank Polska
Annual Report 2014

Plain-text annual report

ANNUAL REPORT 2 014 HIGHLIGHTS CHAIRMAN’S LETTER CEO’S REPORT CORPORATE AND SOCIAL RESPONSIBILITY DIRECTORS REPORT OPERATING & FINANCIAL REVIEW REMUNERATION REPORT AUDITOR’S INDEPENDENCE DECLARATION CORPORATE GOVERNANCE STATEMENT ANNUAL FINANCIAL REPORT INDEPENDENT AUDIT REPORT TO THE MEMBERS SHAREHOLDER INFORMATION INTELLECTUAL PROPERTY REPORT CORPORATE DIRECTORY 01 02 03 12 13 15 18 27 28 33 66 68 70 71 ii Starpharma Holdings Limited Annual Report Highlights CORPORATE R&D tax incentive Starpharma received a total of $4.7 million under the R&D Tax Incentive Program, relating to eligible R&D activities from the 2013 financial year. Starpharma also received approval for certain overseas R&D expenditure for its DEP™ docetaxel program to be eligible for the R&D tax incentive, amounting to an estimated $2 million in cash over 3 years. New Chairman Rob Thomas AM succeeded retiring Chairman, Peter Bartels AO under the Board’s ongoing succession planning and renewal strategy. Mr Thomas has a strong background in financial services and is a non-executive director of a number of listed healthcare companies. VIVAGEL® VivaGel® condom certification in Australia Consumers in Australia are expected to be the first in the world to buy the VivaGel® condom under Ansell’s LifeStyles® Dual Protect™ brand. The condoms to be marketed by Ansell will also carry the VivaGel® brand and Starpharma will receive royalties based on sales. VivaGel® condom approved in Japan Japan’s leading condom company, Okamoto Industries, is preparing for launch of the VivaGel® condom in Japan after regulatory certification was achieved in that country. Japan is the world’s second largest condom market, and Starpharma’s partner, Okamoto holds approximately 60% market share. VivaGel® phase 3 clinical trial for prevention of recurrent BV Starpharma has commenced phase 3 clinical trials of VivaGel® for the prevention of recurrent bacterial vaginosis (BV). The protocol design received binding approval from the US Food and Drug Administration (FDA) under a Special Protocol Assessment (SPA), which reduces regulatory risk for the clinical program. Regulatory submissions in preparation for VivaGel® BV symptomatic relief product With high patient demand for VivaGel® for symptomatic relief of BV, Starpharma is engaged in commercial partnering discussions for this application in countries outside of the US. In parallel, regulatory documentation is being prepared for a number of markets using current clinical data with submissions planned in CY2014. DRUG DELIVERY Dendrimer-enhanced docetaxel commences human clinical trial DEP™ docetaxel phase 1 clinical trial commenced in January involving 25-30 Australian patients at centres in Melbourne and Brisbane. Results so far for DEP™ docetaxel show no evidence of neutropenia, a common dose-limiting side-effect of Taxotere®. Expanded agreement with AstraZeneca Global pharmaceutical company, AstraZeneca, entered into a second, expanded agreement applying Starpharma’s proprietary DEP™ technology to a cancer drug from AstraZeneca’s pipeline. Dendrimer-enhanced version of oxaliplatin demonstrates tumour-inhibiting properties A preclinical study of DEP™ oxaliplatin showed improved tumour-inhibiting efficacy and reduced overall toxicity when compared to standard oxaliplatin, a leading bowel cancer drug. Receipt of Australian Research Council (ARC) Linkage grant Starpharma received a $0.5 million ARC linkage grant in partnership with Monash University to further advance its dendrimer technology in targeted drug delivery. Dendrimer technology awarded Cancer Australia grant A research program in collaboration with Monash Institute of Pharmaceutical Sciences received funding to utilise Starpharma’s dendrimers in the treatment of lung cancer. AGROCHEMICAL Further partnerships for Priostar® in agrochemicals Additional agrochemical partnerships were signed with major industry players: US based Gowan and European based Isagro. Through these partnerships, the companies are utilising Starpharma’s Priostar® dendrimers seeking to enhance the performance of key crop protection formulations. These new partnerships build on Starpharma’s broad portfolio of agrochemical collaborations. Starpharma has signed agreements with many companies in the agrochemical sector, including with the majority of the top 10 largest companies by sales. Dendrimer-enhanced agrochemicals continue to demonstrate strong results In field studies this year, Starpharma’s dendrimer- enhanced glyphosate was found to be more effective on hard-to- control weeds than glyphosate alone. The key benefits seen were a more rapid effect, and better overall effectiveness. Starpharma Holdings Limited Annual Report 1 Starpharma Holdings Limited Annual Report 2014 01 Dear Shareholders, On behalf of the board and management of Starpharma I’m pleased to present the annual report for the financial year 2014. Firstly I’d like to sincerely thank Peter Bartels for his exceptional contribution to Starpharma over the past ten years and acknowledge his role as Chairman in guiding the company from an early stage development company to a business with multiple products nearing commercial launch in the pharmaceutical, sexual health and agrochemical sectors. Starpharma is a leading science-based innovator in Australia and the recent certifications of its VivaGel® condom in the Australian and Japanese markets is a strong endorsement of both this science and the company’s ability to commercialise its technology. The VivaGel® condom is now readying for launch in both these markets, in Australia with Ansell, and in Japan with Okamoto Industries. Both these companies have leading positions in condom sales in their respective territories. For Starpharma, this milestone cannot be understated as it represents not only the first commercial product launch from the VivaGel® portfolio, but a world-first product in the battle against sexually transmitted infections. Starpharma will receive royalty payments on the sales of condoms under these agreements and with launch activities well underway, we will soon see the product on retail shelves. During the year Starpharma commenced an important clinical trial of the innovative and improved version of the leading cancer drug docetaxel, DEP™ docetaxel, in 25-30 patients with solid tumours. This phase 1 clinical trial is being undertaken exclusively in Australia; with Australian cancer patients gaining access to this potentially enhanced cancer therapy. The Federal Government’s R&D tax incentive scheme assists Starpharma with the development of these innovative products, with more than $10 million in tax credits received by Starpharma over the last two years. Preclinical studies for Starpharma’s DEP™ dendrimer technology with known, effective chemotherapies have demonstrated improved efficacy and substantially reduced side effects compared with the original drugs on their own and if these findings are confirmed in human trials, then this is very good news for the patients who will potentially benefit. Starpharma has also recently commenced two phase 3 clinical trials of VivaGel® to prevent the recurrence of bacterial vaginosis (BV), an infection that affects up to a third of the US female adult population. Each trial will involve approximately 600 women across multiple international clinical trial sites. Starpharma is very pleased to have gained approval under a Special Protocol Assessment (SPA) from the US Food and Drug Administration (FDA), which significantly reduces the regulatory risk associated with the clinical development program. Starpharma’s business strategy of advancing lead products internally, in parallel with an active partnering program, allows the company to progress the commercialisation of multiple products concurrently and has resulted in Starpharma owning a deep and robust portfolio of products at various stages of development. This portfolio includes multiple clinical stage products, such as VivaGel® for the prevention of recurrent BV and DEP™ docetaxel, along with regulatory submissions of VivaGel® for symptomatic relief of BV in countries outside of the US, and the previously discussed VivaGel® condom. Starpharma’s partners include a number of leading international companies in pharmaceuticals and agrochemicals. This strategy has also allowed Starpharma to progress the portfolio more quickly while maintaining a strong cash position of $24 million, with a net cash burn of $10 million for the financial year. I’d like to thank shareholders for your ongoing support. We enter the new financial year with a strong conviction that solid progress and the expected receipt of the first VivaGel® condom royalties will impact positively throughout the year. Finally, I would like to thank my fellow board members, including Chief Executive Officer, Dr Jackie Fairley, the executive management team and all employees. I look forward to my first full year as Chairman at an exciting time for Starpharma and its shareholders. Yours sincerely, ! Rob Thomas AM Starpharma Chairman 02 Starpharma Holdings Limited Annual Report Chairman’s LetterMr Rob Thomas AM, Chairman>> “ We look forward to the launch in Australia of the LifeStyles® Dual Protect™ condom with VivaGel®, expected in the next few months.” Chris Kalaitzis, Ansell Vice President, Asia Pacific Region – Sexual Wellness Division I am pleased to provide this report detailing Starpharma’s activities during the 2014 financial year and our plans for the year ahead. It has been an important year for Starpharma with progress across all three programs: VivaGel®, drug delivery and agrochemicals. VivaGel® portfolio A number of major milestones were reached across the VivaGel® portfolio during the year, with certification for VivaGel® condoms achieved in Australia with Ansell, and in Japan with Okamoto, as Starpharma’s partners. The subsequent launch of the VivaGel® condom is expected in both markets in the coming months representing the first VivaGel® product launch and, through royalties, an ongoing revenue stream for Starpharma. Important clinical and regulatory developments have also been achieved for the VivaGel® bacterial vaginosis (BV) stand-alone product. VivaGel® for bacterial vaginosis (BV) Symptomatic relief Starpharma is pursuing regulatory approval and is in active discussions with commercial partners for the use of VivaGel® for the symptomatic relief of BV in various markets outside the US. This follows strong efficacy data from recent clinical studies, regulatory input and high levels of patient acceptability for a product based on claims of symptomatic relief. High levels of patient demand and commercial interest underpin this strategy, which will see regulatory documentation for this product submitted in the second half of calendar year 2014. Starpharma Holdings Limited Annual Report 2014 03 The LifeStyles® Dual Protect™ condom with VivaGel® received TGA conformity assessment certification in July 2014 and will be launched following inclusion in the Australian Register of Therapeutic Goods (ARTG) Dr Jackie Fairley, Chief Executive OfficerCEO’s ReportChairman’s Letter CEO’s Report >> “ Receiving agreement on the SPA is an important and very positive development as it effectively eliminates the US regulatory risk associated with clinical development, by specifying upfront the FDA’s agreed trial design. This significantly reduces overall development risk for VivaGel ®. SPA agreement from the FDA is protected by US law and gives Starpharma certainty and confidence that the studies will support a regulatory submission for the approval of VivaGel ® for the prevention of recurrent BV in the US.” Dr Jackie Fairley, Cheif Executive Officer, Starpharma 04 Starpharma Holdings Limited Annual Report VivaGel® for bacterial vaginosis (BV) continuedPrevention of recurrenceStarpharma has recently commenced two pivotal phase 3 clinical trials of VivaGel® for the prevention of recurrent bacterial vaginosis (BV). In July 2014, Starpharma received a Special Protocol Assessment (SPA) designation for this trial program. The SPA agreement is a binding declaration received from the US Food and Drug Administration (FDA) that stipulates that the phase 3 clinical study design, endpoints, statistical analyses and other aspects of the planned studies are acceptable to support regulatory approval of the product. A SPA is rare and difficult to achieve with only a handful of companies in Australia achieving this milestone. The SPA significantly reduces development risk by effectively removing US FDA regulatory risk associated with the phase 3 studies. Approximately 600 women will be recruited to each trial where the primary efficacy endpoint is recurrence of BV over a 16 week treatment period. The double-blinded, randomised trial will compare VivaGel® with a placebo gel. Quintiles, a leading global clinical research organisation, has been appointed to assist Starpharma in the conduct of the clinical trials. Trial sites include locations in North America, Europe and Asia.There are currently no approved products for the prevention of recurrent BV, which affects approximately 1 in 3 women and recurs in approximately 50 per cent of women within 12 months. CEO’s Report >> “ Our partnership with Starpharma is a great example of two highly innovative companies working together to bring to market a ground- breaking new sexual health product. New product development is central to Ansell’s business strategy and this highly innovative product is exciting for both companies.” Chris Kalaitzis, Ansell Vice President, Asia Pacific Region – Sexual Wellness Division The VivaGel® condom Starpharma received Conformity Assessment Certification for the VivaGel® condom by the Australian Therapeutic Goods Administration (TGA), a key regulatory milestone for the VivaGel®. Starpharma’s marketing partner, Ansell, plans to launch the VivaGel® condom under its brand, LifeStyles® Dual Protect™, in the coming months, following inclusion on the Australian Register of Therapeutic Goods (ARTG). The TGA certification is similar to CE certification of devices (CE Mark) in Europe. The TGA certification will also support certain regulatory processes in other markets. VivaGel® is a novel antimicrobial agent which has been shown in laboratory studies to inactivate up to 99.9 percent of HIV, HPV and HSV-2. Its application to condoms has resulted in the first product of its kind, which combines a physical barrier with an agent intended to help further reduce the risk of exposure to the abovementioned sexually transmitted viruses. The VivaGel® condom is a world-first product with global relevance and based on innovative Australian technology. Under the licence agreement with Ansell, LifeStyles® Dual Protect™ condoms will carry the VivaGel® brand, with Ansell having exclusive Australian marketing rights for the product and being responsible for producing the VivaGel® condoms. Regulatory certification of VivaGel® condoms marks a major milestone for Starpharma and our partner, Ansell, one of the world’s leading condom companies and healthcare innovators. It is particularly pleasing that two Australian, home-grown companies are pioneering, developing and commercialising an Australian scientific innovation. The licensing agreement with Ansell also provides marketing rights to Ansell for the VivaGel® condom in countries outside of Japan. In March, regulatory certification of VivaGel® condoms in Japan was achieved by the leading Japanese condom company, Okamoto. This collaboration is an important partnership for Starpharma, with Japan being the second largest condom market in the world, and Okamoto holding approximately 60 per cent share of that market. Okamoto’s senior managing director, Mr Seiji Takeuchi, recently stated publicly that condoms with functional coatings and gels represent the next wave of innovation in the Japanese condom market, following a decade-long focus on condom thinness. >> “ We are very pleased to be in a partnership with Starpharma for this product… condoms with functional coatings and gels represent the next wave of innovations in the Japanese condom market…” Mr Seiji Takeuchi, Okamoto’s Senior Managing Director Starpharma Holdings Limited Annual Report 2014 05 >> Results so far for DEP™ docetaxel show no evidence of neutropenia (a low white blood cell count), which is one of the most important dose- limiting side effects of standard formulations of docetaxel. DEP™ oxaliplatin and other DEP™ programsIn preclinical studies of DEP™ oxaliplatin, improved tumour-inhibiting efficacy and reduced overall toxicity was observed when compared to the blockbuster cancer drug, oxaliplatin. Oxaliplatin is sold by Sanofi under the brand name Eloxatin®. A colon cancer model was used in the study, which found DEP™ oxaliplatin also substantially reduced neutropenia.The results of both preclinical drug delivery studies indicate that Starpharma’s DEP™ technology has the great potential to deliver better efficacy compared to these common chemotherapy drugs alone, in addition to reduced neutropenia and other common side effects. Starpharma is also working on a number of other internal DEP™ programs focussed on improving leading therapeutics.Partnered pharmaceutical programsIn April, Starpharma announced the signing of a second, expanded agreement with AstraZeneca, which will see the application of the DEP™ drug delivery technology to a cancer drug from AstraZeneca’s pipeline. This additional work builds on the existing partnership agreement involving Starpharma’s delivery technology that began in September 2012. Under the agreement, AstraZeneca will provide funding for a cancer research program to be conducted jointly with Starpharma. Starpharma also continues to work on a number of confidential partnered DEP™ programs.Drug Delivery PortfolioDEP™ docetaxel programStarpharma’s drug delivery program reached a major milestone in January this year, with the commencement of a phase 1 human clinical trial for DEP™ docetaxel. The first group of patients have received one or more cycles of treatment at escalating doses, and no neutropenia has been observed thus far. The trial is being conducted through Nucleus Network at Melbourne’s AMREP/Alfred Hospital facility, Austin Health/Olivia Newton-John Cancer & Wellness Centre and Royal Brisbane & Women’s Hospital. The clinical trial involves 25-30 patients with solid tumours. The primary objective of the study is to establish the maximum tolerated dose and dose limiting toxicities of DEP™ docetaxel, which is a new formulation of the widely marketed chemotherapeutic, Taxotere®. In its existing formulation, Taxotere® is known to cause a number of toxic side effects in patients, including neutropenia (reduced white blood cell count) and in some cases, life-threatening anaphylaxis.In preclinical studies of Starpharma’s DEP™ docetaxel formulation neutropenia was not observed, whereas animals treated with Taxotere® exhibited severe neutropenia. In humans, neutropenia is a life threatening and dose-limiting side effect that occurs in more than 75 per cent of patients treated with docetaxel (Taxotere®). Early clinical trial results are promising as no neutropenia has been observed for DEP™ docetaxel to date.06 Starpharma Holdings Limited Annual ReportCEO’s Report>> “As a leading discovery-led company this alliance represents an exciting collaboration with an Australian-based company to combine the oncology treatments of tomorrow that AstraZeneca is developing using innovative delivery mechanisms.” Mark Fladrich, Managing Director, AstraZeneca Australia Starpharma Holdings Limited Annual Report 2014 07CEO’s Report Agrochemicals and crop protection A number of positive developments in the agrochemical portfolio have seen Starpharma move closer to commercialisation using the company’s dendrimer platform technology. US-based agrochemical producer, Gowan Company LLC, signed a partnership with Starpharma for the evaluation of Starpharma’s Priostar® dendrimer technology in certain high value crop protection formulations. Gowan has global agrochemical sales worth more than US$300 million annually. A deal with European company, Isagro, was also announced in the reporting period under which Isagro tests Starpharma’s Priostar® dendrimer technology with a number of its fungicide formulations. Isagro is an agrochemical company with global sales of approximately €150 million and 620 employees. More widely, Starpharma has signed agreements with many companies in the agrochemical sector, including the majority of the top 10 largest companies by sales. Priostar® dendrimers provide a number of benefits to agrochemical companies and end-user growers. These benefits can include: > > Improved product efficacy; More concentrated formulations to reduce supply chain costs and for greater ease of handling; > Reduction in solvent loading; and > Improved bioavailability through increased adhesion, to reduce losses due to rain run-off, and the need for multiple applications. Further field trials have also been completed demonstrating the effectiveness of Starpharma’s dendrimer technology when applied to glyphosate for the treatment of hard to control weeds. Results from these trials show that Starpharma’s Priostar® glyphosate formulations are more effective on a number of hard to control weed species than marketed glyphosate alone. Glyphosate is an off-patent product currently sold under a number of brands, including Roundup®, and has global sales of approximately US$5 billion annually, in a US$44 billion agrochemical market. >> “ Priostar® offers a unique opportunity to develop value-added, IP-protected agrochemical formulations without the expense and risk associated with registering new crop protection actives.” Dr Paul Barrett, VP Business Development, Starpharma 08 Starpharma Holdings Limited Annual ReportCEO’s Report >> “ At Gowan we are proud of our history of providing a complete offering to farmers and we are very pleased to be able to include Starpharma’s innovative technology for potential improvements to our crop protection formulations.” Sandra Alcaraz, Disruptive Technologies Manager, Gowan Company LLC Starpharma Holdings Limited Annual Report 2014 09 CEO’s Report Overview of financial results 3 Year Financial Summary Net cash outflows from operations remained comparable to the prior year at $9.8 million for the year ended 30 June 2014, with cash reserves at the end of the year of $24.0 million. Starpharma received the total anticipated $4.7 million of R&D tax incentive relating to FY13 expenditures. The R&D tax refund relates to R&D expenditure, and allows Starpharma to confidently advance development of its proprietary products including its development of VivaGel® and DEP™ docetaxel. In addition, Starpharma received a $2.3 million R&D tax incentive ruling for overseas R&D activities related to the DEP™ docetaxel program. Starpharma reported a net loss of $14.6 million, an increase from the prior year loss of $5.2 million. The variance in the net loss compared to prior year is a result of the clinical programs in progress and also a result of the prior year loss reflecting $4.1 million of R&D tax incentives relating to the previous 2012 financial year. Revenue and grant income Interest revenue Total revenue and income 2014 $M 2013 $M 2012 $M 0.3 1.0 1.3 0.8 1.6 2.4 1.1 1.8 2.9 Expenditure (15.9) (7.6) (16.6) Net loss after tax (14.6) (5.2) (13.7) Net operating and investing cash outflows (10.1) (10.0) (9.9) Net proceeds from issue of shares 0.2 0.9 33.7 Cash and cash equivalents at the end of year 24.0 33.8 42.8 10 Starpharma Holdings Limited Annual ReportCEO’s ReportDr Brian Kelly Research Manager>> The R&D tax incentive allows Starpharma to confidently advance development of its proprietary products including the clinical programs for VivaGel ® and DEP™ docetaxel. In the case of DEP™ docetaxel, it supports the conduct of the clinical trial in Australia with the additional benefit that Australian patients will be the first in the world to have access to Starpharma’s improved version of the widely used cancer drug, docetaxel. Future outlook The coming year is a pivotal one for Starpharma with revenues expected from the launch of the VivaGel® condom in both Australia and Japan and the likelihood of other markets being approved throughout the year. Starpharma now has two products in clinical trial; a novel and improved version of a widely used cancer drug that has the potential to significantly reduce debilitating side effects of common cancer treatments and improve efficacy; and a first in class treatment for the prevention of recurrent bacterial vaginosis, in phase 3 clinical trials. These “firsts” emphasise Starpharma’s position as a true innovator in Australia and internationally. We also expect to make progress across our product portfolio including regulatory submissions and commercialisation of VivaGel® for symptomatic relief of BV, our agrochemical program, and building further on relationships with our various partners and collaborators. Finally, I would like to personally thank retiring Chairman, Peter Bartels, for his invaluable guidance and support over several years. We have worked closely together in creating Starpharma’s diverse and valuable pipeline of late-stage product opportunities and I look forward to continuing the task of building upon these achievements with incoming Chairman, Rob Thomas. During the year, Starpharma also farewelled retiring Company Secretary, Ben Rogers, who was succeeded by current CFO, Nigel Baade. Experienced pharmaceutical executive, Dr Tony Eglezos, joined our executive and business development teams as Vice President of Business Development from CSL during the year. In closing, I would like to sincerely thank Starpharma’s dedicated and highly professional executive management team, my fellow board members and all employees for their support during the year. Jackie Fairley Chief Executive Officer Starpharma Holdings Limited Annual Report 2014 11CEO’s Report>> “ Starpharma is a global leader in nanotechnology drug delivery and our relationship with Starpharma is a wonderful example of how researchers can work with companies to advance very promising pharmaceutical products from the lab to the clinic.” Professor Chris Porter, Monash Institute of Pharmaceutical Sciences Starpharma is a world leader in the development of dendrimer products for pharmaceutical, life science and other applications, and aims to create value through the commercialisation of its proprietary products. In striving for this objective, Starpharma acknowledges its role within society and believes its success will deliver long term positive benefits to all stakeholders. Starpharma’s corporate governance principles and code of conduct set the framework for how the company, management and employees are expected to conduct themselves: always ethically and responsibly. Our PeopleThe employees of Starpharma are critical for achieving business success. To ensure Starpharma remains a safe, healthy, and attractive workplace for our employees, Starpharma has established workplace policies and practices. Policies assist to ensure employees have engaging and satisfying roles and receive periodic assessments and feedback on performance. Policies provide for ongoing training and career development, and are intended to ensure a balanced work and home life. Starpharma’s Code of Conduct reflects the core values of the company and sets out standards of behaviour in matters including equal employment opportunity and best practice in recruitment. Starpharma also has a Health and Wellbeing policy to support employees in maintaining or adopting healthy lifestyles, recognising that employee physical and mental health has a positive impact on the individuals and culture of the organisation.Employees are rewarded for their performance, dedication, and contribution to the results of Starpharma. Employees are recruited into and retained in positions based on merit. A balance of skills, expertise and opinion, as well as diversity are viewed as important cultural elements within the collegiate team environment. The Board has adopted a Diversity Policy to provide a framework for Starpharma to achieve a number of diversity objectives, with an initial focus on gender. Employee equity participation schemes are used to provide the opportunity for all staff to share in the business success of the company and to align the objectives of employees with those of shareholders.Occupational health and safety is considered every employee’s responsibility, and a safe working culture is promoted and encouraged. There is an active committee structure to eliminate, reduce or mitigate risks associated with Starpharma’s activities. Occupational Health & Safety Committee members represent all sections of the workplace including management and employees.Our PartnersStarpharma has established important business and scientific partnerships with leading global companies, international medical research organisations and key governmental and non-governmental departments and institutions. These relationships offer critical analysis of research concepts from world experts in their field and provide the pathway for products to enter the market and change daily lives.The CommunityThe very nature of Starpharma products affords the opportunity of changing lives for the better. Through innovative research and development, Starpharma is creating products for needs which are currently unmet, within the public health, pharmaceutical and medical markets. All of Starpharma’s pharmaceutical and medical products and clinical research activities comply with strict regulatory and ethical approval processes. These include the FDA in the United States, TGA in Australia and other regulatory bodies as applicable.The EnvironmentThe broad application of Starpharma’s dendrimer research extends into projects that may assist the environment. Research in the field of agrochemicals may improve existing products and reduce the negative impact of current practices on the environment. More effective chemical formulations for agrochemicals could reduce the frequency or level of application and potentially improve the environmental profile of such products. In conducting its research and operations Starpharma has documented procedures and processes in place to ensure that all waste products (albeit relatively minor in volume) are disposed of strictly in accordance with relevant environment regulations. 