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www.silex.com.au
Annual Report
2016
Important
Notice
Forward Looking Statements and Business Risks:
Some risk factors that could affect future results and
commercial prospects include, but are not limited to: the
outcome of the GLE restructure which Silex is participating
in, results from the SILEX uranium enrichment engineering
development program being conducted jointly by the
Company and GLE; the demand for natural uranium and
enriched uranium; the time taken to develop the SILEX
technology; results from IQE’s commercialisation program and
the demand for cREO™ products, the potential development
of competing technologies; the potential for third party claims
against the Company’s ownership of Intellectual Property; the
potential impact of government regulations or policies in the
USA, Australia or elsewhere; and the outcomes of various
commercialisation strategies undertaken by the Company
and/or its Licensees GLE and IQE.
Silex Systems is a research and development Company
whose primary asset is the SILEX laser uranium enrichment
technology, originally developed at the Company’s technology
facility in Sydney, Australia. The SILEX technology, licensed
exclusively to GE-Hitachi Global Laser Enrichment LLC (GLE)
in the USA, is currently in the engineering development
stage and plans for commercial deployment remain distant
and high risk.
Silex also has an interest in a unique semiconductor
technology known as ‘cREO™’ through its ownership
of subsidiary Translucent Inc. The cREO™ technology is
exclusively licensed to IQE Plc based in the UK. IQE is
progressing the cREO™ technology towards commercial
deployment in various advanced semiconductor products.
The outcome of IQE’s commercialisation program remains
high risk.
The commercial potential of these two technologies is
currently unknown. Accordingly, the statements in this report
regarding the future of the SILEX technology, the cREO™
technology and any associated 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.
SIlEx SyStEmS
lImItED
ABN 69 003 372 067
Company
Directory
Directors
Dr L M McIntyre – Chair
Dr M P Goldsworthy – CEO/MD
Mr R A R Lee
Mr C D Wilks
Audit Committee
Mr R A R Lee – Chair
Dr L M McIntyre
Mr C D Wilks
People & Remuneration
Committee
Dr L M McIntyre – Chair
Mr R A R Lee
Mr C D Wilks
Company Secretary
Ms J E Ducie
Registered Office and
Principal Place of
Business
Suite 8.01, Level 8
56 Clarence Street
Sydney NSW 2000, Australia
Stock Exchange
Listed on the Australian Stock
Exchange, Ticker: SLX
Listed on the OTCQX International,
Ticker: SILXY
Postal address: PO Box 364, Sydney
NSW 2001, Australia
Auditors
📞 +61 2 9704 8888
📠 +61 2 9704 8851
✉
💻 www.silex.com.au
investor.relations@silex.com.au
Share Registry
Computershare Registry Services
Pty Limited
Level 5, 115 Grenfell Street, Adelaide,
South Australia 5000, Australia
GPO Box 1903 Adelaide
South Australia 5001, Australia
📞 Enquiries:
Within Australia: 1300 556 161
Outside Australia: +61 8 8236 2300
✉ web.queries@computershare.com.au
💻 www.computershare.com.au
PricewaterhouseCoopers
Solicitors
Baker & McKenzie
Bankers
Australia and New Zealand Banking
Group Limited
American Depository
Receipts (ADR)
Information
Silex Systems Limited’s ADRs may be
purchased on the US OTCQX market.
Details are as follows:
Ratio: 1 ADR = 5 ordinary shares
Symbol: SILXY
CUSIP: 827046 10 3 9414F102
Exchange: OTCQX
Country: Australia
Contents
Chair’s Report
CEO’s Report
Business Overview
Company Overview
Directors’ Report
Corporate Governance Statement
Concise Financial Report
Independent Auditor’s Report to the Members
Shareholders’ Information
Company Directory
2
4
6
12
16
40
41
52
54
57
Chair’s
Report
Dr Lisa McIntyre
Chair
Dear Fellow Shareholders,
The year ended 30 June 2016 was another difficult year
during which the nuclear fuel markets remained severely
depressed, and this continued to have a negative impact on
our share price. With two world-class technologies currently
under license to leading commercial organisations, this is an
issue which is of concern to us, particularly when our current
cash reserves of ~$49 million, is equivalent to ~$0.29 per
share. In response, we continue to pay particular attention
to the execution of our business strategy, to risk and to
governance whilst ensuring we remain able to respond to
challenges as they occur and remain poised for substantial
activity once the market for nuclear fuel inevitably improves.
Despite the challenges that exist in the market for nuclear
fuel, we continue to push forward with activities to support
our Licensee, GE-Hitachi Global Laser Enrichment LLC
(GLE) in the commercialisation of our unique and potentially
disruptive core technology – the SILEX laser-based uranium
enrichment technology. Our recent activities include actively
participating in the restructure of GLE announced in April this
year, with Silex playing a substantially increased role in the
commercialisation program and taking the lead on the search
for new investors.
We also made significant progress during the year with the
completion of the Company’s strategic business review
announced 30 June 2014. This resulted in the licensing of the
Translucent cREO™ technology to IQE Plc based in the UK
and the sale of Solar Systems’ assets.
“Our Management team
and board continue to
make progress against
a backdrop of difficult
business conditions and
strategic challenges.”
Our Management team and board continue to make progress
against a backdrop of difficult business conditions and
strategic challenges. We are pleased to see discussions
advancing with several parties interested in investing in
SILEX technology Licensee, GLE and the progress that has
been achieved in the engineering and economic validation
program in key project activities at both the Wilmington and
Sydney project sites. Finally, GLE’s negotiations with the US
Department of Energy regarding the strategically important
tails reprocessing opportunity in Paducah, Kentucky are
nearing completion.
We also successfully transferred our unique semiconductor
cREO™ technology during the year to IQE Plc, the global
leader in the design and manufacture of advanced
semiconductor wafer products. IQE’s effort and focus that
has been applied to the advancement of Translucent’s unique
cREO™ technology to date is encouraging. If this technology
is successfully deployed by IQE, Silex stands to earn a
significant royalty stream of up to 6% of the revenues IQE
generates from use of this technology.
A full update on our activities is provided by Dr Michael
Goldsworthy, our CEO/MD, in his following report.
2
Silex Annual Report 2016
Corporate Governance
Outlook
Despite the challenges that currently exist in the nuclear
fuel markets and for the commercialisation of the SILEX
technology, we remain encouraged by the future for the
global nuclear industry and the inevitable turnaround in the
nuclear fuel markets that will come in the next several years.
We continue to believe the SILEX technology, being our
core asset and the only third generation laser enrichment
technology being commercialised in the world, is the best
path forward to re-build long-term value for our shareholders.
I would like to thank our shareholders for their interest and
support of Silex during these difficult market conditions and
poor share price performance. I look forward to updating you
again at our Annual General Meeting in November.
Dr Lisa McIntyre
Chair
4 October 2016
We have restructured and reduced the size of our Board
in recent years to reflect the changing requirements of the
Company and to ensure a mix of directors on the Board
from different backgrounds with complementary skills and
experience. We welcomed Robert Lee to the Board on 1 July
2015 who was formally elected by shareholders at our 2015
Annual General Meeting, to replace Andrew Stock who retired
on 31 August 2015. At the present time, we believe our Board
has the appropriate mix of skills, experience and industry
knowledge for our current opportunities and challenges.
We have successfully implemented our major strategic review
and strategy to significantly reduce our operational cash burn
and devote our resources to the commercialisation of the
SILEX technology. Since the announcement of our strategic
review on 30 June 2014, there has been a 75% reduction in
head count Company wide and we have combined various
roles and responsibilities to streamline operations and reduce
costs wherever possible. We were of course saddened to
see a number of valued team members leave the Company.
Some difficult remuneration decisions have also been
made in recent years which impacted the Company’s
Key Management Personnel: details are provided in our
Remuneration Report.
Financial Performance
Our net loss for the year was $3.4 million decreasing by
$32.5 million compared to the prior year and in line with our
stated restructure objectives. Our prior year result was heavily
impacted as a result of outcomes from our strategic review
and the decision to focus the Company’s efforts on the SILEX
technology. Whilst we commenced the reimbursement of GLE
shareholder GE-Hitachi’s funding obligations during the year
(expense of $2.6 million for the 6 months to 30 June 2016),
we continued to reduce our operating expenses with a saving
of $0.8 million compared to the prior year.
