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Annual Report 2013
IMPORTANT NOTICE:
Forward Looking Statements and Business Risks
Silex Systems is a research and development Company whose assets are its proprietary rights in various technologies, including,
but not limited to, the SILEX technology, Solar Systems technology and business, Translucent technology and ChronoLogic
technology. Several of the Company’s technologies are in the development stage and have not been commercially deployed,
and therefore are high-risk. Accordingly, the statements in this report regarding the future of the Company’s technologies and
commercial prospects are forward looking and actual results could be materially different from those expressed or implied by
such forward looking statements as a result of various risk factors.
Some risk factors that could affect future results and commercial prospects include, but are not limited to: results from the SILEX
uranium enrichment commercialisation program; the demand for enriched uranium; the risks associated with the development of
Solar Systems technology and related marketing activities; the outcomes of the Company’s interests in the development of various
semiconductor, photonics, instrumentation and alternative energy technologies; the time taken to develop various technologies;
the development of competing technologies; the potential for third party claims against the Company’s ownership of Intellectual
Property associated with its numerous technologies; the potential impact of government regulations or policies; and the outcomes
of various commercialisation strategies undertaken by the Company.
Silex Systems Limited ABN 69 003 372 067
Contents
02
Chairman’s Report
06
CEO’s Report
12 Company Overview
26 Directors’ Report
58
Corporate Governance Statement
67 Concise Financial Report
78
Independent Auditor’s Report to the Members
80 Shareholders’ Information
85 Company Directory
Chairman’s
Report
Professor Stephen Burdon
Chairman
‘ Silex is well placed
to capitalise on the
opportunities within
the clean energy sector
as the demand for
nuclear and solar power
continues to increase.’
2
Dear Fellow Shareholders
The year ended 30 June 2013 was a
milestone year for Silex Systems Limited
with a number of key achievements,
particularly in our uranium enrichment
and utility-scale solar power businesses.
These illustrate our commitment to
progressing technological development
towards realising greater shareholder value.
While maintaining a strong focus on
delivering operational and strategic priorities,
during the year, we continued to implement
important corporate governance initiatives.
Milestone Achievements
The SILEX Uranium Enrichment Technology achieved two
significant milestones this year. The Test Loop Phase I
Milestone completion in May evidenced advanced technology
demonstration and validation and secured a US$15 million
milestone payment for Silex. Achieving this milestone was
a key step in the commercialisation of the SILEX Uranium
Enrichment Technology, allowing focus to shift now to
developing and testing full scale plant equipment in
Phase II of the program.
The successful completion of the Phase I Milestone was
preceded in September 2012 by the US Nuclear Regulatory
Commission (NRC) approval of the world’s first license to
construct and operate a commercial SILEX laser enrichment
plant in Wilmington, North Carolina, and is a great tribute to
the combined GLE-Silex team after several years of excellent
work. I would like to take this opportunity to congratulate our
CEO and co-inventor of the SILEX Technology, Dr Michael
Goldsworthy, and his talented team of scientists and engineers,
for their pivotal contribution in achieving the milestone.
Silex Annual Report 2013 up our efforts with a new investor and public relations
program. We introduced an investor newsletter and increased
communications with both current and potential shareholders.
These activities will continue into the New Year and we believe
will provide a good platform for us to keep shareholders fully
informed of our progress and the opportunities ahead. As
always, your Board and Management teams are interested
in feedback on all of these initiatives.
We remain keenly focused on delivering key milestones and
commercialising our unique technologies for the benefit of
our shareholders. The Board and Management continue
to evaluate strategies to monetise our technologies and
increase shareholder value at the earliest opportunity.
The Paducah, Kentucky depleted uranium processing
proposal recently submitted by GLE, which is currently under
evaluation by the US Department of Energy, provides an
additional commercial opportunity for the SILEX technology.
Solar Systems officially opened its 1.5MW Mildura Solar
Demonstration Facility in July – a key milestone on the path
to commercialising our unique ‘Dense Array’ CPV technology.
The Mildura plant was officially opened by the Victorian
Minister for Energy and Resources, The Hon. Nicholas
Kotsiras MP, and the launch was attended by over 120
people including local members of parliament, community
stakeholders, business partners, investors and media.
We are excited about the economic potential that this unique
renewable energy technology may deliver to Solar Systems
and ultimately to Silex shareholders, if the projected low
cost of generated electricity can be realised over the next
few years. We are also pleased to have progressed with
construction of our 1MW facility in Saudi Arabia – a key
future market for this innovative technology. An additional
site has also been secured in California, USA and we are
currently assessing several other mid-sized commercial
project opportunities.
Translucent has continued to progress its advanced substrate
product development and associated industry validation
activities in the target Power Electronics and CPV solar cell
markets. We also anticipate finalising our strategic review
process for ChronoLogic, with the aim of securing appropriate
partners for its technology and products.
Financial Performance
We achieved a good result this year in terms of preserving our
balance sheet, with cash reserves of ~$73 million at the time of
writing (which includes the milestone payment of US$15 million
from GE-Hitachi Global Laser Enrichment (GLE)). All business
units operated according to approved budgets and progressed
towards key commercial objectives.
We have remained acutely focused on improving market
sentiment and our share price, and during the year stepped
33
Silex Annual Report 2013 Enhancements to our remuneration practices can be found in
the Remuneration Report commencing on page 35 and we
look forward to answering any questions you may have at our
Annual General Meeting in November 2013.
Management
Last year’s decision to bolster our executive management
capability, with the goal of providing for greater focus on the
commercialisation phases of our various businesses, led us to
the active recruitment of additional executives within the Group.
This includes the recruitment of a Chief Executive Officer for the
Solar Systems business, currently underway, as well as the
promotion of our long serving Vice President of Engineering,
Dr Andrew Clark, to a business unit operational leadership
role at Translucent.
In addition, we will continue to recruit and boost our executive
ranks, as and when it makes commercial sense.
Outlook
Silex is well placed to capitalise on the opportunities within
the clean energy sector as the demand for nuclear and solar
power continues to increase. We remain firmly committed
to progressing each of our unique technologies through
their respective commercialisation phases and build on
the milestone achievements of the last 12 months.
I very much look forward to updating you again at the
Annual General Meeting in November.
Professor Stephen Burdon
Chairman
3 October 2013
Corporate Governance
Our commitment to ongoing Board renewal has seen the
appointment of two new non-executive Directors during the
year. Dr Lisa McIntyre was appointed in July 2012 and was
formally elected by shareholders at the 2012 Annual General
Meeting. We are very pleased with Lisa’s contribution to date.
We have also recently welcomed Mr Andrew Stock, who was
appointed on 1 August 2013. Andrew brings a wealth of
energy industry experience to the Board and his appointment
will continue to strengthen and diversify the skill set of the
Board. Silex Directors recommend shareholders vote to
formally elect Andrew at the 2013 Annual General Meeting.
Mr Chris Wilks has made invaluable contributions both to the
Board and Management. His deep legacy knowledge and
financial skills, particularly relating to GE and GLE, remain a
significant asset and we strongly recommend his re-election
to the Board at the 2013 Annual General Meeting.
In June 2013, Mr Peter Campbell decided to retire as a
non-executive Director of Silex in order to enable ongoing
Board renewal, effective as of 30 September 2013. We
sincerely thank Peter for his immeasurable contribution to
the Silex Board over the last 17 years and wish him well in
his future endeavours.
With our recent changes, we now believe we have a good
mix of skills, experience and industry knowledge for the
current opportunities and challenges, but we will continue to
review the best Board composition for our business during
the next 12 months.
The People & Remuneration Committee has continued to
review the remuneration of Key Management Personnel and
non-executive Directors. Throughout FY2013, the Company
has continued to implement initiatives to provide greater
clarity and links between remuneration and the execution of
the Group’s strategy and to take performance into account at
all times when reviewing remuneration for all employees of the
Group. In finalising our Short Term Incentive awards for our
CEO and other senior managers, we have taken into account
Total Shareholder Returns over the year and therefore have
provided lower entitlements than normal to continue our
policy of aligning remuneration with shareholder returns.
4
Silex Annual Report 2013 55
The year ended 30 June 2013 has been
an exciting year for Silex. Our unique
technologies are transitioning to
commercialisation, whilst a number of
significant milestones were achieved
during the year.
Silex is in a strong financial position with
cash reserves of ~$73 million at the time of
writing. This includes a milestone payment
of US$15 million which was received from
GE-Hitachi Global Laser Enrichment (GLE)
in July 2013. As we move towards 2014,
we are firmly committed to progressing
our unique technologies through their
respective commercialisation phases and
look forward to continuing to build on the
milestone achievements of the last 12
months. Operational updates for each
of our businesses are detailed on
pages following.
CEO’s
Report
Dr Michael Goldsworthy
CEO/Managing Director
‘ ...we are firmly committed
to progressing our unique
technologies through their
respective commercialisation
phases and look forward to
continuing to build on the
milestone achievements
of the last 12 months.’
6
Silex Annual Report 2013 Highlights of the Year in Review
SILEX Uranium Enrichment
•
•
•
•
Test Loop Program Phase I Milestone successfully
completed at GE-Hitachi Global Laser Enrichment’s
(GLE) facility in USA, triggering a US$15 million milestone
payment to Silex;
Technology is now being engineered to commercial scale
in the Phase II program;
Approval from the US Nuclear Regulatory Commission for
a construction and operating license for the Wilmington,
North Carolina, USA, facility; and
GLE submitted a proposal in response to a Request for
Offers from the US Department of Energy to construct
a new facility at Paducah, Kentucky to enrich depleted
uranium inventories using the SILEX Technology.
Solar Systems
•
•
Opening of Australia’s largest Concentrating Photovoltaic
(CPV) solar power station in Mildura, Australia. The 1.5MW
facility, consisting of 40 large CPV dish concentrator systems,
is connected to the local grid and generating clean energy;
Preliminary project development activities to develop
the 100MW Mildura Power Station advanced with
construction expected to commence in late 2014,
subject to successful operation of the 1.5MW facility
and finalisation of financial prerequisites; and
•
Construction of a 1MW facility at the Nofa Equestrian
Resort near Riyadh, Saudi Arabia is well advanced.
Translucent
•
Continued progress of advanced substrate product
development and industry validation activities targeting the
Power Electronics and CPV solar cell markets including:
– Improving the quality of Gallium Nitride (GaN) material
which could significantly reduce costs of production for
the Power Electronics industry; and
– Advancing low-cost germanium-tin (GeSn) substrates
for application to ultra-high efficiency multi-junction solar
cells with wafers being processed by industry partners.
ChronoLogic
Following a review, discussions continue to secure strategic
partners for the ChronoLogic technology and products.
77
Silex Annual Report 2013 SILEX Uranium Enrichment
Phase I: Test Loop Milestone Completion
The Path Forward
In May 2013, Silex announced that the Test Loop Program
Phase I Milestone: Technology Demonstration and Validation,
had been successfully completed at GE-Hitachi Global Laser
Enrichment’s (GLE) facility in Wilmington, North Carolina, USA.
Completion of the Phase I Milestone triggered a US$15 million
milestone payment from GLE to Silex, which was received in
July 2013.
The achievement of the Test Loop Phase I Milestone – involving
advanced technology demonstration – is a key step in the
commercialisation of the SILEX Uranium Enrichment Technology
by GLE. The milestone completion followed receipt of approval
from the US Nuclear Regulatory Commission in September
2012 for a combined construction and operating license for the
first commercial plant planned for Wilmington, North Carolina.
Phase II: Full-Scale Engineering and
Economic Validation
The Project teams in Wilmington, North Carolina, Oak Ridge,
Tennessee and Lucas Heights, Australia are now fully focused
on Phase II of the Commercialisation Program, which includes
economic and engineering validation of the technology and
full scale-up for the construction of the initial commercial
production module. Once optimised, this module would be
replicated several times to build out the world’s first laser
enrichment plant.
GLE is conducting a stage-gated approach to commercialisation
of the SILEX laser enrichment technology, with the following
three phases:
Phase
Objectives
Phase I
Test Loop technology
demonstration and NRC
commercial plant
license approval
Status
Completed
Phase II
Economic and engineering
validation for the initial
commercial production module
Commenced
in 2012
Phase III Construction of the first full-scale
commercial production facility
Yet to
commence
While pursuing the Phase II program and taking into account
industry and market conditions, commercial opportunities
and other factors, GLE plans to evaluate deployment of
the technology and the construction of the first full-scale
commercial production facility at Wilmington, North Carolina.
Paducah, Kentucky Opportunity Update
The US Department of Energy (DOE) issued a formal Request
for Offers (RFO) for re-utilisation of the Paducah Gaseous
Diffusion Plant facilities after the plant ceased operations
in May 2013. GLE submitted a response to the RFO on
14 August which included a non-binding proposal to establish
an enrichment plant at Paducah using the SILEX Technology.
The Paducah enrichment plant proposal would potentially
involve the processing of hundreds of thousands of tons of
depleted uranium tails inventories owned by the DOE. The
DOE expects to enter negotiations with preferred parties in
the next few months and, if viable, execute an agreement
in early 2014, or sooner if possible.
8
Silex Annual Report 2013 The Nuclear Industry Outlook
The global nuclear power industry is now facing the
future with renewed confidence after two years of relative
uncertainty, following the tragic earthquake and tsunami
events in Japan in March 2011, which led to the disaster
at the Fukushima nuclear plant. The industry is moving
ahead once again with many governments around the world
recognising that nuclear power is an important source of
clean base-load energy in a carbon-constrained economy.
Globally, there are 432 operable nuclear power plants
including 48 plants in Japan that are still offline pending
re-start approvals by Japan’s Nuclear Regulation Authority.
There are currently 68 nuclear reactors under construction
world-wide, 162 reactors planned with funding or major
commitments in place, and expected to be in operation within
8-10 years and a further 316 reactors proposed with specific
program or site proposals and expected to be in operation
within 15 years. This significant expansion in nuclear capacity
is planned by several countries, most notably China, India and
the Middle East.
Uranium enrichment pricing has been significantly impacted
since the events of Fukushima, with prices currently down
~30%. Enrichment (and uranium) pricing is expected to
remain depressed in the short-term (the next 2 to 3 years)
due to the continuing effect of excess supply of uranium
and enrichment services largely attributable to the Japanese
nuclear reactor fleet being offline (to date only 2 of the 50
operable reactors have been re-started).
Despite the negative short-term outlook, we believe the
market outlook for the medium and long-term is very positive.
The positive medium-term sentiment will be driven primarily
by the shutdown of approximately 25% of current uranium
enrichment capacity in CY2013, with the closure of the
6MSWU Paducah Gaseous Diffusion Plant in May 2013
and the cessation of the 6MSWU Russia-United States
Highly Enriched Uranium (HEU) program at the end of
CY2013. New centrifuge capacity of only around 5MSWU
will only partially replace this gap – potentially leading to a
supply constrained market in the 5 to 10 year timeframe.
In the longer term, the approximate doubling of existing
global nuclear power capacity will see a significant increase
in the demand for uranium enrichment services.
99
Silex Annual Report 2013 Solar Systems
During the year, a number of important milestones
were achieved by Solar Systems including the opening
of the Mildura Concentrating Photovoltaic (CPV) Solar
Demonstration Facility and construction of the facility
at Nofa in Saudi Arabia. These and other activities are
detailed below.
Mildura Solar Demonstration Facility
Australia’s largest CPV solar power station was opened on
17 July 2013. The 1.5MW facility, consisting of 40 large CPV
dish concentrator systems, is connected to the local grid and
providing enough power for up to 500 average sized homes at
peak power production. The operating plant will be evaluated
over the next year to provide performance and reliability data
needed to establish commercial viability of the technology,
before proceeding with a much larger 100MW solar power
station at the same location.
Preliminary project development activities for the 100MW
Mildura Power Station are progressing. Construction is
expected to commence in late 2014, subject to successful
operation of the 1.5MW facility and securing the necessary
funding arrangements. If built, the 100MW Mildura Solar
Facility is expected to be one of the largest solar CPV plants
in the world. The 100MW Mildura Power Station Project has
received conditional funding commitments of $75 million
from the Commonwealth Government and approximately
$35 million from the Victorian Government.
Additional Demonstration Plants and Power
Station Projects
Construction of a 1MW facility at the Nofa Equestrian Resort
near Riyadh, Saudi Arabia, continues. This will be the first
offshore facility using Solar Systems’ ‘Dense Array’ CPV Dish
technology. Significant opportunities exist for the development
of solar projects in Saudi Arabia with a major 40GW solar
initiative worth around US$109 billion announced in 2012
by the Saudi government.
Solar Systems has also secured an option over a site for
the construction of a demonstration facility of up to 1MW
at Beaumont, California, USA. Solar Systems will maintain
this option and will review this opportunity later in CY2013.
During FY2014 Solar Systems’ business development
activities will primarily focus on additional mid-sized project
opportunities (10 to 50MW) in Australia, the Middle East and
potentially USA.
10
Silex Annual Report 2013 Translucent
ChronoLogic
Translucent continues to progress its advanced substrate
product development and industry validation activities in
the target Power Electronics and CPV solar cell markets.
If successfully commercialised, Translucent’s proprietary
substrates, which utilise its novel rare earth oxide (REO)
materials, may provide significant cost advantages and
potential performance improvements compared to sapphire,
germanium and other expensive substrates that these
industries currently use.
Product Development Activities
i) Substrates for Power Electronics
Translucent has continued to improve the quality of Gallium
Nitride (GaN) material incorporated in its vGaN™ on-silicon
substrates which could significantly reduce costs of
production for the Power Electronics industry. Prototype
transistor test structures have been fabricated and tested
with favourable initial results. Commercial grade vGaN™
substrates are expected to be ready for customer
evaluation later in CY2013.
ii) Substrates for Ultra-High Efficiency Solar Cells
Development of Translucent’s proprietary low-cost
germanium-tin (GeSn) substrates for application to ultra-high
efficiency multi-junction solar cells has advanced with wafers
being processed by industry partners. Single junction solar
cells have been demonstrated with encouraging results.
Double and triple junction solar cells are currently being
grown, with demonstration multi-junction cells expected to
be produced later in CY2013 for subsequent evaluation.