12 Starpharma Holdings Limited Annual ReportCorporate & Social ResponsibilityDr Jeremy Paull, VP Development & Regulatory Affairs Dr David Owen, VP Research Directors’ Report Your directors have pleasure in presenting this report on the consolidated entity (referred to hereafter as the group or the company) consisting of Starpharma Holdings Limited and the entities it controlled at the end of, or during, the year ended 30 June 2014. Directors The following persons were directors of Starpharma Holdings Limited (“the company”) at the date of this report: R B Thomas (Chairman) R A Hazleton P J Jenkins Z Peach J K Fairley (Chief Executive Officer) P R Turvey All were directors during the whole of the financial year, with the exception of: R B Thomas who was appointed as a director on 4 December 2013 and as Chairman on 13 June 2014. P T Bartels who was a director from the beginning of the financial year until his retirement on 13 June 2014. Information on Directors Rob B Thomas AM, BEc, MSAA, SF Fin Independent non-executive director (appointed 4 December 2013) Chairman (from 13 June 2014) Member of remuneration & nomination committee (from 24 February 2014) Member of audit & risk committee (from 24 February 2014) Mr Thomas has a strong background in financial services and is a non executive director on a number of listed Healthcare companies in Australia and the United States. He has more than 35 years’ experience in the securities industry with Potter Partners (now UBS), County Natwest and Citigroup. He is currently Chairman of TAL Limited (formerly Tower Australia Limited), Gragher Capital Securities and the NSW State Library. He is the immediate past non-executive Chairman of Heartware International Inc and remains a non-executive director of that company and is also a director of ASX listed REVA Medical Inc., Virgin Australia Limited and Biotron Limited. Rob holds a Bachelor of Economics from Monash University and is a fellow of the Securities Institute of Australia. He is also a Master Stockbroker and is a Fellow of the Australian Institute of Company Directors. Jacinth (Jackie) K Fairley BSc, BVSc (Hons), MBA Executive director (appointed 1 July 2006) Chief Executive Officer Dr Jackie Fairley has more than 25 years of operational experience in the pharmaceutical and biotechnology industries working in business development and senior management roles with companies including CSL and Faulding (now Hospira). She was appointed Chief Executive Officer of the group in July 2006. Jackie holds first class honours degrees in Science (pharmacology and pathology) and Veterinary Science from Melbourne University and was a practicing veterinary surgeon prior to joining CSL in 1989. Whilst at CSL she obtained an MBA from the Melbourne Business School where, as Dux of her final year, she was the recipient of the prestigious Clemenger Medal and a number of other academic prizes. Jackie is also a Graduate of the Australian Institute of Company Directors. Jackie currently sits on the board of the Melbourne Business School, and is a past member of the Federal Government’s Pharmaceutical Industry Working Group and the Federal Ministerial Biotechnology Advisory Council. She is also an advisor to the Carnegie Innovation Fund. Other current directorships of listed entities: Virgin Australia Limited, REVA Medical Inc., Biotron Limited, Heartware International Inc. (NASDAQ listed, de-listed from ASX on 17 Sep 2013) Former directorships of listed entities in last 3 years: None Other current directorships of listed entities: None Former directorships of listed entities in last 3 years: None 1,664,197 ordinary shares in Starpharma Holdings Limited 1,510,000 employee performance rights Peter J Jenkins MB, BS (Melb), FRACP Independent Non-executive director (appointed 13 May 1997) Deputy Chairman Chairman of remuneration & nomination committee Consultant physician and gastroenterologist. Holds clinical and research positions with the Alfred Hospital and has held clinical research positions with the Baker Medical Research Centre. Former judge of the Australian Technology Awards. Executive Director of AusBio Ltd, an unlisted public biotechnology company. Other current directorships of listed entities: Nil Former directorships of listed entities in last 3 years: None 1,537,462 ordinary shares in Starpharma Holdings Limited 270,000 ordinary shares in Starpharma Holdings Limited Peter T Bartels, AO, FAISM, FRSA Independent non-executive director (appointed 6 August 2003 until 13 June 2014) Chairman (until 13 June 2014) Member of remuneration & nomination committee (until 13 June 2014) Member of audit & risk committee (until 13 June 2014) Mr Bartels has considerable experience in the pharmaceutical industry; while working for Abbott Laboratories he was responsible for the introduction of a wide range of industrial, agricultural, veterinary and human pharmaceuticals into the Australian market. He was a director of Drug Houses of Australia and was managing director of DHA Pharmaceuticals. He has been a major player in corporate Australia, having held the positions of CEO and Managing Director of both Coles Myer Ltd and Fosters Brewing Company Ltd. He is a past Chairman of the Australian Sports Commission, the Australian Institute of Sport, the Commonwealth Heads of Government Committee for Sport and the Royal Women's and Royal Children's Hospitals. Peter is presently Chair of the Dean's external Advisory Council, for the Faculty of Medicine, Dentistry and Health Sciences at The University of Melbourne. Other current directorships of listed entities: None Former directorships of listed entities in last 3 years: None 332,930 ordinary shares in Starpharma Holdings Limited Starpharma Holdings Limited Annual Report Starpharma Holdings Limited Annual Report 2014 13 13 Corporate & Social Responsibility Directors’ Report Information on Directors (continued) Richard A Hazleton BSChE, MSChE, HonDrEng, HonDrCommSc Independent Non-executive director (appointed 1 December 2006) Member of audit & risk committee Peter R Turvey BA/LLB, MAICD Independent Non-executive director (appointed 19 March 2012) Chairman of audit & risk committee Mr Hazleton is a former chairman and CEO of US-based global corporation Dow Corning. Joined Dow Corning in 1965 and held numerous positions in engineering, manufacturing and finance, both in the US and Europe, before becoming Chief Executive Officer of the company in 1993, and Chairman of the board of Directors and CEO in 1994. Retired from Dow Corning in 2001. Chairman of Dendritic Nanotechnologies Inc (DNT) from 2004 until Starpharma’s acquisition of that company in October 2006. Has served on the boards of the American Chemistry Council and the Chemical Bank and Trust Company (Midland, MI, USA) as well as several non-profit social service agencies in Michigan and Belgium. Other current directorships of listed entities: None Former directorships of listed entities in last 3 years: None 157,616 ordinary shares in Starpharma Holdings Limited Zita Peach BSc Independent Non-executive director (appointed 1 October 2011) Member of remuneration & nomination committee Ms Peach has more than 20 years of commercial experience in the pharmaceutical industry, particularly in marketing and business development, working for major industry players such as CSL Limited and Merck Sharp & Dohme, the Australian subsidiary of Merck Inc. Ms Peach is currently the Managing Director and Executive Vice President, for Fresenius Kabi Australia and New Zealand, a leader in medical devices, intravenous fluids, intravenous genetics and clinical nutrition. Previously, Ms Peach was Vice President, Business Development R&D for CSL, a position she held for ten years. Ms Peach is a Non-Executive Director of the ASX-listed Vision Eye Institute Limited. Ms Peach is a graduate member of the Australian Institute of Company Directors. Other current directorships of listed entities: Vision Eye Institute Limited Former directorships of listed entities in last 3 years: None 3,000 ordinary shares in Starpharma Holdings Limited Mr Turvey has had more than 30 years of experience in the biotech/pharmaceutical industry having been former Executive Vice President Licensing, Group General Counsel and Company Secretary of global biopharmaceutical company CSL Limited, retiring in 2011. Mr. Turvey is currently a principal of Foursight Associates Pty Ltd, a director of the industry organisation AusBiotech Limited, and a director of Victorian Government owned entity Agriculture Victoria Services Pty Ltd. Mr. Turvey played a key role in the transformation of CSL from a government owned enterprise, through ASX listing in 1994, to a global plasma and biopharmaceutical company. He also had responsibility for the protection and licensing of CSL's intellectual property and for risk management within CSL, which included management of the internal audit function, reporting to the Audit & Risk Management Committee of the Board as well as being the Chairman of the Corporate Risk Management Committee. Other current directorships of listed entities: Admedus Limited Former directorships of listed entities in last 3 years: None 47,000 ordinary shares in Starpharma Holdings Limited Company Secretary The Company Secretary is Mr Nigel Baade, holding the position from 13 December 2013. Mr Baade also holds the position of Chief Financial Officer, which he has held from January 2009. Mr Baade is a CPA qualified accountant with extensive experience in the pharmaceutical and biotechnology industries. Prior to joining Starpharma as Financial Controller in 2006, he has held positions at Hagemeyer, Cerylid Biosciences, Faulding (Hospira) and UMT (Fonterra). He holds qualifications from University of Tasmania and Monash University. Mr Ben Rogers was Company Secretary until his retirement on 13 December 2013. 14 Starpharma Holdings Limited Annual Report 2014 Starpharma Holdings Limited Annual Report 14 Directors’ Report Operating & Financial Review Principal activities The principal activities of the group consist of research, development and commercialisation of dendrimer products for pharmaceutical, life-science and other applications. Activities within the group are directed towards the development of precisely defined nano-scale materials, with a particular focus on the development of VivaGel® for the management and prevention of bacterial vaginosis, and as a condom coating for prevention of sexual transmitted infections. Starpharma is also applying dendrimers to drug delivery, and in agrochemicals. Result The financial report for the financial years ended 30 June 2014, and the results herein, have been prepared in accordance with Australian Accounting Standards. The consolidated loss after income tax attributable to ordinary shareholders for the financial year ended 30 June 2014 was $14,635,000 (2013: $5,229,000). The net operating and investing cash outflows for the year were $10,064,000 (2013: $9,951,000), with a cash balance at 30 June 2014 of $24,028,000 (June 2013: $33,840,000). Dividends and distributions No dividends were paid or declared during the period and no dividends are recommended in respect to the financial year ended 30 June 2014 (2013: Nil). Review of operations Key highlights until the date of this report include: ⋅ VivaGel® condom received Conformity Assessment Certification from the Australian Therapeutic Goods Administration (TGA). Ansell will launch the VivaGel® condom under their brand Lifestyles® Dual ProtectTM following listing on the Australian Register of Therapeutic Goods (ARTG); ⋅ The commencement of the phase 3 clinical studies of the VivaGel® bacterial vaginosis (BV) product for the prevention of recurrent BV following the US FDA granting Special Protocol Assessment (SPA) agreement on the design and planned analyses of the studies; ⋅ The granting of regulatory certification for marketing the VivaGel® condom in Japan by market leader, Okamoto Industries; ⋅ Commencement of a phase 1 human clinical trial for DEPTM docetaxel conducted in Australia. The study will enrol up to 30 patients, with the primary objective to establish the maximum tolerated dose (MTD) and dose limiting toxicities of DEPTM docetaxel; ⋅ DEPTM oxaliplatin shows improved anti-cancer efficacy and less toxicity in animal studies; ⋅ The signing of a second, expanded agreement with AstraZeneca in the field of cancer medicine using DEPTM technology; ⋅ Successful submission to AusIndustry for certain overseas R&D activities for DEPTM docetaxel to be eligible for R&D tax incentives; ⋅ Additional grant funding with collaborator, Monash Institute of Pharmaceutical Sciences, from the Australian Research Council and Cancer Australia for dendrimer-based drug research; and ⋅ New agrochemical Priostar® partnerships. VivaGel® Program The pivotal phase 3 clinical trials, to confirm VivaGel®’s ability to prevent recurrence of bacterial vaginosis (R-BV), commenced in July 2014 following the US FDA granting Special Protocol Assessment (SPA) agreement on the design and planned analyses of the studies. The granting of the SPA agreement follows the earlier agreement of the European Medicines Agency (EMA) on the design of the studies. Extensive preparations were undertaken during the year ahead of the SPA and EMA agreement including the selection of the trial sites and the appointment of a global Clinical Research Organisation. These trials will build on the positive results of a phase 2 R-BV efficacy study, reported in 2013, which demonstrated both reduced overall risk of R-BV in patients using 1% VivaGel® and delayed time to first recurrence, compared with placebo. Bacterial vaginosis (BV) is the most common cause Starpharma Holdings Limited Annual Report Starpharma Holdings Limited Annual Report 2014 of vaginal infection worldwide and existing treatments for BV are considered suboptimal and recurrence is a major issue. There are currently no approved products to prevent R-BV. VivaGel® therefore has the potential to be a first in class therapeutic for prevention of R-BV. Starpharma is also pursuing symptomatic BV relief claims for VivaGel® in selected markets based on the efficacy and demonstrated excellent symptomatic relief shown in earlier VivaGel® phase 3 clinical trials. The company is in discussions with potential commercial partners for distribution rights for this application of VivaGel®. The VivaGel® condom, with commercial rights licensed to Ansell and Okamoto, has received conformity certification and regulatory certification from regulatory agencies in Australia and Japan, respectively. Preparations during the year for market launch, including product positioning, packaging design and manufacturing validation will allow the launch of VivaGel® condom in the coming months. Extensive consumer research has indicated a strong demand for a VivaGel® condom with 86% of participants rating it as “very interesting” and >90% saying they would buy the product. Drug Delivery Program The first human clinical trial of a dendrimer-reformulated version of docetaxel (DEPTM docetaxel) began in January 2014. The phase 1 study will involve approximately 25-30 cancer patients at centres in Melbourne and Brisbane, with the primary objective to establish the maximum tolerated dose (MTD) and dose limiting toxicities of DEPTM docetaxel. Results so far indicate no evidence of neutropenia (reduced circulating neutrophil numbers). DEPTM docetaxel is an enhanced version of the anti-cancer drug docetaxel (Taxotere®), which had reported annual sales of US$3.1 billion in 2010. Positive pre-clinical study results for DEPTM docetaxel were also received during the year. These demonstrated that DEPTM docetaxel did not cause neutropenia and other important bone marrow-related toxicities which occur in more than 75% of patients treated with Taxotere®. Bone marrow toxicities are the most important dose-limiting side effects of docetaxel. Earlier pre-clinical studies of DEPTM docetaxel have also demonstrated superior anti-cancer effectiveness compared to docetaxel across a range of important cancer types including breast, prostate, lung and ovarian cancer. In the broader drug delivery program, Starpharma released impressive pre-clinical results showing the superior performance of its DEPTM oxaliplatin compared to oxaliplatin (Eloxatin®). Eloxatin is a leading bowel cancer drug. DEPTM oxaliplatin has been shown in animal models to have improved anti-tumour efficacy; reduced toxicity for bone marrow; and reduced toxicity for the nervous system (neurotoxicity). The neurotoxicity improvement of DEPTM oxaliplatin is particularly important as this is the major dose-limiting toxicity, and causes the most debilitating side-effects, of oxaliplatin treatment. Around 85-95% of patients who undergo Eloxatin® therapy suffer irreversible nerve damage to the hands and feet. Progress was also made in the company’s confidential partnered drug delivery programs, with a second, expanded agreement with AstraZeneca in the field of cancer medicine signed during the year. Starpharma also announced, following submission to AusIndustry, it is eligible to receive an additional estimated $2 million cash in research and development (R&D) tax incentives over three years for the DEPTM docetaxel program. This is in addition to the R&D tax incentives for eligible Australian expenditure. Agrochemical Program Industry interest and commercial agreements involving Starpharma’s Priostar® dendrimers continued to expand and mature. The latest announced collaborations are with Isagro which is examining dendrimer applications within its fungicides; and Gowan which is pursuing crop protection formulations in high value markets. Starpharma is also developing its own dendrimer- containing formulations involving selected generic actives, which studies have shown to have enhanced characteristics including enhanced solubility and stability of the active and improved efficacy and rain-fastness of agrochemicals. A number of programs including glyphosate (RoundUp®) are underway with glyphosate field trials ongoing. 15 15 Directors’ Report Operating & Financial Review Matters subsequent to the end of the financial year Review of Financials Starpharma commenced its phase 3 clinical trials of VivaGel® for the prevention of recurrent bacterial vaginosis after the protocol design received written approval in July 2014 under a Special Protocol Assessment (SPA) from the US Food and Drug Administration (FDA). In July 2014, the VivaGel® condom received Conformity Assessment Certification from the Australian TGA. Ansell to will launch the VivaGel® condom in the coming months under their brand Lifestyles® Dual ProtectTM, following listing on the Australian Register of Therapeutic Goods (ARTG). No other matters or circumstances have arisen since 30 June 2014 that have significantly affected, or may significantly affect: (a) the consolidated entity’s operations in future financial years, or (b) the results of those operations in future financial years, or (c) the consolidated entity’s state of affairs in future financial years. Strategy, future developments and prospects There is no change to Starpharma’s strategy from the previous year. The company aims to create value for shareholders through the commercial exploitation of proprietary products based on its dendrimer technology in pharmaceutical, life science and other applications. The company’s key focus is to advance and broaden its product development pipeline for VivaGel®, drug delivery and agrochemicals. It is intended to achieve this by continuing to utilise a combination of internally funded and partnered projects across the portfolio. The company commercialises its development pipeline with corporate partners via licensing agreements at various stages in a product’s development lifecycle; depending on the product, a partner’s relative strength of product and market expertise, comparison of current and future potential returns, and the risks involved in advancing the product to the next value inflection point or milestone. Starpharma remains well positioned to create value in the medium term, due to its deep expertise, strong intellectual property portfolio, diverse development portfolio, a culture and ability to innovate and adapt its technology platform to product opportunities, proven risk management practices, and a solid cash position. The company will continue using its cash resources to invest in selected research and development activities to achieve its objectives. Legal At the date of the Directors’ Report there are no significant legal issues. 30 June 2014 $000 30 June 2013 $’000 Income statement Revenue from continuing operations 1,246 2,429 Other income 7 5 Research and development expenses (10,991) (3,505) Administration expenses (4,890) (4,149) Finance costs (7) (9) Loss attributable to members (14,635) (5,229) Income statement The reported net loss after tax of $14,635,000 (2013: $5,229,000) is after fully expensing all research and development expenditure and patenting costs in the current year. A contra research and development expense of $4,222,000 (2013: $8,704,000) has been recorded for research and development activities eligible under the Australian Government’s R&D tax incentive program. The variance in the net loss compared to prior year is a result of current year clinical programs in progress, lower interest and partner revenue and also a result of the prior year loss reflecting a $4,071,000 R&D tax incentive relating to the 2012 year. Research and development expenses include the costs of the VivaGel® clinical and regulatory programs for BV and condom, the internal drug delivery program, including DEPTM docetaxel, and the agrochemical programs. Administration expenses include the amortisation of intangible assets, costs of patents, and the share- based expensing of employee incentives schemes. Total revenue and other income for the year was $1,253,000 (2013: $2,434,000), a reduction from the previous year due to lower interest revenue earned on cash deposits and lower revenue from commercial partners. Balance sheet At 30 June 2014 the group’s cash position was $24,028,000 (June 2013: $33,840,000). Trade and other receivables of $4,570,000 (June 2013: $5,492,000) includes $4,154,000 receivable from the Australian Government under the R&D tax incentive program. Statement of cash flows The net operating and investing cash outflows for the year were $10,064,000 (2013: $9,951,000) including costs associated with the company’s VivaGel®, drug delivery and agrochemical programs. During the financial year $4,701,000 (2013: $5,395,000) was received from R&D tax incentives associated with eligible expenditure and activities from the prior financial year. Net cash inflows from financing activities of $203,000 (2013: $828,000) included $235,000 on the issue of shares from the exercise of share options (2013: $878,000). Earnings per share Basic loss per share ($0.05) ($0.02) Diluted loss per share ($0.05) ($0.02) 2014 2013 16 Starpharma Holdings Limited Annual Report 2014 Starpharma Holdings Limited Annual Report 16 Directors’ Report Operating & Financial Review Material Business Risks Health and Safety The group operates in the biotechnology and pharmaceutical sectors and is in the development phase. Any investment in these sectors is considered high-risk. The group is subject to normal business risks, including but not limited to interest rate movements, labour conditions, government policies, securities market conditions, exchange rate fluctuations and a range of other factors which are outside the control of the Board and management. More specific material risks of the sector and the group include, but are not limited to: ⋅ Scientific, technical & clinical – product development requires a high level of scientific rigour, the outcomes of which cannot be known beforehand. Activities are experimental in nature so the risk of failure or delay is material. Key development activities, including clinical trials and product manufacture, are undertaken by specialist contract organisations; and there are risks in managing the quality and timelines of these activities. ⋅ Regulatory – products and their testing may not be approved by, or may be delayed, by regulatory bodies (eg. US Food and Drug Administration) whose approvals are necessary before products can be sold in market. ⋅ Financial - the group currently, and since inception, does not receive sufficient income to cover operating expenses. Although current cash reserves are sound, there is no certainty that additional capital funding may not be required in the future, and no assurance can be given that such funding will be available, if required. ⋅ Intellectual property (IP) – commercial success requires the ability to develop, obtain and maintain commercially valuable patents, trade secrets and confidential information. Gaining and maintaining the IP across multiple countries; and preventing the infringement of the group’s exclusive rights involves management of complex legal, scientific and factual issues. The company must also operate without infringing upon the IP of others. ⋅ Commercialisation – the company relies, and intends to rely, upon corporate partners to market, and in some cases finalise development and registration of its products, on its behalf. There are risks in establishing and maintaining these relationships, and with the manner in which partners execute on these collaborative agreements. ⋅ Product acceptance & competiveness – a developed product may not be considered by key opinion leaders (eg. doctors), reimbursement authorities (eg. PBS-listing) or the end customer to be an effective alternative to products already on market, or other products may be preferred. ⋅ Product liability – a claim or product recall would significantly impact the company. Insurance, at an acceptable cost, may not be available or be adequate to cover liability claims if a marketed product is found to be unsafe. ⋅ Key personnel – the company’s success and achievements against timelines depend on key members of its highly qualified, specialised and experienced management and scientific teams. The ability to retain and attract such personnel is important. ⋅ Grant and R&D incentives – the company may undertake R&D activities under competitive grants and be part-funded by other incentive programs (eg. R&D tax credits). There is no certainty that grants or incentive programs will continue to be available to the company, and changes in government policy may reduce their applicability. In accordance with good business practice in the pharmaceutical industry the company’s management actively and routinely employs a variety of risk management strategies. These are broadly described in the Corporate Governance Statement (section 7.1. Risk assessment and management). The Board, CEO and senior management team of the group are committed to providing and maintaining a safe and healthy working environment for the company’s employees and anyone entering its premises or with connections to the company’s business operations. Employees are encouraged to