Silex Annual Report 2016
3
“At the time of writing,
Silex is in a strong financial
position with cash reserves
of ~$49 million.”
CEO’S
Report
Dr Michael Goldsworthy
CEO/Managing Director
The global nuclear fuel markets remained depressed during
the year and continued to create a challenging business
environment for Silex and Licensee of the SILEX technology,
GE-Hitachi Global Laser Enrichment LLC (GLE). Despite
this situation, Silex continued to push forward with activities
to support both licensees in the commercialisation of our
unique and potentially disruptive technologies – the SILEX
laser-based uranium enrichment technology and the
Translucent cREO™ semiconductor technology.
Our activities with respect to the continued development
and commercialisation of our core asset, the SILEX
technology expanded during the year, following GE-
Hitachi’s announcement that they are looking to exit GLE.
Silex negotiated and executed a term sheet in April 2016
with GE-Hitachi that provides the framework for a full
restructure of GLE. Specifically, the term sheet provides
Silex with an option to become a shareholder in GLE, and
the right to assign in part or in whole the acquisition terms
to third parties.
Accordingly, Silex has taken the lead on the search for new
investors in GLE with discussions advancing with several
interested parties. The efforts to restructure GLE are being
conducted in parallel to the ongoing technology development
project, with good progress being achieved in the engineering
and economic validation program with key project activities at
both the Wilmington and Sydney project sites.
4
Silex Annual Report 2016
The Paducah commercial plant opportunity negotiated by
GLE with the US Department of Energy (DOE) continues
to be viewed as an ideal path to market for the SILEX
technology. At the time of writing, an agreement between
GLE and the DOE regarding the strategically important tails
reprocessing opportunity in Paducah, Kentucky is expected
to be finalised in the near future.
The long term fundamentals for the SILEX technology
and GLE are underpinned by the anticipated recovery of
the global markets for natural and enriched uranium. Key
contributing factors to the expected recovery of the nuclear
fuel markets include the restart of nuclear reactors in Japan,
which have been largely shutdown since 2011, and the
continued growth in global nuclear energy capacity. Despite
the ongoing delays in the restart of Japanese reactors,
we have been encouraged by recent developments in the
nuclear industry in the US, UK and continued support
for extensive nuclear build programs in China, Russia,
India and South Korea. We therefore remain encouraged
by these positive developments and continue to believe
the SILEX technology, being our core asset and the
only third generation laser enrichment technology being
commercialised in the world, is the best path forward to
deliver value to our shareholders.
“Silex remains firmly
committed to providing
ongoing support to the
GLE commercialisation
program activities”
The restructure of the Company announced on 30 June
2014 has now been finalised, resulting in the licensing
of the Translucent cREO™ technology in September 2015
to UK-based semiconductor company IQE Plc and the
sale of Solar Systems’ assets. Both subsidiaries ceased
operations during FY2016.
At the time of writing, Silex is in a strong financial position with
cash reserves of ~$49 million.
Outlook
Silex remains firmly committed to providing ongoing
support to the GLE commercialisation program activities
at both the Wilmington and Sydney sites whilst leading the
process to restructure GLE with new investors. Subject to
successfully completing the GLE restructure, we will aim for
the commercialisation program to be ramped up again as
soon as practicable, in anticipation of the commencement of
a recovery in the nuclear fuel markets. Our mission remains
to deliver the unique and disruptive SILEX laser uranium
enrichment technology as the next generation technology for
the global uranium enrichment industry.
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
Silex Annual Report 2016
5
Business
Overview
Business Facts
Platform
Nuclear Fuel for Clean Electricity Generation
Locations
Technology Development:
Silex: Lucas Heights, NSW, Australia
GLE: Wilmington, North Carolina, USA
Corporate Office
Sydney, NSW, Australia
The SILEX Laser Uranium
Enrichment Technology
Business Description
Silex invented and initially developed the ‘SILEX’ laser-
based uranium enrichment technology in Sydney during
the 1990’s. The technology was licensed exclusively in
2006 to GE-Hitachi Global Laser Enrichment LLC (‘GLE’),
a business venture currently comprising GE (51%), Hitachi
(25%) and Cameco (24%). Silex and GLE jointly continue
to commercialise the technology for potential deployment
in the USA. The target markets are the global nuclear fuel
markets for natural and enriched uranium, worth several
billions of dollars annually.
Background
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
governments of the United States and Australia was
signed in May 2000.
In June 2001, the technology was officially Classified
by the United States and Australian governments,
bringing the project formally under the strict security and
regulatory protocols of each country.
In 2006, Silex signed a Technology Commercialisation
and License agreement with General Electric Company
(GE) to develop and commercialise the technology to
enrich uranium for use in nuclear power reactors around
the world. Since 2008, the project has been managed by
GE subsidiary GLE.
Uranium Enrichment
Naturally occurring uranium must be enriched before it can
be used as fuel in a nuclear power reactor. Enrichment
is a technically difficult process and constitutes a major
component of nuclear fuel costs accounting for around
one third of the cost of nuclear fuel and up to 5% of the
total cost of the electricity generated at current prices.
Uranium enrichment involves increasing the atomic
concentration of the ‘active’ 235U isotope from 0.7% in
natural uranium to approximately 5% required for reactor
fuel. GLE and Silex are jointly developing the SILEX third
generation laser enrichment technology:
• Separation of Isotopes by Laser EXcitation (SILEX)
• Highly selective excitation of 235UF6 to separate isotopes
The two methods of uranium enrichment used to
date have been the now obsolete Gas Diffusion (first
generation) and Gas Centrifuge (second generation).
Silex’s third generation laser-based process provides
much higher enrichment process efficiency compared
to these earlier methods, potentially offering significantly
lower overall costs.
6
Silex Annual Report 2016
The Nuclear Fuel Production
The SILEX Technology License Agreement with GLE
The SILEX technology can be utilised in 2 steps of the
Nuclear Fuel Cycle to produce:
1. Natural grade uranium via re-processing of tails
inventories; and
2. Enriched uranium for use as fuel in nuclear power reactors.
The SILEX Technology
The SILEX technology is a unique laser-based process that
has the potential to economically separate uranium isotopes
as well as several other elements.
It has a number of advantages over other uranium enrichment
processes including:
Silex’s agreement with GLE is an exclusive worldwide
commercialisation and licensing agreement for the SILEX
technology. The underlying value in the agreement with
GLE is a perpetual royalty of up to 12 percent payable to
Silex, 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.
Additionally, under the commercialisation and license
agreement there are potentially two further milestone
payments payable:
• SILEX laser technology has inherently higher efficiency
• US$5 million – on commencement of construction of the
resulting in lower costs;
initial commercial plant; and
• Smaller environmental footprint than centrifuge and diffusion
plants; and
• Anticipated to have the lowest capital costs of all enrichment
technologies.
Significantly, the SILEX technology is the only third generation
laser-based uranium enrichment technology under
commercial development in the world today.
• US$15 million – upon verification by the US Nuclear
Regulatory Commission of construction compliance and
operational readiness of the initial commercial plant.
These milestone payments follow the US$15 million milestone
payment that was received by Silex in July 2013, triggered by
the successful completion of the Test Loop Phase 1 Program
Milestone: Technology Demonstration and Validation.
Uranium Production
Refinining & Conversion
Enrichment
SILEX/GLE
Other
Fuel
Fabrication
Electricity
Power Distribution
Power Plant
Silex Annual Report 2016
7
Business Overview (continued)
Activities During the Year in Review
GLE Restructure
The Company’s primary focus in FY2016 was on the
continued development and commercialisation of our core
asset – the SILEX technology, and in more recent months,
the restructure of our Licensee GE-Hitachi Global Laser
Enrichment LLC (GLE). GE-Hitachi Nuclear Energy (GEH)
announced in April that they are looking to exit GLE, due to
changes in business priorities and the continuing difficult
conditions being experienced in the nuclear fuel markets. On
29 April 2016, Silex signed a term sheet with GEH securing
an exclusive option to acquire GEH’s 76% interest in GLE,
and the right to assign in part or in whole the acquisition
terms to third parties.