Commercial Activities
Commercial activities continue to increase with potential
customers in both the Power Electronics and CPV industries
building functional devices and conducting trials on Translucent’s
silicon wafer-based substrates with continuously improving results.
Development of the core USB-inSync™ technology continues
to advance, with the demonstration of the third generation
level of performance. Development of several new products
has been completed in preparation for introduction into the
Test and Measurement instrumentation market.
A review is being undertaken for this business, with the aim
of securing appropriate strategic partners for its technology
and products. This has resulted in interest from several
companies and discussions are continuing. The process has
taken longer than anticipated, however, it is expected that
significant progress in this effort will be achieved by the end
of this fiscal year.
Outlook
We remain firmly committed to progressing each of our
technologies through their respective commercialisation
phases and establishing economic value through a prudent
investment and monetisation strategy. We look forward to
sharing our results with you and providing a further update
at the Annual General Meeting in November.
Dr Michael Goldsworthy
CEO/Managing Director
1111
Silex Annual Report 2013 Company
Overview
Our Mission
Silex Corporate Structure
To become a world leader in
advanced technology solutions
in key strategic markets,
including the nuclear industry,
the solar power industry and
the semiconductor materials
and instrumentation industries.
Silex Systems
Limited
ASX: SLX
OTCQX: SILXY
HQ: Sydney, Australia
(The SILEX Uranium
Enrichment Technology)
www.silex.com.au
12
Silex Annual Report 2013 Solar Systems Pty Ltd
Melbourne, Australia (100% ownership)
Utility-Scale PV (Solar Power Stations)
www.solarsystems.com.au
Translucent Inc.
Palo Alto, USA (99% ownership)
Advanced Materials
(Semiconductors & Solar)
www.translucentinc.com
Translucent
Earth Abundant Materials
Technology
ChronoLogic Pty Ltd
Adelaide, Australia (90% ownership)
Instrumentation (Test & Measurement)
www.chronologic.com.au
1313
Silex Annual Report 2013 Historical Background
1988
1990
1993
1995
1996
1998
1999
Silex was established by founder Dr Michael
Goldsworthy as a technology research and
development subsidiary of Sonic Healthcare
Limited, an Australian publicly listed company.
Silex began researching the isotope separation
concepts of the co-inventors Dr Michael
Goldsworthy and Dr Horst Struve.
The unique principles of the SILEX (Separation
of Isotopes by Laser EXcitation) Process
were formulated.
‘Proof of Principle’ demonstration of the SILEX
Process was achieved at the Company’s
laboratories in Lucas Heights, south of Sydney.
Uranium enrichment, the largest market for
isotope separation, became the primary focus
of the Company.
Silex was divested from Sonic Healthcare Limited
and set about establishing the commercial viability
of the SILEX technology.
Silex was listed on the Australian Stock Exchange
(ASX) under the symbol ‘SLX’.
An Agreement for Cooperation between the US and
Australian Governments was signed, paving the way
for continued development of the SILEX Technology
for uranium enrichment, and facilitating its future
transfer to the US.
2000
The first macroscopic demonstration of the SILEX
uranium process was successfully achieved.
Silex won the 2000 Australian Technology Award for
Excellence in the Manufacturing and Engineering sector.
Silex raised $36 million through a share issue to
assist in funding the development of the Company’s
technology portfolio.
The SILEX Technology was officially “Classified”
by the US and Australian Governments. The
implications of classification relate mainly to
security protocols.
2002
Silex acquired a controlling 51% interest in
ChronoLogic Pty Ltd, an Adelaide-based start-up
developing novel technology for the electronics and
instrumentation industries.
The SILEX Uranium Enrichment Project achieved
a key milestone with the first full demonstration on
practical uranium enrichment using the SILEX ‘Direct
Measurement Facility’ at Lucas Heights, Sydney.
2003
2004
Silex took a majority ownership in Translucent Inc.,
moving to ~70% interest (from 30%).
Silex successfully commissioned the world’s first
silicon laser enrichment pilot plant.
Translucent secured its first US Patent for
‘optical silicon’ and filed patents for Silicon-on-
Insulator (SOI) and dielectric substrates for the
semiconductor industry.
2005
Translucent wins a US Defence Department
DARPA Grant to help develop the ‘optical silicon’
technology, under DARPA’s Electronics and
Photonics Integrated Circuits (EPIC) Program.
ChronoLogic wins a Federal Government
“Commercial Ready Grant” for its novel
‘USB-inSync™’ Data Acquisition technology.
2006
Silex and the General Electric Company sign an
exclusive Technology Commercialisation and
License Agreement for the SILEX Uranium
Enrichment Technology in May, with US
Government authorisations received in October.
Silex also increased its stake in ChronoLogic to 90%.
2001
Silex entered the semiconductor materials field
with the founding investment for Translucent Inc.,
a Silicon Valley start-up developing silicon
photonics technology.
2007
Transfer of the SILEX Uranium Enrichment project
to GE’s Wilmington, North Carolina (USA) nuclear
fuel plant was completed in the first half of 2007.
Hitachi joined GE as project partner.
14
Silex Annual Report 2013
GE-Hitachi signs Letters of Intent for uranium
enrichment services and support using the SILEX
Technology with Exelon and Entergy – the two
largest nuclear power utilities in the US.
Silex successfully completes a $50 million capital
raising in October.
GLE and Silex announced the successful completion
of the Test Loop initial measurement program in April.
2011
Silex successfully completed a capital raising of $89
million and a share purchase plan which raised a
further $20 million.
2008
Global Laser Enrichment (GLE), formed as a subsidiary
of GE-Hitachi Nuclear Energy (GEH) to commercialise
the SILEX Technology, announced that it had selected
its Wilmington, North Carolina, headquarters site
for the first potential commercial SILEX uranium
enrichment facility.
2012
GLE was notified that the US Nuclear Regulatory
Commission (NRC) approved a license to operate the
Test Loop for the demonstration of the next generation
SILEX laser enrichment technology.
GEH and Cameco Corp. announced that Cameco
Corporation, the world’s largest uranium producer,
had joined the GLE venture.
Cameco paid US$123.8 million for a 24% stake in GLE.
GE retained 51% ownership with Hitachi at 25%.
2009
Silex announced in June the acquisition of the
Sydney Olympic Park (SOP) solar photovoltaic (PV)
panel manufacturing facility – the only PV panel plant
in Australia.
In August, the US Nuclear Regulatory Commission
(NRC) announced it had accepted GLE’s license
application to construct and operate a commercial
SILEX uranium enrichment facility in Wilmington,
triggering a ~30 month review process.
In July, GLE announced the on-schedule start-up of
the Test Loop to evaluate the next-generation SILEX
uranium enrichment technology.
2010
Silex acquired the business assets of Melbourne
based Solar Systems Group in March. Solar
Systems’ concentrating photovoltaic (CPV)
technology is applicable to large utility-scale
solar power generation, using its unique
ultra-high efficiency ‘Dense Array’ technology.
Completion of a $75 million Federal Government
conditional funding package for the 100MW Mildura
Solar Power Station was announced by Solar Systems
in June. A $35 million conditional funding package
from the Victorian Government for the same project
was confirmed in 2010.
Solar Systems was awarded a funding grant from the
Australian Solar Institute. The business also secured
a site for a facility at the Nofa Equestrian Resort near
Riyadh, Saudi Arabia with construction of a 1MW
facility commencing during the year. An additional
demonstration site was also secured in Beaumont,
California, USA. Solar Systems opened its 0.6MW
Test & Demonstration Facility at Bridgewater, Victoria.
Following a significant business restructure and
continuing challenging trading conditions in the
Australian solar panel market, Silex decided to
cease the panel manufacturing operations at Silex
Solar’s Sydney Olympic Park plant.
In September, the US NRC approved the world’s first
Construction and Operating License for a commercial
laser enrichment plant utilising the SILEX technology
at Wilmington, North Carolina.
2013
Successful completion of the Test Loop Program Phase
I Milestone: Technology Demonstration and Validation
was achieved in May in Wilmington, North Carolina –
triggering a $US15 million milestone payment from GLE
to Silex (which was received in July).
Solar Systems completed construction of Australia’s
largest CPV Solar Plant – a 1.5MW Solar Demonstration
Facility at Mildura, Victoria in June. The 1.5MW facility
is a precursor to a potential 100MW facility at the
same location.
Silex is listed on the OTCQX exchange in the US
under the symbol ‘SILXY’ in June.
15
15
Silex Annual Report 2013
Business
Overview
SILEX Technology:
Business Facts
Platform
Nuclear Energy
Location
Lucas Heights, NSW, Australia
GLE: Wilmington, North Carolina,
and Oak Ridge, Tennessee, USA
Corporate Office: Sydney, NSW, Australia
16
SILEX Technology
Business Description
Silex Systems Third Generation Laser-Based Uranium
Enrichment Technology
Silex has licensed its ‘SILEX’ laser-based enrichment
technology to GE-Hitachi Global Laser Enrichment (GLE),
a business venture comprising GE (51%), Hitachi (25%)
and Cameco (24%). Silex and GLE are commercialising
the technology for potential deployment in the USA.
Background
After several years of pioneering R&D, the SILEX Technology was
invented by Silex Systems scientists Dr Michael Goldsworthy
and Dr Horst Struve in the mid 1990’s. In order to facilitate the
potential commercial deployment of the technology in the United
States, an Agreement for Cooperation between the United
States and Australia was enacted in May 2000.
In June 2001, the technology was officially Classified by
the United States and Australian governments, bringing the
project formally under the security and regulatory protocols
of each country.
Silex signed a Technology Commercialisation and License
agreement with General Electric Company (GE) in 2006 to
develop and commercialise the technology to enrich uranium
for use in nuclear power reactors. Since 2008, the project has
been managed by GE subsidiary Global Laser Enrichment
(GLE), comprising GE (51%) Hitachi (25%) and Cameco (24%).
Uranium Enrichment
Naturally occurring uranium must be enriched before it can be
used as fuel in a nuclear reactor. Enrichment is a technically
difficult process and constitutes a major component of
nuclear fuel costs.
Uranium enrichment involves increasing the atomic concentration
of the ‘active’ U-235 isotope from 0.7 per cent in natural
uranium to approximately 5 percent required for reactor fuel.
Silex Annual Report 2013 The two methods of uranium enrichment used to date have
been the now obsolete Gas Diffusion (first generation) and
Centrifuge (second generation). The third generation laser-
based SILEX process provides much higher enrichment
efficiency compared to these earlier methods, offering
significantly lower costs.
The SILEX Technology
The SILEX Technology is a unique laser-based process that
has the potential to efficiently separate uranium isotopes as
well as other various elements.
The SILEX Technology has a number of advantages over
other uranium enrichment processes including:
• Breakthrough in efficiency – uses less energy
• Smaller footprint than centrifuge and diffusion
• Lowest capital costs of all enrichment technologies
Significantly, SILEX Technology is the only third generation
laser-based uranium enrichment technology under
development in the world.
GLE Agreement
Our agreement with Global Laser Enrichment (GLE) is
an exclusive worldwide commercialisation and licensing
agreement for the SILEX Uranium Enrichment Technology.
GLE is conducting a stage-gated approach to commercialisation
of the SILEX laser enrichment technology, with the following
three phases:
Phase
Objectives
Phase I
Test Loop technology
demonstration and
NRC commercial plant
license approval
Status
Completed
Phase II
Economic and engineering
validation for the initial
commercial production module
Commenced
in 2012
Phase III Construction of the first full-scale
commercial production facility
Yet to
commence
Subject to the outcome of the Phase II program and securing
of sufficient conditional customer commitments, GLE plans
to make a decision regarding deployment of the technology
and the construction of the first full-scale commercial
production facility.
Following a recent review and update to the original
Technology Commercialisation and License Agreement,
signed between Silex and General Electric in 2006, the final
commercialisation milestone payment has been restructured
into two payments:
•
•
Commencement of construction for the initial commercial
plant: US$5 million
NRC verification of construction compliance of the initial
commercial plant: US$15 million
The timeline for these milestones and related activities
will be reviewed as Phase II continues.
Perpetual Royalty
Additionally, Silex will receive a perpetual royalty of up to
12 percent, comprising:
•
•
A base royalty of 7 percent of revenues generated from
enrichment services using the SILEX Technology; and
An additional royalty of up to 5 percent based on the
total cost of deployment whereby the lower the cost of
deployment per unit production, the higher the royalty.
1717
Silex Annual Report 2013 Business
Overview
Continued
Solar Systems:
Business Facts
Platform
Solar Energy
Ownership
100 Percent
Manufacturing
Melbourne, Victoria, Australia
Project Sites
Bridgewater, Victoria, Australia
Mildura, Victoria, Australia
Tibrak, Saudi Arabia
Beaumont, California, USA
Acquired
2010
18
Solar Systems
Business Description
Ultra-High Efficiency Utility-Scale CPV Power Generation
Solar Systems has developed Ultra-High Efficiency Utility-
Scale concentrating photovoltaic (CPV) technology based
on its proprietary ‘Dense Array’ dish concentrator system,
targeting deployment of utility-scale solar power stations in
key global markets.
Background
As climate change issues bring about a paradigm shift in energy
production from conventional fossil fuel sources to renewable
energy sources and nuclear power, there has been increasing
interest in developing solar energy technology that could be
economically viable in very large-scale utility projects in the
order of 10’s to 100’s of megawatts (MW’s) electrical output.
Silex acquired the assets of Melbourne based Solar Systems,
including the technology, intellectual property and patents,
a new manufacturing facility in Abbotsford, Melbourne and
a large-scale test and demonstration facility in Bridgewater,
central Victoria in 2010.
CPV Dish Technology
Solar Systems utilises a novel approach known as the
‘Dense Array’ concentrating photovoltaic (CPV) dish
technology, whereby low-cost large-area parabolic mirrors
reflect the sunlight onto a small-area solar conversion module,
concentrating the sunlight to the equivalent of approximately
500 to 1000 suns.
The ‘Dense Array’ system is based on close packing of ultra-
high efficiency solar cells in a centrally mounted converter.
The cells are cooled for maximum output efficiency, high
reliability and extended cell life, all key differentiators when
compared with other CPV technologies. The concentrator
systems are based on high reliability parabolic Dish
Concentrators which are programmed to accurately track
the sun from sunrise to sunset every day to maximise the
total energy yield produced.
Silex Annual Report 2013 The cells used in Solar Systems’ patented CPV technology
are called ‘multi-junction’ cells because they contain several
sub-cell structures in each cell (currently three cells in one),
which enable the conversion of the sun’s rays directly into
electricity (with no moving parts) at extremely high efficiency.
These cells are constantly improving, with a clearly defined
roadmap from the current conversion efficiency of greater
than 40% with a roadmap to efficiencies of over 50%. By
incorporating these highly efficient multi-junction solar cells
into its ‘Dense Array’ dish concentrator, Solar Systems can
produce approximately 1000 times the amount of energy as a
roof mounted flat plate PV panel with the same area of cells.
The ‘Dense Array’ CPV Converter
The centrally mounted ‘Dense Array’ CPV converter is actively
cooled via a closed loop cooling system. In comparison to
other CPV technologies, this results in:
•
higher cell operating efficiencies (lower operating temperature)
• higher cell reliability (less severe thermal cycling)
•
longer expected cell lifetime (more stable lifetime operation)
Commercialisation and Project Deployment
Solar Systems is undertaking a phased approach to the
commercialisation of its ‘Dense Array’ CPV Technology:
Phase
Objectives
Phase I
Product Commercialisation Program:
•
•
Product release milestone including upgrade of the ‘Dense Array’ converter
16 Dish 0.6MW test facility installed at Bridgewater, Victoria
Phase II
Pilot Demonstration Facilities and Certification Process:
•
•
•
•
Mildura Stage 1: 40 Dish system units (1.5MW peak power output)
Nofa, Saudi Arabia – 1MW
Beaumont, USA – up to 1MW
International Electrotechnical Commission (IEC) certification process
Phase III Global Deployment of Utility Scale Projects:
•
•
Mildura Stage 2: 100MW power station
Conditional funding contributions: Federal Government $75 million and Victorian
Government $35 million
•
Exploring domestic and global project opportunities at the 10 to 50 MW scale
Status
Completed – June 2012
Completed – June 2013
Under construction
TBA
Underway
Planning underway
Key elements in the Solar Systems Technology
Manufacturing
Melbourne
CPV Module
6cm x 6cm
CPV Converter
0.25m2
CS500 Dish
15m Diameter
1919
Silex Annual Report 2013 Business
Overview
Continued
Translucent:
Business Facts
Platform
Advanced Semiconductor Materials
Ownership
99 Percent
Location
Palo Alto, California, USA
Acquired
2001 (founded by Silex)
20
Translucent
Business Description
Game Changing Semiconductor Substrate Materials
Translucent has developed novel semiconductor materials
based on the ‘rare earth oxide’ (REO) family for application
to the manufacturing of next generation devices in the
semiconductor, power electronics and photovoltaics industries.
Background
Translucent has been developing advanced materials, initially
based on REO’s in its state-of-the-art development facility in
Palo Alto, California, since 2001.
The initial research and development activities focused on
applications in the photonics and semiconductor industries.
By carefully depositing REO’s onto well-established
semiconductor materials such as silicon, and making them
compatible with other semiconductor materials and industrial
semiconductor processes, the original photonics applications
have been expanded to include photovoltaics and power
electronics, with a common theme of using the REO’s to
develop low cost “on-silicon” solutions.
REO Technology – Commercial Applications
Several industries are forced to use high-cost non-silicon
substrates for high-end semiconductor device applications.
For example, high cost substrates such as germanium,
sapphire and silicon carbide are commonly used for
fabrication of many high powered semiconductor devices.
Translucent’s innovative REO platform could enable these
industries to use large low-cost silicon wafers, potentially
overcoming traditional barriers (such as wafer bowing and
cracking), in the highly prized transition to silicon wafers.
Translucent is commercialising this technology with a focus
on applications in the semiconductor, Power Electronics and
photovoltaics industries.