actively participate in the management of environmental and Occupational Health and Safety (OH&S) issues. The company has adopted an OH&S Policy and has an established OH&S committee structure as part of its overall approach to workplace safety. The OH&S committee provides a forum for management and employees to consult on health and safety matters. The primary role of the committee is to coordinate the development and implementation of OH&S policy and procedures, to consider any work related safety matters or incidents, and to ensure compliance with relevant legislation and guidelines. The committee includes representatives of management, and employees from each operational area generally in proportion to the number of people working in the area and the perceived safety risks associated with working in that area. The OH&S committee meets on a regular basis over the year. Environment and Regulation The group is subject to environmental regulations and other licences in respect of its research and development facilities. There are adequate systems in place to ensure compliance with relevant Federal, State and Local environmental regulations and the Board is not aware of any breach of applicable environmental regulations by the group. There were no significant changes in laws or regulations during the 2014 financial year or since the end of the year affecting the business activities of the group, and the Board is not aware of any such changes in the near future. Meetings of Directors The number of meetings of the company’s board of directors and of each committee held during the year ended 30 June 2014, and the numbers of meetings attended by each director were: Directors Board Audit & risk committee Remuneration & nomination committee P T Bartels 11 of 11 2 of 2 2 of 2 J K Fairley 11 of 11 R A Hazleton 11 of 11 P J Jenkins 11 of 11 Z Peach 11 of 11 R B Thomas 5 of 5 P R Turvey 11 of 11 N/A 2 of 2 N/A N/A 0 of 0 2 of 2 N/A N/A 2 of 2 2 of 2 1 of 1 N/A The table above illustrates the number of meetings attended compared with the number of meetings held during the period that the director held office or was a member of the committee. N/A denotes that the director is not a member of the relevant committee. Starpharma Holdings Limited Annual Report Starpharma Holdings Limited Annual Report 2014 17 17 Directors’ Report Remuneration Report The remuneration report sets out remuneration information for non-executive directors, executive directors and other key management personnel of the group Directors & key management personnel disclosed Non-executive and executive directors – see pages 13 and 14. Other key management personnel: N J Baade C P Barrett A Eglezos D J Owen J R Paull B P Rogers Chief Financial Officer & Company Secretary (Company Secretary from 13 December 2013) VP, Business Development VP, Business Development (from 12 August 2013) VP, Research VP, Development and Regulatory Affairs Company Secretary (until 13 December 2013) Remuneration Governance The remuneration and nomination committee, consisting of at least three independent non-executive directors, advises the Board on remuneration policies and practices generally, and makes specific recommendations on remuneration packages and other terms of employment for executive directors, other senior executives and non-executive directors. The objective of the company’s remuneration policy is to ensure appropriate and competitive reward for the results delivered. The framework aligns executive reward with achievement of strategic objectives and the creation of value for shareholders. Non-executive director remuneration policy Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of, the directors. The Chairman’s fees are determined independently of the fees of non- executive directors based on comparative roles in the external market. Non-executive directors do not receive bonuses or forms of equity securities, or any performance-related remuneration or retirement allowances. Directors’ fees Non-executive directors’ fees are reviewed annually by the remuneration and nomination committee, taking into account comparable remuneration data from the biotechnology sector. Non-executive directors’ fees were increased with effect from 1 April 2014, with the previous increase occurring from 1 January 2010. Fees and payments are determined within an aggregate non-executive directors’ fee pool limit, approved by shareholders. The aggregate amount currently stands at $450,000 and was approved by shareholders on 15 November 2006. This amount (or some part of it) is to be divided among the non-executive directors as determined by the Board and reflecting the time and responsibility related to the Board and committees. The aggregate amount paid to non-executive directors for the year ended 30 June 2014 was $401,555 (2013: $385,000). Directors’ fees include any statutory superannuation contributions required under Australian superannuation guarantee legislation. Annual Directors’ Fees From 1 April 2014 Until 1 April 2014 Board Chair (no additional fees for serving on Board committees) 125,000 120,000 Base fee for other non-executive directors 62,500 60,000 Chair of audit & risk committee 7,500 N/A Chair of remuneration and nomination committee 5,000 N/A Member of audit & risk committee 3,000 N/A Member of remuneration and nomination committee 2,500 N/A Executive remuneration policy and framework Remuneration packages are set at levels that are intended to attract and retain high calibre executives capable of managing the group’s operations. Each year, the company benchmarks the value of fixed remuneration, short term incentives and long term incentives against a group of comparator companies to ensure these objectives are met. The executive pay and reward framework comprises: ⋅ base pay and benefits, including superannuation; ⋅ short term performance incentives; and ⋅ long term incentives through participation in the Starpharma employee equity plans. The combination of these comprises an executive's total remuneration. The remuneration and nomination committee, with the Board are actively reviewing the company’s remuneration structure, including short and long term incentive plans to ensure they meet good corporate practice for a company of Starpharma’s size, nature and the company lifecycle. Relationship between executive reward and company performance The company’s remuneration policy aligns executive reward with the interests of shareholders. The primary focus is on growth in shareholder value through achievement of research, development, regulatory and commercial milestones, and therefore performance goals are not necessarily linked to financial performance measures typical of companies operating in other market segments. Remuneration is set based on key performance indicators (KPIs) typical of a biotechnology company in Starpharma’s lifecycle, which may include (but are not limited to) successful negotiations of commercial contracts, achieving key research, development and regulatory milestones, and ensuring the availability of adequate capital to achieve stated objectives. Improvement in the rating of the company against peer biotechnology companies may also be taken into consideration in determining the performance of the executive team, and can be assessed on a qualitative basis by reviewing external sources such as biotechnology publications and non-commissioned research reports. Other factors taken into account in determining remuneration packages include a demonstrated record of performance, internal and external relativities, and the company’s ability to pay. Base pay and benefits Executives receive their base pay and benefits structured as a Total Fixed Remuneration (TFR) package which may be delivered as a combination of cash and prescribed non-financial benefits at the executives’ discretion. Superannuation is included in TFR. There are no guaranteed base pay increases in any executives’ contracts. Short-term performance incentives With the exception of the CEO, executive service agreements do not include pre-determined bonus or equity allocations, however short term cash incentives may be awarded at the end of the performance review cycle upon achievement of individual and/or company related KPIs. Following a performance evaluation against these KPIs, the amount of possible bonus payable to each executive is determined by the remuneration and nomination committee and Board based on the CEO’s recommendation. The remuneration and nomination committee and the Board consider this an appropriate approach for a company of Starpharma’s size, nature and lifecycle. The short term incentive structure is under active review to ensure it meets good corporate practice. Long-term incentives Long-term incentives for executives and employees to deliver long- term shareholder returns are provided by a combination of equity plans that may include: ⋅ an Employee Performance Rights Plan; ⋅ an Employee Share Plan ($1,000 Plan); and ⋅ an Employee Share Option Plan. ⋅ 18 Starpharma Holdings Limited Annual Report 2014 Starpharma Holdings Limited Annual Report 18 Directors’ Report Remuneration Report Participation in these plans is at the Board’s discretion and no individual has an ongoing contractual right to participate in a plan or to receive any guaranteed benefits. For key appointments, an initial allocation of long-term equity incentives may be offered as a component of their initial employment agreement. The structure of long-term incentives is under the active review of the remuneration and nomination committee to ensure it meets good corporate practice for a company of Starpharma’s size, nature and company lifecycle. Starpharma Employee Performance Rights Plan The introduction of the Starpharma Employee Performance Rights Plan (ASX code SPLAK) was approved by the Board in 2010 and subsequently approved by shareholders at the 2011 annual general meeting. The objective of the Plan is to assist in the recruitment, reward, retention and motivation of employees of the company. The Plan allows for the issue of performance rights (being rights to receive fully paid ordinary shares subject to continued employment with the company and the satisfaction of certain performance hurdles over a specified period). The key aspects of the Plan are: ⋅ All executives and staff and certain contractors may be invited to apply for Rights under the scheme. ⋅ One Right once vested is equivalent to one fully paid ordinary share. ⋅ Rights and the resultant shares are granted for no consideration. ⋅ Appropriate vesting conditions can be applied to each allocation. The standard vesting condition in the plan rules is continued employment for two years unless otherwise determined by the Board. Additional performance hurdles may need to be met to enable vesting. ⋅ At the end of the vesting period a further disposal restriction (Holding Lock) may be applied to restrict disposal of the resulting shares. The standard Holding Lock in the plan rules is one year after vesting unless otherwise determined by the Board. ⋅ Rights will lapse on cessation of employment before the vesting date, except for good leaver and change of control provisions at the Board’s discretion. The Holding Lock on the resulting shares will be automatically removed on cessation of employment. ⋅ In the event of a change of control of the company the Board has the discretion to determine whether Rights will vest and become exercisable. In making its decision, the Board must consider: (i) the portion of the Vesting Period elapsed; and (ii) the extent to which the Performance Conditions (if any) have been met. ⋅ In the event of cessation due to death, illness, permanent disability, redundancy or any other circumstance approved by the Board unvested Rights will lapse, unless the Board determines otherwise having regard to: (i) the portion of the Vesting Period elapsed; and (ii) the extent to which the Performance Conditions (if any) have been met. Starpharma Employee Share Plan ($1,000 Plan) All executives and staff, excluding directors, are eligible to participate in the Starpharma Employee Share Plan ($1,000 Plan). The objective of the $1,000 Plan is to assist in the reward, retention and motivation of employees of the company. An annual allocation of up to $1,000 of shares may be granted and taxed on a concessional basis. Shares are granted under the $1,000 Plan for no consideration and are escrowed for 3 years while participants are employed by the company. Starpharma Employee Share Option Plan Options may be granted under the Starpharma Holdings Limited Employee Share Option Plan (ASX code SPLAM) which was approved by shareholders at the 2007 annual general meeting. All executives and staff are eligible to participate in the Plan. The objective of the Plan is to assist in the recruitment, reward, retention and motivation of employees of the company. Options are granted under the Plan for no consideration. The exercise price of options granted under the Plan must be not less than the market price at the time the decision is made to invite a participant to apply for options. The exercise price is usually calculated on the basis of 15% above market price. Market price is calculated as the volume-weighted average price (VWAP) of the shares in the 15 days preceding the approval to grant the options. Starpharma Holdings Limited Annual Report Starpharma Holdings Limited Annual Report 2014 Performance review and development Executives and all other staff participate in a formal two stage performance review and development process consisting of an objectives planning and development session at the commencement of the annual cycle and a performance and salary review towards the end of the cycle. The objective of the salary review is to ensure that all employees are appropriately remunerated for their contribution to the company, that remuneration is competitive within the relevant industry sector, and that increases in employees’ skills and responsibilities are recognised. During the year a performance evaluation of all executives and other staff took place in accordance with this process to assess each employee’s performance against their pre- agreed KPIs to determine the level of bonus payable. Trading in company securities The trading of shares issued to participants under any of the company’s employee equity plans is governed by the company’s securities trading policy. Executives are prohibited from entering into any hedging arrangements over unvested securities. Further information regarding the company’s securities trading policy is set out in Section 3.2 of the Corporate Governance Statement. Use of remuneration consultants If remuneration consultants are to be engaged to provide remuneration recommendations as defined in section 9B of the Corporations Act 2001, they are to be engaged by, and report directly to, the remuneration & nomination committee. No remuneration consultants have been engaged to provide such remuneration services during the financial year. Voting and comments made at the company’s 2013 Annual General Meeting (AGM) Of the votes cast on the company’s remuneration report for the 2013 financial year, 91% were in favour of the resolution. The company did not receive any specific feedback at the AGM or throughout the year on its remuneration practices. Performance of Starpharma Holdings Limited The executive team of Starpharma achieved important milestones directly related to their key performance indicators, including: ⋅ VivaGel® condom received Conformity Assessment Certification from the Australian TGA; ⋅ Preparation, regulatory feedback and initial ethics approval for the phase 3 clinical studies of the VivaGel® bacterial vaginosis (BV) product for the prevention of recurrent BV; ⋅ The granting of regulatory certification for marketing the VivaGel® condom in Japan; ⋅ Commencement of a phase 1 human clinical trial for DEPTM docetaxel conducted in Australia; ⋅ Broadened drug delivery portfolio with positive preclinical results including DEPTM oxaliplatin; ⋅ Expansion of the drug delivery partnerships; ⋅ Approved R&D tax incentive overseas finding with respect to the DEPTM docetaxel program; ⋅ New agrochemical Priostar® partnerships; and ⋅ Additional grant funding with collaborator, Monash Institute of Pharmaceutical Sciences. The broad corporate key performance indicators listed on page 18, together with individual KPIs relevant to each executive, are considered to be appropriate drivers of growth in shareholder value and were used by the remuneration and nomination committee and the Board in assessing the appropriate level of short and long term incentives payable to each executive during the year. In addition to the KPIs above, a significant proportion of the CEO’s performance rights are linked to growth in total shareholder return (TSR) as measured by either, achievement of absolute share price targets, or as returns relative to the S&P/ASX300 Accumulation Index. The closing share price on the date prior to the date of this report was $0.74, which represents a 5 year TSR (avg annual rate) of 11%1. The share price as at 30 June 2014 was $0.58 (2013: $0.81, 2012: $1.37, 2011: $1.50, 2010: $0.54). 1 Source: CommSec Accessed 13/08/2014. 19 19 Directors’ Report Remuneration Report Details of remuneration The following tables show details of the remuneration received by the directors and the key management personnel of the group for the current and previous financial year. 2014 Name Short-term benefits Post- employment Long-term benefits Cash salary & fees $ Cash bonus# $ Non-monetary benefits $ Superannuation $ Long service leave $ Share-based payments Shares# $ Performance Rights# $ Non-executive directors R B Thomas1 P T Bartels2 P J Jenkins 35,888 105,581 56,636 R A Hazleton Z Peach P R Turvey 61,375 56,064 57,208 Executive director – – – – – – – – – – – – 3,320 9,766 5,239 – 5,186 5,292 – – – – – – J K Fairley 403,648 200,000 39,932 20,775 14,612 Other Key Management Personnel (group) N J Baade C P Barrett A Eglezos3 D J Owen J R Paull B P Rogers4 192,564 212,096 170,090 206,817 197,211 48,918 30,000 25,000 8,000 30,000 40,000 – 15,347 401 17,754 363 13,213 2,737 1,804,096 Totals 1 Appointed 4 December 2013. Appointed Chairman 13 June 2014. 2 Retired 13 June 2014. 3 Appointed 12 August 2013. 4 Retired 13 December 2013. 333,000 89,747 25,000 17,775 16,061 17,775 25,000 34,900 186,089 23,811 24,036 334 27,954 (8,809) (42,477) 39,461 Non-executive directors P T Bartels R Dobinson1 P J Jenkins R A Hazleton Z Peach P R Turvey Executive director 120,000 25,000 55,046 60,000 55,046 50,034 – – – – – – – – – – – – – – 4,954 – 4,954 9,966 – – – – – – J K Fairley 368,213 150,000 40,608 21,286 27,824 Other Key Management Personnel (group) B P Rogers J R Paull C P Barrett N J Baade D J Owen M L McColl2 117,680 185,280 206,158 183,067 186,140 128,852 10,399 35,000 30,000 30,000 32,500 – 5,021 13,356 – 13,698 311 259 24,917 25,000 16,470 24,970 24,970 9,608 Totals 1 Resigned 28 November 2012. 2 Resigned 18 January 2013. 1,740,516 287,899 73,253 167,095 6,203 8,982 13,944 13,475 9,680 (516) 79,592 4,995 973,311 3,430,699 Total $ 39,208 115,347 61,875 61,375 61,250 62,500 – – – – – – 624,576 1,303,543 82,823 82,823 35,353 82,823 82,823 (17,910) 370,544 363,130 248,591 366,731 350,437 26,168 Total $ 120,000 25,000 60,000 60,000 60,000 60,000 – – – – – – 325,844 933,775 44,526 55,657 55,657 55,657 55,657 (10,331) 209,745 324,274 323,228 321,866 310,257 128,871 – – – – – – – 999 999 999 999 999 – – – – – – – – 999 999 999 999 999 999 5,994 582,667 2,937,016 2013 Name Short-term benefits Post- employment Long-term benefits Cash salary & fees $ Cash bonus# $ Non-monetary benefits $ Superannuation $ Long service leave $ Share-based payments Shares# $ Performance Rights# $ # All performance related remuneration, including cash bonuses, shares, and performance rights granted are determined to be an ‘at risk’ component of total remuneration. There were no retirement benefits paid in the current or prior year. 20 Starpharma Holdings Limited Annual Report 2014 Starpharma Holdings Limited Annual Report 20 Directors’ Report Remuneration Report The relative proportions of remuneration that are linked to performance and those that are fixed are as follows: Fixed remuneration At risk - STI At risk – LTI1 Name 2014 2013 2014 2013 2014 2013 J K Fairley N J Baade C P Barrett A Eglezos2 M L McColl3 D J Owen J R Paull B P Rogers4 37% 69% 70% 82% -% 69% 65% 100% 49% 73% 73% -% 100% 71% 72% 73% 15%1 16%1 8% 7% 3% -% 8% 11% -% 9% 9% -% -% 10% 11% 6% 48% 23% 23% 15% -% 23% 24% * 35% 18% 18% -% * 18% 17% 22% * Percentage not disclosed as the total amount of STI and/or LTI remuneration expense was negative for the relevant period. 1The percentage of the value of remuneration consisting of equity, based on the market value of shares at grant date, and the fair value of options and performance rights expensed during the current year. 2 Appointed 12 August 2013. 3 Resigned 18 January 2013. 4 Retired 13 December 2013. Service Agreements Remuneration and other terms of employment for the CEO and the executives are formalised in service agreements which include a formal position description and set out duties, rights and responsibilities, and entitlements on termination. Each of these agreements provides that the executive may receive performance- related cash bonuses, and other benefits including participation, when eligible, in the Starpharma Holdings Employee Equity Plans. Other major provisions of the agreements relating to remuneration are set out below for those executives who are employed at the date of this report. J K Fairley Chief Executive Officer – No fixed term of agreement. – Base salary, inclusive of superannuation, per annum as at 30 June 2014 of $460,000, to be reviewed annually by the remuneration and nomination committee. – A cash bonus up to $200,000 for the year to 30 June 2014 allocated proportionately on the achievement of predetermined objectives. – Fringe benefits consist of on-site car parking. – Subject to termination at any time by: (i) the Executive giving to the company twelve months’ notice in writing; or (ii) the company giving to the Executive six months’ notice in writing. If the company gives notice in accordance with this clause, the Executive will be entitled to a termination payment upon the expiration of the notice period, of an amount equal to 6 months’ total remuneration. – The Executive’s employment may be terminated by the company at any time without notice if the Executive: (i) is guilty of serious misconduct; (ii) becomes unable to pay the Executive’s debts as they become due; or (iii) is found guilty by a court of a criminal offence. N J Baade Chief Financial Officer & Company Secretary – No fixed term of agreement. – Base salary, inclusive of superannuation, per annum as at 30 June 2014 of $237,114, to be reviewed annually by the remuneration and nomination committee. – Subject to termination at any time by: (i) the Executive giving to the company not less than three months’ written notice; or Starpharma Holdings Limited Annual Report Starpharma Holdings Limited Annual Report 2014 (ii) the company giving to the Executive written notice, or payment in lieu of that notice, which notice period shall be four months. – The Executive’s employment may be terminated by the company at any time without notice for serious breach of obligations to the employer, wilful neglect of duty, serious misconduct or bankruptcy. C P Barrett VP – Business Development – No fixed term of agreement. – Base salary, inclusive of superannuation, per annum as at 30 June 2014 of $232,989, to be reviewed annually by the remuneration and nomination committee. – Subject to termination at any time by: (i) the Executive giving to the company not less than two months’ written notice; or (ii) the company giving to the Executive written notice, or payment in lieu of that notice, which notice period shall be four months. – The Executive’s employment may be terminated by the company at any time without notice for serious breach of obligations to the employer, wilful neglect of duty, serious misconduct or bankruptcy. A Eglezos VP – Business Development – No fixed term of agreement. – Base salary, inclusive of superannuation, per annum as at 30 June 2014 of $229,838, to be reviewed annually by the remuneration and nomination committee. – Subject to termination at any time by: (i) the Executive giving to the company not less than three months’ written notice; or (ii) the company giving to the Executive written notice, or payment in lieu of that notice, which notice period shall be three months. – The Executive’s employment may be terminated by the company at any time without notice for serious breach of obligations to the employer, wilful neglect of duty, serious misconduct or bankruptcy. 21 21 Directors’ Report Remuneration Report D J Owen VP – Research – No fixed term of agreement. – Base salary, inclusive of superannuation, per annum as at 30 June 2014 of $231,134, to be reviewed annually by the remuneration and nomination committee. – Subject to termination at any time by: (i) the Executive giving to the company not less than three months’ written notice; or (ii) the company giving to the Executive written notice, or payment in lieu of that notice, which notice period shall be three months. – The Executive’s employment may be terminated by the company at any time without notice for serious breach of obligations to the employer, wilful neglect of duty, serious misconduct or bankruptcy. Share-based payments Options Options are granted under the Starpharma Holdings Limited Employee Share Option Plan (ASX code SPLAM) (“the Plan”) which was approved by shareholders at the 2007 annual general meeting. All employees of the group are eligible to participate in the plan. Options are granted under the plan for no consideration and when exercised, enable the holder to subscribe for one fully paid ordinary share of the company to be allotted not more than ten business days after exercise, at the exercise price. The vesting period is 1 to 2 years from the date of grant, and the exercise period is 2 to 3 years from the end of the vesting period. There were no options granted in the current or prior year. The terms and conditions of each grant of options affecting remuneration of any director of the company and any key management personnel of the group in this or future reporting periods are as follows: J R Paull VP – Development and Regulatory Affairs – No fixed term of agreement. – Base salary, inclusive of superannuation, per annum as at 30 June 2014 of $235,970, to be reviewed annually by the remuneration and nomination committee. – Fringe benefits consist of on-site car parking. – Subject to termination at any time by: (i) the Executive giving to the company not less than three months’ written notice; or (ii) the company giving to the Executive written notice, or payment in lieu of that notice, which notice period shall be six months. – The Executive’s employment may be terminated by the company at any time without notice for serious breach of obligations to the employer, wilful neglect of duty, serious misconduct or bankruptcy. Shares issued to directors and key management personnel on the exercise of options Details of ordinary shares issued to the key management personnel of the group on the exercise of options in the current and prior year were: Number of shares issued on exercise of options during the year Intrinsic value $1 Name 2014 2013 2014 2013 N J Baade 125,000 C P Barrett 125,000 – – 36,775 36,775 – – D J Owen 125,000 100,000 27,400 120,190 Date exercise- able Grant date Expiry date Exercise price Value per option at grant date % vested J R Paull – 125,000 – 52,400 B P Rogers 100,000 100,000 61,920 116,190 29 Jun 2009 29 Jun 2011 28 Jun 2014 $0.37 $0.23 100% Options granted under the Plan carry no dividend or voting rights. There are no options outstanding at the end of the year. The weighted average remaining contractual life of share options outstanding at the end of the previous year was 1.00 year. Fair value of options granted There were no options granted in the current or prior year. For earlier years, the fair value at grant date was independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and the expected price volatility of the underlying share, the expected dividend yield and the risk free rate for the term of the option. The expected price volatility is based on the historic volatility (based on the remaining life of the options), adjusted for any expected changes to future volatility due to publicly available information. 