Under the term sheet signed with GEH, Silex further agreed
to reimburse GEH its pro-rata share of funding for the
Wilmington operation for CY2016. This is in addition to Silex
funding the development of commercial-scale laser systems
at its Lucas Heights facility in Sydney. GLE shareholder
Cameco (24% owner of GLE) remains supportive of Silex’s
efforts to restructure GLE.
Silex has taken the lead on the search for new investors in
GLE, with a preference for securing high calibre strategic
investors who are capable of supporting GLE’s transition to
market with the SILEX technology. Discussions continue to
advance with a number of interested parties, two of whom
had commenced due diligence activities at the time of writing.
Silex firmly believes that GLE is the best vehicle to take the
SILEX technology to market, based on the preservation of
several key assets which will underpin GLE’s value going
forward. These assets include:
• The highly skilled and specialised engineering team
based in Wilmington (in addition to the highly talented
laser development team in Sydney);
• The Test Loop demonstration facility that has operated
since 2010 and continues to advance the technology
towards full-scale demonstration; and
• The combined construction and operating license (COL)
granted by the US Nuclear Regulatory Commission in 2012 for
a potential commercial enrichment plant in Wilmington, NC.
In addition to the abovementioned key assets, the Paducah
commercial plant opportunity (to produce natural grade
uranium from the reprocessing of tails stockpiles owned by
the US Department of Energy (DOE)) has been negotiated
exclusively between the DOE and GLE.
8
Project Activities Update - Phase II: Full-Scale
Engineering and Economic Validation
The focus of the Company is firmly set on the remainder of
the commercialisation program for the SILEX technology.
Phase
Objectives
Test Loop technology
demonstration and NRC
commercial plant license approval
Phase I
Phase II
Status
Completed
2013
Economic and engineering
validation for the initial commercial
production module
Commenced
in 2013
Phase III
Construction of the first full-scale
commercial production facility
To be
confirmed
Whilst the pace of this commercialisation program was
slowed significantly by GLE in July 2014 in line with
continued adverse conditions in the nuclear fuel markets, the
technology engineering and economic validation program
has continued to achieve significant progress during FY2016.
Key technology demonstration activities relating to improved
process efficiency and scaled-up laser system performance
were completed during the year in review at the Wilmington
and Sydney project sites respectively.
Subject to successfully completing the GLE restructure with
new investors on board, we will aim for the commercialisation
program to be ramped up again in the near future, in
anticipation of the commencement of a recovery in nuclear
fuel market conditions.
“The Paducah commercial
plant opportunity continues
to be viewed as an ideal
path to market for the
SILEX technology. ”
Silex Annual Report 2016 The Paducah Opportunity
The Paducah commercial plant opportunity continues to be
viewed as an ideal path to market for the SILEX technology.
The opportunity would allow for the initial commercial
deployment of the technology on a smaller scale and at
a lower cost, representing a lower risk path to market for
investors and other stakeholders.
The opportunity would involve construction of GLE’s
proposed ‘Paducah Laser Enrichment Facility’ (PLEF)
utilising the SILEX technology to reprocess hundreds of
thousands of tons of high assay tails inventories owned
by the DOE. An agreement between GLE and the DOE
facilitating the tails reprocessing is nearing finalisation.
The tails reprocessing would occur over a period of 40 years
or more, resulting in the production of natural grade uranium
which could then be sold into the expanding global uranium
market. At a nominal production rate of around 2000 metric
tons of natural uranium hexafluoride (UF6) per year (subject
to applicable regulations), this would rank as a large ‘Tier 1’
uranium mine by today’s standards.
Subject to a recovery in uranium market pricing and receipt of
required regulatory approvals and securing project financing,
the Paducah commercial plant opportunity represents an
ideal bridging project to full commercial deployment for our
potentially disruptive laser enrichment technology.
Wilmington Enrichment Plant Opportunity
In 2012, GLE obtained a combined construction and
operating license (COL) from the US Nuclear Regulatory
Commission (NRC) for an enrichment plant of up to 6
million separative work units (SWU – the unit for enrichment)
planned for Wilmington, North Carolina. The Wilmington plant
COL approval is the first license granted in the world for a
commercial laser enrichment facility.
Domestic enrichment capacity in the US is currently
approximately one third of the total US enrichment
requirements. In this light, there remains considerable
interest from US utilities in the possibility of a new US-based
enrichment supplier as the enrichment market recovers
Nuclear Power Outlook
Challenging market conditions continued to impact the
nuclear fuel markets throughout FY2016. This was not
unexpected given the continued slow pace of the restart of
the Japanese nuclear reactor fleet following the Fukushima
disaster in 2011 and the announcement of the premature
retirement of a number of reactors in the US and Europe. As
a result, demand for enrichment and uranium remains low
and accordingly prices are currently depressed.
Longer term, a more positive outlook remains for the nuclear
industry, driven by the merits of nuclear power as a clean
emissions-free source of base load electricity becoming
better understood around the world. Ten new reactor units
commenced operations in the past year giving a total of 445
operable reactors globally. With an additional 61 reactors
under construction and 170 planned – the demand and
supply fundamentals of the nuclear fuel markets are set to
recover in the coming years.
Billions of dollars of investment continues to be made every
year in the nuclear industry with new nuclear plant builds
continuing in the US and the UK, as well as more extensive
programs in China, Russia, India and South Korea. This is in
addition to extensions being granted to the operating lives of
existing nuclear plants which could see many of these plants
generating clean, reliable and affordable baseload electricity
for up to 80 years.
Nuclear Fuel Market Outlook
The predicted growth in nuclear reactor build as highlighted
above underpins the forecast market conditions that
could support increasing demand for nuclear fuel from
the early 2020’s. Both uranium and enrichment (U/SWU)
price recovery and uncovered demand are expected to
improve, according to industry analysts Ux Consulting and
others. In addition, given the current environment which has
precipitated the curtailment of future projects and expansion
opportunities and shuttering of existing capacity by both U
and SWU producers, ‘accessible’ supply could decrease as
demand increases. This provides potential for GLE and the
SILEX technology to participate in the annual global market
for uranium and enrichment from the early 2020’s.
We therefore remain encouraged by these positive
developments in the global nuclear industry. We continue
to believe the SILEX technology, being our core asset and
the only third generation laser enrichment technology being
commercialised in the world, is the best path forward to
deliver value to our shareholders.
9
Silex Annual Report 2016
Business Overview (continued)
The Translucent cREO™
Semiconductor Technology
Business Description
Over the past decade, Silex subsidiary Translucent
Inc developed a novel set of semiconductor materials
known as ‘Rare Earth Oxides’ (REO™) for application
to the manufacturing of next generation devices in the
semiconductor, digital communications and power
electronics industries. Following the extensive pursuit of
business development options for Translucent, an exclusive
License and Assignment Agreement was signed with UK-
based IQE Plc (LON:IQE) in September 2015. IQE is the
global leader in the design and manufacture of advanced
semiconductor wafer products.
“IQE is the global
leader in the design
and manufacture of
advanced semiconductor
wafer products.”
The Translucent – IQE Agreement
Following the signing of the exclusive License and
Assignment Agreement with UK-based IQE in September
2015, an initial license fee payment of US$1.4 million was
paid by IQE in March 2016 following the transfer of the
cREO™ technology to IQE’s Greensboro, North Carolina
manufacturing facility. In accordance with the agreement,
the product development and commercialisation activities
are to be conducted by IQE during a 30-month option and
license period. Should IQE elect to exercise the right to
purchase the technology within this period, the payment of
a further US$5 million will be made.
More importantly, the potential commercial applications
that IQE have identified for the technology may result in
an attractive perpetual royalty of up to 6% of revenues
generated by IQE from use of the cREO™ technology.
10
Activities During the Year in Review
Following the successful transfer of Translucent’s unique
epitaxy equipment and associated cREO™ technology to
IQE’s North Carolina (NC) production facility, effort and
focus has been applied to the advancement of the unique
cREO™ technology.
IQE have been producing cREO™ templates on
silicon wafers using one of Translucent’s production
reactors for a number of months. The semiconductor
characteristics of the templates produced are an excellent
match to previously achieved results by Translucent.
A second production reactor devoted to development
and commercialisation of additional cREO™ materials
recently entered service at the Greensboro facility.
These production reactors will continue to produce
product templates for the IQE Group and select
commercial partners, with initial focus on RF (wireless)
communications and power electronics device materials.