Silex Annual Report 2013 Substrates for Power Electronics
Translucent has continued to improve the quality of Gallium
Nitride (GaN) material incorporated in its vGaN™ on-silicon
substrates which could significantly reduce costs of
production for the Power Electronics industry. Prototype
transistor test structures have been fabricated and tested
with favourable initial results. Commercial grade vGaN™
substrates are expected to be ready for customer
evaluation later in CY2013.
Substrates for Ultra-High Efficiency Solar Cells
Development of Translucent’s proprietary low-cost
germanium-tin (GeSn) substrates for application to ultra-high
efficiency multi-junction solar cells has advanced with wafers
being processed by industry partners. Single junction solar
cells have been demonstrated with encouraging results.
Double and triple junction solar cells are currently being
developed, with demonstration multi-junction cells expected
to be produced later in CY2013 for subsequent evaluation.
2121
Silex Annual Report 2013 ChronoLogic
Business Description
Precision Test and Measurement through a Universal
Distributed Platform
ChronoLogic has developed the world’s first high precision
timing and control products based on the ultra-low cost
USB-inSync™ platform, targeting applications in the electronic
instrumentation markets.
Background
The target markets for ChronoLogic’s range of products are
quite considerable, amounting to several billions of dollars in
revenue annually. They include:
• Test & Measurement Market
• Data Acquisition Market
• Precision Timing Market
ChronoLogic has developed a range of instruments for
the test and measurement industry called ‘Distributed
Virtual Instrumentation’ (DVI), incorporating its
‘USB-inSync™’ technology.
ChronoLogic is also pioneering new USB-based connectivity
standard called ‘UXI’ to extend cross-platform interoperability
from existing technology to the ‘USB-inSync™’ platform.
Business
Overview
Continued
ChronoLogic:
Business Facts
Platform
Advanced Materials & Instrumentation
Ownership
90 Percent
Location
Adelaide, South Australia, Australia
Acquired
2002 (51 percent)
2006 (90 percent)
22
Silex Annual Report 2013 ChronoLogic’s Technology
Virtually every consumer product we use today has been
manufactured and tested in plants and laboratories using data
acquisition and control systems, and test and measurement
instrumentation. Applications fall within the Test, Control and
Automation areas, including the semiconductor, automotive
and mining industries through to medical diagnostics and
food processing.
A large number of these applications require synchronous
measurements and acquisition of data, and the ability to
control processes and/ or events with precise relative timing.
These requirements are addressed for the first time
on the low-cost USB-based instrumentation platform
by ChronoLogic.
ChronoLogic’s USB-inSync™ technology transforms the
ubiquitous USB connection from a simple consumer
connectivity data-bus to an instrumentation grade
interface with class-leading synchronisation capabilities.
Following a review, discussions continue to secure strategic
partners for the ChronoLogic technology and products.
2323
Silex Annual Report 2013 Concise Financial Report
for the year ended
30 June 2013
Silex SyStemS limited
& itS SubSidiaRieS
abN 69 003 372 067
Your directors present their report on the consolidated entity consisting of Silex Systems Limited (Silex or the
Company) and the entities it controlled at the end of, or during the year ended 30 June 2013.
1. Directors
The following persons were directors of Silex Systems Limited during the whole of the financial year and up to
the date of this report:
Prof S W R Burdon
Mr R P Campbell
Dr C S Goldschmidt
Dr M P Goldsworthy
Mr C D Wilks
Dr L M McIntyre was appointed a director on 2 July 2012 and Mr A M Stock was appointed a director on
1 August 2013 and both continue in office at the date of this report.
2. Principal activities
During the year the principal continuing activities of the consolidated entity consisted of:
a)
b)
c)
d)
SILEX Technology: commercialisation of the Company’s foundation technology – the laser isotope
separation process for uranium enrichment known as the ‘SILEX Technology’;
Solar Systems: research, development and commercialisation activities for the unique ‘Dense Array’
concentrated photovoltaic (CPV) system being developed for utility-scale solar power stations by
wholly-owned subsidiary Solar Systems Pty Ltd;
Translucent: research, development and commercialisation of novel semiconductor materials based
on the ‘rare earth oxide’ family for application to the manufacturing of next generation devices in the
semiconductor, power electronics and photovoltaics industries. These activities are being undertaken
by Translucent Inc, a California based company in which Silex has a 99% fully diluted interest; and
ChronoLogic: development and commercialisation of high precision timing and control products based on
the proprietary USB-inSync™ technology targeting application in the electronic instrumentation markets.
These activities are being undertaken by ChronoLogic Pty Ltd, in which Silex has a 90% interest.
3. Dividend
No dividend payments were made during the year. No dividend has been recommended or declared by
the Board.
26
Directors’ ReportSilex Annual Report 2013 4. Review of operations and activities
Information on the operations and financial position of the consolidated entity and its business strategies and
prospects is set out below and in section 8 ‘Likely developments and expected results of operations’.
Trading Results
A summary of consolidated revenue and results is set out below:
Revenue from continuing operations
Profit/(loss) before income tax expense
Income tax expense
Net profit/(loss) from continuing operations
Net (loss) from discontinued operation
Net (loss) for the year
Net (loss) is attributable to:
Owners of Silex Systems Limited
Non-controlling interests
2013
$
2012
$
23,654,025
9,438,691
850,544
(17,982,777)
-
850,544
(1,080,995)
(230,451)
-
(17,982,777)
(18,987,847)
(36,970,624)
(93,119)
(137,332)
(230,451)
(36,792,005)
(178,619)
(36,970,624)
Key information about the consolidated operations, results and financial position
Comments on the operations and the results of those operations are set out below:
The improved result for the period was mainly due to the US$15.0m (AU$15.4m) revenue from GE-Hitachi Global
Laser Enrichment (‘GLE’) for the successful completion of the Test Loop Program Phase I Milestone. In addition,
Silex Systems has continued to focus on lowering its operating cost structure whilst maintaining technical and
commercialisation progress for each of its business segments.
The current year result was also impacted favourably by the R&D Tax Incentive program. The result included
R&D Tax Incentive income of $3.3m relating to the previous financial year which was not included in the FY2012
financial statements, as at the time of lodgement the value of the incentive could not be reliably measured.
The Silex Systems’ segment result was $15.9m profit in the current year compared to $1.5m profit in the previous
year. The discontinuation of the Silex Solar operation also contributed to the improved result with a loss of
$1.1m, compared to $19.0m in the previous year. The Silex Systems’ business segment profit was mostly
offset by losses in the other business segments as commercialisation activities continued.
2727
Directors’ ReportSilex Annual Report 2013 Financial review
Details of segment results are detailed below:
Silex Systems
The segment result for the parent company Silex Systems was a profit of $15.9m compared to a profit of $1.5m
in the previous year. The improved result in the current year was due to the successful completion of the Test
Loop Program Phase I Milestone resulting in milestone revenue of US$15.0m (AU$15.4m) to Silex Systems (nil
in the previous year).
Solar Systems
The segment result for Solar Systems was a loss of $9.0m compared to a loss of $11.6m for the previous year,
mainly due to the due to the favourable impact of the R&D Tax Incentive program of $2.8m and an increase in
Government grant income of $2.7m.
On 24th June 2013, Solar Systems announced that it had completed construction and commissioning of
Australia’s largest concentrating photovoltaic (CPV) solar power station (1.5MW) in Mildura, north-west Victoria.
The construction of a demonstration CPV solar power station at the Nofa Resort near Riyadh, Saudi Arabia, is also
well advanced. It will be the first off-shore demonstration facility using the CS500 ‘Dense Array’ Dish CPV System.
Translucent
The segment result for Translucent, based in the United States, was a loss of $4.6m compared to a loss of
$6.2m in the previous year, due to income received from the provision of goods and services to Solar Systems
and implementation of other operational cost reductions.
ChronoLogic
The segment result for ChronoLogic was a loss of $1.3m compared to a loss of $1.7m in the previous year.
The improved result was due to the favourable impact of the R&D Tax Incentive program of $0.5m.
Balance sheet
A summary of our balance sheet is set out below:
AsseTs
Total current assets
Total non-current assets
total assets
LiABiLiTies
Total current liabilities
Total non-current liabilities
total liabilities
Net assets
equiTy
total equity
30 June 2013
30 June 2012
$
$
89,074,871
48,155,201
96,116,311
36,352,733
137,230,072
132,469,044
8,502,832
7,402,984
15,905,816
121,324,256
6,884,726
4,942,953
11,827,679
120,641,365
121,324,256
120,641,365
As at 30 June 2013, total assets were $137.2m. Significant assets are cash holdings (cash and term deposits
$64.4m), trade and other receivables ($21.0m – largely comprising payments due from GLE), property, plant
and equipment ($27.4m) and intangible assets comprising patents and other assets generated through previous
acquisitions ($20.6m). Total liabilities were $15.9m and are made up of trade and other payables and provisions
(e.g. amounts we have set aside for potential future liabilities, particularly those related to employees). The Group
does not have any borrowings (e.g. bank debt) at present.
28
Directors’ ReportSilex Annual Report 2013 5. earnings per share
earnings per share for profit/(loss) from continuing operations
attributable to the ordinary equity holders of the company
Basic earnings per share
Diluted earnings per share
earnings per share for (loss) attributable to the ordinary equity holders
of the company
Basic earnings per share
Diluted earnings per share
2013
cents
0.6
0.6
(0.1)
(0.1)
2012
cents
(10.5)
(10.5)
(21.6)
(21.6)
6. significant changes in state of affairs
The Silex Solar operation ceased all activities and the plant at Sydney Olympic Park was decommissioned and
subsequently closed in October 2012. There were no other significant changes in the state of affairs of the Group
during the financial year not otherwise dealt with in this report.
7. Matters subsequent to the end of the financial year
The directors are not aware of any matters or circumstances which are not otherwise dealt with in the financial
statements that have significantly or may significantly affect the operations of the consolidated entity, the results
of its operations or the state of the consolidated entity in subsequent years.
8. Likely developments and expected results of operations
Silex is a technology company with interests in a number of technology development projects both in Australia
and overseas. Silex also has manufacturing operations through its subsidiary Solar Systems Pty Ltd at Abbotsford,
Victoria. The Company’s future prospects remain dependent on the outcomes of the various technology
development programs, including the Company’s success in ultimately commercialising those technologies.
Business strategies and future prospects – segmental analysis
The Group’s segments are summarised below:
Silex Systems
Silex invented a novel method for enriching uranium using lasers in the mid-1990’s, and after further development
activities in Australia, is currently supporting the commercialisation of the SILEX Technology in Wilmington, North
Carolina, USA under a Technology Commercialisation and License Agreement with GE-Hitachi Global Laser
Enrichment (GLE) – a business venture owned by GE (51%), Hitachi (25%) and Cameco (24%). The successful
completion of the Test Loop Program Phase I Milestone resulted in a US$15m milestone payment to Silex.
2929
Directors’ ReportSilex Annual Report 2013 GLE is conducting a stage-gated approach to commercialisation of the SILEX laser enrichment technology, with
the following three phases:
Phase
Phase i
Phase ii
Objectives
Test Loop technology demonstration and NRC commercial plant
license approval
Economic and engineering validation for the initial commercial
production module
Status
Completed
Commenced in 2012
Phase iii
Construction of the first full-scale commercial production facility
Yet to commence
While pursuing the Phase II program and taking into account industry and market conditions, commercial
opportunities and other factors, GLE plans to evaluate deployment of the technology and the construction
of the first full-scale commercial production facility at Wilmington, North Carolina.
The US Department of Energy (DOE) issued a formal Request for Offers (RFO) for re-utilisation of the Paducah
Gaseous Diffusion Plant facilities after the plant ceased operations in May 2013. GLE submitted a response to
the RFO on 14th August which included a non-binding proposal to establish an enrichment plant at Paducah
using the SILEX Technology. The Paducah enrichment plant proposal would potentially involve the processing
of hundreds of thousands of tons of depleted uranium tails inventories owned by the DOE. The DOE expects to
enter negotiations in the next few months and, if viable, execute an agreement in early 2014, or sooner if possible.
The global nuclear industry continues to face short-term issues following the tragic earthquake and tsunami
events in Japan in March 2011, which led to the disaster at the Fukushima nuclear plant. Uranium enrichment
pricing has been significantly impacted since the events of Fukushima, with prices currently down ~30%.
Enrichment (and uranium) pricing is expected to remain depressed in the short-term (the next 2 to 3 years)
due to the continuing effect of excess supply of uranium and enrichment services largely attributable to the
Japanese nuclear reactor fleet being offline (to date only 2 of the 50 operable reactors have been re-started).
Even with the unique challenges facing the nuclear industry including uranium enrichment, the industry nevertheless
offers a great opportunity to create a company of global significance in the energy sector with many governments
around the world recognising that nuclear power is an important source of clean base-load energy in a carbon-
constrained economy. It is anticipated that existing global nuclear power capacity will approximately double in
the longer term and we will see a significant increase in the demand for uranium enrichment services. The risks
surrounding industry growth projections and market conditions, most of which are beyond our control, could impact
the Phase II and Phase III programs outlined above.
Solar Systems
Significant progress with the development of Solar Systems’ unique concentrating photovoltaic (CPV) ‘Dense
Array’ technology and associated intellectual property has been made in the last 12 months. During the year,
Solar Systems announced it had completed construction and commissioning of Australia’s largest concentrating
photovoltaic (CPV) solar power station (1.5MW) in Mildura, Victoria. The 1.5MW solar power plant is a precursor
to a 100MW plant at the same site. Construction of the 100MW Mildura Power Station Project is expected
to commence in late 2014, subject to successful operation of the 1.5MW facility and securing the necessary
funding arrangements. The 100MW Project has received conditional funding commitments of $75 million from
the Commonwealth Government and approximately $35 million from the Victorian Government. The construction
of a demonstration CPV solar power station (1MW) at the Nofa Resort near Riyadh, Saudi Arabia, is also well
advanced. An option for a site for an additional off-shore demonstration plant (up to 1MW) has also been
secured in Beaumont California, USA. Solar Systems will maintain this option and will review this opportunity
later in CY2013. During FY2014 Solar Systems’ business development activities will primarily focus on
additional mid-sized project opportunities (10 to 50MW) in Australia, the Middle East and potentially USA.
30
Directors’ ReportSilex Annual Report 2013 Translucent
Silex has a 99% fully diluted interest in Translucent Inc, a California based company which has developed novel
semiconductor materials based on the ‘rare earth oxide’ family for application to the manufacturing of next
generation devices in the semiconductor, power electronics and photovoltaics industries.
These technologies continue to be developed for commercial deployment. Potential customers in both the
power electronics and CPV industries are continuing trials with Translucent’s substrate and devices with steadily
improving results being achieved. Future commercial prospects for the Translucent technology will depend on
continued success with the technical program, third party validation of the technologies, protection of intellectual
property including patents, and successful implementation of commercialisation strategies.
ChronoLogic
Silex holds a 90% interest in ChronoLogic, which has developed the world’s first high precision timing and
control products based on the ultra-low cost patented USB-inSync™ technology, including the enhanced
Distributed Virtual Instrumentation (DVI) product range. ChronoLogic has been undertaking a process to secure
appropriate strategic partners for its technology and/or products. Detailed discussions on possible business
transactions, including joint venturing, merger or acquisition are continuing.
9. share options
shares under option
Unissued ordinary shares of Silex Systems Limited under option at the date of this report are as follows:
Number of options
issue price of shares
Grant date
expiry date
25,000
50,000
50,000
50,000
100,000
130,000
565,000
540,000
165,000
325,000
1,469,242
25,000
3,494,242
$3.63
$3.54
$3.51
$4.19
$5.88
$6.13
$5.24
$4.65
$5.28
$2.92
$2.04
$3.61
7th October 2008
6th October 2013
28th November 2008
27th November 2013
5th December 2008
4th December 2013
31st March 2009
29th June 2009
30th March 2014
28th June 2014
11th January 2010
10th January 2015
27th May 2010
30th July 2010
26th May 2015
29th July 2015
15th October 2010
14th October 2015
5th July 2011
4th July 2016
8th December 2011
7th December 2016
16th March 2012
15th March 2017
No option holder has any right under the option to participate in any other share issue of the Company or of any
other entity. Between the balance sheet date and the date of this report no options were granted.
shares issued on the exercise of options
There were no ordinary shares of Silex Systems Limited issued during the year ended 30 June 2013 on the
exercise of options granted under the Silex Systems Limited Employee Share Option Plan.
Between balance date and the date of this report, no options were exercised.
3131
Directors’ ReportSilex Annual Report 2013 10. information on Directors
a) Directors’ profiles
Professor stephen Burdon
MBA BSc (Hons) FAICD, FAIM, FIE Aust
Chairman – Non-executive (director since 2011)
Experience and expertise
Professor Burdon has extensive management experience. He previously held the position of Managing Director
of OTC, Group Managing Director of Telstra and Managing Director of British Telecom Asia Pacific. In addition,
Professor Burdon has experience as a non-executive director on over a dozen private and public company
boards in Australia, NZ, India and Japan. He is currently a Professor of Management at the University of
Technology Sydney and CASS Business School London.
Other current directorships
None
Former directorships in last 3 years
Non-executive director of Transfield Services Limited (2000 to July 2010)
Special responsibilities
Member of Audit Committee
Member of People and Remuneration Committee (Chair to 4 February 2013)
Mr Peter Campbell
FCA, CTA, FAICD
Non-executive (director since 1996)
Experience and expertise
Mr Campbell has been an independent and non-executive director since 1996. He is a Chartered Accountant
with his own practice based in Sydney and is a Fellow of both the Institute of Chartered Accountants in Australia
and the Tax Institute of Australia. Mr Campbell is also a registered Company Auditor.
Other current directorships
Non-executive director of Sonic Healthcare Limited since 1993 and Chairman since October 2010 and
non-executive director of QRxPharma Limited since 2007.
Former directorships in last 3 years
None
Special responsibilities
Chairman of Audit Committee
Member of People and Remuneration Committee
Dr Colin Goldschmidt
MB BCh, FRCPA, FAICD
Non-executive (director since 1992)
Experience and expertise
Dr Goldschmidt has extensive experience in listed public company management, operational company
leadership, international business operations and healthcare and scientific markets in Australia, Europe
and the USA. He is the CEO of Sonic Healthcare Limited, a global laboratory services company.