1 The intrinsic value of each option exercised has been determined as opening share price on the date of allotment of shares less the option exercise price. The amount paid per ordinary share by the key management personnel of the group on the exercise of options were as follows: Share allotment date on exercise of options Amount paid per share 2 Sep 2013; 22 May 2014; 18 Jun 2014 $0.37 No amounts are unpaid on any shares issued on the exercise of options. Options granted to directors and key management personnel No options have been granted to directors or key management personnel in the current or prior year, or since the end of the year. No options vested or expired (unexercised) in the current or prior year, or since the end of the year. No options lapsed during the year as a result of performance milestones not being met. 22 Starpharma Holdings Limited Annual Report 2014 Starpharma Holdings Limited Annual Report 22 Directors’ Report Remuneration Report Option holdings The numbers of options over ordinary shares in the company held during the financial year by executive directors and other key management personnel of the group, including their close family members and entities related to them, are set out below. No non-executive director held options in the current or prior year. 2014 Name Balance at the start of the year Granted during the year as compensation Exercised during the year Other changes during the year Balance at the end of the year Vested and exercisable at the end of the year Unvested Directors of Starpharma Holdings Limited J K Fairley – Other key management personnel of the group N J Baade C P Barrett A Eglezos1 D J Owen J R Paull 125,000 125,000 – 125,000 – B P Rogers2 1 Appointed 12 August 2013. 2 Retired 13 December 2013. 100,000 – – – – – – – – 125,000 125,000 – 125,000 – 100,000 – – – – – – – – – – – – – – – – – – – – – – – – – – – – Performance rights The number of rights over ordinary shares in the company provided as remuneration during the financial year to any of the executive directors and the key management personnel of the group, including their close family members and entities related to them, are set out below. No non-executive director held share rights in the current or prior year. J K Fairley was granted 950,000 performance rights over ordinary shares following approval by shareholders at the 2013 annual general meeting. 2014 Name Balance at the start of the year Granted during the year as compensation Directors of Starpharma Holdings Limited Vested during the year Other changes during the year# Balance at the end of the year Vested and exercisable at the end of the year Unvested J K Fairley1 960,000 950,000 200,000 (200,000) 1,510,000 – 1,510,000 Other key management personnel of the group N J Baade C P Barrett A Eglezos2 D J Owen J R Paull 90,000 90,000 – 90,000 90,000 100,000 100,000 100,000 100,000 100,000 40,000 40,000 – 40,000 40,000 – – – – – 72,000 B P Rogers3 1 The value of rights that were forfeited during the year was $31,350. 2 Appointed 12 August 2013. 3 Retired 13 December 2013. The value of rights that were forfeited during the year was $62,000. # Other changes during the year relate to the forfeiture of rights. (40,000) 32,000 – 150,000 150,000 100,000 150,000 150,000 – – – – – – – 150,000 150,000 100,000 150,000 150,000 – The value at vesting date of performance rights that vested during 2014 was $370,960 (2013: $864,940). No other shares were issued on the vesting of performance rights in the current year provided as remuneration to any of the directors or the key management personnel of the group. Starpharma Holdings Limited Annual Report Starpharma Holdings Limited Annual Report 2014 23 23 Directors’ Report Remuneration Report Share-based payments (continued) The terms and conditions of the grant of performance rights to the directors or the key management personnel of the group in the current year were as follows: Grant date Vesting Date Holding Lock Expiry date Number of Rights Performance Measure Value per right at 16 September 2013 16 September 2015 16 September 2016 500,000 Achievement of KPIs 22 November 2013 30 September 2014 30 September 2015 500,000 Achievement of KPIs 22 November 2013 22 November 2015 22 November 2016 50,000 Continued Employment 22 November 2013 22 November 2015 22 November 2016 50,000 Index TSR 22 November 2013 22 November 2015 22 November 2016 100,000 Index TSR +10% 22 November 2013 22 November 2016 22 November 2017 100,000 Continued Employment 22 November 2013 22 November 2016 22 November 2017 50,000 Index TSR 22 November 2013 22 November 2016 22 November 2017 100,000 Index TSR +10% grant date % vested $0.89 $0.85 $0.85 $0.55 $0.54 $0.85 $0.58 $0.55 Nil Nil Nil Nil Nil Nil Nil Nil Information of the performance measures: Achievement of KPIs: Continued Employment: Index TSR: Index TSR + 10%: The achievement of certain key business performance indicators linked to matters which the Board believes are key drivers of shareholder value. Employee remains employed by the company until the vesting date. If the company achieves a total shareholder return (TSR), relative to the S&P/ASX 300 Accumulation Index (Index) for the vesting period, which is equal to or greater than the Index. If the company achieves a total shareholder return (TSR), relative to the S&P/ASX 300 Accumulation Index (Index) for the vesting period, which is which is 10% or more greater than the Index. Ordinary shares The number of ordinary shares in the company provided as remuneration during the financial year to any of the directors or the key management personnel of the group, including their close family members and entities related to them, are set out below. Key management personnel of the group, excluding directors, were eligible to participate in the Employee Share Plan ($1,000 Plan). Shares to the value of $1,000 were granted to Australian-based permanent employees under the plan during the current and prior year. 2014 Name Balance at the start of the year Granted during the year as compensation On exercise of share options during the year On vesting of performance rights during the year Other changes during the year Balance at the end of the year Directors of Starpharma Holdings Limited Ordinary Shares R B Thomas1 P T Bartels2 J K Fairley P J Jenkins R A Hazleton Z Peach P R Turvey 170,000 332,930 1,824,197 1,537,462 157,616 3,000 47,000 Other key management personnel of the group Ordinary Shares N J Baade C P Barrett A Eglezos3 D J Owen J R Paull 202,394 159,268 – 110,916 220,831 – – – – – – – 1,204 1,204 1,204 1,204 1,204 – – – – – – – 125,000 125,000 – 125,000 – – – 100,000 – 200,000 (360,000)5 – – – – 40,000 40,000 – 40,000 40,000 – – – – – – – – – 270,000 332,930 1,664,197 1,537,462 157,616 3,000 47,000 368,598 325,472 1,204 277,120 262,035 209,449 B P Rogers4 1 Appointed 4 December 2013 with a holding of 170,000 shares at the time of appointment. 2 Retired 13 June 2014. 3 Appointed 12 August 2013. 4 Retired 13 December 2013. 5 On market sale of shares to partially fund the tax liability associated with securities granted under the company’s equity incentive plans. (83,259) 100,000 32,000 – 258,190 24 Starpharma Holdings Limited Annual Report 2014 Starpharma Holdings Limited Annual Report 24 Directors’ Report Remuneration Report Details of remuneration Details of remuneration: cash bonuses, shares, performance rights and options For each cash bonus and grant of equity included in the tables on pages 20 to 25, the percentage of the available bonus or grant that was paid, or that vested, in the financial year, and the percentage that was forfeited because the person did not meet the service and individual performance objectives is set out below. The options and performance rights vest over the specified periods provided vesting criteria are met. No options or rights will vest if the conditions are not satisfied, hence the minimum value of the options and rights yet to vest is nil. The maximum value of the options and rights yet to vest has been determined as the amount of the grant date fair value of the options and rights that is yet to be expensed. Cash bonus Shares Grant date value of shares granted during 20142 Grant date value of rights granted during 20142,3 For- feited Paid Year granted Vested Forfeited Performance rights Name % % $ $ J K Fairley 100% – – 715,350 N J Baade C P Barrett A Eglezos4 D J Owen J R Paull B P Rogers5 –1 –1 –1 –1 –1 –1 – – – – – – 999 89,000 999 89,000 999 89,000 999 89,000 999 89,000 – – 1 The bonuses paid are at the absolute discretion of the Board based on an individual’s performance within the year. There is no unpaid component of the bonuses awarded. 2 The value at grant date calculated in accordance with AASB 2 Share-based Payments of shares and performance rights granted during the year as part of remuneration. 3 The maximum value of options and performance rights is Financial years in which rights may vest 30/06/2017 30/06/2016 30/06/2015 30/06/2016 30/06/2015 30/06/2014 30/06/2016 30/06/2015 30/06/2014 30/06/2016 30/06/2015 30/06/2014 30/06/2016 30/06/2016 30/06/2015 30/06/2014 30/06/2016 30/06/2015 30/06/2014 % – – – – – 50% – – – – – – – – – – – – – Maximum value yet to vest $ 134,119 85,922 124,259 144,385 35,176 – 53,647 7,642 – 53,647 7,642 – 53,647 53,647 7,642 – 53,647 7,642 – – – % – – – – – 50% – – 100% – – 100% – – – 100% – – 100% – 100% 2014 2014 2014 2013 2013 2013 2014 2013 2012 2014 2013 2012 2014 2014 2013 2012 2014 2013 2012 2013 2012 100% – – – vesting period. The amount which will be included in a given key management personnel’s remuneration for a given year is consistent with this amortised amount. No options or performance rights will vest if the conditions are not satisfied, hence the minimum value yet to vest is nil. 4 Appointed 12 August 2013. 5 Retired 13 December 2013. determined at grant date and is amortised over the applicable Starpharma Holdings Limited Annual Report Starpharma Holdings Limited Annual Report 2014 25 25 - End of remuneration report - Directors’ Report Shares under option There are no unissued ordinary shares of Starpharma Holdings Limited under option at the date of this report. Shares issued on the exercise of options The following ordinary shares of Starpharma Holdings Limited were issued during the year and up to the date of this report on the exercise of options. No amounts are unpaid on any of the shares. Date options granted Issue price of shares (Option exercise price) Number of shares issued 29 Jun 2009 $0.37 635,000 Shares under rights Unissued ordinary shares of Starpharma Holdings Limited under the Employee Performance Rights Plan at the date of this report are as follows: Grant date Vesting date Holding lock cessation date Number of rights granted Balance of rights at date of report 13 Sep 2012 19 Sep 2014 19 Sep 2015 672,400 499,400 30 Nov 2012 30 Nov 2014 30 Nov 2015 200,000 200,000 30 Nov 2012 30 Nov 2015 30 Nov 2016 360,000 360,000 by the officers or the improper use by the officers of their position or of information to gain advantage for themselves or someone else or to cause detriment to the company. It is not possible to apportion the premium between amounts relating to the insurance against legal costs and those relating to other liabilities. Audit & non audit services The company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the company and/or the group are important. Details of the amounts paid or payable to the auditor (PricewaterhouseCoopers) for audit and non-audit services provided during the year are set out below. The board of directors has considered the position and, in accordance with the advice received from the audit and risk committee is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons: ⋅ all non-audit services have been reviewed by the audit and risk committee to ensure they do not impact the impartiality and objectivity of the auditor; ⋅ none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants. During the year the following fees were paid or payable for services provided by the auditor (PricewaterhouseCoopers) of the company, its related practices and non-related audit firms. 16 Sep 2013 16 Sep 2015 16 Sep 2016 1,261,600 1,151,600 Assurance Services 22 Nov 2013 30 Sep 2014 30 Sep 2015 500,000 500,000 22 Nov 2013 22 Nov 2015 22 Nov 2016 200,000 200,000 Audit or review of financial reports of the entity or any entity in the group under the Corporations Act 2001 2014 $ 2013 $ 92,106 87,600 22 Nov 2013 22 Nov 2016 22 Nov 2017 250,000 250,000 No other assurance services, taxation or advisory services have been provided by the auditor in either the current or prior year. Performance rights and the resultant shares are granted for no consideration. Auditors’ Independence Declaration Shares issued on the vesting of rights The following ordinary shares of Starpharma Holdings Limited were issued during the year to the date of this report on the vesting of performance rights granted under the Employee Performance Rights Plan. The shares are issued for nil consideration. Date rights granted Issue price of shares (Exercise price of right) Number of shares issued 25 Nov 2011 13 Sep 2012 30 Nov 2012 $ - $ - $ - 410,000 10,000 200,000 Insurance of officers During the financial year, Starpharma Holdings Limited arranged to insure the directors and executive officers of the company and related bodies corporate. The terms of the policy prohibit disclosure of the amount of the premium paid. The liabilities insured are legal costs that may be incurred in defending civil or criminal proceedings that may be brought against the officers in their capacity as officers of entities in the group, and any other payments arising from liabilities incurred by the officers in connection with such proceedings. This does not include such liabilities that arise from conduct involving a wilful breach of duty A copy of the auditors’ independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 27. Rounding of amounts The company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission, relating to the ‘’rounding off’’ of amounts in the directors’ report. Amounts in the directors’ report have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar. Auditor PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001. This report is made in accordance with a resolution of the Directors. Rob Thomas AM Chairman Melbourne, 13 August 2014 26 Starpharma Holdings Limited Annual Report 2014 Starpharma Holdings Limited Annual Report 26 Auditor’s Independence Declaration Auditor’s Independence Declaration As lead auditor for the audit of Starpharma Holdings Limited for the year ended 30 June 2014, I declare that to the best of my knowledge and belief, there have been: Auditor’s Independence Declaration a) b) no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and As lead auditor for the audit of Starpharma Holdings Limited for the year ended 30 June 2014, I declare that to the best of my knowledge and belief, there have been: a) no contraventions of any applicable code of professional conduct in relation to the audit. no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and This declaration is in respect of Starpharma Holdings Limited and the entities it controlled during the period. no contraventions of any applicable code of professional conduct in relation to the audit. b) This declaration is in respect of Starpharma Holdings Limited and the entities it controlled during the period. Anton Linschoten Partner PricewaterhouseCoopers Anton Linschoten Partner PricewaterhouseCoopers Melbourne 13 August 2014 Melbourne 13 August 2014 PricewaterhouseCoopers, ABN 52 780 433 757 Freshwater Place, 2 Southbank Boulevard, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001 T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au Liability limited by a scheme approved under Professional Standards Legislation. PricewaterhouseCoopers, ABN 52 780 433 757 Freshwater Place, 2 Southbank Boulevard, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001 T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au Starpharma Holdings Limited Annual Report Starpharma Holdings Limited Annual Report 2014 Liability limited by a scheme approved under Professional Standards Legislation. 27 27 Corporate Governance Statement Starpharma Holdings Limited (“the company”) and the Board are committed to achieving and demonstrating the highest standards of corporate governance. The Board guides and monitors the company’s activities on behalf of the shareholders. In developing policies and setting standards the Board considers the Australian Securities Exchange (“ASX”) Corporate Governance Principles and Recommendations (2nd Edition with 2010 Amendments) (“the 2nd Edition CGC Recommendations”). The Corporate Governance Statement set out below describes the company’s current corporate governance principles and practices which the board considers to comply with the 2nd Edition CGC Recommendations. All of these practices, unless otherwise stated, were in place for the entire financial year 2014. The ASX has released recent amendments to the 2nd Edition CGC Recommendations, incorporated in a 3rd Edition (“3rd Edition CGC Recommendations), which are effective from 1 July 2014. The company’s compliance against the 3rd Edition CGC Recommendations will be described in the 2015 Annual Report. This Corporate Governance Statement is available on the company’s website. The company and its controlled entities together are referred to as the group in this statement. Principle 1: Lay solid foundations for management and oversight Relationship between Board and Management The relationship between the Board and senior management is critical to the group’s long term success. The directors are responsible to the shareholders for the performance of the group in both the short and the longer term and seek to balance sometimes competing objectives in the best interests of the group as a whole. Their focus is to enhance the interests of shareholders and other key stakeholders and to ensure the group is properly managed. Responsibilities of the Board The responsibilities of the Board include: (a) Strategic Issues – approving the company's corporate strategy; – overseeing and monitoring organisational performance and the achievement of the group’s strategic goals and objectives; – approving any major transaction not included in the budget or outside the ordinary course of the business; – determining the structure of the company and the definition of the business; (b) Shareholding Items – issuing shares, options or performance rights; – granting special rights to shares; – determining the amount of a dividend; (c) Financial Items – approving the company's credit policy; – reviewing and approving the annual budget and financial plans including available resources and major capital expenditure initiatives; – seeking credit in excess of $50,000; – giving any guarantee or letter of credit or any security over the company's assets; (d) Expenditure Items – approval of the annual and half-year financial reports; – approving expenditure exceeding $250,000 ($100,000 until Principle 2: Structure the Board to add value 2.1 Responsibilities of the Board The Board operates in accordance with the broad principles of the charter. In addition to the responsibilities of the Board as set out above, the charter also details the Board’s composition requirements as set out below. 2.2 Board Composition – The Board is to be composed of both executive and non- executive directors with a majority of non-executive directors. – In recognition of the importance of independent views and the Board’s role in supervising the activities of management the Chairman must be an independent non-executive director, the majority of the Board must be independent of management and all directors are required to bring independent judgement to bear in their Board decision making. – The Chairman is elected by the full Board and meets regularly with the CEO. – The Board may decide to appoint one of the non-executive directors as Deputy Chairman. – The company maintains a mix of directors on the Board from different genders, age groups and professional backgrounds who have complementary skills and experience. – The Board has established measurable Board gender diversity objectives and assess annually the objectives and the progress in achieving them. 29 August 2013); – approving divestments of assets exceeding $50,000; (e) Audit – approving appointment or removal of external auditors; – considering any external audit reports; (f) Board and Senior Management – establishing corporate governance policies; – appointment, performance assessment and, if necessary, removal of the CEO; – determining remuneration of the CEO; – ratifying the appointment and, if necessary, the removal of senior executives; (g) Other Board Responsibilities – enhancing and protecting the reputation of the group; – overseeing the operation of the group, including its systems for control, accountability, and risk management; – monitoring financial performance; – liaison with the company’s auditors; – ensuring there are effective management processes in place and approving major corporate initiatives; and – reporting to shareholders. Responsibilities of the CEO Day to day management of the group’s affairs and the implementation of the corporate strategy and policy initiatives are delegated by the Board to the Chief Executive Officer (“CEO”). These delegations are reviewed on an annual basis. CEO and Senior Executive Performance A performance assessment for senior executives was last conducted in April 2014. The process for these assessments is described in the Remuneration Report under the heading “Performance review and development” on page 19 of this report. The Board is to undertake an annual Board performance review and consider the composition, structure, and role of the Board and individual responsibilities of directors. – The minimum number of directors is three and the maximum is fifteen unless the company passes a resolution varying that number. – There is no requirement for a director to hold shares in the company. 2.3 Board members Details of the members of the Board, their experience, qualifications, term of office and independent status are set out in the directors’ report under the heading “Information on Directors”. There are five non-executive directors, all of whom are deemed independent under the principles set out below, and one executive director, at the date of signing the directors’ report. The Board seeks to ensure that: – at any point in time, its membership represents an appropriate balance between directors with experience and knowledge of the group and directors with an external or fresh perspective; and – the size of the Board is conducive to effective discussion and efficient decision-making. 28 Starpharma Holdings Limited Annual Report 2014 Starpharma Holdings Limited Annual Report 28 Corporate Governance Statement 2.4 Directors’ independence The company has adopted specific principles for assessing the independence of directors: To be deemed independent, a director must be a non-executive and: – not be a substantial shareholder of the company or an officer of, or otherwise associated directly with, a substantial shareholder of the company; – within the last three years, not have been employed in an executive capacity by the company, or been a director after ceasing to hold any such employment; – within the last three years, not have been a principal of a material professional adviser or a material consultant to the company, or an employee materially associated with the service provided; – not be a material supplier or customer of the company, or an officer of or otherwise associated directly or indirectly with a material supplier or customer; – must have no material contractual relationship with the company other than as a director; and – be free from any interest and any business or other relationship which could, or could reasonably be perceived to, materially interfere with the director’s ability to act in the best interests of the company. Materiality for the purposes of applying these criteria is determined on both quantitative and qualitative bases. An amount of 5% of the individual director’s net worth is considered material, and in addition a transaction of any amount or a relationship is deemed material if knowledge of it may impact the shareholders’ understanding of the director’s performance. A substantial shareholder for the purposes of applying these criteria is a person with a substantial shareholding as defined in section 9 of the Corporations Act 2001. Under these criteria the Board has determined that all non- executive directors were independent at the date of this report. 2.5 Term of office The company’s Constitution specifies that all non-executive directors must retire from office no later than the third annual general meeting following their last election, and that one third of non-executive 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. It is anticipated that non-executive directors would generally hold office for up to ten years, and shall serve a maximum of fifteen years from date of first election by shareholders. The Board, on its initiative and on an exceptional basis, may exercise discretion to extend this maximum term where it considers that such an extension would benefit the company. 2.6 Chairman and Chief Executive Officer (CEO) The current Chairman, Mr Rob Thomas, is an independent non- executive director appointed in 2013. The CEO, Dr Jackie Fairley, was appointed as a director and CEO on 1 July 2006. The Chairman is responsible for leading the Board, ensuring directors are properly briefed in all matters relevant to their role and responsibilities, facilitating Board discussions and managing the Board’s relationship with the company’s senior executives. The Board has established the functions delegated to the CEO. The CEO is responsible for implementing company strategies and policies, and for the day to day business operations of the group in accordance with the strategic objectives of the group as approved by the Board from time to time. In accordance with current practice, the Board’s policy is for the roles of Chairman and CEO to be undertaken by separate people. 2.7 Commitment The Board held eleven meetings during the year. Meetings are usually held at the company’s corporate offices. A summary of the number of meetings of the Board and of each Board committee held during the year ended 30 June 2014, and the number of meetings attended by each director is disclosed in the Directors’ Report. The commitments of non-executive directors are considered by the remuneration and nomination committee prior to their appointment to the Board and are reviewed each year as part of the annual performance assessment. Prior to appointment or being submitted for re-election each non-executive director is required to specifically acknowledge that they have and will continue to have the time available to discharge their responsibilities to the company. 2.8 Conflict of interests Directors are expected to avoid any action, position or interest that may result in a conflict with an interest of the company. A director who has a material personal interest in a matter that relates to the affairs of the company must give notice of such interest and is precluded from participating in discussions or decision making on such dealings. 2.9 Independent professional advice Directors and Board committees have the right, in connection with their duties and responsibilities, to seek independent professional advice at the company’s expense. Prior approval of the Chairman is required, but this approval will not be unreasonably withheld. 2.10 Performance assessment The Board undertakes an annual self-assessment of its performance. Each director is asked to consider matters such as composition, structure and role of the Board, and performance of individual directors. The Chairman then meets individually with each director to discuss the assessment. During the year an assessment of the Board and its committees was conducted in accordance with these procedures. The CEO’s performance is assessed taking into account attainment of predetermined targets or goals based on various financial and other measurable indicators related to the company. The CEO meets with the remuneration and nomination committee annually to discuss attainment of key performance indicators of both the CEO and the senior management team. 2.11 Board committees The Board has established two committees to assist in the execution of its duties and to allow detailed consideration of complex issues. The committee structure and membership is reviewed on an annual basis. Board committees are chaired by an independent director other than the Chairman of the Board. Where applicable matters determined by committees are submitted to the full Board as recommendations for Board decisions. 