Business Facts
Platform
Semiconductor materials
Locations
Technology Development by Licensee:
IQE: Greensboro, North Carolina, USA
Corporate Office
Sydney, NSW, Australia
Silex Annual Report 2016 Silex Annual Report 2016
11
Company
Overview
Historical
Background
Our mission is to deliver
the unique and disruptive
SILEX laser uranium enrichment
technology as the next generation
technology for the global uranium
enrichment industry.
1988
1996
Silex is established by founder Dr Michael Goldsworthy as a
technology research and development subsidiary of Sonic
Healthcare Limited, an Australian publicly listed company.
Silex is divested from Sonic Healthcare Limited and sets about
establishing the commercial viability of the SILEX technology.
1990
Silex begins researching the isotope separation concepts of
co-inventors Dr Michael Goldsworthy and Dr Horst Struve.
1993
The unique principles of the SILEX (Separation of Isotopes by
Laser EXcitation) Process are formulated.
1995
‘Proof of Principle’ demonstration of the SILEX Process is
achieved at the Company’s laboratories in Lucas Heights,
Sydney. Uranium enrichment, the largest market for isotope
separation, becomes Silex’s primary focus.
1998
Silex lists on the Australian Stock Exchange (ASX) under the
symbol ‘SLX’.
2000
An Agreement for Cooperation between the US and
Australian Governments is signed, paving the way for
continued development of the SILEX technology for uranium
enrichment, and facilitating its future transfer to the US.
The first macroscopic demonstration of the SILEX uranium
process is successfully achieved.
Silex wins the 2000 Australian Technology Award for
Excellence in the Manufacturing and Engineering sector.
Silex raises $36 million through a share issue to assist in
funding the development of its technology portfolio.
12
Silex Annual Report 2016
2001
2008
The SILEX technology is officially Classified by the US and
Australian Governments. The implications of classification
relate mainly to security protocols.
2002
GE-Hitachi Global Laser Enrichment LLC (GLE), formed
as a subsidiary of GE-Hitachi Nuclear Energy (GEH) to
commercialise the SILEX technology, announces it has
selected its Wilmington, North Carolina, headquarters
site for the first potential commercial SILEX uranium
enrichment facility.
The SILEX Uranium Enrichment Project achieves a key
milestone with the first full demonstration on practical uranium
enrichment using the SILEX ‘Direct Measurement Facility’ at
Lucas Heights, Sydney.
GLE is notified that the US Nuclear Regulatory Commission
(NRC) has approved a license to operate the Test Loop for
the demonstration of the next generation SILEX laser uranium
enrichment technology.
2004
Silex successfully commissions the world’s first silicon laser
enrichment pilot plant.
2006
Silex and the General Electric Company sign an exclusive
Technology Commercialisation and License Agreement for the
SILEX laser uranium enrichment technology in May, with US
Government authorisations received in October.
2007
GEH and Cameco Corporation announce that Cameco, the
world’s largest uranium producer, has joined the GLE venture.
Cameco paid US$123.8 million for a 24% stake in GLE. GE
retains 51% ownership with Hitachi at 25%.
2009
In August, the US Nuclear Regulatory Commission (NRC)
announces it has accepted GLE’s license application
to construct and operate a commercial SILEX uranium
enrichment facility in Wilmington, triggering a ~36 month
review process.
In July, GLE announces the on-schedule start-up of the Test
Loop to evaluate the next-generation SILEX laser uranium
enrichment technology.
Transfer of the SILEX Uranium Enrichment Project to GE’s
Wilmington, North Carolina (USA) nuclear fuel plant is
completed in the first half. Hitachi joins GE as project partner.
2010
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.
In April, GLE and Silex announce the successful completion
of the Test Loop initial measurement program.
Silex successfully completes a $50 million capital raising
in October.
2011
Silex successfully completes an $89 million capital raising and
a share purchase plan which raises a further $20 million.
Silex Annual Report 2016
13
2012
2015
Work continues at reduced pace on the commercialisation of
the SILEX laser uranium enrichment technology at GLE’s test
loop facility in Wilmington, North Carolina (with GLE funding)
and at Silex’s Lucas Heights laser facility in Sydney (under
Silex funding).
In September, Silex subsidiary Translucent Inc’s unique
semiconductor technology known as ‘cREO™’ was exclusively
licensed to IQE Plc based in the UK. Under the terms of the
License and Assignment Agreement, IQE has 30 months
in which to elect to acquire Translucent’s technology.
Translucent ceased its Californian operation in December
2015 following the successful transfer of the technology and
commercialisation program to IQE.
2016
GEH announced in April that it is looking to exit GLE, due
to changes in business priorities and the continuing difficult
market conditions. Silex subsequently successfully negotiated
and executed a term sheet with GEH securing an exclusive
option to acquire GEH’s 76% interest in GLE, and the right
to assign in part or in whole the acquisition terms to third
parties. Accordingly, Silex has taken the lead on the search
for new investors for GLE. Discussions continue with a
number of parties interested in investing in GLE and the SILEX
technology commercialisation program.
In September, the US NRC approves the world’s first
Construction and Operating License for a commercial laser
enrichment plant utilising the SILEX technology at Wilmington,
North Carolina.
2013
In May, GLE and Silex achieve the successful completion
of the Test Loop Program Phase I Milestone: Technology
Demonstration and Validation in Wilmington, North Carolina
– triggering a US$15 million milestone payment from GLE to
Silex (which was received in July 2013).
Silex lists on the OTCQX exchange in the US under the
symbol ‘SILXY’ in June.
2014
The US Department of Energy (DOE) selects GLE for future
operations at its Paducah, Kentucky Site. The DOE and
GLE commence negotiations for a 40-year contract to have
the SILEX Technology commercially deployed for the re-
enrichment of depleted uranium tails.
In June, Silex announces completion of a strategic review of
the entire business, determining to refocus efforts on its primary
economic asset, the SILEX laser uranium enrichment technology.
The strategic review also involves an accelerated transition to
market for subsidiaries Solar Systems and Translucent.
In July, GLE announces its own restructure in response
to worsening trading conditions in the global nuclear fuel
markets, initially triggered by the events in Fukushima, Japan
in March 2011. The changes result in the consolidation of
GLE’s operations. Importantly, the key commercial terms of
Silex’s licence agreement with GLE do not change.
14
Silex Annual Report 2016
Concise
Financial
report
for the year ended 30 June 2016
Silex SyStemS limited
& itS SubSidiarieS
abN 69 003 372 067
directors’ report
Your directors present their report on the consolidated entity consisting of Silex Systems Limited (Silex or the Company) and the
entities it controlled at the end of, or during the year ended 30 June 2016.
1. Directors and Company secretary
The following persons were directors of Silex Systems Limited during the whole of the financial year and up to the date
of this report:
Dr L M McIntyre - Chair
Dr M P Goldsworthy
Mr R A R Lee
Mr C D Wilks
Mr A M Stock was a director from the beginning of the financial year until his retirement on 31 August 2015.
The Company secretary is Ms J E Ducie BBus, CA, GAICD. Ms Ducie was appointed to the position of Company secretary in
2010. Before joining Silex, Ms Ducie held a senior finance position in the Construction industry in the Middle East and prior to
that worked as a Senior Associate with a Chartered Accounting Practice.
2. Principal activities
During the year, the principal activity of the Company was the continued development and commercialisation of our core asset
and foundation technology – the laser isotope separation process for uranium enrichment known as the SILEX technology. In
addition, the Company’s restructure announced on 30 June 2014 was finalised, resulting in the licensing of the Translucent Inc.
cREO™ semiconductor technology and the sale of Solar Systems’ assets. Both subsidiaries ceased operations during the year.
3. Dividend
No dividend payments were made during the year. No dividend has been recommended or declared by the Board.