Other current directorships
Managing Director of Sonic Healthcare Limited since 1993.
32
Directors’ ReportSilex Annual Report 2013 Former directorships in last 3 years
None
Special responsibilities
Member of Audit Committee
Dr Michael Goldsworthy
BSc (Hons), MSc, PhD, FAIP, MAICD
CEO/Managing Director – Executive (director since 1992)
Experience and expertise
Dr Goldsworthy received his PhD in Physics from The University of New South Wales. Prior to starting with
Silex Systems Limited in 1988, Dr Goldsworthy was a member of the University’s academic staff and was
involved in a number of laser-associated research projects. Dr Goldsworthy is the founder of the Company
and has been the driving force behind the SILEX uranium enrichment project, and the establishment of the
consolidated entity’s extensive interests in solar, semiconductor and photonics technologies. Dr Goldsworthy
was awarded the Royal Society of NSW’s James Cook Medal for 2009 which recognises outstanding
contributions for science and human welfare.
Other current directorships
None
Former directorships in last 3 years
None
Special responsibilities
Chief Executive Officer/Managing Director
Dr Lisa Mcintyre
BSc (Hons) PhD, GAICD
Non-executive (director since July 2012)
Experience and expertise
Dr McIntyre is a company director for various companies including HCF, I-MED Network Pty Ltd, the Garvan Institute of
Medical Research and Tutoring Australasia. Prior to 2011, Lisa was a senior partner in global strategic firm L.E.K.
Consulting for 19 years and led L.E.K.’s Asia Pacific Life Science and Technologies practice in Sydney where she
advised healthcare companies and organisations on strategy, commercialisation and performance issues.
Other current directorships
None
Former directorships in last 3 years
None
Special responsibilities
Member of Audit Committee
Chairperson of People and Remuneration Committee (Member to 4 February 2013)
3333
Directors’ ReportSilex Annual Report 2013 Mr Andrew stock
BEng (Chem) (Hons), FIE Aust, GAICD
Non-executive (director since 2013)
Experience and expertise
Mr Stock was appointed to the Board in August 2013. He is one of Australia’s most senior business leaders in the
energy sector, with over thirty years’ experience in Australia and overseas. He spent eighteen years with Origin Energy
in a number of senior executive positions.
Other current directorships
Non-executive director of Horizon Oil Limited since 2011 and non-executive director of Geodynamics Limited
since 2003.
Former directorships in last 3 years
None
Mr Christopher Wilks
BComm, FAICD
Non-executive (director since 1988)
Experience and expertise
Mr Wilks has a background in chartered accounting and investment banking. He was previously a partner in a
private investment bank and has held positions on the board of a number of public companies.
Other current directorships
Executive director of Sonic Healthcare Limited since 1989.
Former directorships in last 3 years
None
Special responsibilities
Business development and corporate strategy
b) Directors’ interests in shares and options as at the date of this report
director’s name
Prof S W R Burdon
Mr R P Campbell
Dr C S Goldschmidt
Dr M P Goldsworthy
Dr L M McIntyre
Mr A M Stock
Mr C D Wilks
Class of shares
No. of shares
Share options
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
35,000
1,354,823
2,525,937
5,934,212
8,230
-
2,814,021
-
-
-
1,102,207
-
-
367,035
34
Directors’ ReportSilex Annual Report 2013 11. Remuneration report
Message from the People & Remuneration Committee Chairperson
Dear Shareholder,
I am pleased to present the Silex Systems Limited Remuneration Report for the year ended 30 June 2013.
Report overview
The Board has endorsed our approach to the Remuneration Report this financial year. This Remuneration Report
provides a summary of Silex’s remuneration policy and practices throughout the past financial year as they apply
to Silex’s directors and Key Management Personnel (KMP). In particular, this report provides an overview of the
implementation of the changes to remuneration practices that have occurred throughout 2013.
As stated in our 2012 Remuneration Report, it was the Company’s objective to provide greater clarity and links
between remuneration and the execution of the Group’s strategy and performance. Throughout 2013, the
Company has continued to implement such initiatives and to take performance into account at all times when
reviewing remuneration for all employees of the Group.
The Remuneration Report contains disclosures as required by Australian regulations and additional disclosures
relating to the structure and approach to remuneration at Silex.
improvement initiatives
The Silex business model requires a top calibre executive team with both the leadership skills to manage diverse
businesses across different geographies, as well as the technical expertise to manage and direct technical,
scientific and regulatory matters of varying complexity in each business. The remuneration strategy for KMP
is intended to ensure we have in place remuneration policies and programs that balance the following:
•
•
•
•
Based upon a globally consistent framework with some local flexibility to enable us to hire, retain and
motivate the requisite individuals and specialised talent in each of the markets in which we operate;
Provide our key talent with incentive opportunities that have a clear alignment and appropriate balance
between remuneration outcomes and short and long term company performance, including the
accomplishment of major strategic imperatives. These performance based awards need to be delivered
through a mix of cash and equity vehicles to provide KMP with a sense of ownership in the business and
an appropriate level of reward for over-achievement. In this context, it should be noted that some of
our businesses compete for specialised talent with start-up entities where equity is a key element of a
competitive remuneration package;
Compliance with relevant regulatory and legislative requirements in Australia and with global good
governance practices; and
The desire to be transparent in the disclosures and explanations associated with our remuneration practices
while acknowledging the commercial sensitivity of some of the strategic targets and innovations upon which
performance is assessed and incentive outcomes are determined.
As you will note by reading the Remuneration Report, the Company has continued throughout 2013 to modify
the method and manner in which its KMP are remunerated. This has been achieved through adjusting the
alignment between company performance and remuneration outcomes.
3535
Directors’ ReportSilex Annual Report 2013 Throughout 2013, the People & Remuneration Committee has also focused attention on ensuring that the Short
Term Incentive Plan (STIP) continues to align remuneration with Company performance, while also being market-
based in its operation. The Committee continues to acknowledge that for some key employees, the STIP needs
to include an assessment of strategic accomplishments, including innovations and commercialisation initiatives
that do not result in an immediate ‘bottom line’ impact but may be the essence of our future growth.
In recognising that there is a requirement to ensure our remuneration policies reinforce Silex’s future strategies
and reward performance for achieving these strategies, we continue to have confidence that our approach
to remunerating KMP with a market-based remuneration structure with an appropriate at-risk component
appropriately aligns KMP and shareholder risk and rewards. The Committee will continue to review the STIP
and Long Term Incentive Plan (LTIP) to ensure the “flow” of annual award grants is in line with good governance
and to ensure we have in place controls to manage the overall total equity committed to equity based incentives
and employee share acquisition. Such reviews will continue to take into account shareholders’ perspectives and
good governance guidelines issued by investor groups such as the Australian Council of Super Investors (ACSI).
Further details on our remuneration approach and the remuneration for the 2013 financial year are set out in this
Remuneration Report. We hope we have demonstrated our continued undertaking to align KMP remuneration
and reward with performance, and look forward to answering any questions you may have at our Annual General
Meeting in November 2013.
Dr Lisa Mcintyre
Chairperson, People & Remuneration Committee
36
Directors’ ReportSilex Annual Report 2013 Remuneration Report
Contents
The Remuneration Report is presented in eight sections:
Section
1.0 Directors and Key Management Personnel disclosed in this report
2.0 Remuneration governance
2.1 Board oversight
2.2 People & Remuneration Committee structure
2.3 Use of remuneration consultants
3.0 Linking remuneration to company performance
3.1 Remuneration strategy and structure
3.2 Performance Rights Plan
3.3 Employee Share Option Plan
3.4 Share Trading Policy
4.0 Non-executive directors’ remuneration
5.0 Chief executive Officer/Managing Director & Key Management Personnel remuneration
5.1 Chief executive Officer/managing director remuneration
5.1.1 Remuneration structure
5.1.2 Short Term Incentive – 2013 financial year outcome
5.1.3 Long Term Incentive – 2013 financial year outcome
5.2 Other Key management Personnel remuneration
5.2.1 Short Term Incentive – 2013 financial year outcome
5.3 Summary of Key management Personnel contracts
6.0 Directors’ and Key Management Personnel’s remuneration
7.0 Other statutory disclosures
7.1 Analysis of options over equity instruments granted as remuneration
8.0 Company performance and consequences on shareholder wealth
8.1 Relationship between remuneration and company performance
8.2 Details of remuneration: cash bonuses, rights, options and restricted shares
8.3 Restrictions on limiting risk
8.4 Other executives of the consolidated entity
8.5 Performance of Silex Systems Limited
3737
Directors’ ReportSilex Annual Report 2013
1.0 Directors and Key Management Personnel disclosed in this report
The 2013 Remuneration Report has been prepared in accordance with the requirements of section 300A of the
Corporations Act 2001 and accounting standard requirements and applies to Key Management Personnel (KMP)
of the Group. KMP for the 2013 financial year are as follows:
Name
Position
Non-executive and executive directors
Prof S W R Burdon
Mr R P Campbell
Dr C S Goldschmidt
Dr M P Goldsworthy
Dr L M McIntyre
Mr C D Wilks
Chairman and non-executive director
Non-executive director
Non-executive director
Managing Director/CEO – Executive director
Non-executive director
Non-executive director
Other key management personnel
Ms J E Ducie
CFO/Company Secretary
2.0 Remuneration governance
2.1 Board oversight
The Silex Board is ultimately responsible for ensuring that the Group’s remuneration structure is equitable and
aligned with the long term interests of shareholders. The Board and its advisors are independent of Management
when making decisions affecting employee remuneration.
Consistent with this responsibility, the Board’s People & Remuneration Committee assists in making recommendations.
The People & Remuneration Committee is comprised solely of non-executive directors, all of whom are considered
by the Board to be independent directors.
In order to ensure that it is fully informed about the Group’s remuneration strategies, structures and decision making
processes, the People & Remuneration Committee meets regularly with Management in attendance by invitation.
38
Directors’ ReportSilex Annual Report 2013 2.2 People & Remuneration Committee structure
The People & Remuneration Committee is a committee of the Board currently comprised of independent,
non-executive directors. Its role is to make recommendations to the Board regarding the Group’s remuneration
policies and practices, including those applicable to the Group’s KMP.
Members of the People & Remuneration Committee as at the date of this report were as follows:
Committee members
Dr L M McIntyre – (member from 2 July 2012, Chairperson from 5 February 2013)
Prof S W R Burdon (member for full year, Chairman until 4 February 2013)
Mr R P Campbell
Committee secretary
Ms A N Scott (appointed 5 February 2013)
Ms J E Ducie (from 6 August 2012 until 4 February 2013)
Number of meetings in Fy13
4
Other individuals who regularly
attended meetings
Dr M P Goldsworthy – CEO/MD
Ms J E Ducie - CFO/Company Secretary
The role of the People & Remuneration Committee is to:
•
Review and recommend to the Board the appropriate remuneration policies and practices for the Group,
and its specific application to KMP, as well as the general application to all employees;
• Determine levels of reward to the CEO/MD and other KMP;
• Provide guidance to the Chair of the Board on evaluating the performance of the CEO/MD;
•
Review and make recommendations to the Board regarding the remuneration of non-executive directors;
and
• Communicate with shareholders and other key stakeholders on remuneration policy.
The role and responsibilities of the People & Remuneration Committee are set out in the People & Remuneration
Committee Charter, which is available on the Company’s website at: www.silex.com.au/about/corporate-governance.
The Charter is reviewed regularly and was last reviewed in April 2013. Further information on the People &
Remuneration Committee is provided in the Corporate Governance Statement of this Annual Report.
3939
Directors’ ReportSilex Annual Report 2013 2.3 use of remuneration consultants
The People & Remuneration Committee directly engages external advisors to provide input on the process of
reviewing remuneration when required. Such advice will typically cover non-executive and executive director
remuneration, KMP remuneration and advice in relation to incentive plans. Remuneration consultants are
engaged by and report directly to the People & Remuneration Committee.
The Silex Board’s People & Remuneration Committee approved the engagement of Aon Hewitt to provide
remuneration recommendations including: a KMP remuneration benchmark review and a recommendation
on the STI and LTI award for the 2013 financial year for the CEO/MD. Aon Hewitt has now provided their
recommendations in relation to these matters for the 2013 and the 2014 financial years.
The following arrangements were made to ensure that the remuneration recommendations were free from undue
influence from any members of the KMP:
•
•
•
Aon Hewitt was engaged by, and reported directly to, the Chair of the People & Remuneration Committee.
The agreement for the provision of remuneration consulting services was executed by the Chair of the
People & Remuneration Committee under delegated authority on behalf of the Board;
The report containing the remuneration recommendations was provided by Aon Hewitt directly to the Chair
of the People & Remuneration Committee; and
Aon Hewitt was permitted to speak to Management throughout the engagement to understand company
processes, practices and other business issues and obtain Management perspectives. However, Aon Hewitt
was not permitted to provide any member of Management with a copy of their draft or final report that
contained the remuneration recommendations.
As a consequence, the Board is satisfied that the recommendations were made free from undue influence from
any members of the KMP.
The remuneration recommendations were provided to Silex as an input into decision making only. The
People & Remuneration Committee considered the recommendations along with other factors in making
its remuneration decisions.
The total fees paid to Aon Hewitt for the remuneration recommendations were $9,200. There were no other
services provided by Aon Hewitt for the financial year ended 30 June 2013.
40
Directors’ ReportSilex Annual Report 2013 3.0 Linking remuneration to company performance
3.1 Remuneration strategy and structure
The remuneration strategy has been designed to attract, motivate and retain high quality personnel whilst having
regard to contemporary market practice and good governance. These arrangements are also aligned with
organisational practices and behaviours and aim to drive improvement to total shareholder value, whilst taking
into account the dynamic labour market and regulatory landscape. The Group’s aim is to reward KMP with a
level and mix of remuneration commensurate with their position and responsibilities within the Company and
competitive within the market in which they were recruited.
Those KMP who have a greater ability to influence outcomes have a greater proportion of overall remuneration
‘at risk’.
The following table provides a summary of the three key remuneration components for KMP for the 2013
financial year:
total Fixed Remuneration
Composition
Comprises base salary, superannuation and any other packaged benefits.
Purpose
To provide competitive fixed remuneration set with reference to role, market and experience.
link to performance
Company and individual performance are considered during the annual remuneration review.
Short term incentives (Sti)
Composition
All KMP are eligible to participate in the STI Plan.
Purpose
Awards are currently paid in cash, performance rights, options or share awards.
STI rewards are generally based on a percentage of the KMP’s Total Fixed Remuneration (TFR).
This percentage is recommended to the Board by the People & Remuneration Committee and is
dependent on the KMP’s role and responsibilities and ability to influence outcomes for the Group.
To reward KMP for their contribution to achievement of Group and/or divisional outcomes,
as well as divisional Key Performance Indicators (KPIs). Deferral of a portion of the short term
incentive earned into equity (performance rights, options or shares) will further align reward
with Group performance.
link to performance
Operating cash flow is a key financial metric (performance to approved budget).
Linked to other non-financial measures, such as commercial deliverables, performance, and
specific operational and strategic deliverables for the Group.
STI awards granted in equity (rights, options, shares) may be “clawed back” if the relevant KMP acts
fraudulently or dishonestly or breaches their obligations to the Group (this may apply, for example,
where there are accounting irregularities, unethical behaviour or compliance breaches as a result of a
KMP’s fraudulent or dishonest conduct).
4141
Directors’ ReportSilex Annual Report 2013 long term incentives (lti)
Composition
All KMP are eligible to participate in the LTI Plan. LTI awards may be made under the Employee
Share Option Plan (ESOP) or the Performance Rights Plan (PRP).
These award vehicles provide the People & Remuneration Committee with the flexibility to determine
the nature, terms and conditions of each grant each year.
The final decision on the award vehicle is determined by the full Board at their discretion.
Purpose
LTIs are intended to specifically create a link between long-term shareholder value and the
retention and remuneration of KMP.
Delivering LTI in options and/or performance rights is considered the best way to recognise and
reward the accomplishment of commercially sensitive strategic business initiatives and scientific
and regulatory breakthroughs. Participants are aligned to these accomplishments, delivering
significant value in future years rather than in the current year.
link to performance
LTI award performance measures for KMP will be linked to metrics such as total shareholder
return over the award period relative to the ASX 300 Index.
KMP LTI award criteria may also be subject to a minimum share price hurdle established at the
time of award.
LTI awards granted in equity (options, performance rights) may be “clawed back” if the relevant
KMP acts fraudulently or dishonestly or breaches their obligations to the Group (this may apply,
for example, where there are accounting irregularities, unethical behaviour or compliance breaches
as a result of a KMP’s fraudulent or dishonest conduct).
The Group’s policy is to position total fixed remuneration at or around the median percentile of direct industry
peers and other Australian listed companies of a similar size and complexity. Variable remuneration opportunities
are intended to provide the opportunity to earn total remuneration above the market median for outstanding
performance against the stretch targets set.
Remuneration levels are considered annually in a thorough remuneration review that considers market data,
insights into remuneration trends, the performance of the Company and individual, and the broader economic
environment. This review is conducted by the People & Remuneration Committee in consultation with
independent remuneration consultants.
3.2 Performance Rights Plan
During FY2013, the Company took steps to implement the new Performance Rights Plan as approved by Shareholders
at the 2012 AGM. This Plan was designed to ensure that Silex’s remuneration framework is aligned with both the
Company’s business strategy and the remuneration structures of other publicly listed companies in Australia.
The new plan is structured in a manner whereby awards which are granted (described as performance rights) are
a right to acquire fully paid ordinary shares in the Company for nil exercise price, subject to meeting certain pre-
determined KPIs and vesting conditions. Performance rights awards are anticipated to be made annually to KMP
and other senior personnel of the Company at the sole discretion of the Board.
In accordance with Shareholder approval, the Performance Rights Plan has been designed such that it may be
used as a Short Term Incentive or Long Term Incentive vehicle.
42
Directors’ ReportSilex Annual Report 2013 The key terms of the plan are as follows:
What is the purpose
of the PRP and who
may be awarded
performance rights?