2.11.1 Remuneration and nomination committee The company has established a remuneration and nomination committee composed of three independent non-executive directors. At the date of this report the committee consisted of the following: Dr P J Jenkins (Chairman) Mr R Thomas Ms Z Peach Details of these directors’ attendance at committee meetings are set out in the directors’ report on page 17. The charter of the remuneration and nomination committee is, to the extent delegated by the Board, to: – conduct periodic reviews of Board membership having regard to present and future needs of the company and make recommendations on Board composition and appointments; – conduct periodic reviews of and conclude on the independence of each director; – propose candidates for Board vacancies; – oversee Board succession including the succession of the Chairman; – oversee the periodic assessment of Board performance; – advise the Board on remuneration and incentive policies and practices generally; and – make specific recommendations on remuneration packages and other terms of employment for executive directors, other senior executives and non-executive directors. When the need for a new director is identified, the committee reviews the range of skills, experience and expertise on the Board, identifies its needs and prepares a short-list of candidates with appropriate skills and experience. Where necessary, advice is Starpharma Holdings Limited Annual Report Starpharma Holdings Limited Annual Report 2014 29 29 Corporate Governance Statement Principle 2: Structure the Board to add value (continued) sought from independent search consultants. The remuneration and nomination committee’s terms of reference include responsibility for reviewing any transaction between the organisation and the directors, or any interests associated with the directors, to ensure the structure and the terms of the transaction are in compliance with the Corporations Act 2001 and are appropriately disclosed. When an existing director is required to stand for re-election, the remuneration and nomination committee also reviews the range of skills, experience and expertise on the Board. 2.11.2 Audit and risk committee The company also has an audit and risk committee. Further details about the committee are included on page 31. Principle 3: Promote ethical and responsible decision making 3.1 Code of conduct 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. The company has established a code of conduct reflecting the core values of the company and setting out the standards of ethical behaviour expected of directors, officers and employees in all dealings and relationships including with shareholders, contractors, customers and suppliers, and with the company. Areas covered include employment practices, equal opportunity, harassment and bullying, conflicts of interest, use of company assets and disclosure of confidential information. The code of conduct is available in the Corporate Governance section of the company’s website. 3.2 Trading in company securities The dealing in company securities by directors, executives and employees (collectively “Employees”) is only permitted (subject also to complying with applicable laws) during the following periods (trading windows): ⋅ the period starting 24 hours after the release of Starpharma’s annual results and ending on 31 December; ⋅ the period starting 24 hours after the release of the Starpharma’s half-year results and ending on 30 June; and ⋅ such other period as determined by the Chairman or a Committee of the Board. Notwithstanding the existence of these trading windows, the company may notify Employees not to buy, sell or otherwise deal in securities of the company during all or part of any trading window. The other periods of the year are considered black-out periods (or closed periods) during which time Employees must not deal in securities of the company unless there are exceptional circumstances and prior written permission from the “approving officer” (Board, Chairman, CEO or Company Secretary, as appropriate) is given. An Employee who wishes to enter into a margin loan in relation to securities of the company must obtain written permission from the “approving officer” prior to entering into the margin loan. Except with prior written permission from the “approving officer”, Employees may not enter into any transaction which would have the effect of hedging or otherwise transferring to any other person the risk of any fluctuation in the value of: (a) securities in the company which are subject to a restriction on disposal under an employee share or incentive plan; or (b) options or performance rights (or any unvested securities in the company underlying them). The Securities Trading Policy was approved by the Board and released to the ASX on 16 December 2010, and is effective from that date. The Securities Trading Policy is discussed with each new employee as part of their induction training, and is available in the Corporate Governance section of the company’s website. 3.3 Diversity policy The company is committed to workplace diversity, and the Board values the level of diversity already present within the organisation, believing that continuing to promote diversity is in the best interests of the company, its employees and its shareholders. In June 2011, the Board approved a Diversity Policy which operates alongside the Code of Conduct and Anti-Discrimination, Bullying and Harassment policies, providing a framework for Starpharma to achieve a number of diversity objectives. The Diversity Policy is available in the Corporate Governance section of the company’s website. Independent of external corporate governance initiatives the company has embraced a culture of inclusion and equal opportunity across diversity areas recognised as potentially impacting upon equality in the workplace - gender, national origin, culture, language, sexual orientation, disability and age. Board and management believe that a culture of diversity has helped the company to tap a deeper pool of talent and has enhanced the collective skillset, contributing to the strong performance of the business. In accordance with the Diversity Policy the Board has established measurable objectives for achieving gender diversity and has conducted an assessment of the objectives and progress in achieving them. An appropriate gender balance already exists across the company and therefore the initial focus has been on the career development of women rather than on increasing representation of female employees. Objectives set by the Board for the 2013-2014 financial year, and progress against these objectives are set out below: Objective 1: Measurement - Continue to measure and track diversity of gender, age and country of origin, and continue to promote a corporate culture that accepts and embraces diversity within the company and more widely within the biotech sector. Progress towards objective: The company’s HR policies and processes were reviewed during the 2013-2014 financial year, consistent with our regular review of all policies, to ensure they are inclusive in nature and consistent with the aims of the Diversity Policy. Previously established systems continue to be used to track and report diversity statistics including gender, country of origin and age. At 30 June 2014, 52% of the company’s employees were female, compared with 54% in July 2013. The table below shows the proportion of female employees in the whole organisation, in senior executive positions and on the Board, at 30 June 2014. Whole organisation Senior Executive Board Total Female % female 33 17 52% 8 3 6 2 38% 33% Objective 2: Development - Identify higher potential female employees for further career development opportunities and continue to seek professional development opportunities and initiatives. Continue to encourage and provide opportunities for female networking and role models. Progress towards objective: Professional development opportunities and options that are aligned with the company’s needs and the individual’s role are considered for all employees as part of the company’s annual performance review process. Investments in formal/external development programs are made where possible and appropriate, as well as being provided via internal development opportunities where they exist. As in previous years, during the 2014 financial year the company supported participation of all female staff in an industry initiative “Connecting 30 Starpharma Holdings Limited Annual Report 2014 Starpharma Holdings Limited Annual Report 30 Corporate Governance Statement Women in Biotechnology” run by the BioMelbourne Network industry group, which included presentations by industry role models. company also has a number of part time roles reflecting both business needs and the company’s support for flexible working arrangements. Objective 3: Family friendliness –Maintain initiatives to smooth transitions before, during and after parental leave, and to retain employees after they have taken parental leave. Objective 4: Pay parity – Reduce the risk of unconscious gender bias and understand any gender differentials in remuneration relative to benchmarks analysing remuneration by gender. Progress towards objective: The company has a Parental Leave Policy which includes maternity leave and partner leave, and where possible, the provision of flexible working hours and part time arrangements to facilitate transitions associated with parental leave. Staff are encouraged to approach management to discuss their particular needs before and after parental leave. The Principle 4: Safeguard integrity in financial reporting 4.1 Audit and risk committee The company has established an audit and risk committee comprising three independent non-executive directors. At the date of this report the committee consisted of the following: Mr P R Turvey (Chairman) Mr R B Thomas Mr R A Hazleton Details of these directors’ qualifications and attendance at committee meetings are set out in the directors’ report on pages 13 to 17. The audit and risk committee members have appropriate financial expertise. All members are financially literate and have an appropriate understanding of the industry in which the group operates. The committee meets at least twice a year, and has direct access to the company’s auditors. The charter of this committee is to: – review and report to the Board on the annual report, the half-year financial report and all other financial information published by the company or released to the market; – assist the Board in reviewing the effectiveness of the organisation’s internal control environment covering: > effectiveness and efficiency of operations, > reliability of financial reporting, and > compliance with applicable laws and regulations. – oversee the effective operation of the risk management framework by: > ensuring the effective implementation of the risk management policy and program, > defining risk threshold levels for referral to the Board, > ensuring that an effective system of internal compliance and control is in place, > ensuring staff charged with risk management responsibilities have appropriate authority to carry out their functions and have appropriate access to the audit and risk committee, and > ensuring the allocation of sufficient resources for the effective management of risk. – recommend to the Board the appointment, removal and remuneration of the external auditors, and review the terms of their engagement, the scope and quality of the audit and assess performance; – consider the independence and competence of the external auditor on an ongoing basis; Progress towards objective: During the annual staff remuneration review, gender based analyses of pre-and post-remuneration review differentials to benchmarks were completed. This confirmed that there are no significant gender differences in remuneration relative to role benchmarks. – review and monitor related party transactions and assess their propriety; – assist the Board in the development and monitoring of statutory compliance and ethics programs; – provide assurance to the Board that it is receiving adequate, up to date and reliable information; – report to the Board on matters relevant to the committee’s role and responsibilities. In fulfilling its responsibilities, the audit and risk committee: – receives regular reports from management and the external auditors; – reviews the processes the CEO and CFO have in place to support their certifications to the Board; – reviews any significant disagreements between the auditors and management, irrespective of whether they have been resolved; – meets separately with the external auditors at least twice a year without the presence of management; – provides the external auditors with a clear line of direct communication at any time to either the Chairman of the committee or the Chairman of the Board. The audit and risk committee has authority, within the scope of its responsibilities, to seek any information it requires from any employee or external party. 4.2 External auditors The company’s policy is to appoint external auditors who clearly demonstrate quality and independence. The performance of the external auditor is reviewed annually. The current auditors are PricewaterhouseCoopers who have been the external auditors of the company since it commenced operations. It is PricewaterhouseCoopers policy to rotate audit engagement partners on listed companies at least every five years, and the current audit engagement partner assumed responsibility for the conduct of the audit in 2010. An analysis of fees paid to the external auditors, including a break-down of fees for non-audit services, if any, is provided in note 18 to the financial statements. It is the policy of the external auditors to provide an annual declaration of their independence to the audit and risk committee. The external auditor is requested to attend the annual general meeting and be available to answer shareholder questions about the conduct of the audit and the preparation Principle 5 and 6: Make timely and balanced disclosures and respect the rights of shareholders 5.1. Continuous disclosure The company has developed a continuous disclosure and shareholder communication policy to ensure compliance with the ASX Listing Rules and to facilitate effective communication with shareholders. A copy of this policy is available on the company’s website. information that should be disclosed to the market, or whether any price sensitive information may have been inadvertently disclosed. 6.1 Electronic Communication All ASX announcements are posted on the company’s website as soon as practicable after release to the ASX. The Board has appointed the Company Secretary as the person responsible for disclosure of information to the ASX. This role includes responsibility for ensuring compliance with the continuous disclosure requirements of the ASX Listing Rules and overseeing and co-ordinating information disclosure to the ASX, analysts, brokers, shareholders, the media and the public. Procedures have been established for reviewing whether there is any price sensitive ASX announcements are also posted on the OTCQX website (www.otcqx.com) in order to provide timely disclosure to US investors trading in the company’s Level One ADRs (OTCQX:SPHRY). The company’s website also has an option for shareholders to register their email address for direct email updates which the company may send for material company matters which have previously been released to ASX and OTCQX. Starpharma Holdings Limited Annual Report Starpharma Holdings Limited Annual Report 2014 31 31 Corporate Governance Statement Principle 7: Recognise and manage risk 7.1. Risk assessment and management The Board, through the audit and risk committee, is responsible for ensuring there are adequate policies in relation to risk management, compliance and internal control systems. The company operates in a challenging and dynamic environment, and risk management is viewed as integral to realising new opportunities as well as identifying issues that may have an adverse effect on the company’s existing operations and its sustainability. The company is committed to a proactive approach towards risk management throughout its entire business operations. The Board aims to ensure that effective risk management practices become embedded in the company’s culture and in the way activities are carried out at all levels of the company. The Board and management recognise the importance that risk management plays in ensuring the business is able to fully capitalise on the opportunities available to it, as well as mitigating potential loss. Health and Safety are considered to be of paramount importance and are the focus of significant risk management activities within the company. Other risk areas that are addressed include business continuity and disaster recovery, reputation, intellectual property, product development and clinical trials. Adherence to the Code of Conduct is required at all times and the Board actively promotes a culture of quality and integrity. The Board has required management to design and implement a risk management and internal control system to manage the group’s material business risks. The risk management policy, a summary of which is available on the company website, sets out policies for the oversight of material business risks, and describes the responsibilities and authorities of the Board, the audit and risk Principle 8: Remunerate fairly and responsibly 8.1 Remuneration and nomination committee The company has established a remuneration and nomination committee consisting of three independent non-executive directors. Details regarding composition, meetings and charter are set out in section 2.11.1 of this Corporate Governance Statement. 8.2 Non-executive and executive remuneration Each member of the senior executive team has signed a formal employment contract covering a range of matters including their duties, rights, responsibilities and any entitlements on termination. Each contract includes a position description which is reviewed by the committee as necessary in consultation with the CEO and relevant executive. Further information on directors’ and executives’ remuneration, including principles used to determine remuneration, is set out in the Remuneration Report on pages 18 to 25. committee, the CEO, CFO & Company Secretary, and the senior management team. The CEO, CFO & Company Secretary are responsible to the Board through the audit and risk committee for the overall implementation of the risk management program. During the financial year management has reported to the Board as to the effectiveness of the group’s management of its material risks. 7.2. Corporate reporting The company prepares audited financial statements for each year ending 30 June, and reviewed financial statements for each half year period ending 31 December. In accordance with ASX Listing Rules the annual financial statements are lodged with the ASX by 31 August, and half year statements are lodged with the ASX by 28 February each year. The CEO and the CFO have made the following certifications to the Board for the year ended 30 June 2014: – that the company’s financial reports are complete and present a true and fair view, in all material respects, of the financial condition and operational results of the company and group and are in accordance with relevant accounting standards; and – that the above statement is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board and that the company’s risk management and internal compliance and control is operating efficiently and effectively in all material respects in relation to financial reporting risks. Executive directors and senior management receive a mix between fixed and incentive pay, comprising both cash and eligibility to participate in equity incentive schemes. Non-executive directors receive fees only and are not eligible for bonus payments or participation in equity incentive schemes. Non-executive directors do not receive termination/retirement benefits, whereas executive directors and senior management are entitled to termination payments in accordance with the terms of their contracts (detailed on page 21 to 22). 8.3 Prohibition on hedging of unvested entitlements Employees are prohibited from entering into transactions in products which limit the economic risk of participating in unvested entitlements under equity-based remuneration schemes. Details in relation to this policy are contained in the Securities Dealing Policy which is available in the Corporate Governance section of the company’s website 32 Starpharma Holdings Limited Annual Report 2014 Starpharma Holdings Limited Annual Report 32 Annual Financial Report for the year ended 30 June 2014 Contents • • • • • • • • Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Balance Sheet Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Notes to the Consolidated Financial Statements Directors’ Declaration Independent Audit Report to the Members 34 35 36 37 38 39 65 66 These financial statements are the consolidated financial statements for the consolidated entity consisting of Starpharma Holdings Limited and its subsidiaries. The financial statements are presented in Australian currency. Starpharma Holdings Limited is a company limited by shares, incorporated and domiciled in Australia. Its registered office and principal place of business is: Starpharma Holdings Limited Baker IDI Building, 75 Commercial Road Melbourne, Victoria, 3004, Australia A description of the nature of the group’s operations and its principal activities is included in the CEO’s Report on pages 3 to 11 and in the operating and financial review in the directors’ report on pages 15 to 17, which are not part of this financial report. The financial statements were authorised for issue by the directors on 13 August 2014. The directors have the power to amend and reissue the financial report. Through the use of the internet, Starpharma ensures that corporate reporting is timely and complete. All recent press releases, financial reports and other information are available on its website: www.starpharma.com. Starpharma Holdings Limited Annual Report 2014 Starpharma Holdings Limited Annual Report 33 33 Consolidated Income Statement for the year ended 30 June 2014 Revenue from continuing operations Other income Administration expense Research and development expense Finance costs Loss before income tax Income tax expense Loss from continuing operations attributable to members of Starpharma Holdings Limited Loss per share for loss from continuing operations attributable to the ordinary equity holders of the company Basic loss per share Diluted loss per share Notes 5 5 6 6 7 24 24 30 June 2014 30 June 2013 $'000 1,246 7 (4,890) (10,991) (7) (14,635) - (14,635) $ ($0.05) ($0.05) $'000 2,429 5 (4,149) (3,505) (9) (5,229) - (5,229) $ ($0.02) ($0.02) The above consolidated income statement should be read in conjunction with the accompanying notes. Starpharma Holdings Limited Annual Report 2014 34 Starpharma Holdings Limited Annual Report 34 Consolidated Statement of Comprehensive Income for the year ended 30 June 2014 Notes Loss for the year Other comprehensive income (loss) Items that may be reclassified to profit or loss Foreign exchange differences on translation of foreign operations 15 Other comprehensive income (loss) Total comprehensive income (loss) for the year attributable to members of Starpharma Holdings Limited 30 June 2014 30 June 2013 $'000 (14,635) (110) (110) $'000 (5,229) 713 713 (14,745) (4,516) The above statement of consolidated comprehensive income should be read in conjunction with the accompanying notes. Starpharma Holdings Limited Annual Report 2014 Starpharma Holdings Limited Annual Report 35 35 Consolidated Balance Sheet as at 30 June 2014 30 June 2014 30 June 2013 Current Assets Cash and cash equivalents Trade and other receivables Total Current Assets Non-Current Assets Property, plant and equipment Intangible assets Total Non-Current Assets Total Assets Current Liabilities Trade and other payables Borrowings Provisions (employee entitlements) Deferred income Total Current Liabilities Non-Current Liabilities Borrowings Provisions (employee entitlements) Total Non-Current Liabilities Total Liabilities Net Assets Equity Contributed equity Reserves Accumulated losses Total Equity Notes 8 9 10 11 12 13 13 14 15 16 $'000 24,028 4,570 28,598 509 7,755 8,264 36,862 3,114 27 659 44 3,844 48 19 67 3,911 32,951 140,349 4,852 (112,250) 32,951 $'000 33,840 5,492 39,332 411 8,807 9,218 48,550 1,696 25 627 111 2,459 75 48 123 2,582 45,968 140,081 3,502 (97,615) 45,968 The above consolidated balance sheet should be read in conjunction with the accompanying notes. Starpharma Holdings Limited Annual Report 2014 36 Starpharma Holdings Limited Annual Report 36 Consolidated Statement of Changes in Equity for the year ended 30 June 2014 Contributed capital Reserves Accumulated losses Notes $'000 139,171 $'000 1,866 - $'000 (92,386) (5,229) Balance at 1 July 2012 Loss for the year Other comprehensive income Foreign exchange differences on translation of foreign operations Total comprehensive income (loss) for the year Transactions with owners, recorded directly in equity Contributions of equity, net of transaction costs Employee share plans Employee performance rights plan Total transactions with owners Balance at 30 June 2013 Loss for the year Other comprehensive income Foreign exchange differences on translation of foreign operations Total comprehensive income (loss) for the year Transactions with owners, recorded directly in equity Contributions of equity, net of transaction costs Employee share plans Employee performance rights plan Total transactions with owners Balance at 30 June 2014 15 14 14 15 15 14 14 15 Total equity $'000 48,651 (5,229) 878 32 923 1,833 45,968 - 713 (5,229) (4,516) - - - - - - - 878 32 - 910 713 713 - - 923 923 140,081 3,502 (97,615) - - - 235 33 - 268 - (14,635) (14,635) (110) (110) - - 1,460 1,460 - (110) (14,635) (14,745) - - - - 235 33 1,460 1,728 140,349 4,852 (112,250) 32,951 The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes. Starpharma Holdings Limited Annual Report 2014 Starpharma Holdings Limited Annual Report 37 37 Consolidated Statement of Cash Flows for the year ended 30 June 2014 Notes $'000 $'000 30 June 2014 30 June 2013 Cash Flows from Operating Activities Receipts from trade and other debtors (inclusive of GST) Grant income and R&D tax incentives (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Interest received Interest paid Net cash outflows from operating activities 23 Cash Flow from Investing Activities Payments for property, plant and equipment Net cash outflows from investing activities Cash Flow from Financing Activities Proceeds from issue of shares Share issue transaction costs Lease repayments Net cash inflows from financing activities Net increase (decrease) in cash and cash equivalents held Cash and cash equivalents at the beginning of the year Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at the end of the year 387 4,707 (16,108) 1,208 (7) (9,813) (251) (251) 235 - (32) 203 (9,861) 33,840 49 24,028 423 5,453 (17,270) 1,609 (10) (9,795) (156) (156) 878 - (50) 828 (9,123) 42,812 151 33,840 The above consolidated statement of cash flows should be read in conjunction with the accompanying notes. Starpharma Holdings Limited Annual Report 2014 38 Starpharma Holdings Limited Annual Report 38 Notes to the Consolidated Financial Statements 30 June 2014 Contents 1. 2. 3. 4. 5. 6. 7. 8. 