16
Silex Annual Report 2016 directors’ report
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
(Loss) before income tax expense
Income tax expense
Net (loss) from continuing operations
Net profit/(loss) from discontinued operations
Net (loss) for the year
Net (loss) is attributable to:
Owners of Silex Systems Limited
2016
$
2015
$
1,617,655
3,674,860
(4,700,759)
(2,284,993)
–
(4,700,759)
1,303,871
(3,396,888)
–
(2,284,993)
(33,659,803)
(35,944,796)
(3,396,888)
(35,944,796)
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 Silex technology Commercialisation Program
The Company’s primary focus in FY2016 was on the continued development and commercialisation of our core asset – the
SILEX technology, and the restructure of our Licensee, GE-Hitachi Global Laser Enrichment LLC (GLE). As announced to the
ASX on 18 April 2016, GE-Hitachi Nuclear Energy (GEH) is looking to exit GLE, due to changes in business priorities and the
continuing difficult market conditions. Silex subsequently successfully negotiated and executed a term sheet with GEH on
29 April 2016 securing an exclusive option to acquire GEH’s 76% interest in GLE, and the right to assign in part or in whole
the acquisition terms to third parties. Accordingly, Silex has taken the lead on the search for new investors for GLE, with a
preference for securing high calibre strategic investors who are capable of supporting GLE’s transition to market with the SILEX
technology. Silex believes that GLE is the best vehicle to take the SILEX technology to market. Discussions continue with a
number of parties interested in investing in GLE and the SILEX technology commercialisation program.
Under the term sheet signed with GEH, Silex agreed to reimburse GEH its pro-rata share of funding for the Wilmington operation
for CY2016. This is in addition to Silex funding the development of commercial-scale laser systems at its Lucas Heights facility
in Sydney. The combined funding from Silex for the Wilmington operation and the laser development activities in Sydney is
expected to be up to $10m during CY2016. GLE shareholder, Cameco, 24% owner of GLE, remains supportive of Silex’s efforts
to restructure GLE.
Meanwhile, the technology engineering and economic validation program has continued to achieve pleasing results during
FY2016 with program milestones achieved at both the Wilmington and Sydney project sites. Activities in the Test Loop facility in
Wilmington, North Carolina (NC) resulted in the successful demonstration of key process efficiency improvements which should
translate into lower operating and capital costs. Ongoing laser system development activities in Sydney resulted in the initial
demonstration of a prototype commercial-scale plant laser system during the year.
17
Silex Annual Report 2016 directors’ report
Challenging market conditions continued to plague the nuclear fuel markets throughout FY2016. This was not unexpected
given the continued slow pace of the restart of the Japanese nuclear reactor fleet following the Fukushima disaster in 2011
and the announcement of the premature retirement of a number of reactors in the US and Europe. As a result, demand for
enrichment and uranium remains low and prices are currently depressed. However, we continue to believe that the outlook for
the nuclear industry in the long term is positive as evidenced by the start-up of 10 new reactor units in the past year bringing the
total number of operable reactors to 445 worldwide. With an additional 61 reactors under construction and 170 planned – the
demand and supply fundamentals of nuclear fuel markets are expected to recover in the coming years.
We remain convinced that the best way to create value for our shareholders is to continue to focus our efforts on the restructure
of GLE and to potentially become a shareholder in GLE ourselves such that we can have greater visibility and influence over the
technology commercialisation program going forward.
discontinued Operations – translucent and Solar Systems
In June 2014, Silex announced a major restructure which aimed to return the Company’s focus solely on the SILEX laser
enrichment technology. The restructure has been completed and resulted in the exclusive licensing of Translucent’s unique
semiconductor technology known as ‘cREO™’ to IQE Plc based in the UK (LON: IQE). IQE is progressing the cREO™ technology
towards commercial deployment in various advanced semiconductor markets. Under the terms of the License and Assignment
Agreement signed in September 2015, IQE has 30 months in which to elect to acquire Translucent’s technology. Translucent
ceased its Californian operation in December 2015 following the successful transfer of the technology and commercialisation
program to IQE.
Silex subsidiary Solar Systems Pty Ltd also ceased operations during FY2016. Various property, plant and equipment and
technology assets have been sold to third parties.
Financial review
A summary of our consolidated income statement is set out below:
2016
$
1,617,655
1,467,828
(60,107)
(2,550,261)
(3,091,636)
(951,041)
(433,766)
(699,431)
–
(4,700,759)
1,303,871
(3,396,888)
2015
$
3,674,860
42,475
(154,296)
–
(4,017,953)
(642,304)
(474,107)
(713,668)
–
(2,284,993)
(33,659,803)
(35,944,796)
Revenue from continuing operations
Other income
Research and development materials
Development expenditure
Employee benefits expense
Consultants and professional fees
Rent, utilities and property outgoings
Other expenses
Income tax expense
Net (loss) from continuing operations
Net profit/(loss) from discontinued operations
Net (loss) for the year
18
Silex Annual Report 2016
directors’ report
The net loss from ordinary activities of $3.4m decreased by $32.5m compared to the prior year. The net loss is comprised of
the loss from continuing operations of $4.7m (an increase of $2.4m compared to the prior year) and the profit from discontinued
operations of $1.3m (an improvement of $35.0m compared to the prior year).
Further commentary on the results from our operations and the factors contributing to the decreased net loss from ordinary
activities (after tax) attributable to members is provided below.
Continuing Operations - Silex Systems
The Silex Systems segment result was a $4.7m loss in the current year compared to a $2.3m loss in the prior year. The
increased loss was largely due to a reduction of $1.5m in Recoverable projects costs revenue on the Uranium Enrichment
Project. Interest income also decreased to $1.6m in the current year compared to $2.2m in the prior year as a result of lower
interest rates and lower average cash / term deposit holdings in the current year.
There was an increase in expenses from continuing operations of $1.8m compared to the prior year. This was mainly due to
$2.6m of Development expenditure in the current year relating to Silex’s reimbursement of GEH’s pro-rata share of funding
for the Wilmington operations. This was offset by a reduction in other expenses of $0.8m as a result of the Company’s lower
operating cost structure. In addition, there was a $1.4m increase in Other income which was mainly due to $1.5m for the R&D
tax incentive for Silex’s Lucas Heights operations.
discontinued Operations –translucent and Solar Systems
As a result of the exclusive License and Assignment Agreement for Translucent’s proprietary cREO™ technology that was signed
on the 15 September 2015, the technology was transferred to IQE Plc during the year. IQE is responsible for the completion of
product development and commercialisation activities during a 30-month license period. The Translucent operations in Palo Alto,
California ceased at the end of December 2015.
The Silex Board announced the cessation of the Solar Systems business operation on 30 July 2015. Various property, plant and
equipment and technology assets have been sold to third parties with proceeds of $2.3m received during FY2016. At the time
of writing, all remaining assets of the Solar Systems business have been sold.
The net profit from discontinued operations of $1.3m in the current year includes the operations of Translucent and Solar
Systems. The current year included $1.8m License Fee income from IQE compared to $nil in the prior year. Reversals of
impairment of property, plant and equipment ($0.2m) and intangibles ($0.2m) improved the result in the current year compared
to impairments of $8.9m and $10.4m for property, plant and equipment, and intangibles respectively in the previous year.
19
Silex Annual Report 2016 directors’ report
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 2016
$
30 June 2015
$
55,098,350
1,706,048
56,804,398
61,951,409
67,451
62,018,860
2,950,265
104,728
3,054,993
4,451,614
113,110
4,564,724
53,749,405
57,454,136
53,749,405
57,454,136
As at 30 June 2016, total assets were $56.8m. Significant assets are cash holdings of $51.3m (cash and term deposits), trade
and other receivables of $3.5m and Available-for-sale financial assets of $1.6m. Total liabilities were $3.1m and included trade
and other payables of $1.8m and liabilities associated with our discontinued operations of $0.7m.
5. Earnings per share
earnings per share for (loss) from continuing operations attributable to the
ordinary equity holders of the Company
Basic earnings per share
Diluted earnings per share
earnings per share for (loss) attributable to the ordinary equity holders of
the Company
Basic earnings per share
Diluted earnings per share
2016
Cents
2015
Cents
(2.8)
(2.8)
(2.0)
(2.0)
(1.3)
(1.3)
(21.1)
(21.1)
20
Silex Annual Report 2016 directors’ report
6. Significant changes in state of affairs
The financial position and performance of the Company continued to be affected by the implementation of the outcomes of the
strategic review announced by the Board on 30 June 2014 which aimed to return the Company’s focus to the development of
its foundation technology and core asset – the SILEX technology.
Silex announced on 2 May 2016 that it had signed a term sheet with GE-Hitachi Nuclear Energy (GEH) providing a framework
for the parties to negotiate an acceptable restructure of GLE. Under the term sheet, Silex has agreed to reimburse GEH its
pro-rata share of funding for GLE Wilmington operations whilst conducting a search to identify new investors for GLE and the
commercialisation program.