The PRP is designed to attract, motivate and retain quality personnel and senior employees
to the Company, and align their interests with those of shareholders through the allocation of
performance rights that are subject to the satisfaction of pre-determined vesting conditions.
The Company may select full-time and permanent part-time employees and officers of the
Group, or other persons as determined by the Board, to receive performance rights.
What is the maximum
allocation under
the PRP?
The PRP and the ESOP set an aggregate cap on issuing performance rights and options of up
to 5% of the total equity of the Company in any 2 year reference period. The Board does not
currently envisage the need to issue performance rights and options of more than 5% of the total
equity in the Company in any 5 year reference period.
What are the
vesting conditions?
What vesting
conditions
apply to KmP?
are there hedging
restrictions?
What happens if a
recipient engages
in fraudulent or
dishonest action,
or breaches their
obligations to
the Group?
expiry of
performance rights
Vesting conditions are determined by the Company on a case by case basis to be most relevant
to each recipient. This allows flexibility to tailor awards to best incentivise particular segments of
Management and set specific goals for them relevant to their role in the Group. In general, vesting
conditions may:
• require the recipient to continue in employment with the Group for a particular period of time
(service period); and/or
• be based on a performance hurdle being achieved (such as project specific targets or metrics
such as total shareholder return).
Refer to section 3.1 for details on vesting conditions that may apply to KMP of the Company.
Yes – recipients are restricted from entering into or procuring another person from entering
into any scheme, arrangement, or transaction that protects the value of a performance right
allocated under the PRP, or shares which will be issued, transferred or allocated on exercise
of performance rights.
If the Board determines that a recipient has acted fraudulently or dishonestly, or breached
their obligations to the Group it may:
• cancel that recipient’s un-exercised performance rights;
• forfeit shares held by that recipient through the exercise of performance rights
(by implementing a buy-back or mandatory transfer); and
• require the recipient to pay the Company any proceeds received from the sale of any share
issued on exercise of performance rights, and repay any distributions or dividends paid on
those shares.
A performance right will expire on the earliest of:
• the expiry date determined for that performance right on grant;
• immediately on the recipient ceasing employment with the Group; and
• when any vesting condition becomes incapable of satisfaction;
unless otherwise determined by the Company.
3.3 employee share Option Plan
The Board has also determined that it would be beneficial to refresh the company’s existing Employee Share
Option Plan (ESOP) to ensure consistency with the PRP and update it for changes to law since the ESOP was
originally adopted.
Accordingly, the Board will terminate the existing ESOP during FY2014 and adopt a new ESOP on the following
terms. Any existing awards under the old ESOP will continue to be governed by those terms.
The new ESOP will be structured in a manner whereby awards which are granted (options) are a right to
acquire fully paid ordinary shares in the Company for an exercise price determined at the time of issue of the
options, subject to meeting certain pre-determined KPIs and vesting conditions. Options are anticipated to be
granted infrequently, as determined by the Board to KMP and to other senior personnel to supplement other
remuneration mechanisms.
4343
Directors’ ReportSilex Annual Report 2013 The key terms of the new ESOP are as follows:
What is the purpose
of the eSOP and
who may be
awarded options?
What is the
maximum allocation
under the eSOP
Will there be an issue
price or exercise price
payable on options
issued under the
eSOP?
What are the
vesting conditions?
What vesting
conditions apply
to KmP?
are there hedging
restrictions?
What happens if a
recipient engages
in fraudulent or
dishonest action,
or breaches their
obligations to
the Group?
expiry of options
The ESOP is intended to attract, motivate and retain the most senior personnel of the Company,
and align their interests with those of shareholders through the allocation of options that are
subject to the satisfaction of pre-determined vesting conditions.
The ESOP and the PRP set an aggregate cap on issuing performance rights and options of up to
5% of the total equity of the Company in any 2 year reference period. The Board does not currently
envisage the need to issue performance rights and options of more than 5% of the total equity in the
Company in any 5 year reference period.
Yes – the ESOP allows the Company flexibility to determine the appropriate issue price and
exercise price attached to options as circumstances change.
Vesting conditions are determined by the Company on a case by case basis to be most relevant
to each recipient. This allows flexibility to tailor awards to best incentivise senior officers and set
specific goals for them relevant to their role in the Group. In general, vesting conditions may:
• require the recipient to continue in employment with the Group for a particular period of time
(service period); and/or
• be based on a performance hurdle being achieved (such as project specific targets or metrics
such as total shareholder return).
Refer to section 3.1 for details on vesting conditions that may apply to KMP of the Company.
Yes – recipients are restricted from entering into or procuring another person from entering into
any scheme, arrangement, or transaction that protects the value of an option allocated under
the ESOP, or shares which will be issued, transferred or allocated on exercise of options.
If the Board determines that a recipient has acted fraudulently or dishonestly, or breached their
obligations to the Group it may:
• cancel that recipient’s un-exercised options;
• forfeit shares held by that recipient through the exercise of options (by implementing
a buy-back or mandatory transfer); and
• require the recipient to pay the Company any proceeds received from the sale of any share
issued on exercise of options, and repay any distributions or dividends paid on those shares.
An option will expire on the earliest of:
• the expiry date determined for that option on grant;
• immediately on the recipient ceasing employment with the Group; and
• when any vesting condition becomes incapable of satisfaction;
unless otherwise determined by the Company.
3.4 share Trading Policy
The trading of shares issued to participants under any of the company’s employee equity plans is subject to,
and conditional upon, compliance with the company’s share trading policy.
44
Directors’ ReportSilex Annual Report 2013 4.0 Non-executive directors’ remuneration
The maximum annual aggregate directors’ fee pool limit is $750,000 and was approved by shareholders at the
2011 AGM.
Fees are reviewed annually by the Board taking into account comparable roles and market data provided by
the Board’s independent remuneration consultant. Independent market analysis suggests the directors’ fees
remain below market, however recognise current business circumstances, market capitalisation and shareholder
perspectives. To date, our below average market fees have not been a hindrance to bringing on Board top
calibre new independent directors.
There is currently no proposed change to the existing fee structure:
Board
Audit Committee
People & Remuneration Committee
Chairman
100,000
8,000
8,000
member
80,000
6,000
6,000
In addition to these fees, superannuation contributions will be paid to the benefit of all non-executive directors
capped at the maximum amount required under the Superannuation Guarantee Legislation.
5.0 Chief executive Officer/Managing Director & Key Management
Personnel remuneration
5.1 Chief executive Officer/Managing Director Remuneration
5.1.1 Remuneration structure
For the 2013 financial year, the CEO/MD’s remuneration package included a mix of total fixed remuneration,
short term and long term incentives (at-risk). The below table provides a summary for the 2013 financial year:
total Fixed Remuneration for CeO/md
Composition
assessment
at Risk
Base salary, superannuation and packaged motor vehicle benefits.
Based on responsibilities and performance.
No
Short term incentive Plan for CeO/md
Composition
assessment
Maximum value of 50% of TFR.
Restricted Silex Systems Limited ordinary shares.
A mix of agreed performance criteria comprising financial metrics and one key strategic/
commercial objective for each of the Silex Group businesses. The performance criteria and
their actual calibration and weighting were established at the beginning of the financial year.
at Risk
Yes
4545
Directors’ ReportSilex Annual Report 2013 long term incentive Plan for CeO/md
Composition
assessment
Maximum value of proposed LTI award is 125% of 2013 financial year TFR value.
Restricted Silex Systems Limited ordinary shares.
The LTI has a 3 year performance period from 1 July 2012 until 30 June 2015. At the completion
of the performance period, any award of performance based Silex Systems Limited ordinary
shares will be subject to an additional escrow period, ending 3 years following the end of the
performance period.
The actual LTI payable is subject to performance criteria as approved by Shareholders at the 2012
AGM. These performance criteria include a Total Shareholder Return (TSR) performance condition
over a 3 year period and a Share Price Hurdle of $5.40 as at 30 June 2015.
The TSR Performance Condition applied to KMP LTI awards will be measured over a
3 year performance period relative to the ASX 300 Index:
• TSR less than 50th percentile = 0% vesting
• TSR at 50th percentile = 25% vesting
• TSR at 75th percentile = 75% vesting
• TSR at or above 95th percentile = 125% vesting
• Pro rata vesting between each of the above
The target TSR has been set at the 85th percentile to achieve 100% vesting. This compares
to 100% vesting at the 75th percentile which is the prevalent market practice. This higher hurdle
and the 25% premium for market leading outperformance are consistent with our understanding
of investor expectations.
at Risk
Yes
5.1.2 Short term incentive – 2013 financial year outcome
For the 2013 financial year, the Board, in its discretion and in recognition of the successful completion of the
Phase I Test Loop Milestone for the SILEX uranium enrichment project that triggered a US$15m payment to
Silex, awarded the CEO/MD a $100,000 allotment of restricted shares.
The allotment of STI restricted shares will be issued following the 2013 AGM at the volume weighted average
price (VWAP) of ordinary shares over the five trading days immediately preceding the 2013 AGM.
5.1.3 Long term incentive – 2013 financial year outcome
In accordance with approval granted by Shareholders at the 2012 AGM, the CEO/MD was granted a LTI to a
maximum total value of 125% of 2013 financial year TFR. The performance period was specified as being from
1 July 2012 until 30 June 2015.
46
Directors’ ReportSilex Annual Report 2013 5.2 Other Key Management Personnel Remuneration
For the 2013 financial year, the remuneration packages for other KMP include a mix of fixed and short term
incentives (at-risk). The below table provides a summary for the 2013 financial year:
total Fixed Remuneration for KmP
Composition
assessment
at Risk
Base salary and superannuation.
Based on responsibilities and performance.
No
Short term incentive Plan for KmP
Composition
assessment
Awards are currently paid in cash, performance rights, options or shares.
Short term incentives paid by cash are subject to the achievement of divisional and Group financial
performance, supplemented by strategic and commercial measures specific to business unit
deliverables.
For FY2013 STIs paid via equity were subject to a 2 year escrow period following the end of the
performance period.
at Risk
Yes
5.2.1 Short term incentive – 2013 financial year outcome
For the 2013 financial year, the actual STI award for other KMP (Group CFO/Company Secretary) was
determined having regard to the Group’s cash flow targets and the Board’s assessment of performance and
progress in achieving the agreed commercially sensitive strategic objectives for each of the businesses within
the Group as at 1 July 2012.
Due to the challenging nature of the targets set, it was deemed that 80% achievement was made for the 2013
financial year. This will result in an award of 80% of the maximum short term incentive opportunity of $50,000.
The award of $40,000 (80% x $50,000) will be paid by 75% cash and 25% escrow shares. The allotment of STI
escrowed shares will be issued in October 2013 (prior to 31 October 2013) using a volume weighted average
(VWAP) calculation for the five trading days immediately preceding 30 September 2013.
For commercially sensitive reasons, short term incentive targets for KMP are not published within this
Remuneration Report, however the People & Remuneration Committee believe that all targets are set
appropriately given market expectation of capital returns.
5.3 summary of Key Management Personnel contracts
It is the Group’s policy that service contracts for KMP, including the CEO/MD and CFO/Company Secretary are
unlimited in term however, capable of termination in accordance with their contracts.
With reference to the CEO/MD the notice period is 6 months. An additional termination benefit of 6 months total
fixed remuneration may be paid in the event a restraint or ‘gardening leave’ provision is applied. Any STI or LTI in
place at the time of gardening leave/termination commencement will be dealt with in accordance with the rules
governing the respective plans and in line with the specific termination parameters provided to shareholders at
the time of approval of the equity incentive arrangements.
The Group retains the right to terminate all service contracts with KMP immediately by making payment in
lieu of notice or as otherwise mutually agreed between the parties. On termination of employment, KMP are
also entitled to receive their statutory entitlements of accrued annual and long service leave, together with any
superannuation benefits.
4747
Directors’ ReportSilex Annual Report 2013 Service contracts outline the components of remuneration paid to KMP in accordance with the Group’s
remuneration policy. Fixed remuneration levels are reviewed annually; however there is no obligation to provide
any adjustment. Any adjustment would take into account the KMP’s performance and contribution, the
positioning of the current remuneration relative to the indicative market median, any change in the scope of
the role and any changes required to meet the principles of the Group’s remuneration policy and strategy.
KMP have no entitlements to payment in lieu of notice in the event of removal for misconduct.
6.0 Directors’ and Key Management Personnel’s remuneration
The table below has been prepared in accordance with the requirements of the Corporations Act 2001 and
relevant accounting regulations in Australia.
Short-term
employee benefits
Post-
employment
benefits
Cash
salary
and fees*
Non -
monetary
benefits
Cash
bonus
Super-
annuation
long
term
benefits
long
service
Share-based
payments
leave Options
deferred
Rights
$
$
$
$
$
$
$
total
$
2013
Name
Executive directors
Dr M P Goldsworthy
760,523
-
63,549
16,740
14,623
231,390
161,349
1,248,174
Non-executive directors
Prof S W R Burdon
113,200
Mr R P Campbell
Dr C S Goldschmidt
Dr L M McIntyre
(from 2 July 2012)
Mr C D Wilks
Other KMP
Ms J E Ducie
94,000
86,000
92,800
127,844
-
-
-
-
-
-
-
-
-
10,188
8,460
7,740
8,352
-
-
-
-
-
-
123,388
-
-
-
-
-
102,460
93,740
-
101,152
-
13,500
(1,303)
77,053
-
217,094
238,170
30,000
-
24,840
1,879
38,437
10,000
343,326
total
1,512,537
30,000
63,549
89,820
15,199
346,880
171,349
2,229,334
* inclusive of movement in annual leave accruals
48
Directors’ ReportSilex Annual Report 2013 Short-term
employee benefits
Post-
employment
benefits
long
term
benefits
Share-based
payments
Cash
salary
and fees*
Non -
monetary
benefits
Cash
bonus
Super-
annuation
long
service
leave Options
deferred
Rights
$
$
$
$
$
$
$
total
$
2012
Name
Executive directors
Dr M P Goldsworthy
755,773
-
75,448
15,775
46,193
130,593
304,000 1,327,782
Non-executive directors
Prof S W R Burdon
Mr R P Campbell
Dr C S Goldschmidt
Mr C D Wilks
91,797
89,262
83,285
142,704
Other key management personnel
Ms J E Ducie
177,049
Mr B J Spillane
(until 12 September 2011)
total
25,983
1,365,853
* inclusive of movement in annual leave accruals
-
-
-
-
-
-
-
-
-
-
-
8,262
8,034
7,496
-
-
-
-
-
-
11,984
823
43,487
-
24,347
1,912
74,483
3,060
2,338
481
-
-
-
-
-
-
-
100,059
97,296
90,781
198,998
277,791
31,862
78,508
78,236
49,409
248,563
304,000 2,124,569
The relative proportions of remuneration that are linked to performance and those that are fixed are as follows:
Name
Directors
Prof S W R Burdon (NED)
Mr R P Campbell (NED)
Dr C S Goldschmidt (NED)
Dr M P Goldsworthy (ED)
Dr L M McIntyre (NED)
Mr C D Wilks (NED)
Other key management personnel
Ms J E Ducie
Mr B J Spillane
(until 12 September 2011)
Fixed remuneration
at risk – Sti
at risk – lti*
2013
2012
2013
2012
2013
2012
100.0%
100.0%
100.0%
68.5%
100.0%
64.5%
100.0%
100.0%
100.0%
67.3%
N/A
78.1%
77.2%
73.2%
N/a
100.0%
N/a
N/a
N/a
8.0%
N/a
N/a
11.6
N/a
N/A
N/A
N/A
22.9%
N/A
N/A
-
-
N/a
N/a
N/a
23.5%
N/a
35.5%
N/A
N/A
N/A
9.8%
N/A
21.9%
11.2%
26.8%
N/a
-
* This relates to options issued on an LTI basis and deferred shares on an LTI basis with the percentages based on the value
of amounts expensed during the year.
4949
Directors’ ReportSilex Annual Report 2013 7.0 Other statutory disclosures
7.1 Analysis of options over equity instruments granted as remuneration
Options are granted under the Silex Systems Limited Employee Share Option Plan. Full-time and part-time staff of
the Group are eligible to participate in the plan. Options are granted under the plan for no consideration. Options
are granted for a five year period and options issued to 15 March 2012 vest 100% after two years. Options issued
from 16 March 2012 vest 100% after three years as recommended by various governance bodies.
In accordance with shareholder approval granted at the 2011 AGM, options were granted to the CEO/MD and
non-executive director Mr Chris Wilks during the financial year ended 30 June 2012. These options were granted
for a five year period and vest after three years subject to a Total Shareholder Return (TSR) hurdle measured over
a three year performance period relative to the ASX 300 Index.
No options over ordinary shares in the company were provided to any director of Silex Systems Limited or KMP
of the Group during the year. In addition, no options for any director of Silex Systems Limited or KMP lapsed or
were cancelled during FY2013.
The terms and conditions of each grant of options affecting remuneration in the previous, this or future reporting
periods are as follows:
Grant date
expiry date
30th July 2010
29th July 2015
5th July 2011
4th July 2016
8th December 2011
7th December 2016
exercise
price
$4.65
$2.92
$2.04
Value per
option at
grant date
$1.97
$1.18
$0.63
date exercisable (subject to
share price hurdle)
100% after 30th July 2012*
100% after 5th July 2013
100% after 8th December 2014
Share
price
hurdle
$4.86
$3.05
$2.13
* 40,000 options to Ms J E Ducie vested during the year, however as the share price hurdle has not been met, these options remain
unable to be exercised.
Options granted under the plan carry no dividend or voting rights. When exercisable, each option is convertible
into one ordinary share.
The exercise price of options is based on the weighted average price at which the Company’s shares are traded
on the Australian Stock Exchange during the five days immediately preceding the date options are granted, plus
five cents.
The assessed fair value at grant date of options granted to the individuals is allocated equally over the period
from grant date to vesting date, and the amount is included in the remuneration tables. Fair values at grant date
are determined using a binomial option pricing model that takes into account the exercise price, the term of the
option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the
expected dividend yield, any additional performance hurdles and the risk-free interest rate for the term of the option.