9. Significant Accounting Policies Financial Risk Management Critical Accounting Estimates and Judgements Segment Information Revenue and Other Income Expenses Income Tax Expense Current Assets – Cash and Cash Equivalents Current Assets – Trade and Other Receivables 10. Non-Current Assets – Property, Plant and Equipment 11. Non-Current Assets – Intangible Assets 12. Current Liabilities – Trade and Other Payables 13. Current and Non-Current Liabilities – Borrowings 14. Contributed Equity 15. Reserves 16. Accumulated Losses 17. Related Party Transactions 18. Remuneration of Auditors 19. Contingencies 20. Commitments 21. Subsidiaries 22. Events Occurring After the Balance Sheet Date 23. Reconciliation of Profit After Income Tax to Net Cash Inflow from Operating Activities 24. Earnings Per Share 25. Share-Based Payments 26. Parent Entity Financial Information Starpharma Holdings Limited Annual Report 2014 Starpharma Holdings Limited Annual Report 40 44 46 46 46 47 47 48 50 51 52 53 53 54 55 55 56 56 56 57 58 58 58 59 59 64 39 39 Notes to the Consolidated Financial Statements 30 June 2014 1. Significant Accounting Policies The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are for the consolidated entity consisting of Starpharma Holdings Limited and its subsidiaries (the group). (a) Basis of preparation These general purpose financial statements have been prepared in accordance with Australian Accounting Standards and Interpretations issued by the Australian Accounting Standards Board and the Corporations Act 2001. Starpharma Holdings Limited is a for-profit entity for the purpose of preparing the financial statements. (i) Compliance with IFRS estimates are significant to the financial statements are disclosed in note 3. (vi) Going Concern For the year ended 30 June 2014, the consolidated entity has incurred losses of $14,635,000 (2013: $5,229,000) and experienced net cash outflows of $9,813,000 from operations (2013: $9,795,000), as disclosed in the balance sheet and statement of cash flows, respectively. The company is in the development phase, and given the entity’s strategic plans, the directors are satisfied regarding the availability of working capital for the period up to at least August 2015. Accordingly the directors have prepared the financial report on a going concern basis in the belief that the consolidated entity will realise its assets and settle its liabilities and commitments in the normal course of business and for at least the amounts stated in the financial report. The consolidated financial statements of the group also comply with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). (b) Principles of consolidation (i) Subsidiaries (ii) New and amended standards adopted by the group The group has applied the following standards and amendments for first time for the annual reporting period commencing 1 July 2013: • AASB 10 Consolidated Financial Statements, AASB 11 Joint Arrangements, AASB 12 Disclosure of Interests in Other Entities, AASB 128 Investments in Associates and Joint Ventures, AASB 127 Separate Financial Statements and AASB 2011-7 Amendments to Australian Accounting Standards arising from the Consolidation and Joint Arrangements Standards AASB 2012-10 Amendments to Australian Accounting Standards - Transition Guidance and other Amendments which provides an exemption from the requirement to disclose the impact of the change in accounting policy on the current period AASB 13 Fair Value Measurement and AASB 2011-8 Amendments to Australian Accounting Standards arising from AASB 13 AASB 119 Employee Benefits (September 2011) and AASB 2011-10 Amendments to Australian Accounting Standards arising from AASB 119 (September 2011) AASB 2012-5 Amendments to Australian Accounting Standards arising from Annual Improvements 2009-2011 Cycle, and AASB 2012-2 Amendments to Australian Accounting Standards – Disclosures – Offsetting Financial Assets and Financial Liabilities • • • • • None of the new and amended standards that are mandatory for the first time for the financial year beginning 1 July 2013 affected any of the amounts recognised in the current period or any prior period and are not likely to affect future periods. (iii) Early adoption of standards The group has not elected to apply any pronouncements before their operative date in the annual reporting period beginning 1 July 2013. (iv) Historical cost convention These financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, financial assets and liabilities (including derivative instruments) at fair value through profit or loss, certain classes of property, plant and equipment and investment property. (v) Critical accounting estimates The preparation of financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Starpharma Holdings Limited (“company” or “parent entity”) as at 30 June 2014 and the results of all subsidiaries for the year then ended. Starpharma Holdings Limited and its subsidiaries together are referred to in this financial report as the group or the consolidated entity. Subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases. Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of the impairment of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group. (c) Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer. (d) Foreign currency translation (i) Functional and presentation currency Items included in the financial statements of each of the group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Australian dollars, which is Starpharma Holdings Limited’s functional and presentation currency. (ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. Foreign exchange gains and losses that relate to borrowings are presented in the income statement, within finance costs. All other foreign exchange gains and losses are presented in the income statement on a net basis within other income or other expenses. 40 Starpharma Holdings Limited Annual Report 2014 Starpharma Holdings Limited Annual Report 40 Notes to the Consolidated Financial Statements 30 June 2014 (iii) Group companies The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: • assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; income and expenses for each income statement and statement of comprehensive income are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and all resulting exchange differences are recognised in other comprehensive income. • • On consolidation, exchange differences arising from the translation of any net investment in foreign entities, and of borrowings and other financial instruments designated as hedges of such investments, are recognised in other comprehensive income. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign operation and translated at the closing rate. (e) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances and amounts collected on behalf of third parties. Licence revenue is recognised in accordance with the underlying agreement. Upfront payments are brought to account as revenues unless there is a correlation to ongoing research and both components are viewed as one agreement, in which case the licence income is amortised over the anticipated period of the associated research program. Unamortised licence revenue is recognised on the balance sheet as deferred income. Interest revenue is recognised on a time proportion basis using the effective interest rate method. All revenue is stated net of the amount of Goods and Services Tax (GST). (f) Government Grants Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received and the group will comply with all attached conditions. Government grants relating to costs are deferred and recognised in profit or loss over the period necessary to match them with the costs that they are intended to compensate. Government grants relating to the purchase of property, plant and equipment are included in non-current liabilities as deferred income and are credited to the income statement on a straight-line basis over the expected lives of the related assets. (g) Income Tax The income tax expense or revenue for the period is the tax payable on the current period’s taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses. Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities are settled, based on those tax rates which are enacted or substantively enacted for each jurisdiction. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future. Current and deferred tax balances attributable to amounts recognised directly in other comprehensive income or equity are also recognised directly in other comprehensive income or equity, respectively. Starpharma Holdings Limited and its wholly-owned Australian controlled entities are not consolidated for tax purposes. (i) Investment allowances and similar tax incentives Companies within the group may be entitled to claim special tax deductions for investments in qualifying assets or in relation to qualifying expenditure (eg. investment allowances). The group accounts for such allowances as tax credits, which means that the allowance reduces income tax payable and current tax expense. A deferred tax asset is recognised for unclaimed tax credits that are carried forward as deferred tax assets. (h) Leases Leases of property, plant and equipment where the group has substantially all the risks and rewards of ownership are classified as finance leases (note 20). Finance leases are capitalised at the lease’s inception at the lower of the fair value of the leased property, and the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in short-term and long term payables. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the asset’s useful life or over the shorter of the asset’s useful life and the lease term if there is no reasonable certainty that the group will obtain ownership at the end of the lease term. Leases in which a significant portion of the risks and rewards of ownership are not transferred to the group as lessee are classified as operating leases (note 20). Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease. Lease income from operating leases where the group is a lessor is recognised in income on a straight-line basis over the lease term. (i) Impairment of assets Goodwill and intangible assets that have an indefinite life are not subject to amortisation. They are tested annually for impairment or more frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or changes in circumstance indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash generating units). (j) Cash and cash equivalents For the purpose of presentation in the statement of cash flows, cash and cash equivalents include cash on hand, deposits held with financial institutions, and other short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. The amount of significant cash and cash equivalents not available for use is disclosed in note 8. Starpharma Holdings Limited Annual Report Starpharma Holdings Limited Annual Report 2014 41 41 Notes to the Consolidated Financial Statements 30 June 2014 1. Significant Accounting Policies (continued) (k) Trade Receivables Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. Trade receivables are generally due for settlement within 30 to 60 days. They are presented as current assets unless collection is not expected for more than 12 months after reporting date. Collectibility of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off by reducing the carrying amount directly. An allowance account (provision for impairment of trade receivables) is used when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 90 days overdue) are considered indicators that the trade receivable is impaired. The amount of the impairment allowance is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. Cash flows relating to short-term receivables are not discounted if the effect of discounting is immaterial. The amount of the impairment loss is recognised in profit or loss within administration expenses. When a trade receivable for which an impairment allowance had been recognised becomes uncollectable in a subsequent period, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against other expenses in profit or loss. (l) Investments and other financial assets (i) Classification The group classifies its financial assets in the following categories: financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and, in the case of assets classified as held-to-maturity, re-evaluates this designation at each reporting period. (ii) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for those with maturities greater than 12 months after the reporting date which are classified as non-current assets. Loans and receivables are included in trade and other receivables (note 9) in the balance sheet. (m) Property, Plant and Equipment Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of any component accounted for as a separate asset is derecognised when replaced. All other repairs and maintenance are charged to profit or loss during the financial period in which they are incurred. Depreciation is calculated using the straight-line method to allocate their cost or revalued amounts, net of the residual values, over their estimated useful lives. The expected useful lives are 2 to 20 years. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (note 1 (i)). Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These are included in profit or loss. (n) Leasehold improvements The cost of improvements to or on leasehold properties is amortised over the unexpired period of the lease (being 1 year) or the estimated useful life of the improvement to the group, whichever is shorter. (o) Intangible Assets (i) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the group’s share of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is not amortised. Instead, goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which goodwill arose. (ii) Patents and licences Costs associated with patents are charged to profit or loss in the periods in which they are incurred. Licences and acquired patents with a finite useful life are carried at cost less accumulated amortisation and impairment losses. Amortisation is calculated using the straight-line method to allocate the cost of licences and patents over the period of the expected benefit, which is up to 20 years. (iii) Research and development Research expenditure is recognised as an expense as incurred. Costs incurred on development projects (relating to the application of research findings or other knowledge to a plan or design for the production of new or substantially improved products or services) are recognised as intangible assets when it is probable that the project will, after considering its commercial and technical feasibility and adequate resources are available to complete development, generate future economic benefits and its costs can be measured reliably. The expenditure capitalised comprises all directly attributable costs, including costs of materials, services, direct labour and an appropriate proportion of overheads. Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for use on a straight-line basis over its useful life. To date no development costs have been capitalised. (p) Trade and other payables These amounts represent liabilities for goods and services provided to the group prior to the end of the financial year which are unpaid. The amounts are unsecured and are usually paid within 30 to 45 days of recognition. Trade and other payables are presented as current liabilities unless payment is not due within 12 months from the reporting date. (q) Borrowings Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting period. 42 Starpharma Holdings Limited Annual Report 2014 Starpharma Holdings Limited Annual Report 42 Notes to the Consolidated Financial Statements 30 June 2014 (r) Provisions Provisions for legal claims, service claims and make good obligations are recognised when the group has a present legal or constructive obligation as a result of past events, and it is more probable than not that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item in the same class of obligations may be small. Provisions are measured at the present value of management’s best estimate for the expenditure required to settle the present obligation at the balance date. The discount rate used to determine the present value reflects current market assessment of the time, value of money, and the risks specific to liability. The increase of the provision due to the passage of time is recognised as interest expense. (s) Employee benefits (i) Short-term obligations Liabilities for wages and salaries, including non-monetary benefits, and annual leave expected to be settled within 12 months after the end of the period in which the employees render the related service are recognised in respect of employees’ services up to the period and are measured at the amounts expected to be paid when the liabilities are settled. The liability for annual leave and accumulating personal leave is recognised in the provision for employee benefits. All other short-term employee benefit obligations are presented as payables. (ii) Other long-term employee benefit obligations The liability for long service leave and annual leave which is not expected to be settled within 12 months after the end of the period in which the employees render the related services is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the end of the reporting period using the projected unit credit method. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the end of the reporting period on government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows. The obligations are presented as current liabilities in the balance sheet if the entity does not have an unconditional right to defer settlements for at least twelve months after the reporting date, regardless of when the actual settlements are expected to occur. (iii) Superannuation and Pension Benefits Group companies make the statutory superannuation guarantee contribution in respect of each employee to their nominated complying superannuation or pension fund. In certain circumstances pursuant to an employee’s employment contract the group companies may also be required to make additional superannuation or pension contributions and/or agree to make salary sacrifice superannuation or pension contributions in addition to the statutory guarantee contribution. The group’s legal or constructive obligation is limited to the above contributions. Contributions to the employees’ superannuation or pension plans are recognised as an expense as they become payable. Prepaid contributions are recognised as an asset to the extent that a cash refund or reduction in future payments is available. (iv) Share-based payments Share-based compensation benefits are offered to the directors and employees via the Starpharma Holdings Limited Employee Share Option Plan (“SPLAM”), an Employee Share Plan ($1,000 Plan), and an Employee Performance Rights Plan. Information relating to these plans is set out in note 25 and in the remuneration report under the directors’ report. The fair value of options and performance rights granted is recognised as an employee benefit expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees become Starpharma Holdings Limited Annual Report Starpharma Holdings Limited Annual Report 2014 unconditionally entitled to the options or rights. The fair value at grant date is determined using a Black-Scholes or binomial model (or variant of, as appropriate) that takes into account any exercise price, the term, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option or share right, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term. The fair value excludes the impact of any non-market vesting conditions (for example, profitability and sales growth targets). Non-market vesting conditions are included in assumptions about the number of options or share rights that are expected to become exercisable. At each balance sheet date, the entity revises its estimate of the number of options or share rights that are expected to become exercisable. The employee benefit expense recognised in each period takes into account the most recent estimate. The impact of the revision to original estimates, if any, is recognised in the income statement with a corresponding adjustment to equity. Under the Employee Share Plan ($1,000 Plan) shares are issued to employees for no cash consideration and vest immediately on grant. On this date, the market value of the shares issued is recognised as an employee benefits expense with a corresponding increase in equity. (v) Bonus payments The group recognises a liability and an expense for bonuses based on a formula that takes into consideration performance criteria that has been set. The group recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation. (vi) Termination benefits Termination benefits are payable when employment is terminated before the normal retirement date, or when an employee accepts voluntary redundancy in exchange for these benefits. The group recognises termination benefits when it is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after the end of the reporting period are discounted to present value. (t) Contributed equity Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares, performance rights or options are shown in equity as a deduction, net of tax, from the proceeds. Incremental costs directly attributable to the issue of new shares, performance rights or options, for the acquisition of a business, are not included in the cost of the acquisition as part of the purchase consideration. (u) Dividends Provision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the reporting period but not distributed at the end of the reporting period. (v) Earnings per share (i) Basic earnings per share Basic earnings per share is calculated by dividing the profit attributable to owners of the company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year, adjusted for bonus elements in ordinary shares issued during the year and excluding treasury shares. (ii) Diluted earnings per share Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares. 43 43 Notes to the Consolidated Financial Statements 30 June 2014 1. Significant Accounting Policies (continued) (w) Goods and Services Tax (“GST”) Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense. Receivables and payables are stated inclusive of the amount of GST receivable from, or payable to, the taxation authority is included with other receivables or payables in the balance sheet. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows. (x) Rounding of amounts The company is of a kind referred to in Class order 98/100, issued by the Australian Securities and Investments Commission, relating to the ‘’rounding off’’ of amounts in the financial statements. Amounts in the financial statements have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar. (y) New accounting standards and interpretations Certain new accounting standards and interpretations have been published that are not mandatory for the 30 June 2014 reporting period. The group’s assessment of the impact of these new standards and interpretations is set out below. (i) AASB 9 Financial Instruments, AASB 2009-11 Amendments to Australian Accounting Standards arising from AASB 9, AASB 2010-7 Amendments to Australian Accounting Standards arising from AASB 9 (December 2010) and AASB 2012-6 Amendments to Australian Accounting Standards – Mandatory Effective Date of AASB 9 and Transition Disclosures (effective from 1 January 2017) AASB 9 Financial Instruments addresses the classification, measurement and derecognition of financial assets and financial 2. Financial Risk Management The group’s activities expose it to a variety of financial risks; including market risk, credit risk and liquidity risk. The group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the group. The Chief Executive Officer, and Chief Financial Officer & Company Secretary, under the guidance of the audit and risk committee and the Board, have responsibility for the risk management program. (a) Market risk (i) Foreign Exchange Risk Foreign exchange risk arises when future commercial transactions and recognised assets and liabilities are denominated in a Cash and cash equivalents Trade and other receivables Trade and other payables liabilities. The standard is not applicable until 1 January 2017 but is available for early adoption. There will be no impact on the group’s accounting for financial liabilities, as the new requirements only affect the accounting for financial liabilities that are designated at fair value through profit or loss and the group does not have any such liabilities. The derecognition rules have been transferred from AASB 139 Financial Instruments: Recognition and Measurement and have not been changed. The group has not yet decided when to adopt AASB 9. There are no other standards that are not yet effective and that are expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions. (z) Parent entity financial information The financial information for the parent entity, Starpharma Holdings Limited, disclosed in note 26 has been prepared on the same basis as the consolidated financial statements, except as set out below. (i) Investments in subsidiaries, associates and joint venture entities Investments in subsidiaries, associates and joint venture entities are accounted for at cost in the financial statements of Starpharma Holdings Limited. Dividends received from associates are recognised in the parent entity’s profit or loss when its right to receive the dividend is established. (ii) Share-based payments The grant by the company of options and rights over its equity instruments to the employees of subsidiary undertakings in the group is treated as a capital contribution to that subsidiary undertaking. The fair value of employee services received, measured by reference to the grant date fair value, is recognised over the vesting period as an increase to investment in subsidiary undertakings, with a corresponding credit to equity. currency that is not the entity’s functional currency. The group operates internationally and is exposed to foreign exchange risk arising from currency exposures to major currencies including the US dollar. On the basis of the nature of these transactions, the group does not use derivative financial instruments to hedge such exposures, but maintains cash and deposits in both Australian and US dollars. The directors are regularly monitoring the potential impact of movements in foreign exchange exposure. The exposure to foreign currency risk at the reporting date using an US exchange rate of $0.9420 was as follows: 30 June 2014 US $’000 2,963 13 3 30 June 2013 US $’000 2,976 99 299 44 Starpharma Holdings Limited Annual Report 2014 Starpharma Holdings Limited Annual Report 44 Notes to the Consolidated Financial Statements 30 June 2014 Group Sensitivity The group is mainly exposed to US dollars. The following table details the group’s sensitivity to a 10% increase and decrease in the Australian dollar against the US dollar. A positive number indicates a favourable movement; that is an increase in profit or reduction in the loss. Impact on profit / (loss) on a movement of the US Dollar: Australian dollar strengthens (increases) against the US Dollar by 10% Australian dollar weakens (decreases) against the US Dollar by 10% (285) 348 (266) 325 30 June 2014 $’000 30 June 2013 $’000 (ii) Cash Flow Interest Rate Risk The group holds interest bearing assets and therefore the income and operating cash flows are exposed to market interest rates. At the end of the reporting period, the group had the following term and at call deposits. Refer to note 8 for additional information. Term Deposits and deposits at call Group Sensitivity 30 June 2014 $’000 22,559 30 June 2013 $’000 32,337 At 30 June 2014, if interest rates had changed by 50 basis points either higher or lower from the year end rates with all other variables held constant, group profit for the year would have been $113,000 higher or lower (2013 - change of 50 bps: $162,000 higher/lower) due to either higher or lower interest income from cash or cash equivalents. (b) Credit risk Credit risk is managed on a group basis. Credit risk arises from cash and cash equivalents with banks and financial institutions, as well as credit exposures from royalty and licensing agreements. Credit risk for cash and deposits with banks and financial institutions is managed by maximising deposits held under major Australian and US banks. Other than government tax incentives, third party receivables largely consist of research fees, royalty and licensing receivables from leading, multinational organisations. (c) Liquidity risk Prudent liquidity risk management implies maintaining sufficient cash and marketable securities. The directors regularly monitor the cash position of the group, giving consideration to the level of expenditure and future capital commitments entered into. (d) Fair value estimation The fair value of financial assets and financial liabilities must be estimated for recognition and measurement for disclosure purposes. The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and available-for-sale securities) is based on quoted market prices at the reporting date. The quoted market price used for financial assets held by the group is the current bid price. The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives and investments in unlisted subsidiaries) is determined using valuation techniques. The group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance date. Quoted market prices or dealer quotes for similar instruments are used for long- term debt instruments held. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining financial instruments. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows. The fair value of forward exchange contracts is determined using forward exchange market rates at the reporting date. The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to their short-term nature. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the group for similar financial instruments. Starpharma Holdings Limited Annual Report Starpharma Holdings Limited Annual Report 2014 45 45 Notes to the Consolidated Financial Statements 30 June 2014 3. Critical Accounting Estimates and Judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances. (a) Critical accounting estimates and assumptions The group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below. i) Amortisation of finite life intangible assets The group’s management determines the estimated life of the patents underlying the core technology of the business and calculates amortisation accordingly. The estimate is based on the period of expected benefit which is up to 20 years. This could change as a result of technical innovations or competitor actions in response to severe industry cycles. Management will increase amortisation charges when the useful lives are less than their previously estimated lives. The carrying value of intangible assets at 30 June 2014 is $7,755,000 (2013: $8,807,000). ii) Impairment of Goodwill The group tests annually whether goodwill has suffered any impairment in accordance with the accounting policy stated in notes 1(i) and 1(o). Impairment of goodwill is considered based on the fair value less cost to sell of the cash generating units over which the goodwill is allocated. Performing the assessment of fair value less costs to sell requires the use of assumptions. Refer to note 11 for details of these assumptions. iii) Income Taxes The group is subject to income taxes in Australia and the United States of America. There are transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination may be uncertain. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred tax provisions in the period in which such determination is made. The group has not recognised deferred tax assets or liabilities, including carried forward losses due to the realisation of such benefits as uncertain. The utilisation of tax losses also depends on the ability of the entity to satisfy certain tests at the time the losses are recouped. iv) R&D Tax Incentives The group’s research and development activities are eligible under an Australian Government tax incentive for eligible expenditure from 1 July 2011. Management has assessed these activities and expenditure to determine which are likely to be eligible under the incentive scheme. For the period to 30 June 2014 the group has recorded a contra research and development expense of $4,222,000 (2013: $8,704,000). Of the 2013 total, $4,071,000 relates to 2012 expenditure not previously booked in 2012 due to the uncertainty of its eligibility. Subsequent to the 2012 results, Starpharma received an advance finding from AusIndustry that covers a 3 year period from 1 July 2011. (b) Critical accounting judgements in applying accounting policies i) Impairment of Assets The group follows the guidance of AASB 136 on determining when an investment is other-than-temporarily impaired. This determination requires significant judgement. In making these judgements, the group evaluates, among other factors, the duration and extent to which the fair value of an investment is less than its cost and the financial health of the near-term business outlook for the investee. This includes factors such as industry performance, changes in technology, operating and financing cash flow and recent transactions involving equity instruments. 4. Segment Information The group has determined that on the basis of internal reporting and monitoring to the Chief Executive Officer, who is the chief operating decision maker, the group operates in one business segment, being the discovery, development and commercialisation of dendrimers for pharmaceutical, life science and other applications. 5. Revenue and Other Income Revenue and other income Royalty, customer & licence revenue Interest revenue Other revenue Total revenue Government grants Total other income Total revenue and other income 30 June 2014 $’000 30 June 2013 $’000 273 973 - 1,246 7 7 1,253 840 1,569 20 2,429 5 5 2,434 Total revenue and other income for the year was $1,253,000, a reduction of $1,181,000 from the previous year, mainly due to lower interest revenue earned on cash deposits and lower revenue from commercial partners. 46 Starpharma Holdings Limited Annual Report 2014 Starpharma Holdings Limited Annual Report 46 Notes to the Consolidated Financial Statements 30 June 2014 6. Expenses Loss from continuing operations before income tax expense includes the following items: 30 June 2014 $’000 30 June 2013 $’000 R&D tax incentive (contra expense)1 (4,222) (8,704) Depreciation Amortisation Rental expense on operating leases Defined contribution superannuation expense 1 Refer to Note 3 a) iv) for further information. 7. Income Tax Expense (a) Income tax expense/(credit) Current Tax Deferred Tax Total income tax expense Income tax expense is attributable to: Profit from continuing operations Profit from discontinued operations Aggregate income tax credit Deferred income tax credit (revenue) / expense included in income tax credit comprises: (Decrease) in deferred tax liabilities (b) Numerical reconciliation to income tax credit prima facie tax payable Loss from continuing operations before income tax Tax at the Australian tax rate of 30% (2013: 30%) Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Eligible expenses claimed under R&D tax incentive Amortisation of intangibles Share-based payments Unearned income Sundry items Difference in overseas tax rates Previously unrecognised tax losses now recouped to reduce current tax expense Future income tax benefits not brought to account Income tax credit Starpharma Holdings Limited Annual Report Starpharma Holdings Limited Annual Report 2014 153 943 434 437 159 891 444 402 30 June 2014 $’000 30 June 2013 $’000 – – – – – – – – – – – – – – – – 30 June 2014 $’000 30 June 2013 $’000 (14,635) (4,390) 1,503 174 448 50 24 29 (5) 2,167 – (5,229) (1,569) 477 170 287 (74) 202 26 (179) 660 – 47 47 Notes to the Consolidated Financial Statements 30 June 2014 7. Income Tax Expense (continued) 30 June 2014 $’000 30 June 2013 $’000 (c) Tax losses Unused tax losses for which no deferred tax asset has been recognised (as recovery is currently not probable) Potential tax benefit (d) Unrecognised temporary differences Temporary differences for which no deferred tax asset has been recognised as recoverability is not probable Unrecognised deferred tax relating to the temporary differences (e) Deferred tax liabilities Deferred tax liabilities comprises temporary differences attributable to: Intangibles Sundry items Total deferred tax liabilities Set-off of deferred tax liabilities pursuant to set-off provisions Net deferred tax liabilities Deferred tax liabilities expected to be settled within 12 months Deferred tax liabilities expected to be settled after 12 months 72,641 21,874 26,265 7,819 1,458 464 1,922 (1,922) – 464 1,458 1,922 65,680 19,704 20,304 6,185 1,659 111 1,770 (1,770) – 111 1,659 1,770 Deferred tax assets and deferred tax liabilities have been set off as there is a legally recognised right to set off current tax assets and liabilities, and the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority. Deferred tax assets mainly comprises of temporary differences attributable to tax losses. Potential future income tax benefits attributable to tax losses carried forward have not been brought to account at 30 June 2014 because the directors do not believe that it is appropriate to regard realisation of the future income tax benefit as probable. Similarly, future benefits attributable to net temporary differences have not been brought to account as the directors do not regard the realisation of such benefits as probable. Realisation of the benefit of tax losses would be subject to the group satisfying the conditions for deductibility imposed by tax legislation and no subsequent changes in tax legislation adversely affecting the group. The group is making an assessment as to the satisfaction of deductibility conditions at 30 June 2014 which it believes will be satisfied. 8. Current Assets – Cash and Cash Equivalents Cash at bank and on hand Term Deposits and deposits at call 30 June 2014 $’000 30 June 2013 $’000 1,469 22,559 24,028 1,503 32,337 33,840 Cash at bank and on hand The cash is bearing floating interest rates based on current bank rates. Term deposits and deposits at call The term deposits have maturities of 3 months or less. Funds in deposits at call allow the group to withdraw funds on demand. Cash not available There is $415,023 (2013: $458,000) of cash not available for use due to restrictions associated with a finance lease and credit card facility which is guaranteed by term deposits. Interest rate risk With the exception of loans to controlled entities, current receivables are non-interest bearing. 48 Starpharma Holdings Limited Annual Report 2014 Starpharma Holdings Limited Annual Report 48 Notes to the Consolidated Financial Statements 30 June 2014 30 June 2014 Floating Interest rate Notes $’000 Financial Assets Fixed interest maturing 1 year or less $’000 1 to 2 years $’000 2 to 3 years $’000 3 to 4 years $’000 4 to 5 years $’000 More than 5 years $’000 Non- interest bearing $’000 Contractual Total $’000 cash flows Cash & deposits Receivables 8 9 2,034 20,621 – – 2,034 20,621 – – – – – – – – – – – – – – – 1,373 24,028 N/A 4,570 4,570 4,570 5,943 28,598 4,570 Weighted average interest rate Financial Liabilities Payables Borrowings 12 13 Weighted average interest rate 2.7% 3.3% –% –% –% –% –% –% – – – – 27 27 – 30 30 – 18 18 – – – – – – – – – 3,114 3,114 3,114 – 75 75 3,114 3,189 3,189 –% 8.2% 8.2% 8.2% –% –% –% –% 30 June 2013 Floating Interest rate Fixed interest maturing Notes $’000 1 year or less $’000 1 to 2 years $’000 2 to 3 years $’000 3 to 4 years $’000 4 to 5 years $’000 More than 5 years $’000 Non- interest bearing $’000 Contractual Total $’000 cash flows Financial Assets Cash & deposits Receivables 8 9 Weighted average interest rate Financial Liabilities Payables Borrowings 12 13 Weighted average interest rate 2,427 30,004 – – 2,427 30,004 – – – – – – – – – – – – – – – 1,409 33,840 N/A 5,492 5,492 5,492 6,901 39,332 5,492 2.8% 4.0% –% –% –% –% –% –% – – – – 25 25 – 27 27 – 30 30 – 18 18 – – – – – – 1,696 1,696 1,696 – 100 100 1,696 1,796 1,796 –% 8.2% 8.2% 8.2% 8.2% –% –% –% Starpharma Holdings Limited Annual Report Starpharma Holdings Limited Annual Report 2014 49 49 Notes to the Consolidated Financial Statements 30 June 2014 9. Current Assets – Trade and Other Receivables Trade and grant receivables Interest receivables Prepayments Other receivables Trade and grant receivables Trade and grant receivables primarily comprise of $4,154,000 (2013: $4,632,000) of expenditure reimbursable under the Australian Government’s R&D tax incentive scheme. Other trade receivables are associated with research and development projects and are subject to normal terms of settlement within 30 to 90 days. Credit risk The group considers that there is no significant concentration of credit risk with respect to current receivables. Grant receivables are with government bodies and trade receivables are from large, well respected companies. Loans to controlled entities are assessed for recoverability and provisions are applied as considered appropriate. 30 June 2014 $’000 30 June 2013 $’000 4,211 120 154 85 4,570 4,869 354 178 91 5,492 Impaired receivables As at 30 June 2014, there were no trade and grant receivables that were past due (2013: nil). No receivables are considered impaired at 30 June 2014 (2013: nil) other than from subsidiaries within the group. Other receivables Other receivables comprise sundry debtors and GST claimable and are subject to normal terms of settlement within 30 to 90 days. 50 Starpharma Holdings Limited Annual Report 2014 Starpharma Holdings Limited Annual Report 50 Notes to the Consolidated Financial Statements 30 June 2014 10. Non-Current Assets – Property, Plant and Equipment Plant and Equipment $’000 Leasehold improvements $’000 Plant and Equipment under finance lease $’000 Total Plant and Equipment $’000 At 30 June 2012 Cost Accumulated depreciation and amortisation Net book amount Year ended 30 June 2013 Opening net book amount Additions Disposals Depreciation and amortisation Closing net book amount At 30 June 2013 Cost Accumulated depreciation and amortisation Net book amount Year ended 30 June 2014 Opening net book amount Additions Disposals Depreciation and amortisation Closing net book amount At 30 June 2014 Cost Accumulated depreciation and amortisation Net book amount 2,138 (1,903) 235 235 152 (1) (88) 298 2,116 (1,818) 298 298 244 – (115) 427 2,203 (1,776) 427 1,187 (1,165) 22 22 5 – (22) 5 1,193 (1,188) 5 5 7 – (8) 4 1,199 (1,195) 4 419 (262) 157 157 – – (49) 108 419 (311) 108 108 – – (30) 78 419 (341) 78 Starpharma Holdings Limited Annual Report Starpharma Holdings Limited Annual Report 2014 3,744 (3,330) 414 414 157 (1) (159) 411 3,728 (3,317) 411 411 251 – (153) 509 3,821 (3,312) 509 51 51 Notes to the Consolidated Financial Statements 30 June 2014 11. Non-Current Assets – Intangible Assets Patents & Licences $’000 Goodwill $’000 Total Intangibles $’000 At 30 June 2012 Cost Accumulated depreciation and amortisation Net book amount Year ended 30 June 2013 Opening net book amount Exchange differences Depreciation and amortisation Closing net book amount At 30 June 2013 Cost Accumulated depreciation and amortisation Net book amount Year ended 30 June 2014 Opening net book amount Exchange differences Depreciation and amortisation Closing net book amount At 30 June 2014 Cost Accumulated depreciation and amortisation Net book amount 15,417 (7,889) 7,528 7,528 564 (891) 7,201 16,507 (9,306) 7,201 7,201 (84) (943) 6,174 16,321 (10,147) 6,174 1,461 – 1,461 1,461 145 – 1,606 1,606 – 1,606 1,606 (25) – 1,581 1,581 – 1,581 16,878 (7,889) 8,989 8,989 709 (891) 8,807 18,113 (9,306) 8,807 8,807 (109) (943) 7,755 17,902 (10,147) 7,755 (a) Impairment tests for goodwill Goodwill is tested annually for impairment, and an impairment loss is recognised for the amount by which the carrying amount exceeds the recoverable amount. The recoverable amount is the higher of fair value less costs to sell and value in use. The group has companies in both Australia and the United States – these are also determined to be the Cash Generating Units (CGUs) of the group. The directors have determined that the goodwill (which arose on the acquisition of the remaining share of the US business and intellectual property) should be allocated across these CGUs as the business combination gives rise to synergies within the group’s Australian and United States companies and their intellectual property. The recoverable amounts of the group’s CGUs have been determined based on estimation of their fair value less costs to sell. (b) Key assumptions used for fair value less costs to sell estimation The market capitalisation of the group is used to determine an approximation of the fair value less costs to sell of the two CGUs which make up the group. Given the excess of the market capitalisation of Starpharma Holdings Limited over the carrying value of total assets (including goodwill) at 30 June 2014, goodwill is not considered to be impaired at the end of the reporting period. (c) Impairment tests for finite life intangible assets Identifiable intangible assets with finite lives are carried at cost less accumulated amortisation and adjusted for any accumulated impairment loss. The directors have assessed these assets for indicators of impairment at 30 June 2014 and determined that there is no indication that the asset is impaired. (d) Remaining useful life The patents being amortised have a remaining useful life of 1-12 years as at 30 June 2014. 52 Starpharma Holdings Limited Annual Report 2014 Starpharma Holdings Limited Annual Report 52 Notes to the Consolidated Financial Statements 30 June 2014 12. Current Liabilities – Trade and Other Payables Trade payables and accruals Other payables 30 June 2014 $’000 30 June 2013 $’000 2,586 528 3,114 1,208 488 1,696 Trade payables and accruals The majority of trade payables are related to expenditure associated with the group’s research and development programs. 13. Current and Non-Current Liabilities – Borrowings Lease liabilities are effectively secured as the rights to the leased assets recognised in the financial statements revert to the lessor in the event of default. 2014 Floating Interest rate Lease Liabilities Notes 20 Weighted average interest rate –% 8.2% 8.2% 8.2% – 27 30 18 – –% – – 75 –% –% Fixed interest rate 1 year or less $’000 Over 1–2 years $’000 Over 2–3 years $’000 Over 3–4 years $’000 Over 4–5 years $’000 Over 5 years $’000 Total $’000 2013 Floating Interest rate Fixed interest rate Notes 20 1 year or less $’000 Over 1–2 years $’000 Over 2–3 years $’000 Over 3–4 years $’000 Over 4–5 years $’000 Over 5 years $’000 Total $’000 – 25 27 30 18 – – 100 Lease Liabilities Weighted average interest rate –% 8.2% 8.2% 8.2% 8.2% –% –% Starpharma Holdings Limited Annual Report Starpharma Holdings Limited Annual Report 2014 53 53 Notes to the Consolidated Financial Statements 30 June 2014 14. Contributed Equity (a) Share capital Share Capital 2014 Shares 2013 Shares 2014 $’000 2013 $’000 Ordinary shares – fully paid 285,109,680 283,814,948 140,349 140,081 (b) Movements in ordinary share capital Date Details 1 Jul 2012 11 Jul 2012 Proceeds on exercise of options 11 Jul 2012 Proceeds on exercise of employee options 16 Jul 2012 Proceeds on exercise of options 13 Aug 2012 Proceeds on exercise of employee options 23 Aug 2012 Proceeds on exercise of options 13 Sep 2012 Employee performance rights plan share issue 13 Sep 2012 Proceeds on exercise of employee options 5 Oct 2012 Employee performance rights plan share issue 18 Jan 2013 Employee share plan ($1,000) issue 19 Jun 2013 Proceeds on exercise of employee options Number of shares Issue Price 280,802,451 $’000 139,171 260,660 150,000 477,290 150,000 946,859 717,800 10,000 125,000 25,888 149,000 $0.43 $0.29 $0.43 $0.29 $0.43 $ – $0.37 $ – $1.24 $0.37 Balance at 30 June 2013 283,814,948 Date Details 1 Jul 2013 Number of shares Issue Price 283,814,948 12 Jul 2013 Proceeds on exercise of employee options 2 Sep 2013 Proceeds on exercise of employee options 2 Oct 2013 Employee performance rights plan share issue 29 Nov 2013 Employee performance rights plan share issue 6 Dec 2013 Proceeds on exercise of employee options 30 Jan 2014 Employee share plan ($1,000) issue 19 Feb 2014 Employee performance rights plan share issue 22 May 2014 Proceeds on exercise of employee options 18 Jun 2014 Proceeds on exercise of employee options 50,000 100,000 200,000 410,000 40,000 39,732 10,000 250,000 195,000 $0.37 $0.37 $ – $ – $0.37 $0.83 $ – $0.37 $0.37 113 43 207 43 412 – 4 – 32 56 140,081 $’000 140,081 18 37 – – 15 33 – 93 72 Balance at 30 June 2014 285,109,680 140,349 (c) Ordinary shares As at 30 June 2014 there were 285,109,680 issued ordinary shares. Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the company in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote. Ordinary shares have no par value and the company does not have a limited amount of authorised capital. There is no current on-market share buy-back. (d) Employee Share Plan ($1,000 Plan) Information relating to the Employee Share Plan, including details of shares issued under the plan, is set out in note 25. (e) Employee Performance Rights Plan Information relating to the Employee Performance Rights Plan, including details of rights issued under the plan, is set out in note 25. (f) Options Information relating to the Starpharma Holdings Limited Employee Share Option Plan, including details of options issued, exercised and expired during the financial year and options outstanding at the end of the financial year are set out in note 25. (g) Capital risk management The group’s and the parent entity’s objectives when managing capital are to safeguard their ability to continue as a going concern, so that they can continue to provide returns for shareholders and benefits for other stakeholders. In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets. 54 Starpharma Holdings Limited Annual Report 2014 Starpharma Holdings Limited Annual Report 54 Notes to the Consolidated Financial Statements 30 June 2014 15. Reserves (a) Reserves Share-based payments reserve Foreign currency translation reserve Asset revaluation reserve (b) Movement in reserves Share-based payments reserve Balance at 1 July Performance right expense Balance at 30 June Foreign currency translation reserve Balance at 1 July Currency translation differences arising during the year Balance at 30 June (c) Nature and purpose of reserves (i) Share-based payments reserve The share-based payments reserve is used to recognise the fair value of options and performance rights granted. (ii) Foreign currency translation reserve Exchange differences arising on translation of the foreign subsidiary are taken to the foreign currency translation reserve, as described in Note 1(d). The reserve is recognised in income statement when the net investment is disposed of. 16. Accumulated Losses Accumulated losses balance at 1 July Net loss for the year Accumulated losses balance at 30 June 30 June 2014 $’000 30 June 2013 $’000 5,648 (3,011) 2,215 4,852 30 June 2014 $’000 4,188 1,460 5,648 (2,901) (110) (3,011) 4,188 (2,901) 2,215 3,502 30 June 2013 $’000 3,265 923 4,188 (3,614) 713 (2,901) (iii) Asset revaluation reserve The uplift in fair value of the identifiable net assets of Dendritic Nanotechnologies Inc. on the company’s acquisition of the remaining share in October 2006 was recognised in reserves. 30 June 2014 $’000 (97,615) (14,635) (112,250) 30 June 2013 $’000 (92,386) (5,229) (97,615) Starpharma Holdings Limited Annual Report Starpharma Holdings Limited Annual Report 2014 55 55 Notes to the Consolidated Financial Statements 30 June 2014 17. Related Party Transactions (a) Parent entity and subsidiaries The parent entity of the group is Starpharma Holdings Limited. Interests in subsidiaries are set out in note 21. (c) Key management personnel compensation Short-term employee benefits Post-employment benefits Other long term benefits Share-based payments (b) Transactions with related parties There are related party transactions within the group between the parent and subsidiaries. Transactions include funds advanced to/from entities and the associated interest charge; and management and services fees. All transactions were made on an arm’s length basis. 30 June 2014 $ 30 June 2013 $ 2,226,843 186,089 39,461 978,306 3,430,699 2,101,668 167,095 79,592 588,661 2,937,016 Detailed remuneration disclosures are provided in the remuneration report on pages 18 to 25. 18. Remuneration of Auditors The company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the company and/or the consolidated group are important. Details of the amounts paid or payable to the auditor (PricewaterhouseCoopers) for audit and Statutory audit services Audit or review of financial reports of the entity or any entity in the consolidated entity PricewaterhouseCoopers Total remuneration for statutory audit services No other audit services were performed in the current or prior year. non-audit services provided during the year are set out below. During the year the following fees were paid or payable for services provided by the auditor (PricewaterhouseCoopers) of the parent entity, its related practices and non-related audit firms: 30 June 2014 $ 30 June 2013 $ 92,106 92,106 87,600 87,600 19. Contingencies The company has no contingent assets or liabilities at 30 June 2014 (2013: nil). 56 Starpharma Holdings Limited Annual Report 2014 Starpharma Holdings Limited Annual Report 56 Notes to the Consolidated Financial Statements 30 June 2014 20. Commitments (a) Capital Commitments There is no capital expenditure contracted for, not recognised as liabilities at the reporting date (2013: nil). (b) Lease Commitments Operating leases The group leases laboratory and offices under a lease until 31 August 2015. Commitments for minimum lease payments in relation to cancellable operating leases are payable as follows: Not later than one year Later than one year and not later than five years Later than five years Representing cancellable operating leases 30 June 2014 $’000 30 June 2013 $’000 380 70 – 450 366 450 – 816 Finance Leases The group leases plant and equipment under a finance leases expiring within three (2013: four) years. Commitments in relation to finance leases are payable as follows: Notes 30 June 2014 $’000 30 June 2013 $’000 Not later than one year Later than one year and not later than five years Later than five years Minimum lease payments Future finance charges Recognised as a liability Representing finance lease liabilities: Current Non-Current 13 13 The weighted average interest rate implicit in the lease is 8.2% (2013: 8.2%). 32 51 – 83 (8) 75 27 48 75 32 84 – 116 (16) 100 25 75 100 (c) Expenditure Commitments The group has entered into various agreements for research, development and clinical services. These agreements have typical termination provisions to limit the commitment to the time and materials expended at termination, or up to an approved work order amount. (d) Termination Commitments The service contracts of key management personnel include benefits payable by the group on termination of the employee’s contract. Refer to the remuneration report for details of these commitments. Starpharma Holdings Limited Annual Report Starpharma Holdings Limited Annual Report 2014 57 57 Notes to the Consolidated Financial Statements 30 June 2014 21. Subsidiaries The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1(b). Name of entity Starpharma Pty Limited Angiostar Pty Limited1 Viralstar Pty Limited1 Dendritic Nanotechnologies Inc. Country of Incorporation Class of Shares Australia Australia Australia USA Ordinary Ordinary Ordinary Ordinary 2014 % 100.00% -% -% 100.00% Equity Holding 2013 % 100.00% 100.00% 100.00% 100.00% 1 Angiostar Pty Ltd and Viralstar Pty Ltd, were deregistered with ASIC on date 20 November 2013, these were non-operating subsidiaries. 22. Events Occurring After the Balance Sheet Date The company commenced its phase 3 clinical trials of VivaGel® for the prevention of recurrent bacterial vaginosis after the protocol design received written approval in July 2014 under a Special Protocol Assessment (SPA) from the US Food and Drug Administration (FDA). In July 2014, the VivaGel® condom received Conformity Assessment Certification from the Australian TGA. Ansell will launch the VivaGel® condom in the coming months under their brand Lifestyles® Dual ProtectTM, following listing on the Australian Register of Therapeutic Goods (ARTG). No other matters or circumstances have arisen since 30 June 2014 that have significantly affected, or may significantly affect: (a) the consolidated entity’s operations in future financial years, or (b) the results of those operations in future financial years, or (c) the consolidated entity’s state of affairs in future financial years. 23. Reconciliation of Profit After Income Tax to Net Cash Inflow from Operating Activities Operating loss after tax Depreciation and amortisation Foreign exchange (gains) / losses Non-cash employee benefits: share-based payments Gain (loss) on sale of property, plant and equipment Change in operating assets and liabilities, net of effects of acquisitions and disposals of entities: Decrease (increase) in receivables and other assets Increase (decrease) increase in trade creditors Increase in employee provisions Increase (decrease) in deferred income Net cash outflows from operating activities 30 June 2014 $’000 (14,635) 1,096 (49) 1,493 – 928 1,418 3 (67) (9,813) 30 June 2013 $’000 (5,229) 1,050 (151) 955 (1) (3,424) (2,796) 86 (285) (9,795) 58 Starpharma Holdings Limited Annual Report 2014 Starpharma Holdings Limited Annual Report 58 Notes to the Consolidated Financial Statements 30 June 2014 24. Earnings Per Share Basic loss per share ($) Diluted loss per share ($) Net loss attributable to members of Starpharma Holdings Ltd used as the numerator in calculating diluted and basic earnings per share ($’000) 30 June 2014 30 June 2013 (0.05) (0.05) (14,635) (0.02) (0.02) (5,229) Weighted average number of ordinary shares outstanding during the year used as the denominator in calculating diluted and basic earnings per share 284,414,837 283,281,880 As at 30 June 2014 the company had on issue nil (30 June 2013: 635,000) share options and 3,161,000 (30 June 2013: 1,970,900) performance rights that are not considered dilutive. The options and rights have not been included in the determination of basic earnings per share. The options and rights granted are considered to be potential ordinary shares and have been included in the determination of diluted earnings per share to the extent to which they are dilutive. Given the entity is currently loss making, the potential shares are anti-dilutive and have therefore not been included in the diluted earnings per share calculation. 