Silex’s execution of the strategic review resulted in a number of significant changes and cessation of operations for subsidiaries,
Translucent Inc and Solar Systems during year ended 30 June 2016. A License and Assignment Agreement between
Translucent Inc and IQE Plc was executed on 15 September 2015. The Agreement provides for the completion of product
development and commercialisation activities during the 30-month license period by IQE. As a result, the Translucent technology
has been transferred to IQE’s facility in North Carolina and the Translucent facility in Palo Alto, California was vacated in
December 2015.
In addition, the cessation of the Solar Systems business operation was announced on 30 July 2015. This resulted in the sale
of the assets including the properties at Bridgewater and Mildura and the termination of the lease and exit of the manufacturing
facility at Abbotsford. In July 2016, the Company completed the sale of the IP and associated manufacturing assets.
There were no other significant changes in the state of affairs of the Company during the financial year not otherwise dealt with
in this report.
7. Matters subsequent to the end of the financial year
Between 30 June 2016 and 22 September 2016, the IQE Plc share price (LON: IQE) has increased considerably. Combined
with movements in exchange rates the value of the shares (disclosed as Available-for-sale financial assets) has increased by
approximately $1,160,000 since 30 June 2016. Gains or losses arising from changes in the fair value of shares classified as
available-for-sale are recognised in other comprehensive income. The financial effects of the movements in fair value since 30
June 2016 will be recognised in the financial statements for the year ended 30 June 2017.
The consolidated entity is not aware of any other matters or circumstances which are not otherwise dealt with in the financial
statements that have significantly, or may significantly, affect the operations of the consolidated entity, the results of its
operations or the state of the consolidated entity in subsequent years other than those referred to above.
8. Likely developments and expected results of operations
Overview
Silex is a research and development company whose primary asset is the SILEX laser uranium enrichment technology which is
licensed exclusively to GE-Hitachi Global Laser Enrichment LLC (GLE). As outlined above, GE-Hitachi Nuclear Energy (GEH) is
looking to exit GLE, due to changes in business priorities and the continuing difficult market conditions driven by the Fukushima
disaster in 2011. This announcement followed the slowing of the pace of the SILEX technology commercialisation program by
GLE in July 2014. Silex continues in its efforts to restructure GLE through the introduction of new investors who can support
GLE and the SILEX technology’s transition to market.
21
Silex Annual Report 2016 directors’ report
In light of the above, the timing of future potential milestone payments and royalties under the Technology Commercialisation
and License Agreement signed with GLE may be significantly delayed by several factors, including the slowdown in the pace of
GLE’s commercialisation program announced in July 2014, the outcome of the restructure of GLE currently being led by Silex
and the timing of the recovery in the markets for uranium and enrichment services.
The implementation of the Company’s major strategic review announced on 30 June 2014 involved decisions to cease the Solar
Systems operations in Victoria and the Translucent operations in California. An exclusive License and Assignment Agreement for
Translucent’s technology was signed in September 2015 with UK-based IQE Plc (IQE) as noted above. The outcome of IQE’s
commercialisation program remains high risk.
The Company’s future prospects and results remain largely dependent on the outcomes of the commercialisation programs
for the SILEX and cREO™ technologies, the GLE restructure and a recovery in the accessible markets for both uranium and
enrichment services.
business strategies and future prospects
the Silex technology
Commercialisation Program
The SILEX technology is currently in the final phase of a commercialisation program involving engineering scale-up and
economic validation. Silex has taken the lead on the search for new investors in GLE, with a preference for securing high calibre
strategic investors who are capable of supporting GLE’s transition to market with the SILEX technology. Discussions continue to
advance with a number of interested parties. We remain convinced that the best way to create value for our shareholders is to
continue to focus our efforts on the restructure of GLE and to potentially become a shareholder in GLE ourselves such that we
can have greater visibility and influence over the technology commercialisation program going forward.
Silex firmly believes that GLE is the best vehicle to take the SILEX technology to market, based on the preservation of several
key assets which will underpin GLE’s value going forward. These assets include:
• The highly skilled and specialised engineering team based in Wilmington (in addition to the highly talented laser development
team in Sydney);
• The Test Loop demonstration facility that has operated since 2010 and continues to advance the technology towards full-
scale demonstration; and
• The combined construction and operating license (COL) granted by the US Nuclear Regulatory Commission in 2012 for a
potential commercial enrichment plant in Wilmington, NC.
In addition to these key assets, the Paducah commercial plant opportunity (to produce natural grade uranium from tails
stockpiles owned by the US Department of Energy (DOE)) is being negotiated exclusively between the DOE and GLE.
The focus of the Company is firmly set on the remainder of the commercialisation program for the SILEX technology. Whilst
the pace of this commercialisation program was slowed significantly by GLE in July 2014, the technology engineering and
economic validation program has continued to achieve pleasing results during FY2016. Key technology demonstration activities
relating to improved process efficiency and scaled-up laser system performance were completed during the year in review at the
Wilmington and Sydney project sites respectively.
22
Silex Annual Report 2016 directors’ report
GLE and Silex continue to conduct a stage-gated approach to commercialisation of the SILEX laser enrichment technology,
albeit at reduced pace, with the following three phases:
Phase
Phase I
Phase II
Objectives
Status
Test Loop technology demonstration and NRC commercial plant license approval
Completed 2013
Economic and engineering validation for the initial commercial production module
Commenced in 2013
Phase III
Construction of the first full-scale commercial production facility
To be confirmed
Status of Nuclear Fuel Markets
Challenging market conditions continued to impact the nuclear fuel markets throughout FY2016. This was not unexpected
given the continued slow pace of the restart of the Japanese nuclear reactor fleet following the Fukushima disaster in 2011
and the announcement of the premature retirement of a number of reactors in the US and Europe. As a result, the demand for
enrichment and uranium remains low and prices are currently depressed.
A key contributing factor to the expected recovery of the nuclear fuel markets is the restart of nuclear reactors in Japan, which
have been largely shutdown since 2011. At the time of writing, only 3 reactors are connected to the grid in Japan with another
22 reactors in the restart approval process, according to the World Nuclear Association (WNA) (world-nuclear.org). Despite the
slow pace of restarts, Japan remains committed to nuclear power generation with a target to produce around one fifth of its
power from nuclear energy by 2030.
Longer term, a more positive outlook remains for the nuclear industry, driven by the merits of nuclear power as a clean
emissions-free source of base load electricity becoming better understood around the world. Billions of dollars of investment
continues to be made every year in the nuclear industry with new nuclear plant builds continuing in the US and the UK, as well
as extensive programs in China, Russia, India and South Korea. This is in addition to extensions being granted to the operating
lives of existing nuclear plants which could see many of these plants generating clean, reliable and affordable baseload electricity
for up to 80 years. Ten new reactor units commenced operations in the past year giving a total of 445 operable reactors globally.
With an additional 61 reactors under construction and 170 planned – the demand and supply fundamentals of the nuclear fuel
markets are set to recover in the coming years.
We therefore remain encouraged by these positive developments in the global nuclear industry. We continue to believe the SILEX
technology, being our core asset and the only third generation laser enrichment technology being commercialised in the world,
is the best path forward to deliver value to our shareholders. However, the risks surrounding nuclear industry growth prospects
and the related nuclear fuel market conditions, and the outcome of the GLE restructure, could impact the commercialisation
program outlined above and ultimately the timing of future potential milestone payments and royalties under the Technology
Commercialisation and License Agreement signed with GLE in 2006.
23
Silex Annual Report 2016 directors’ report
9.
Information on Directors
a) directors’ profiles
The following information is current as at the date of this report:
dr lisa mcintyre bSc (Hons), Phd, GaiCd.
Chair – Independent non-executive director
Experience and expertise
Other current listed company directorships
Independent non-executive director for four years and Chair for
two years. Extensive experience as a Company Director. Current
roles include icare NSW, HCF, Cover-More Group Limited,
GenesisCare and Your Tutor Pty Ltd. Executive career in strategy,
commercialisation and performance support as a senior partner of
global strategy firm L.E.K. Consulting for 20 years.