There were no options granted to any individual during FY2013.
shares provided on exercise of remuneration options
There were no ordinary shares issued in the Company provided as a result of the exercise of remuneration
options to each director of Silex Systems Limited and other KMP of the Group for FY2012 and FY2013.
50
Directors’ ReportSilex Annual Report 2013 8.0 Company performance and consequences on shareholder wealth
8.1 Relationship between remuneration and company performance
The overall level of KMP reward takes into account the performance of the Group over a number of years,
with greater emphasis given to the current and prior year.
8.2 Details of remuneration: cash bonuses, rights, options and restricted shares
For each cash bonus, grant of options, rights or issue of restricted shares included in the tables on pages 48-
49, the percentage of the available bonus or grant that was paid, or that vested, is set out below. The maximum
value of options to vest is based on the value determined using the binomial model taking the value calculated as
at grant date.
Details of options included in the tables on pages 48-49 are:
Name
year of grant
years in which
options
may vest
Number
of options
granted
Dr M P Goldsworthy
Y/E 30/06/2012
Y/E 30/06/2015
1,102,207
Mr C D Wilks
Ms J E Ducie
Ms J E Ducie
Y/E 30/06/2012
Y/E 30/06/2015
367,035
Y/E 30/06/2011
Y/E 30/06/2013*
Y/E 30/06/2012
Y/E 30/06/2014
40,000
60,000
Number
of options
forfeited
during the
year
-
-
-
-
maximum
total value
of grant
to vest
694,170
231,159
N/A
70,716
Vested %
-
-
100
-
* The options issued to Ms J E Ducie are subject to a share price hurdle of $4.86 which had not been achieved between the period
between two years after grant date and 30 June 2013.
Details of STI restricted shares included in the tables on pages 48-49 are:
Name
awarded %
Dr M P Goldsworthy
Dr M P Goldsworthy
Ms J E Ducie
76%
25%
80%
Forfeited
%
24%
75%
20%
year granted
Y/E 30/6/2013
Y/E 30/6/2014
Y/E 30/6/2014
Number
granted
84,679
*
**
maximum
value of
shares to
grant
$
-
100,000
10,000
Value per
share
$
3.59
*
**
* These shares will be issued following the 2013 AGM at the volume weighted average price (VWAP) of ordinary shares over the
five trading days immediately preceding the 2013 AGM.
** These shares will be issued in October 2013 at the volume weighted average price (VWAP) of ordinary shares over the five
trading days immediately preceding 30 September 2013.
5151
Directors’ ReportSilex Annual Report 2013 At the 2012 AGM, shareholders approved a short term incentive scheme for CEO/MD Dr Michael Goldsworthy in
the form of restricted Silex Systems Limited ordinary shares. The maximum total value was set at $400,000 (50%
of his 2013 fixed remuneration package) subject to the accomplishment of performance objectives. For the 2013
financial year, the Board, in its discretion and in recognition of the successful completion of the Phase I Test Loop
Milestone for the SILEX uranium enrichment project that triggered a US$15m payment to Silex, awarded the
CEO/MD a $100,000 allotment of restricted shares.
At the 2012 AGM, shareholders approved a long term incentive scheme for Dr Michael Goldsworthy in the form
of restricted Silex Systems Limited ordinary shares. The maximum total value was set at $1,000,000 (125% of
his 2013 fixed remuneration package) subject to the accomplishment of performance objectives over a three
year performance period commencing 1 July 2012. The actual LTI payable is subject to agreed performance
criteria comprising Total Shareholder Return (TSR) over a three year period and is subject to a Share Price
Hurdle of $5.40.
If conditions are met, the allotment of LTI restricted shares will be issued following the 2015 AGM at the volume
weighted average price (VWAP) of ordinary shares over the five days immediately preceding the 2015 AGM.
For the 2013 financial year, the actual STI award for other KMP (Group CFO/Company Secretary) was
determined having regard to the Group’s cash flow targets and the Board’s assessment of performance and
progress in achieving the agreed commercially sensitive strategic objectives for each of the businesses within
the Group as at 1 July 2012.
Due to the challenging nature of the targets set, it was deemed that 80% achievement was made for the 2013
financial year. This will result in an award of 80% of the maximum short term incentive opportunity of $50,000.
The award of $40,000 (80% x $50,000) will be paid by 75% cash and 25% escrow shares. The allotment of STI
escrowed shares (maximum value $10,000) will be issued in October 2013 (prior to 31 October 2013) using a
volume weighted average (VWAP) calculation for the five trading days immediately preceding 30 September 2013.
8.3 Restrictions on limiting risk
Where a part of the directors’ or KMP’s remuneration consists of securities, the director or executive is not
allowed to limit their exposure to risk in relation to the securities. Directors and KMP with remuneration consisting
of securities are required to provide an annual declaration of compliance with this policy.
8.4 Other executives of the consolidated entity
There are no officers, other than executive directors and KMP noted above, involved in, concerned in,
or taking part in the management of the commercial affairs of Silex Systems Limited.
52
Directors’ ReportSilex Annual Report 2013 8.5 Performance of silex systems Limited
year ended 30 June
2009
2010
2011
2012
2013
ePS
cents
(2.6)
(12.3)
(19.6)
(21.6)
(0.1)
Sti
$
-
85,000
13,761
304,000
140,000
Share price at 30 June
6.00
4.60
2.92
3.20
2.20
The decrease in the negative earnings per share in the current year was mainly due to the US$15.0m (AU$15.4m)
revenue from GE-Hitachi Global Laser Enrichment (‘GLE’) for the successful completion of the Test Loop
Program Phase I Milestone. The discontinuation of the Silex Solar operation also contributed to the improved
result with a loss of $1.1m, compared to $19.0m in the previous year. In addition, Silex has continued to focus
on lowering its operating cost structure whilst maintaining technical and commercialisation progress for each of
its business segments.
Silex’s share price has suffered as a result of events in Fukushima which have had a negative impact on uranium-
based stocks, including a significant fall in the Silex share price in the weeks following the initial event. Progress
in the Group’s various technology projects has not directly been reflected in Earnings Per Share (EPS) as some of
the projects remain in the research and development phase and, with the exception of the Uranium Enrichment
Project, are yet to generate substantial revenue.
The Silex Board is mindful of general shareholder concern that long-term equity-based remuneration be linked
to growth in shareholder value. The LTI that was issued to the CEO/MD for FY2013 addresses this with a Total
Shareholder Return (TSR) metric and minimum share price hurdle applied. These performance conditions will
be reviewed to determine the appropriateness to the business prior to any further equity issues.
5353
Directors’ ReportSilex Annual Report 2013 12. Company secretary
Ms Julie Ducie, B. Bus, CA, MAICD was appointed to the position of Company Secretary in October 2010.
Before joining Silex, Ms Ducie spent 4 years in the Construction industry in the Middle East as Finance Manager
of a Facade Engineering company with projects in Dubai, Bahrain and Qatar. Prior to this, Julie was a Senior
Associate with a Chartered Accounting Practice.
13. Meetings
The number of directors’ meetings held during the financial year and the number of meetings attended by each
director are set out in the following table:
director’s name
Prof S W R Burdon
Mr R P Campbell
Dr C S Goldschmidt
Dr M P Goldsworthy
Dr L M McIntyre
Mr C D Wilks
directors’ meetings
audit Committee meetings
People & Remuneration
Committee meetings
Number
Held
Number
attended
Number
Held
Number
attended
Number
Held
Number
attended
12
12
12
12
12
12
12
12
11
12
12
12
3
3
3
*
3
*
3
3
3
*
3
*
4
4
*
*
4
*
4
4
*
*
4
*
* Not a member of the relevant committee
14. indemnification and insurance of directors
The Company has entered into agreements to indemnify the directors of the Company against all liabilities to
persons (other than the Company or related body corporate) which arise out of the performance of their normal
duties as directors or executive officers unless the liability relates to conduct involving lack of good faith. The
Company has agreed to indemnify the directors and executive officers against all costs and expenses incurred
in defending an action that falls within the scope of the indemnity.
The directors’ and officers’ liability insurance provides cover against all costs and expenses involved in defending
legal actions and any resulting payments arising from a liability to persons (other than the Company) incurred in
their position as a director or executive officer unless the conduct involves a wilful breach of duty or an improper
use of inside information or position to gain advantage. The insurance policy does not allow specific disclosure
of the nature of the liabilities insured against or the premium paid under the policy.
54
Directors’ ReportSilex Annual Report 2013 15. environmental regulation
The parent entity is subject to the environmental and health and safety regulations applicable to tenants of the
Lucas Heights Science and Technology Centre. The parent entity is also bound by the rules and regulations
set out in the Australian Radiation Protection and Nuclear Safety Act, 1998, and are a licensee under the Act.
Solar Systems is subject to a number of regulations including VIC Occupational Health and Safety Act 2004,
VIC Occupational Health and Safety Regulations 2007, VIC Dangerous Goods Act 1985, VIC Dangerous Goods
(Storage and Handling) Interim Regulations 2011.
To the best of the Directors’ knowledge, all environmental and health and safety regulatory requirements have
been met and there have been no claims made during the financial year.
16. Non-audit services
The company may decide to employ the auditor on assignments additional to their statutory audit duties
where the auditor’s expertise and experience with the company and/or the consolidated entity are important.
Details of the amounts paid or payable to the auditor (PricewaterhouseCoopers) for audit and non-audit services
provided during the year are set out overleaf.
The Board of Directors has considered the position and, in accordance with the advice received from the Audit
Committee, is satisfied that the provision of the non-audit services is compatible with the general standard
of independence for auditors imposed by the Corporations Act 2001. The directors are satisfied that the
provision of non-audit services by the auditor, as set out below, did not compromise the auditor independence
requirements of the Corporations Act 2001 for the following reasons:
•
•
All non-audit services have been reviewed by the Audit Committee to ensure they do not impact the
impartiality and objectivity of the auditor.
None of the services undermine the general principles relating to auditor independence as set out in
Professional Statement F1, including reviewing or auditing the auditor’s own work, acting in a management
or a decision-making capacity for the company, acting as advocate for the company or jointly sharing
economic risk and rewards.
5555
Directors’ ReportSilex Annual Report 2013 During the year the following fees were paid or payable for services provided by the auditor of the parent
company, its related practices and non-related audit firms
2013
$
2012
$
Remuneration of auditors
(a) Assurance services
Audit services
PricewaterhouseCoopers Australian firm
Audit and review of financial reports and other audit work under the Corporations Act 2001
181,000
163,000
Total remuneration for audit services
181,000
163,000
Other assurance services
PricewaterhouseCoopers Australian firm
Audit of government grants
Total remuneration for other assurance services
Total remuneration for assurance services
(b) Other services
Review of option valuation methodology for Long Term Incentive Plan for directors
Total remuneration for other services
total remuneration
17. Auditors
10,000
5,000
10,000
5,000
191,000
168,000
-
-
11,000
11,000
191,000
179,000
PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001.
18. Auditors’ independence declaration
A copy of the auditors’ independence declaration as required under section 307C of the Corporations Act 2001
is set out on page 57.
This report is made in accordance with a resolution of the Directors.
Dr M P Goldsworthy
CEO/Managing Director
Sydney, 25 September 2013
56
Mr C D Wilks
Director
Directors’ ReportSilex Annual Report 2013
Auditors’ independence Declaration
As lead auditor for the audit of Silex Systems Limited for the year ended 30 June 2013, I declare that, to the best
of my knowledge and belief, there have been:
a)
no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the
audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of Silex Systems Limited and the entities it controlled during the period.
Stephen Humphries
Partner
PricewaterhouseCoopers
Sydney
25 September 2013
PricewaterhouseCoopers, ABN 52 780 433 757
Darling Park Tower 2, 201 Sussex Street, GPO BOX 2650, SYDNEY NSW 1171
DX 77 Sydney, Australia
T +61 2 8266 0000, F +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation
5757
Directors’ ReportSilex Annual Report 2013 Silex Systems Limited (the Company) and the Board are committed to achieving and demonstrating the highest
standards of corporate governance. The Board continues to review the framework and practices to ensure they
meet the interests of shareholders.
A description of the Company’s main corporate governance practices is set out below. All these practices, unless
otherwise stated, were in place for the entire year. They comply with the ASX Corporate Governance Principles
and Recommendations.
Principle 1: Lay solid foundations for management and oversight
The directors are responsible to shareholders for the performance of the Company 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.
Day to day management of the Group’s affairs and the implementation of the corporate strategy and policy
initiatives are formally delegated by the Board to the Chief Executive Officer/Managing Director (CEO/MD)
and senior executives.
The Board of Directors is accountable to shareholders for the performance of the Group and is responsible for
the corporate governance practices of the Group.
The Board’s principal objective is to maintain and increase shareholder value while ensuring that the Group’s
overall activities are properly managed.
Silex’s corporate governance practices provide the structure which enables the Board’s principal objective to be
achieved, whilst ensuring that the business and affairs of the group are conducted ethically and in accordance
with the law.
The Board’s overall responsibilities include:
•
•
•
providing strategic direction and approving corporate strategies;
appointing and removing the CEO/MD;
reviewing and approving business plans, annual budgets and financial plans;
• monitoring management and financial performance and reporting;
• monitoring and ensuring the maintenance of adequate risk management controls and reporting mechanisms; and
•
ensuring the business is conducted ethically and transparently.
The Board delegates responsibility for day-to-day management of the business to the CEO/MD as set out in the
Group’s delegations policy. These delegations are reviewed on an annual basis. The CEO/MD also oversees the
implementation of strategies approved by the Board. The Board uses committees to support it in matters that
require more intensive review and involvement. Details of the Board committees are provided below.
As part of its commitment to good corporate governance, the Board undertakes regular reviews of the practices
and standards governing the Board’s composition, independence and effectiveness, the accountability and
compensation of directors and the Board’s responsibility for the stewardship of the Group.
The Chairman undertakes an annual assessment of the performance of the CEO/MD and the non-executive
directors and meets privately with each director to discuss this assessment. The CEO/MD meets annually
with senior management to discuss their performance. Feedback is also sought from other directors. These
assessments and meetings took place during the year.
58
Corporate Governance StatementSilex Annual Report 2013 Principle 2: structure the Board to add value
The Board is comprised of both executive and non-executive directors with a majority of non-executive
directors. Non-executive directors bring a balanced perspective to the Board’s consideration of strategic,
risk and performance matters and are best placed to exercise independent judgement and review and
constructively challenge the performance of management.
The Chairman is an independent non-executive director, the majority of the Board are 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.
The Company maintains a mix of directors on the Board from different backgrounds with complementary skills
and experience. When a new director is to be appointed, the Board prepares a list of the requisite range of skills,
experience and expertise. From this, the Board prepares a short-list of candidates with appropriate skills and
experience. A number of channels are used to source candidates to ensure the company benefits from a diverse
range of individuals in the selection process.
The Directors of the Company in office at the date of this statement are:
Name
age
Position
expertise
year
appointed
director
Prof S W R Burdon
Mr R P Campbell
Dr C S Goldschmidt
Dr M P Goldsworthy
Dr L M McIntyre
Mr A M Stock
Mr C D Wilks
70
68
59
55
48
61
55
Non-executive director/
Chairman
Non-executive director
Telecommunications industry and Company
Management
Finance and Accounting, Computing and
Company Management
Non-executive director
Company Management
CEO/Managing Director
Physicist and Co-inventor of the
SILEX Technology
Non-executive director
Non-executive director
Non-executive director
Strategy, Commercialisation and Company
Management
Energy industry and
Company Management
Investment Banking, Finance and
Company Management
2011
1996
1992
1992
2012
2013
1988
Prof S W R Burdon, Mr R P Campbell, Dr C S Goldschmidt, Dr L M McIntyre and Mr A M Stock are considered
independent. An independent director cannot be a substantial shareholder (as defined in section 9 of the
Corporations Act 2001). The size and composition of the Board is determined by the full Board. Additional
information on the skills and experience of the directors is included in Section 10 of the Directors’ Report.
5959
Corporate Governance StatementSilex Annual Report 2013 Directors’ independence
The Board has adopted specific principles in relation to directors’ independence. These state that 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 any other
group member, 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 any other group member, or an employee materially associated with the
service provided;
not be a material supplier or customer of the Company or any other group member, 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 or a controlled entity other than as a
director of the Group; 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 these purposes is determined on both quantitative and qualitative bases. 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.
Recent thinking on corporate governance has introduced the view that a director’s independence may be
perceived to be impacted by lengthy service on the Board. The Board will continue to monitor developments
on this issue and further consider and review the independence status of long serving directors.
Non-executive directors
The non-executive directors met during the year, in scheduled sessions without the presence of management,
to discuss the operation of the Board and a range of other matters. Relevant matters arising from these meetings
were shared with the full Board.
Term of office
The Company’s Articles of Association specifies that all directors other than the CEO/MD must retire from office
no later than the third annual general meeting (AGM) following their last election. Where eligible, a director may
stand for re-election. 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.
Chairman and Chief executive Officer/Managing Director (CeO/MD)
The Chairman is responsible for leading the Board, ensuring directors are properly briefed in all matters relevant
to their role and responsibilities, and facilitating Board discussions.
The CEO/MD is responsible for the day-to-day management of the Company’s affairs, and for implementing
Group strategies and policies as determined by the Board of Directors.
60
Corporate Governance StatementSilex Annual Report 2013 induction
The induction provided to new directors and senior executives enables them to actively participate in
decision-making as soon as possible. It ensures that they have a full understanding of the company’s financial
position, strategies, operations, culture, values and risk management policies. It also explains the respective
rights, duties, responsibilities, interaction and roles of the Board and senior executives and the Company’s
meeting arrangements.
Board meetings
The Board meets formally at least 9 times a year to consider a broad range of matters, including progress
with respect to the Company’s various development programs, strategy, financial reviews, acquisitions and
investments. Details of meetings and attendances are set out in the Directors’ Report. Various meetings during
the year were held at operational sites of the Company and a full tour of the facilities was included as part of
the visit.
Conflicts of interest of directors
The Board has guidelines dealing with disclosure of interests by directors and participation and voting at board
meetings where any such interests are discussed. In accordance with the Corporations Act 2001, any director
with a material personal interest in a matter being considered by the Board does not receive the relevant board
papers, must not be present when the matter is being considered, and may not vote on the matter.