25. Share-Based Payments Options (a) Employee Option Plan The establishment of the Starpharma Holdings Limited Employee Share Option Plan (ASX code SPLAM) was approved by shareholders at the Annual General Meeting held on 17 November 2004 and re-approved on 14 November 2007. All full-time or part- time employees and directors of the company or associated companies are eligible to participate in the Plan. The objective of the Plan is to assist in the recruitment, reward, retention and motivation of employees of the company. Options are granted under the plan for no consideration. The vesting period is 1 to 2 years from date of grant, with the exercise period 2 to 3 years from the end of the vesting period. Options granted under the plan carry no dividend or voting rights. Each option is personal to the participant and is not transferable, transmissible, assignable or chargeable, except with the written consent of the remuneration and nomination committee. No options were granted in the current or prior year. (b) Options Attached to a Share Placement The company issued 7,567,119 unlisted options attached to a share placement in August 2007. The options have an exercise price of $0.4346 per option with an expiry date of 21 August 2012. Options granted carry no dividend or voting rights. The remaining balance of 1,684,809 options was exercised before the expiry date. Starpharma Holdings Limited Annual Report Starpharma Holdings Limited Annual Report 2014 59 59 Notes to the Consolidated Financial Statements 30 June 2014 25. Share-Based Payments (continued) Set out below are summaries of options under the schemes: 2014 Grant Date Expiry Date Consolidated and parent entity Exercise Price Balance at start of the year Exercised during the year Forfeited during the year Expired during the year Balance at end of the year Exercisable at end of the year $ Number Number Number Number Number Number 29 Jun 2009 a 28 Jun 2014 $0.37 635,000 635,000 Total 635,000 635,000 – – Weighted average exercise price $0.37 $0.37 $ – – – $ – – – – – $ – $ – 2013 Grant Date Expiry Date Consolidated and parent entity Exercise Price Balance at start of the year Exercised during the year Forfeited during the year Expired during the year Balance at end of the year Exercisable at end of the year $ Number Number Number Number Number Number 21 Aug 2007b 22 Aug 2012 $0.43 1,684,809 1,684,809 1 Jan 2009 a 28 Aug 2012 $0.29 300,000 300,000 29 Jun 2009 a 28 Jun 2014 $0.37 794,000 159,000 Total 2,778,809 2,143,809 – – – – – – – – – – – – 635,000 635,000 635,000 635,000 Weighted average exercise price $0.40 $0.41 $ – $ – $0.37 $0.37 a Options granted under the Employee Option Plan. b Options granted under a share placement. No options were granted in the current or prior year. The weighted average share price at the date of exercise of options exercised during the year ended 30 June 2014 was $0.72 (2013: $1.44). The weighted average remaining contractual life of share options outstanding at the end of the period was nil years (2013: 1.00 year). Where options are issued to employees of subsidiaries within the group, the subsidiaries compensate Starpharma Holdings Limited for the amount recognised as an expense in relation to these options. (c) Fair value of options granted There were no options granted in the current or prior year. The fair value at grant date of options granted in earlier years were independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term of the option, the impact of dilution, the share price at grant date and the expected price volatility of the underlying share, the expected dividend yield and the risk free rate for the term of the option. The expected price volatility is based on the historic volatility (based on the remaining life of the options), adjusted for any expected changes to future volatility due to publicly available information. Options are granted for no consideration, and have varying exercise and expiry dates. Shares (a) Employee Share Plan ($1,000 Plan) All executives and staff, excluding directors, are eligible to participate in the Starpharma Employee Share Plan ($1,000 Plan). The objective of the $1,000 Plan is to assist in the reward, retention and motivation of employees of the group. An annual allocation of up to $1,000 of shares may be granted and taxed on a concessional basis. Shares are granted under the $1,000 Plan for no consideration and are escrowed for 3 years while participants are employed by the group. (b) Fair value of shares granted The weighted average assessed fair value at grant date of employee shares granted during the year ended 30 June 2014 was $0.83 (2013: $1.235 per share). The fair value at grant date is determined by the share price on the date of grant. Employee shares were granted for no consideration. 60 Starpharma Holdings Limited Annual Report 2014 Starpharma Holdings Limited Annual Report 60 Notes to the Consolidated Financial Statements 30 June 2014 Information used in assessing the fair value of shares granted during the year ended 30 June 2014 is as follows: Share grant date Number of shares granted Share price at grant date Assessed fair value Information used in assessing the fair value of shares granted during the year ended 30 June 2013 is as follows: Share grant date Number of shares granted Share price at grant date Assessed fair value Performance Rights 30 January 2014 39,732 $0.83 $0.83 18 January 2013 25,888 $1.235 $1.235 (a) Employee Performance Rights Plan In 2010 the Board approved the introduction of the Employee Performance Rights Plan, which was subsequently approved by shareholders at the 2011 annual general meeting. All executives and staff, including the CEO, are eligible to participate in the Plan. The Plan allows for the issue of performance rights (being rights to receive fully paid ordinary shares subject to continued employment with the company and the satisfaction of certain performance hurdles over a specified period). A further holding lock period may also be applied to restrict disposal after the vesting date. Performance rights are granted under the Plan for no consideration. The objective of the Plan is to assist in the recruitment, reward, retention and motivation of employees of the company. (b) Fair value of performance rights granted The weighted average assessed fair value at grant date of performance rights granted during the year ended 30 June 2014 was $0.83 per right (2013: $1.08). There were 2,211,600 performance rights granted in the current year (2013: 1,682,400). The estimated fair value at grant date is determined using either an option pricing or a binomial model that takes into account the exercise price, the performance measure, the term of the right, the impact of dilution, the share price at grant date and the expected price volatility of the underlying share, the expected dividend yield and the risk free rate for the term of the option. The expected price volatility is based on the historic volatility, adjusted for any expected changes to future volatility due to publicly available information. Set out below are summaries of performance rights: 2014 Grant Date Vesting Date Holding Lock Date Balance at start of the year Granted during the year Converted during the year Forfeited during the year Balance at end of the year 25 Nov 2011 25 Nov 2013 25 Nov 2014 13 Sep 2012 19 Sep 2014 19 Sep 2015 30 Nov 2012 30 Sep 2013 30 Sep 2014 30 Nov 2012 30 Nov 2014 30 Nov 2015 30 Nov 2012 30 Nov 2015 30 Nov 2016 16 Sep 2013 16 Sep 2015 16 Sep 2016 22 Nov 2013 30 Sep 2014 30 Sep 2015 22 Nov 2013 22 Nov 2015 22 Nov 2016 22 Nov 2013 22 Nov 2016 22 Nov 2017 Number 410,000 600,900 400,000 200,000 360,000 – – – – Number – – – – – 1,261,600 500,000 200,000 250,000 Number 410,000 10,000 200,000 – – – – – – Number Number – 91,500 200,000 – – – 499,400 – 200,000 360,000 110,000 1,151,600 – – – 500,000 200,000 250,000 Total 1,970,900 2,211,600 620,000 401,500 3,161,000 Starpharma Holdings Limited Annual Report Starpharma Holdings Limited Annual Report 2014 61 61 Notes to the Consolidated Financial Statements 30 June 2014 25. Share-Based Payments (continued) 2013 Grant Date Vesting Date Holding Lock Date Balance at start of the year Granted during the year Converted during the year Forfeited during the year Balance at end of the year 2 Sep 2010 31 Aug 2012 31 Aug 2013 10 Nov 2011 25 Nov 2011 30 Sep 2012 30 Sep 2013 25 Nov 2013 25 Nov 2014 13 Sep 2012 19 Sep 2014 19 Sep 2015 30 Nov 2012 30 Sep 2013 30 Sep 2014 30 Nov 2012 30 Nov 2014 30 Nov 2015 30 Nov 2012 30 Nov 2015 30 Nov 2016 15 Jan 2013 15 Jan 2015 15 Jan 2016 Number 717,800 375,000 457,500 – – – – – Number – – – 672,400 400,000 200,000 360,000 50,000 Number 717,800 125,000 – – – – – – Number Number – 250,000 47,500 71,500 – – – 50,000 – – 410,000 600,900 400,000 200,000 360,000 – Total 1,550,300 1,682,400 842,800 419,000 1,970,900 Information used in assessing the fair value of performance rights granted during the year ended 30 June 2014 is as follows: Right grant date 16 September 2013 22 November 2013 22 November 2013 22 November 2013 Number of rights granted 1,261,600 500,000 50,000 50,000 Vesting date 16 September 2015 30 September 2014 22 November 2015 22 November 2015 Disposal Restriction until 16 September 2016 30 September 2015 22 November 2016 22 November 2016 Performance Measure Expected price volatility of the company's shares Risk-free interest rate Expected dividend yield Share price at grant date Assessed fair value KPIs 50% 2.7% - $0.89 $0.89 KPIs Continued Employment Index TSR 50% 2.5% - $0.89 $0.85 50% 2.7% - $0.89 $0.85 50% 2.7% - $0.89 $0.55 Right grant date 22 November 2013 22 November 2013 22 November 2013 22 November 2013 Number of rights granted 100,000 100,000 50,000 100,000 Vesting date 22 November 2015 22 November 2016 22 November 2016 22 November 2016 Disposal Restriction until 22 November 2016 22 November 2017 22 November 2017 22 November 2017 Performance Measure Index TSR+10% Continued Employment Index TSR Index TSR+10% Expected price volatility of the company's shares Risk-free interest rate Expected dividend yield Share price at grant date Assessed fair value 50% 2.7% - $0.89 $0.54 50% 3.0% - $0.89 $0.85 50% 3.0% - $0.89 $0.58 50% 3.0% - $0.89 $0.55 62 Starpharma Holdings Limited Annual Report 2014 Starpharma Holdings Limited Annual Report 62 Notes to the Consolidated Financial Statements 30 June 2014 Information used in assessing the fair value of performance rights granted during the year ended 30 June 2013 is as follows: Right grant date 13 September 2012 30 November 2012 30 November 2012 30 November 2012 Number of rights granted 672,400 100,000 100,000 200,000 Vesting date 19 September 2014 30 September 2013 30 September 2013 30 September 2013 Disposal Restriction until 19 September 2015 30 September 2014 30 September 2014 30 September 2014 Performance Measure Expected price volatility of the company's shares Risk-free interest rate Expected dividend yield Share price at grant date Assessed fair value KPIs Share Price ≥ $1.86 Share Price ≥ $2.09 55% 2.8% - $1.55 $1.55 50% 3.0% - $1.16 $0.19 50% 3.0% - $1.16 $0.12 KPIs 50% 3.0% - $1.16 $1.10 Right grant date 30 November 2012 30 November 2012 30 November 2012 30 November 2012 Number of rights granted 50,000 50,000 100,000 80,000 Vesting date 30 November 2014 30 November 2014 30 November 2014 30 November 2015 Disposal Restriction until 30 November 2015 30 November 2015 30 November 2015 30 November 2016 Performance Measure Continued Employment Index TSR Index TSR+10% Continued Employment Expected price volatility of the company's shares Risk-free interest rate Expected dividend yield Share price at grant date Assessed fair value Right grant date Number of rights granted Vesting date Disposal Restriction until Performance Measure Expected price volatility of the company's shares Risk-free interest rate Expected dividend yield Share price at grant date Assessed fair value 55% 2.8% - $1.16 $1.10 55% 2.8% - $1.16 $0.72 55% 2.8% - $1.16 $0.70 60% 2.7% - $1.16 $1.10 30 November 2012 30 November 2012 15 January 2013 80,000 200,000 50,000 30 November 2015 30 November 2015 15 January 2015 30 November 2016 30 November 2016 15 January 2016 Index TSR Index TSR+10% 60% 2.7% - $1.16 $0.77 60% 2.7% - $1.16 $0.76 KPIs 50% 3.3% - $1.17 $1.12 Share price volatility and the risk-free interest rate are obtained through an independent valuation. Expenses arising from share-based payment transactions Total expenses arising from share-based payment transactions recognised during the period were as follows: Employee shares issued Employee performance rights issued Starpharma Holdings Limited Annual Report Starpharma Holdings Limited Annual Report 2014 30 June 2014 $’000 30 June 2013 $’000 33 1,460 1,493 32 923 955 63 63 Notes to the Consolidated Financial Statements 30 June 2014 26. Parent Entity Financial Information (a) Summary financial information The individual financial statements for the parent entity show the following aggregate amounts: Balance Sheet Current assets Total assets Current liabilities Total liabilities Shareholders’ equity Contributed equity Reserves Accumulated losses Loss for the year Total comprehensive income (b) Contingencies of the parent entity The parent entity has no contingent assets or liabilities at 30 June 2014 (2013: nil). 30 June 2014 30 June 2013 Parent $'000 22,657 39,342 800 800 140,349 5,139 (106,946) (12,283) (12,283) $'000 32,684 49,821 725 725 140,081 3,678 (94,663) (10,088) (10,088) 64 Starpharma Holdings Limited Annual Report 2014 Starpharma Holdings Limited Annual Report 64 Directors’ Declaration for the year ended 30 June 2014 In the directors’ opinion: (a) the financial statements and notes set out on pages 33 to 64 are in accordance with the Corporations Act 2001, including: (i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; and (ii) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2014 and of its performance for the financial year ended on that date; 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. Note 1(a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board. The directors have been given the declarations by the chief executive officer and chief financial officer required by section 295A of the Corporations Act 2001. This declaration is made in accordance with a resolution of the directors. Rob Thomas AM Chairman Melbourne, 13 August 2014 Starpharma Holdings Limited Annual Report Starpharma Holdings Limited Annual Report 2014 65 65 Independent Audit Report to the Members of Starpharma Holdings Limited Independent auditor’s report to the members of Starpharma Holdings Limited Independent auditor’s report to the members of Starpharma Holdings Limited Report on the financial report We have audited the accompanying financial report of Starpharma Holdings Limited (the company), Report on the financial report which comprises the consolidated balance sheet as at 30 June 2014, the consolidated income We have audited the accompanying financial report of Starpharma Holdings Limited (the company), statement, consolidated statement of comprehensive income, consolidated statement of changes in which comprises the consolidated balance sheet as at 30 June 2014, the consolidated income equity and consolidated statement of cash flows for the year ended on that date, a summary of statement, consolidated statement of comprehensive income, consolidated statement of changes in significant accounting policies, other explanatory notes and the directors’ declaration for Starpharma equity and consolidated statement of cash flows for the year ended on that date, a summary of Holdings Limited (the consolidated entity). The consolidated entity comprises the company and the significant accounting policies, other explanatory notes and the directors’ declaration for Starpharma entities it controlled at year’s end or from time to time during the financial year. Holdings Limited (the consolidated entity). The consolidated entity comprises the company and the entities it controlled at year’s end or from time to time during the financial year. Directors’ responsibility for the financial report The directors of the company are responsible for the preparation of the financial report that gives a Directors’ responsibility for the financial report true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 The directors of the company are responsible for the preparation of the financial report that gives a and for such internal control as the directors determine is necessary to enable the preparation of the true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 financial report that is free from material misstatement, whether due to fraud or error. In Note 1, the and for such internal control as the directors determine is necessary to enable the preparation of the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial financial report that is free from material misstatement, whether due to fraud or error. In Note 1, the Statements, that the financial statements comply with International Financial Reporting Standards. directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the financial statements comply with International Financial Reporting Standards. Auditor’s responsibility Our responsibility is to express an opinion on the financial report based on our audit. We conducted Auditor’s responsibility our audit in accordance with Australian Auditing Standards. Those standards require that we comply Our responsibility is to express an opinion on the financial report based on our audit. We conducted with relevant ethical requirements relating to audit engagements and plan and perform the audit to our audit in accordance with Australian Auditing Standards. Those standards require that we comply obtain reasonable assurance whether the financial report is free from material misstatement. with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the An audit involves performing procedures to obtain audit evidence about the amounts and disclosures assessment of the risks of material misstatement of the financial report, whether due to fraud or error. in the financial report. The procedures selected depend on the auditor’s judgement, including the In making those risk assessments, the auditor considers internal control relevant to the consolidated assessment of the risks of material misstatement of the financial report, whether due to fraud or error. entity’s preparation and fair presentation of the financial report in order to design audit procedures In making those risk assessments, the auditor considers internal control relevant to the consolidated that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the entity’s preparation and fair presentation of the financial report in order to design audit procedures effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the accounting policies used and the reasonableness of accounting estimates made by the directors, as well effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of as evaluating the overall presentation of the financial report. accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence In conducting our audit, we have complied with the independence requirements of the Corporations Independence Act 2001. In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. PricewaterhouseCoopers, ABN 52 780 433 757 Freshwater Place, 2 Southbank Boulevard, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001 T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au PricewaterhouseCoopers, ABN 52 780 433 757 Freshwater Place, 2 Southbank Boulevard, SOUTHBANK VIC 3006, GPO Box 1331, MELBOURNE VIC 3001 Liability limited by a scheme approved under Professional Standards Legislation. T: 61 3 8603 1000, F: 61 3 8603 1999, www.pwc.com.au 66 Liability limited by a scheme approved under Professional Standards Legislation. Starpharma Holdings Limited Annual Report Starpharma Holdings Limited Annual Report 2014 66 Independent Audit Report to the Members of Starpharma Holdings Limited Auditor’s opinion In our opinion: (a) the financial report of Starpharma Holdings Limited is in accordance with the Corporations Act 2001, including: (i) (ii) giving a true and fair view of the consolidated entity's financial position as at 30 June 2014 and of its performance for the year ended on that date; and complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001. (b) the financial report and notes also comply with International Financial Reporting Standards as disclosed in Note 1. Report on the Remuneration Report We have audited the remuneration report included in pages 18 to 25 of the directors’ report for the year ended 30 June 2014. The directors of the company are responsible for the preparation and presentation of the remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the remuneration report, based on our audit conducted in accordance with Australian Auditing Standards. Auditor’s opinion In our opinion, the remuneration report of Starpharma Holdings Limited for the year ended 30 June 2014 complies with section 300A of the Corporations Act 2001. PricewaterhouseCoopers Anton Linschoten Partner Melbourne 13 August 2014 Starpharma Holdings Limited Annual Report Starpharma Holdings Limited Annual Report 2014 67 67 Shareholder Information The shareholder information set out below was applicable as at 31 July 2014. Supplementary information as required by ASX listing requirements. A. Distribution of Equity Shareholders Analysis of numbers of equity security holders by size of holding 1 –1,000 1,001–5,000 5,001–10,000 10,001–100,000 100,000 and over Total There were 392 holders of less than a marketable parcel of ordinary shares. B. Equity Security Holders The names of the twenty largest holders of quoted equity securities are listed below: Name 1. HSBC Custody Nominees (Australia) Limited 2. National Nominees Limited 3. JP Morgan Nominees Australia Limited 4. Citicorp Nominees Pty Limited 5. T & N Argyrides Investments P/L 6. BNP Paribas Noms Pty Ltd 7. Mr Peter Malcolm Colman 8. Kenneth Nominees Pty Ltd 9. HSBC Custody Nominees (Australia) Limited 10. Applecross Secretarial Services Pty Ltd 11. Citicorp Nominees Pty Limited 12. UBS Wealth Management Australia Nominees Pty Ltd 13. Mr Kingsley Bryan Bartholomew 14. JPS Distribution Pty Ltd 15. Commonwealth Scientific And Industrial Research Organisation 16. Warbont Nominees Pty Ltd 17. Ms Jacinth Fairley 18. HSBC Custody Nominees (Australia) Limited - A/C 2 19. Applecross Secretarial Services Pty Ltd 20. Mrs Wendy Jean Ayres Class of equity security Shares Performance rights 737 1,691 906 1,397 214 4,945 – – – 21 6 27 Number held 73,316,647 31,939,425 24,319,864 12,731,952 5,410,449 4,164,654 3,855,968 3,422,053 3,106,060 2,885,588 2,587,187 2,498,620 2,000,000 1,863,255 1,448,798 1,202,834 1,156,697 1,124,196 1,118,588 1,117,947 Ordinary shares Percentage of issued shares 25.72 11.20 8.53 4.47 1.90 1.46 1.35 1.20 1.09 1.01 0.91 0.88 0.70 0.65 0.51 0.42 0.41 0.39 0.39 0.39 181,270,782 63.58 68 Starpharma Holdings Limited Annual Report 2014 Starpharma Holdings Limited Annual Report 68 Shareholder Information Name Employee Performance Rights C. Substantial Holders Unquoted equity securities over ordinary shares Number on issue 3,161,000 Number of holders 27 Substantial shareholders as shown in substantial shareholder notices received by the company as at 31 July 2014: Name Acorn Capital Limited Allan Gray Australia Pty Ltd M&G Investment Funds The Dow Chemical Company D. Voting Rights Ordinary shares Number held 26,357,951 41,319,032 37,069,789 14,406,827 The voting rights attached to each class of equity securities are set out below: (a) Ordinary shares On a show of hands every member present at a meeting in person or by proxy shall have one vote and on a poll each share shall have one vote. (b) Options No voting rights. (c) Performance Rights No voting rights. Starpharma Holdings Limited Annual Report Starpharma Holdings Limited Annual Report 2014 69 69 Intellectual Property Report The Starpharma patent portfolio currently has around 30 active patent families with over 110 granted patents and more than 60 patent applications pending. Key patents within the Starpharma portfolio as at 31 July 2014: Title VivaGel® Patent Portfolio Antiviral Dendrimers Priority Date & Publication Number 15 June 1994 WO95/34595 Anionic Or Cationic Dendrimer Antimicrobial Or Antiparasitic Compositions 14 September 1998 WO00/15240 Agents For The Prevention & Treatment Of Sexually Transmitted Diseases-I 30 March 2001 WO02/079299 Microbicidal Dendrimer Composition Delivery System 18 October 2005 WO2007/045009 Contraceptive Composition Method Of Treatment Or Prophylaxis Of Bacterial Vaginosis 22 March 2006 WO2007/106944 16 May 2011 WO2012/000891 Drug Delivery Patent Portfolio Disulfide-containing dendritic polymers Macromolecules Compounds Having Controlled Stoichiometry Modified Macromolecules Targeted Polylysine Dendrimer Therapeutic Agent Macromolecules Priostar Patent Portfolio Dendritic Polymers With Enhanced Amplification And Interior Functionality Sep 30, 1996 25 October 2005 WO2007/048190 10 August 2006 WO2007/082331 11 August 2006 WO2008/017125 6 June 2011 WO2012/167309 20 April 2005 WO2006/065266 Patents Granted Applications Pending Australia, Brazil, Canada, China, Europe, Hong Kong, Japan, Mexico, New Zealand, Singapore, South Korea, USA Australia, Canada, Europe, Japan, Mexico, New Zealand, Singapore, South Korea, USA Australia, Canada, China, Europe, Hong Kong, Japan, Mexico, New Zealand, Singapore, South Korea, USA Brazil Australia, Japan, New Zealand, Russian Federation, Taiwan, USA Argentina, Canada, China, Europe, Hong Kong, India, Malaysia, South Korea Australia, China, Japan, USA Canada, Europe Australia, Brazil, Canada, China, Europe, India, Israel, Japan, South Korea, Mexico, Russia, USA USA Australia, USA Canada, Europe USA Australia, Canada, China, Europe, China, USA Argentina, Canada, China, India, Israel, Japan, Mexico, New Zealand, Singapore, South Korea, Taiwan, USA India, Japan, USA Europe, India Australia, Brazil, Canada, China, Europe, India, Japan, South Korea, USA Brazil, Europe, Hong Kong Dendritic Polymers With Enhanced Amplification And Interior Functionality 21 December 2005 WO2006/115547 PEHAM Dendrimers for use in Agriculture 26 October 2009 WO2011/053605 Australia, Canada, China, India, Argentina, Brazil, Europe, Hong Israel, Mexico, New Zealand, Singapore, South Korea, Taiwan, USA Kong, Japan Australia, Brazil, China, Europe, India, Japan, USA 70 Starpharma Holdings Limited Annual Report 2014 Starpharma Holdings Limited Annual Report 70 Solicitors Norton Rose Fulbright RACV Tower, 485 Bourke Street Melbourne VIC 3000 Australia Stock exchange listing ASX Limited Level 45, North Tower, Rialto, 525 Collins Street, Melbourne VIC 3000 Australia ASX Code: SPL Starpharma’s American Depositary Receipts (ADRs) trade under the code SPHRY (CUSIP number 855563102). Each Starpharma ADR is equivalent to ten ordinary shares of Starpharma as traded on the ASX. The Bank of New York Mellon is the depositary bank. Starpharma’s ADRs are listed on OTCQX International (www.otcmarkets.com), a premium market tier in the U.S. for international exchange-listed companies, operated by OTC Markets Group. Website address www.starpharma.com Corporate Directory Company name Starpharma Holdings Limited ABN 20 078 532 180 Directors R B Thomas AM – Chairman J K Fairley – Chief Executive Officer P J Jenkins – Deputy Chairman R A Hazleton Z Peach P R Turvey Company Secretary Nigel Baade Registered office Baker IDI Building 75 Commercial Road, Melbourne, Victoria 3004 Australia Telephone +61 3 8532 2700 Fax +61 3 9510 5955 Postal address GPO Box 6535 Melbourne VIC 3004 Australia Share register Computershare Investor Services Pty Limited 452 Johnston Street, Abbotsford VIC 3067 GPO Box 2975 Melbourne, VIC 3001 1300 850 505 (within Australia) +613 9415 4000 (outside Australia) www.computershare.com Auditor PricewaterhouseCoopers Freshwater Place Southbank VIC 3006 Australia Starpharma Holdings Limited Annual Report Starpharma Holdings Limited Annual Report 2014 71 71 STARPHARMA HOLDINGS LIMITED ABN 20 078 532 180 Baker IDI Building 75 Commercial Road, Melbourne VIC 3004 Australia Telphone +61 3 8532 2700 Facsimile +61 3 9510 5955 www.starpharma.com 

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