Non-executive director of Cover-More Group Limited since
November 2013
Former listed company directorships in last 3 years
None
Special responsibilities
Chair of the Board
Member of Audit Committee
Chair of People & Remuneration Committee
Interests in shares and options
Ordinary shares – Silex Systems Limited
Options over ordinary shares –
Silex Systems Limited
48,230
Nil
dr michael Goldsworthy bSc (Hons), mSc, Phd, FaiP, GaiCd.
Chief Executive Officer/Managing Director
Experience and expertise
CEO/MD for twenty four years. Founder of the Company and
co-inventor of the SILEX uranium enrichment technology.
Other current listed company directorships
Former listed company directorships in last 3 years
None
None
Special responsibilities
Interests in shares and options
Chief Executive Officer / Managing Director
Ordinary shares – Silex Systems Limited
Options over ordinary shares –
Silex Systems Limited
5,979,055
1,102,207
mr Christopher Wilks bComm, FaiCd.
Non-executive director
Experience and expertise
Other current listed company directorships
Non-executive director for twenty eight years. Finance director and
CFO of Sonic Healthcare Limited. Various other directorships held of
public companies held over the last thirty years.
Executive director of Sonic Healthcare Limited since 1989 (Finance
director since 1993)
Former listed company directorships in last 3 years
None
Special responsibilities
Business development and corporate strategy
Member of Audit Committee
Member of People & Remuneration Committee
Interests in shares and options
Ordinary shares – Silex Systems Limited
Options over ordinary shares –
Silex Systems Limited
2,814,021
367,035
24
Silex Annual Report 2016
directors’ report
mr robert lee bSc, mba, GaiCd.
Independent non-executive director
Experience and expertise
Independent non-executive director from 1 July 2015. Experienced
company director, corporate adviser and former Executive Director
of Macquarie Group Limited. Currently a non-executive director of
Westmead IVF and Maple-Brown Abbott Limited.
Other current listed company directorships
Former listed company directorships in last 3 years
None
None
Special responsibilities
Chair of Audit Committee
Member of People & Remuneration Committee
Interests in shares and options
Ordinary shares – Silex Systems Limited
Options over ordinary shares –
Silex Systems Limited
The following individual is a former director of the Silex Board:
mr andrew Stock beng (Chem) (Hons), Fie aust, GaiCd.
Independent non-executive director until 31 August 2015
Experience and expertise
Non-executive director for 2 years
Other current listed company directorships
Non-executive director of Horizon Oil Limited (director since 2011)
Former listed company directorships in last 3 years
Non-executive director of Geodynamics Limited (2003 to 2015)
Special responsibilities
Chair of Audit Committee
Member of People & Remuneration Committee
Interests in shares and options
Ordinary shares – Silex Systems Limited
Options over ordinary shares –
Silex Systems Limited
Nil
Nil
Nil
Nil
10. Meetings
The number of directors’ meetings held during the financial year and the number of meetings attended by each director are set
out in the following table:
director’s name
Dr L M McIntyre
Dr M P Goldsworthy
Mr R A R Lee
Mr A M Stock (held to date of retirement)
Mr C D Wilks
directors’
meetings
audit Committee
meetings
People & Committee
meetings
Number
Held
Number
attended
Number
Held
Number
attended
Number
Held
Number
attended
10
10
10
2
10
10
10
10
2
10
3
*
3
1
3
3
*
3
1
3
3
*
3
1
3
3
*
3
1
3
* Not a member of the relevant committee at the time the scheduled meetings were held
25
Silex Annual Report 2016
directors’ report
11. Remuneration Report
Dear Shareholders,
On behalf of the Board, I am pleased to present to you the FY2016 Silex Systems Limited Remuneration Report for which
we seek your support at our Annual General Meeting in November.
The details of the remuneration received by the Company’s Key Management Personnel (KMP) are prepared in accordance
with accounting standards, legislative requirements and best practice corporate governance guidance. The following
comments aim to provide greater insight into our remuneration policies and practices during what has been a difficult time
for Silex and our shareholders.
Challenging business conditions continue to be faced by the Company, which are largely attributable to the ongoing depressed
state of the nuclear fuel markets in a post-Fukushima operating environment. These conditions continue to negatively impact
the commercialisation program of our foundation technology – the SILEX laser-based uranium enrichment technology
and ultimately our share price. Despite these difficult conditions, Silex continues to push forward with activities to support
the licensees of our unique and potentially disruptive technologies – the SILEX technology and the Translucent cREO™
semiconductor technology.
We have successfully implemented our major strategic review and strategy to significantly reduce our operational cash burn
and devote our resources to the commercialisation of the SILEX technology. As a result of our restructure, significant changes
have taken place throughout the Company since the announcement of our strategic review on 30 June 2014, including a 75%
reduction in head count Company wide, a ~50% reduction in corporate headcount and the combining of various roles and
responsibilities to streamline operations and reduce costs.
Some difficult decisions have been made in recent years which impacted the Company’s KMP. From 1 January 2015, our
CEO/MD agreed to a reduction of approximately 55% to Total Maximum Potential Remuneration, which included a reduction
of 31% in Total Fixed Remuneration. No remuneration increases were awarded to KMP for the 3 years to 30 June 2016 and
from 1 April 2016, our Board agreed to reduce its remuneration with the cessation of committee fees.
For FY2017, no changes were made to the remuneration package of our CEO/MD. We awarded various members of our team
salary increases – the retention of our significantly reduced team and their individual and collective expertise that benefits the
Company being a key focus. A full review was completed of the remuneration package of our CFO/Company Secretary and an
increase of 12.65% to Total Fixed Remuneration and a 25% increase to the maximum available short term incentive awarded.
We remain cognisant of shareholder concern that any long-term equity based remuneration is linked to growth in shareholder
value. Therefore, at this time, it has been determined that no long-term incentives will be granted.
On behalf of the Board, I invite you to review the full report and thank you for your continued interest. I look forward to answering
any questions you may have at our Annual General Meeting in November 2016.
dr lisa mcintyre
Chair, People & Remuneration Committee
26
Silex Annual Report 2016
directors’ report
The Directors present the Remuneration Report for the year ended 30 June 2016, outlining key aspects of our remuneration
policy and framework and remuneration awarded for the Company’s non-executive directors, executive directors and other
executive key management personnel.
The report contains the following sections:
a) Directors and KMP disclosed in this report
b) Remuneration governance
c) Linking remuneration structure to company performance
d) Voting and comments made at the Company’s 2015 Annual General Meeting
e) Executive KMP remuneration structure
f)
g) Non-executive directors’ remuneration
h) Directors’ and KMP remuneration
i) Details of share-based compensation and bonuses
j) Shares under option
Link between FY2016 remuneration and performance
a) directors and KmP disclosed in this report
The 2016 Remuneration Report has been prepared in accordance with the requirements of section 300A of the Corporations
Act 2001 and accounting standard requirements and applies to KMP of the Company. KMP are defined as those persons who
have authority and responsibility for planning, directing and controlling the activities of the Company.
Name
Position
Non-executive and executive directors
Dr L M McIntyre
Dr M P Goldsworthy
Mr R A R Lee
Mr A M Stock
Mr C D Wilks
Other executive KmP
Ms J E Ducie
Mr C R Murray
Chair and Non-executive director
CEO/Managing Director – Executive director
Non-executive director
Non-executive director (until 31 August 2015)
Non-executive director
CFO/Company Secretary
CEO – Solar Systems (until 31 August 2015)
27
Silex Annual Report 2016
directors’ report
b) remuneration governance
board oversight
The Silex Board is ultimately responsible for ensuring that the Company’s remuneration structure is equitable and aligned with
the long-term interests of shareholders. The Board and its advisors are independent of Management when making decisions
affecting employee remuneration.
People & remuneration Committee structure
The People & Remuneration Committee is a committee of the Board currently comprised of a majority of independent non-
executive directors. Its role is to make recommendations to the Board regarding the Company’s remuneration policies and
practices, including those applicable to the Company’s KMP.