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 written approval of the Chairman is required,
but this will not be unreasonably withheld.
All directors have access to Company records and information and receive detailed financial and operational
reports from senior management during the year to enable them to carry out their duties. Directors also liaise
with senior management as required, and may consult with other employees and seek additional information
on request.
Performance assessment and remuneration
The Board meets to undertake an annual self-assessment of its collective performance, the performance
of the Chairman and of its committees. This was performed in June 2013 and all deemed satisfactory. The
Board discusses a broad range of issues including the progress of the various research, development and
commercialisation projects, the financial results, major deals negotiated and the share price. The Board
considers the appropriate mix of skills required by the Board to maximise its effectiveness and its contribution
to the Group.
The Chairman undertakes an annual assessment of the performance of individual directors and holds discussions
with each director to discuss this assessment. The CEO/MD meets annually with non-director senior executives
to discuss their performance. Feedback is also sought from other directors.
The Directors’ Report contains details of remuneration paid to directors and Key Management Personnel (KMP).
Executive and non-executive directors’ fees are clearly separated in the Directors’ Report.
Where bonuses are paid, details of the reason for the bonus are described. Equity awards issued to executive
directors are approved by shareholders at the Annual General Meeting.
Additional information on performance evaluation and remuneration is provided in the Directors’ Report.
6161
Corporate Governance StatementSilex Annual Report 2013 Board committees
The Board has established a number of committees to assist in the execution of its duties and to allow detailed
consideration of complex issues. Current committees of the Board are the People & Remuneration (formerly
called the Remuneration Committee) and Audit Committees. Each is comprised solely off non-executive
directors. The committee structure and membership is reviewed on an annual basis.
Nomination committee
The Board has decided that it is in the Company’s best interests that the full Board deals with nomination issues.
As a result, a Nomination Committee has not been established. From time to time, the Board may establish a
temporary sub-committee to assist the Board in fulfilling its nomination responsibilities.
Principle 3: Promote ethical and responsible decision making
Code of conduct
The Company has developed a Code of Conduct (the Code) which has been fully endorsed by the Board and
applies to all directors and employees.
In summary, the Code requires that at all times Company personnel act with the utmost integrity, objectivity and
in compliance with the letter and the spirit of the law and company policies.
A copy of the Code is available on the Company’s website at: www.silex.com.au/about/corporate-governance.
Diversity policy
The Company values diversity and recognises the benefits it can bring to the organisation’s ability to achieve its
goals. Accordingly, the Company has developed a diversity policy, a copy of which can be found on the Company’s
website. This policy outlines the Company’s position on all forms of diversity, in particular diversity as it relates to
gender. It includes requirements for the Board to establish measurable objectives for achieving diversity, and for
the Board to assess annually both the objectives, and the company’s progress in achieving them.
In accordance with this policy and ASX Corporate Governance Principles, the Board has established the
following objectives in relation to gender diversity. The aim is to achieve these objectives over the coming
2 to 3 years as director, senior executive positions and management become vacant and appropriately
skilled candidates are available:
Number of women employees in the whole organisation
Number of women in senior executive and management positions
Number of women on the Board
* Target to be achieved by 2016
Objective (%)
actual (%)
35.0
35.0
33.0*
25.0
44.0
16.6
Responsibility for diversity has been included in the board charter and the people and remuneration committee
charter (diversity at all levels of the company).
62
Corporate Governance StatementSilex Annual Report 2013 share trading policy
The Company has in place a formal share trading policy which places certain prohibitions on the trading of the
Company’s shares. The policy is on the Company’s website at: www.silex.com.au/about/corporate-governance.
All Silex share dealings by directors are promptly notified to the Australian Stock Exchange (ASX). All directors
and employees are prohibited from buying and selling Silex shares at any time if they are aware of any material
price sensitive information that has not been made available to the public. This however does not restrict
directors and employees from exercising options over unissued Silex shares. Trading of the subsequently
issued shares is however subject to the prohibitions above.
Principle 4: safeguarding integrity in financial reporting
Audit Committee
The Audit Committee consists of 4 non-executive independent directors as follows:
Mr R P Campbell – Chairman
Prof S W R Burdon
Dr C S Goldschmidt
Dr L M McIntyre (member from 2 July 2012)
Details of these directors’ qualifications and attendance at Audit Committee meetings are set out in the
Directors’ Report.
The Audit Committee has appropriate financial expertise and all members are financially literate and have an
appropriate understanding of the industries in which the Group operates.
The Audit Committee has its own charter setting out its role and responsibilities, composition, structure, membership
requirements and the manner in which the committee is to operate. The charter is reviewed on an annual basis
and is available on the Company’s website at: www.silex.com.au/about/corporate-governance.
Minutes of committee meetings are tabled at the subsequent Board meeting.
The main responsibilities of the committee are to:
•
•
•
•
•
•
•
•
review, assess and approve the financial reports 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
− compliance with applicable laws and regulations;
oversee the effective operation of the risk management framework;
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;
review and approve the level of non-audit services provided by the external auditors and ensure it does not
adversely impact on auditor independence;
review and monitor related party transactions and assess their propriety; and
report to the Board on matters relevant to the committee’s role and responsibilities.
6363
Corporate Governance StatementSilex Annual Report 2013
In fulfilling its responsibilities, the Audit Committee receives regular reports from Management and the external
auditors. It also meets with the external auditors at least twice a year – more frequently if necessary, and reviews
any significant disagreements between the auditors and Management, irrespective of whether they have been
resolved. The external auditors have a clear line of direct communication at any time to either the Chairman of
the Audit Committee or the Chairman of the Board.
The Audit Committee has authority, within the scope of its responsibilities, to seek any information it requires
from any employee or external party.
external auditors
The Company and Audit Committee policy is to appoint external auditors who clearly demonstrate quality
and independence. The performance of the external auditor is reviewed annually and applications for tender
of external audit services are requested as deemed appropriate, taking into consideration assessment of
performance, existing value and tender costs. It is PricewaterhouseCoopers’ policy to rotate audit engagement
partners on listed companies at least every five years.
An analysis of fees paid to the external auditors, including a break-down of fees for non-audit services, is provided in
the Directors’ Report. It is the policy of the external auditors to provide annual declarations of their independence
to the audit 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 and content of the Audit Report.
Principles 5 and 6: Make timely and balanced disclosures and respect the
rights of shareholders
Continuous disclosure and shareholder communication
The Company has written policies and procedures on information disclosure that focus on continuous disclosure
of any information concerning the Company and its subsidiaries that a reasonable person would expect to have a
material effect on the price of the Company’s securities. These policies and procedures also include the arrangements
the Company has in place to promote effective communication with shareholders and encourage participation at
general meetings. The Company’s Continuous Disclosure Policy is available on the Company’s website.
The Company Secretary has been nominated as the person responsible for communications with the Australian Stock
Exchange (ASX). This role includes responsibility for ensuring compliance with the continuous disclosure requirements
in the ASX Listing Rules and overseeing and co-ordinating information disclosure to the ASX, analysts, brokers,
shareholders, the media and the public.
Information disclosed to the ASX is posted on the Company’s website as soon as it is disclosed to the ASX.
Procedures have also been established for reviewing whether any price sensitive information has been inadvertently
disclosed, and if so, this information is also immediately released to the market.
64
Corporate Governance StatementSilex Annual Report 2013 The role of shareholders
The Board of Directors aims to ensure that the shareholders are informed of all major developments affecting
the Group’s state of affairs. Information is communicated to shareholders as follows:
•
The Annual Report is distributed to all shareholders who have elected to receive it and is posted on the
Company’s website. The Board ensures that the Annual Report includes relevant information about the
operations of the Group during the year, changes in the state of affairs of the Group and details of likely
future developments, in addition to the other disclosures required by the Corporations Act 2001;
•
Proposed major changes in the Group which may impact on share ownership rights are submitted to a
vote of shareholders.
The Board encourages full participation of shareholders at the Annual General Meeting to ensure a high level
of accountability and identification with the Group’s strategy and goals. Important issues are presented to the
shareholders as single resolutions.
The shareholders are responsible for voting on the appointment of directors.
Principle 7: Recognise and manage risk
The Board, through the Audit Committee, is responsible for ensuring there are adequate policies in relation to risk
management, compliance and internal control systems. These policies, detailed in the Audit Committee charter,
are available on the Company website. In summary, the Company policies are designed to ensure strategic,
operational, legal, reputation and financial risks are identified, assessed, effectively and efficiently managed and
monitored to enable achievement of the Group’s business objectives.
Considerable importance is placed on maintaining a strong control environment. There is an organisational
structure with clearly drawn lines of accountability and delegation of authority. Adherence to the Code of
Conduct is required at all times and the Board actively promotes a culture of quality and integrity.
Detailed control procedures cover management accounting, financial reporting, project appraisal, environment,
health and safety, IT security, compliance and other risk management issues.
The Board requires management to design and implement the risk management and internal control system
to manage the Company’s material business risks. The Board discusses these policies at regular intervals. For
example, management provides details of cash deposits, intellectual property patenting, significant commercial
exposures and various other business risks on a regular basis for review. The risks are managed in accordance
with the risk management system in place and periodically reviewed. Management has reported to the Board
on the effectiveness of the Company’s management of its material business risks.
The Board requires that each major proposal submitted to the Board for decision is accompanied by sufficient
due diligence and risk review.
Occupational Health and safety (OH&s)
The Company recognises the importance of Occupational Health and Safety (OH&S) issues and is committed
to the highest levels of performance. To help meet this objective, OH&S Committees have been established
to facilitate the systematic identification of OH&S issues and to ensure they are managed in a structured and
rigorous manner. This system has been operating for a number of years and allows the Company to:
• monitor its compliance with all relevant OH&S legislation and regulations;
•
•
•
continually assess and improve the effectiveness of the Company’s OH&S program;
encourage employees to actively participate in the management of all OH&S issues; and
reinforce the importance of safe work practices throughout the Company, as mandated by management.
6565
Corporate Governance StatementSilex Annual Report 2013 environmental regulation
As noted in the Directors’ Report, the parent entity is subject to the environmental and health and safety
regulations applicable to tenants of the Lucas Heights Science and Technology Centre. The parent entity is
also bound by the rules and regulations set out in the Australian Radiation Protection and Nuclear Safety Act,
1998, and are a licensee under that Act. Solar Systems is also subject to a number of regulations including
VIC Occupational Health and Safety Act 2004, VIC Occupational Health and Safety Regulations 2007, VIC
Dangerous Goods Act 1985 and VIC Dangerous Goods (Storage and Handling) Interim Regulations 2011.
To the best of the Directors’ knowledge, all environmental regulatory requirements have been met.
Corporate reporting
In complying with recommendation 7.3, the CEO/MD and CFO/Company Secretary have made the following
certifications to the Board:
•
•
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 control and
that the system is operating effectively in all material respects in relation to financial reporting risks.
Principle 8: Remunerate fairly and responsibly
People & Remuneration Committee
The People & Remuneration Committee consists of the following non-executive independent directors:
Dr L M McIntyre (member from 2 July 2012, Chairperson from 5 February 2013)
Prof S W R Burdon (member for full year, Chairman from 30 September 2011 to 4 February 2013)
Mr R P Campbell
Details of these directors’ attendance at People and Remuneration Committee meetings are set out in
the Directors’ Report.
The role and responsibilities of the People & Remuneration Committee are set out in the People & Remuneration
Committee charter, which is available on the Company’s website at: www.silex.com.au/about/corporate-governance.
The People & Remuneration Committee advises the Board on remuneration and incentive 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. Further information on directors’
and KMP’s remuneration is set out in the Directors’ Report, which distinguishes non-executive directors’
remuneration from that of executive directors and KMP.
The People & Remuneration Committee adopts policies that attract and maintain talented and motivated
directors and employees so as to encourage enhanced performance.
66
Corporate Governance StatementSilex Annual Report 2013 Silex SyStemS limited
abN 69 003 372 067
Concise Financial
Report – 30 June 2013
68 Consolidated income statement
69
Consolidated statement of comprehensive income
70 Consolidated balance sheet
71
Consolidated statement of changes in equity
73 Consolidated statement of cash flows
74 Notes to the financial statements
77 Directors’ declaration
78
Independent auditor’s report to the members
Relationship of the concise financial
report to the full financial report
The concise financial report is an extract from the full financial report for the year ended 30 June 2013.
The financial statements and specific disclosures included in the concise financial report have been
derived from the full financial report.
The concise financial report cannot be expected to provide as full an understanding of the financial
performance, financial position and financing and investing activities of Silex Systems Limited and
its subsidiaries as the full financial report. Further financial information can be obtained from the full
financial report.
The full financial report and auditor’s report will be sent to members on request, free of charge. Please
call +61 2 9704 8888 and request a copy of the full financial report (or email enquiries@silex.com.au).
Alternatively, you can access both the full financial report and the concise report via the internet on our
website: www.silex.com.au.
Consolidated income statement
for the year ended 30 June 2013
Revenue from continuing operations
Other income
Cost of sales
Research and development materials
Finance costs
Depreciation and amortisation expense
Employee benefits expense
Consultants and professional fees
Printing, postage, freight and stationery
Rent, utilities and property outgoings
Travelling expenses
Share of net profit/(loss) of associate accounted for using the equity method
Other expenses from continuing activities
Profit/(loss) before income tax expense
Income tax expense
Net profit/(loss) from continuing operations
Net (loss) from discontinued operation
Net (loss) for the year
Net (loss) is attributable to:
Owners of Silex Systems Limited
Non-controlling interests
Note
2
3
2013
$
2012
$
23,654,025
9,438,691
8,191,314
1,504,310
(3,660,488)
(2,362,108)
(1,793)
(298,422)
(1,739,738)
(3,127)
(2,959,264)
(2,788,685)
(15,663,647)
(16,658,397)
(2,892,539)
(2,761,833)
(270,878)
(1,483,977)
(649,816)
4,895
(260,735)
(1,748,757)
(1,147,798)
(31,320)
(1,055,180)
(1,486,966)
850,544
(17,982,777)
-
-
850,544
(17,982,777)
5
(1,080,995)
(18,987,847)
(230,451)
(36,970,624)
(93,119)
(36,792,005)
(137,332)
(230,451)
(178,619)
(36,970,624)
earnings per share for profit/(loss) from continuing operations attributable to the
ordinary equity holders of the company
Basic earnings per share
Diluted earnings per share
earnings per share for (loss) attributable to the ordinary
equity holders of the company
Basic earnings per share
Diluted earnings per share
2013
cents
0.6
0.6
(0.1)
(0.1)
2012
cents
(10.5)
(10.5)
(21.6)
(21.6)
The above consolidated income statement should be read in conjunction with the accompanying notes.
68
Silex Annual Report 2013 Consolidated statement of comprehensive income
for the year ended 30 June 2013
Net (loss) for the year
Other comprehensive income
Items that may be reclassified to profit or loss:
Exchange differences on translation of foreign operations
Other comprehensive income for the year, net of tax
total comprehensive income for the year
Attributable to:
Owners of Silex Systems Limited
Non-controlling interest
total comprehensive income for the year
Total comprehensive income for the period attributable to owners of
Silex Systems Limited arises from:
Continuing operations
Discontinued operation
2013
$
2012
$
(230,451)
(36,970,624)
212,435
212,435
(18,016)
(121,503)
(121,503)
(37,092,127)
119,316
(36,913,508)
(137,332)
(178,619)
(18,016)
(37,092,127)
1,200,311
(17,925,661)
(1,080,995)
(18,987,847)
119,316
(36,913,508)
The above consolidated statement of comprehensive income should be read in conjunction with the
accompanying notes.
6969
Silex Annual Report 2013 Consolidated balance sheet
as at 30 June 2013
aSSetS
Current assets
Cash and cash equivalents
Held to maturity investments – term deposits
Trade and other receivables
Inventories
Total current assets
Non-current assets
Property, plant and equipment
Deferred tax assets
Intangible assets
Investments accounted for using the equity method
Total non-current assets
total assets
liabilitieS
Current liabilities
Trade and other payables
Provisions
Total current liabilities
Non-current liabilities
Trade and other payables
Provisions
Total non-current liabilities
total liabilities
Net assets
eQuity
Contributed equity
Reserves
Accumulated losses
Capital and reserves attributable to owners of:
Silex Systems Limited
Non-controlling interests
total equity
30 June 2013
30 June 2012
$
$
8,720,156
55,663,843
21,048,200
3,642,672
3,682,254
83,912,921
6,633,569
1,887,567
89,074,871
96,116,311
27,427,549
15,687,753
6,080
11,337
20,618,441
20,555,407
103,131
98,236
48,155,201
36,352,733
137,230,072
132,469,044
7,440,541
1,062,291
8,502,832
5,070,084
1,814,642
6,884,726
7,210,483
192,501
7,402,984
4,779,164
163,789
4,942,953
15,905,816
11,827,679
121,324,256
120,641,365
231,417,226
231,068,369
9,744,529
9,180,044
(119,161,791)
(119,068,672)
121,999,964
121,179,741
(675,708)
(538,376)
121,324,256
120,641,365
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
70
Silex Annual Report 2013
Consolidated statement of changes in equity
for the year ended 30 June 2013
attributable to owners of Silex Systems limited
Contributed
equity
$
Reserves
$
accumulated
losses
$
Non-
controlling
interests
$
total
$
total
$
balance at 30 June 2011
231,040,738
6,930,760
(82,276,667)
155,694,831
(359,757)
155,335,074
Net (loss) for the year
-
-
(36,792,005)
(36,792,005)
(178,619)
(36,970,624)
Exchange differences
on translation of
foreign operations
total comprehensive
income for the year
transactions with owners
in their capacity as owners
Shares to employees,
net of transaction costs
Employee share options –
value of employee services
Transactions with
non-controlling interests
Deferred tax credit
recognised directly in equity
-
(121,503)
-
(121,503)
-
(121,503)
-
(121,503)
(36,792,005)
(36,913,508)
(178,619)
(37,092,127)
36,462
-
-
36,462 -
36,462
-
2,364,665
-
2,364,665 -
2,364,665
-
6,122
-
6,122 -
6,122
(8,831)
-
-
(8,831)
-
(8,831)
27,631
2,370,787
-
2,398,418
-
2,398,418
balance at 30 June 2012
231,068,369
9,180,044
(119,068,672)
121,179,741
(538,376)
120,641,365
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
7171
Silex Annual Report 2013 Consolidated statement of changes in equity
for the year ended 30 June 2013 (continued)
attributable to owners of Silex Systems limited
Contributed
equity
$
Reserves
$
accumulated
losses
$
Non-
controlling
interests
$
total
$
total
$
balance at 30 June 2012
231,068,369
9,180,044
(119,068,672)
121,179,741
(538,376)
120,641,365
Net (loss) for the year
Exchange differences
on translation of
foreign operations
total comprehensive
income for the year
transactions with
owners in their
capacity as owners
Shares to employees,
net of transaction costs
Employee shares and
options – value of
employee services
Transfer from share based
payments reserve
Deferred tax credit
recognised directly in equity
-
-
-
-
(93,119)
(93,119)
(137,332)
(230,451)
212,435
-
212,435
-
212,435
212,435
(93,119)
119,316
(137,332)
(18,016)
(5,367)
-
-
(5,367)
-
(5,367)
-
711,531
-
711,531
-
711,531
359,481
(359,481)
-
-
-
-
(5,257)
-
-
348,857
352,050 -
(5,257)
700,907
-
-
(5,257)
700,907
balance at 30 June 2013
231,417,226
9,744,529
(119,161,791)
121,999,964
(675,708)
121,324,256
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
72
Silex Annual Report 2013
Consolidated statement of cash flows
for the year ended 30 June 2013
Cash flows from operating activities
Receipts from customers and government grants (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Interest paid
Net cash (outflows) from operating activities
Cash flows from investing activities
Proceeds from held to maturity investments – term deposits
Payments for property, plant and equipment
Payments for intangibles
Proceeds from sale of property, plant and equipment
Net cash inflows from investing activities
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from issue of shares to non-controlling interest
Net cash (outflows)/inflows from financing activities
Net increase/(decrease) in cash held
Cash and cash equivalents at the beginning of the financial year
Effects of exchange rate changes on cash
Cash and cash equivalents at end of year*
2013
$
2012
$
19,625,906
16,794,963
(31,567,717)
(38,846,105)
3,719,524
5,897,855
(1,793)
(3,127)
(8,224,080)
(16,156,414)
28,249,078
10,024,579
(13,818,509)
(6,100,818)
(1,598,172)
343,335
(126,375)
233,911
13,175,732
4,031,297
(5,367)
-
(5,367)
(1,538)
6,122
4,584
4,946,285
(12,120,533)
3,682,254
15,470,436
91,617
8,720,156
332,351
3,682,254
* Held to maturity investments excluded from cash and cash equivalents
55,663,843
83,912,921
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
7373
Silex Annual Report 2013 Notes to the financial statements
30 June 2013
This concise financial report relates to the consolidated entity consisting of Silex Systems Limited and the
entities it controlled at the end of, or during, the year ended 30 June 2013. The accounting policies have been
consistently applied to all years presented, unless otherwise stated otherwise.
Note 1 Presentation currency
The presentation currency used in this concise financial report is Australian dollars.
Note 2 Revenue
From continuing operations
Milestone revenue
Recoverable project costs from GLE
Sale of goods
Services
Interest income
Other
From discontinued operation (note 5)
Sale of goods
Rent
Interest income
2013
$
15,406,738
4,099,109
135,823
606,341
2012
$
-
3,865,756
61,472
-
3,406,014
5,500,081
-
11,382
23,654,025
9,438,691
834,325
8,063,520
42,606
9,952
-
128,831
886,883
8,192,351
(i) Milestone revenue
GLE milestone revenue of $15,406,738 (2012: nil) was recognised as revenue during the financial year. The
performance criteria under the Agreement have been met.
Note 3 Other income
From continuing operations
Government grants
Research and development tax incentive
Foreign currency exchange gains (net)
Profit on sale of property, plant and equipment
Other
From discontinued operation (note 5)
Foreign currency exchange gains (net)
Profit on sale of property, plant and equipment
74
2013
$
3,917,365
3,286,116
987,833
-
-
2012
$
1,245,381
-
250,397
5,266
3,266
8,191,314
1,504,310
100,442
171,662
272,104
79,456
190,201
269,657
Silex Annual Report 2013 Notes to the financial statements
30 June 2013 (continued)
(i) Government grants
Federal and state government solar project grants of $3,768,178 (2012: $1,245,381) were recognised as other
income by Solar Systems during the financial year. The Company has met the conditions of the grants and the
income has been recognised. Export Market Development Grant income of $149,187 (2012: nil) was recognised
as income during the financial year by Solar Systems. There are no unfulfilled conditions attached to these grants.
(ii) Research and development tax incentive
Research and development tax incentive income of $3,286,116 (2012: nil) was recognised as other income
by the Group during the year. This relates to expenditure in the previous financial year. The Group has met the
conditions of the tax incentive.
Note 4 segment information
2013
Silex Systems
Solar Systems
translucent
Chronologic
$
$
$
$
total
$
Total segment revenue
Inter-segment revenue
Revenue from
external customers
Segment result
24,102,506
(1,207,141)
747,405
3,005,182
11,243
27,866,336
-
(3,005,170)
-
(4,212,311)
22,895,365
747,405
12
11,243
23,654,025
15,853,031
(9,047,205)
(4,614,789)
(1,340,493)
850,544
total segment assets
80,888,426
43,761,286
3,497,389
total segment liabilities
1,915,117
9,970,906
521,515
324,494
302,461
128,471,595
12,709,999
2012
Silex Systems
Solar Systems
translucent
Chronologic
$
$
$
$
total
$
Total segment revenue
Inter-segment revenue
Revenue from
external customers
Segment result
10,327,364
62,839
2,082,430
19,015
12,491,648
(982,048)
-
(2,070,909)
-
(3,052,957)
9,345,316
62,839
11,521
19,015
9,438,691
1,484,055
(11,570,290)
(6,153,323)
(1,742,422)
(17,981,980)
total segment assets
88,113,766
29,565,459
2,987,328
total segment liabilities
1,715,089
4,007,021
330,330
305,912
243,832
120,972,465
6,296,272
The Board of Directors assesses the performance of the operating segments based on a result that excludes
exchange gains and losses on intercompany loans which eliminate on consolidation and amortisation of intellectual
property on consolidation. In previous reporting periods, share based payments expense was also excluded from
the segment result. This expense is now included, and as such the previous year comparative has been restated.
A reconciliation of segment result to net profit/(loss) from continuing operations is provided as follows:
Segment result
Amortisation of intellectual property on consolidation
Profit/(loss) before income tax from continuing operations
2013
$
2012
$
850,544
(17,981,980)
-
(797)
850,544
(17,982,777)
7575
Silex Annual Report 2013 Notes to the financial statements
30 June 2013 (continued)
Note 5 Discontinued operation
As previously reported, all Silex Solar activities have ceased and the plant was decommissioned and closed in
October 2012.
A summary of the results of the discontinued operation is provided below.
Revenue (note 2)
Other income (note 3)
Expenses
(Loss) before income tax
Income tax expense
2013
$
886,883
272,104
(2,239,982)
(1,080,995)
2012
$
8,192,351
269,657
(27,449,855)
(18,987,847)
-
-
(loss) after income tax of the discontinued operation
(1,080,995)
(18,987,847)
Net cash (outflows) from operating activities
Net cash inflows from investing activities
Net cash (outflows) from financing activities
2013
$
2012
$
(1,353,350)
(3,411,963)
221,662
-
180,912
-
Net cash (outflows) from the discontinued operation
(1,131,688)
(3,231,051)
Note 6 Dividends
No dividends were declared or paid during the year or in the prior year.
Note 7 events occurring after reporting date
The directors are not aware of any matters or circumstances which are not otherwise dealt with in the financial
statements that have significantly or may significantly affect the operations of the consolidated entity, the results
of its operations or the state of the consolidated entity in subsequent years.
76
Silex Annual Report 2013 directors’ declaration
The directors declare that in their opinion, the concise financial report of the consolidated entity for the year
ended 30 June 2013 as set out on pages 67 to 76 complies with Accounting Standard AASB 1039: Concise
Financial Reports.
The concise financial report is an extract from the full financial report for the year ended 30 June 2013.
The financial statements and specific disclosures included in the concise financial report have been derived
from the full financial report.
The concise financial report cannot be expected to provide as full an understanding of the financial performance,
financial position and financing and investing activities of the consolidated entity as the full financial report, which
is available on request.
This declaration is made in accordance with a resolution of the directors.
Dr M P Goldsworthy
Managing Director
Mr C D Wilks
Director
25 September 2013
7777
Silex Annual Report 2013 independent auditor’s report to the
members of Silex Systems limited
Report on the concise financial report
We have audited the accompanying concise financial report of Silex Systems Limited (the company) which
comprises the balance sheet as at 30 June 2013, the income statement, statement of comprehensive income,
statement of changes in equity and statement of cash flows for the year then ended and related notes, derived
from the audited financial report of the company for the year ended 30 June 2013 for Silex Systems Limited
Group (the consolidated entity). The concise financial report does not contain all the disclosures required by
the Australian Accounting Standards and accordingly, reading the concise financial report is not a substitute
for reading the audited financial report.
Directors’ responsibility for the concise financial report
The directors are responsible for the preparation of the concise financial report in accordance with Accounting
Standard AASB 1039 Concise Financial Reports, and the Corporations Act 2001, and for such internal controls
as the directors determine are necessary to enable the preparation of the concise financial report.
Auditor’s responsibility
Our responsibility is to express an opinion on the concise financial report based on our audit procedures which were
conducted in accordance with Auditing Standard ASA 810 Engagements to Report on Summary Financial Statements.
We have conducted an independent audit, in accordance with Australian Auditing Standards, of the financial report of
the consolidated entity for the year ended 30 June 2013. We expressed an unmodified audit opinion on that financial
report in our report dated 25 September 2013. The Australian Auditing Standards require that we comply with relevant
ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance
whether the financial report for the year is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
concise financial report. The procedures selected depend on the auditor’s judgement, including the assessment
of the risks of material misstatement of the concise financial report, whether due to fraud or error. In making
those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the concise
financial report in order to design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the entity’s internal control.
Our procedures include testing that the information in the concise financial report is derived from, and is
consistent with, the financial report for the year, and examination on a test basis, of audit evidence supporting
the amounts and other disclosures which were not directly derived from the financial report for the year. These
procedures have been undertaken to form an opinion whether, in all material respects, the concise financial
report complies with AASB 1039 Concise Financial Reports.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
audit opinions.
PricewaterhouseCoopers, ABN 52 780 433 757
Darling Park Tower 2, 201 Sussex Street, GPO BOX 2650, SYDNEY NSW 1171
DX 77 Sydney, Australia
T +61 2 8266 0000, F +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation
78
Silex Annual Report 2013 independent auditor’s report to the
members of Silex Systems limited (continued)
independence
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
We confirm that the independence declaration required by the Corporations Act 2001, which has been given to
the directors of Silex Systems Limited would be in the same terms if given to the directors as at the date of this
auditor’s report.
Auditor’s opinion
In our opinion, the concise financial report of the company for the year ended 30 June 2013 complies with
Australian Accounting Standard AASB 1039: Concise Financial Reports.
Report on the remuneration report
The following paragraphs are copied from our report on the remuneration report for the year ended 30 June 2013.
We have audited the remuneration report included in pages 35-53 of the directors’ report for the year ended
30 June 2013. The directors of the company are responsible for the preparation and presentation of the
remuneration report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to
express an opinion on the remuneration report, based on our audit conducted in accordance with Australian
Auditing Standards.
Auditor’s opinion
In our opinion, the remuneration report of Silex Systems Limited for the year ended 30 June 2013, complies with
section 300A of the Corporations Act 2001.
Matters relating to the electronic presentation of the audited concise financial report
This auditor’s report relates to the concise financial report and remuneration report of Silex Systems Limited
(the company) for the year ended 30 June 2013 included on Silex Systems Limited web site. The company’s
directors are responsible for the integrity of the Silex Systems Limited web site. We have not been engaged
to report on the integrity of this web site. The auditor’s report refers only to the concise financial report and
remuneration report named above. It does not provide an opinion on any other information which may have been
hyperlinked to/from the concise financial report or the remuneration report. If users of this report are concerned
with the inherent risks arising from electronic data communications they are advised to refer to the hard copy of
the audited financial report and remuneration report to confirm the information included in the audited financial
report and remuneration report presented on this web site.
PricewaterhouseCoopers
Stephen Humphries
Partner
Sydney
25 September 2013
7979
Silex Annual Report 2013 Shareholders’ information
30 June 2013
1. information relating to shareholders as at 12 september 2013
(a) Distribution schedule
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001 and over
Total number of holders of each class of security
Voting rights – on a show of hands
– on a poll
Percentage of total holding held by the largest 20 holders
Number of total holding less than a marketable parcel of shares
Substantial shareholders
Jardvan Pty Ltd
M&G Investment
(including M&G Investment Funds (3) & (12), M&G Investment Management Limited,
M&G Limited, M&G Group Limited and Prudential plc)
The Bank of New York Mellon Corporation
2,360
2,638
809
780
91
6,678
71.98%
616
Ordinary shares
29,801,030
17,050,000
14,268,822
80
Silex Annual Report 2013
Shareholders’ information
30 June 2013 (continued)
(b) Names of Twenty Largest Holders as at 12 september 2013
Name
Jardvan Pty Ltd
HSBC Custody Nominees (Australia) Limited
National Nominees Limited
J P Morgan Nominees Australia Limited
J P Morgan Nominees Australia Limited (Cash Income A/c)
Majenta Holdings Pty Ltd
Polly Pty Ltd
Citicorp Nominees Pty Limited
Throvena Pty Ltd
Hamlac Pty Ltd
Mr Christopher David Wilks
Quintal Pty Ltd
Quadrangle Nominees Limited (No 3 A/c)
Mithena Holdings Pty Ltd
UBS Wealth Management Australia Nominees Pty Ltd
Merrill Lynch (Australia) Nominees Pty Limited
BNP Paribas Noms Pty Ltd (DRP)
Matrix Investments Pty Limited (Matrix Holdings Account)
Mr Hayden Harvey Prior
Snowside Pty Ltd (Snowside A/c)
2. Vendor securities as at 12 september 2013
There are no vendor securities.
Number of
securities
29,801,030
29,674,380
15,281,812
12,935,524
6,461,139
5,703,923
4,073,863
3,190,309
2,978,203
2,525,937
2,405,070
2,002,952
1,280,971
817,139
701,825
690,480
520,332
511,452
510,000
477,559
Percentage
held
17.50%
17.43%
8.98%
7.60%
3.80%
3.35%
2.39%
1.87%
1.75%
1.48%
1.41%
1.18%
0.75%
0.48%
0.41%
0.41%
0.31%
0.30%
0.30%
0.28%
122,543,900
71.98%
8181
Silex Annual Report 2013
Shareholders’ information
30 June 2013 (continued)
3. interest of directors in shares as at 12 september 2013
Prof S W R Burdon
Mr R P Campbell
Dr C S Goldschmidt
Dr M P Goldsworthy
Dr L M McIntyre
Mr A M Stock
Mr C D Wilks
Ordinary shares
interest held
35,000
1,354,823
2,525,937
Beneficially
Beneficially
Beneficially
5,934,212
Personally/Beneficially
8,230
-
Beneficially
N/A
2,814,021
Personally/Beneficially
4. securities subject to voluntary escrow as at 12 september 2013
As at 12 September 2013 the following securities were subject to
voluntary escrow:
Ordinary shares
84,679
30 June 2014
Number
on issue
date escrow
period ends
5. unquoted equity securities as at 12 september 2013
Options issued under the Silex Systems Limited
Employee Share Option Plan to take up ordinary shares
Other options issued to take up ordinary shares*
* These are options to Dr M P Goldsworthy (1,102,207) and Mr C D Wilks (367,035).
Number
on issue
2,025,000
1,469,242
Number
of holders
38
2
82
Silex Annual Report 2013 Company
Directory
Directors
Share Registry
Computershare Registry Services Pty Ltd
Level 5, 115 Grenfell Street
Adelaide SA 5000, Australia
GPO Box 1903
Adelaide SA 5001, Australia
Enquiries within Australia: 1300 556 161
Enquiries outside Australia: +61 3 9415 4000
Email: web.queries@computershare.com.au
Website: www.computershare.com.au
Stock Exchange
Listed on the Australian Stock Exchange, Ticker: SLX
Listed on the OTCQX International, Ticker: SILXY
American Depository Receipts
(ADR) Information
Silex Systems Limited’s ADRs may be purchased on
the US OTCQX market.
Details are as follows:
Ratio: 1 ADR = 5 ordinary shares
Symbol: SILXY
CUSIP: 827046 10 3 9414F102
Exchange: OTCQX
Country: Australia
Auditors
PricewaterhouseCoopers
Solicitors
Baker & McKenzie
Bankers
Australia and New Zealand Banking Group Limited
Prof S W R Burdon – Chair
Dr M P Goldsworthy – CEO/Managing Director
Dr C S Goldschmidt
Dr L M McIntyre
Mr A M Stock
Mr C D Wilks
Audit Committee
Mr A M Stock – Chair
Prof S W R Burdon
Dr C S Goldschmidt
Dr L M McIntyre
People & Remuneration Committee
Dr L M McIntyre – Chair
Prof S W R Burdon
Mr A M Stock
Company Secretary
Ms J E Ducie
Corporate Office
Suite 8.03, Level 8
56 Clarence Street
Sydney NSW 2000, Australia
Registered Office and Principal Place
of Business
Lucas Heights Science & Technology Centre
Building 64, New Illawarra Road
Lucas Heights NSW 2234, Australia
Ph: +61 2 9704 8888
Fax: +61 2 9279 1051
Postal Address
PO Box 364
Sydney NSW 2001
Email: Investor.relations@silex.com.au
Website: www.silex.com.au
ABN: 69 003 372 067
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