Members of the People & Remuneration Committee were as follows:
Committee members
Committee secretary
Number of meetings in FY2016
Dr L M McIntyre – Chair
Mr R A R Lee
Mr A M Stock (until 31 August 2015)
Mr C D Wilks
Ms A N Scott
3
Other individuals who regularly attended meetings
Dr M P Goldsworthy – CEO/MD
The role of the People & Remuneration Committee is to:
• Review and recommend to the Board the appropriate remuneration policies and practices that are competitive and reasonable
for the Company and its specific application to KMP, as well as the general application to all employees;
• Determine remuneration levels of the CEO/MD and other KMP;
• Manage the incentive plans which apply to executive directors and senior executives (the executive team), including key
performance indicators and performance hurdles; and
• Review and make recommendations to the Board regarding the remuneration of non-executive directors.
The role and responsibilities of the People & Remuneration Committee are set out in the People & Remuneration Committee
Charter, which is available on the Company’s website at www.silex.com.au/Corporate-Governance.
use of remuneration consultants
The Company did not engage remuneration consultants during FY2016. The Company has previously engaged AON Hewitt to
conduct a thorough review of KMP and Board remuneration and structure. The recommendations from that review were fully
implemented during FY2015 and FY2016. The Company continues to access market data and industry remuneration surveys
and reports on a regular basis.
28
Silex Annual Report 2016 directors’ report
c) linking remuneration structure to company performance
Remuneration strategy, policy and framework
In determining executive KMP remuneration, the Board’s policy is based on the principle of aligning remuneration outcomes
with the successful delivery of strategy whilst ensuring our remuneration practices are designed to attract, motivate and retain
highly qualified and specialised personnel. Regard for contemporary market practice, good governance and alignment to
changing business circumstances is held at all times. The Company aims to reward executive KMP with a level and mix of
remuneration commensurate with their position and responsibilities within the Company that is competitive within the market
in which they were recruited. Executive KMP who have a greater ability to influence outcomes have a greater portion of their
overall remuneration package ‘at risk’.
Remuneration for executive KMP is reviewed annually and considers market data, insights into remuneration trends, the
performance of the Company and the individual, and the broader economic and operating environment. This review is
conducted in consultation with independent remuneration consultants where appropriate.
The executive KMP remuneration framework has two components:
• Total fixed remuneration; and
• At-risk incentives.
element
Purpose
Performance metrics
Potential Value
Total Fixed Remuneration
(TFR)
At Risk Incentives –
Short-term Incentive (STI)
Provide competitive
market salary, including
superannuation and
non-monetary benefits.
Reward executive’s
performance, representative
of their contribution to
achievement of Company
outcomes, as well as
functional Key Performance
Indicators (KPIs).
Reference to role, market and
experience.
Positioned at median
market rate.
Rewards are generally
based on a percentage of
the executive’s Total Fixed
Remuneration (TFR).
Linked to key performance
hurdles that may include
financial metrics such as
operating cash flow and
non-financial measures,
such as commercial
deliverables, and other specific
operational and strategic
deliverables for the Company.
Long-term Incentives (LTI) were not offered to the CEO/MD or CFO/Company Secretary in FY2016. At this time, it has been
determined that no LTIs will be granted for FY2017.
assessing performance and claw-back of remuneration
The People & Remuneration Committee is responsible for assessing performance against KPIs and determining the incentive
awards to be paid. To assist in this assessment, the Committee receives detailed reports on performance from management
which are based on independently verifiable data such as financial measures, market information and data from independently
run surveys. At all times the Board has the discretion to make a final determination based on share price performance
or other factors.
In the event of serious misconduct or a material misstatement in the Company’s financial statements the Board can
cancel or defer performance-based remuneration and may also claw back performance-based remuneration paid in previous
financial years.
29
Silex Annual Report 2016 directors’ report
d) Voting and comments made at the Company’s 2015 annual General meeting
Silex Systems Limited received more than 98% of “yes” votes on its Remuneration Report for the 2015 financial year.
e) executive KmP remuneration structure
For FY2016, executive KMP remuneration packages included a mix of total fixed remuneration (TFR) and short-term at-risk
incentives.
total Fixed remuneration (tFr)
TFR is comprised of base salary, superannuation and packaged benefits. TFR is reviewed annually, or on promotion. It is
benchmarked against market data for comparable roles in companies in a similar industry and with similar market capitalisation.
The Committee aims to position executives at or near the median, with flexibility to take into account capability, experience, and
value to the organisation and performance of the individual.
Effective from 1 January 2015, the TFR for the Silex CEO/MD was significantly reduced by mutual agreement. For FY2016, the
TFR for all other KMP remained unchanged.
Short-term incentives (Sti)
Composition
assessment
CeO/managing director
CFO/Company Secretary
Awards may be delivered
in cash or Restricted
Silex Systems Limited
ordinary shares subject to
shareholder approval.
Awards are currently paid
in cash. A portion of the
payment may also be delivered
in Restricted Silex Systems
Limited ordinary shares.
CeO – Solar Systems
(nb. no Fy2016 Sti issued)
Awards were historically paid
in cash.
Award is subject to the
achievement of agreed
performance criteria
comprising financial metrics
and specific key strategic and
commercial objectives.*
Award is subject to the
achievement of divisional and
Company financial performance,
supplemented by strategic and
commercial measures specific
to business unit deliverables.*
Award was subject to the
achievement of Solar Systems
financial performance,
supplemented by strategic and
commercial measures specific
to the Solar Systems business.*
total maximum
Opportunity
at risk
$200,000
Yes
$80,000
Yes
$160,000
Yes
*For commercially sensitive reasons, short-term incentive targets for executive KMP are not published within this Remuneration Report, however
the People & Remuneration Committee believe that all targets are set appropriately and align with shareholder expectations and execution of
Company strategy. At all times the Board has the discretion to make a final determination based on share price performance or other factors.
long-term incentive (lti)
No long-term incentives were granted during FY2016 to the CEO/MD or CFO/Company Secretary.
A LTI/Success Fee Bonus was offered to the CEO – Solar Systems in FY2014. This was not time-bound and remained an
ongoing potential incentive throughout FY2015 and until the announcement of the cessation of the Solar Systems’ business
operations on 30 July 2015. The maximum incentive opportunity was in-line with the objectives of the Board’s major strategic
review and was tied to the financial close of a transaction for the Solar Systems business or assets and the value secured for
Silex shareholders, after taking into account Silex’s investment to date. As a result of the announcement of the cessation of the
operations and redundancy of the CEO, no long-term incentive was payable.
At the time of writing, it has been determined that no long-term incentives will be granted to the CEO/MD or CFO/Company
Secretary during FY2017.
30
Silex Annual Report 2016 directors’ report
f) link between Fy2016 remuneration and performance
Fy2016 performance and impact on remuneration
Throughout FY2016, the Company continued to implement significant strategic changes and respond to challenging operating
conditions in the nuclear industry. The Company’s primary focus was on the continued development and commercialisation of
the SILEX technology. In addition, the major strategic review implementation was completed resulting in the exclusive License
and Assignment Agreement for Translucent’s proprietary cREO™ technology being signed on the 15 September 2015, and the
transfer of the technology to IQE Plc during the year. As IQE will now be responsible for the completion of product development
and commercialisation activities, the Translucent operations in Palo Alto, California ceased at the end of December 2015. The
Solar Systems business also ceased operating during the year and various property, plant and equipment and technology assets
sold to third parties.
The STI performance criteria for FY2016 for the CEO/MD and CFO/Company Secretary were heavily focussed on the
deliverables associated with the SILEX technology and the Company’s strategic review. Key performance criteria met included
the licensing of the Translucent cREO™ technology, progress in the commercialisation of the SILEX technology, delivery of
financial rigour and operational cost reductions and resolution of the Solar Systems business.
The Board awarded the CEO/MD and the CFO/Company Secretary 70% and 85% respectively of the maximum STIs available.
These incentives were paid in cash after satisfying the required service and performance conditions.
The FY2015 STI and 25% of the maximum short-term inventive for FY2016 for the CFO/Company Secretary was cancelled
and a retainer equal to the maximum STI opportunity put in place in November 2014. This was in light of the significant
restructure that resulted from the major strategic review and the considerable absorption and expansion of duties following a
50% headcount reduction in corporate resources. This retainer was time bound and eligibility criteria deemed satisfied on 30
September 2015, with payment made in October 2015.
Statutory performance indicators
We aim to align KMP remuneration to our strategic and business objectives and the creation of shareholder wealth. The below
table shows measures of the Company’s financial performance over the last five years as required by the Corporations Act
2001. However, as a pre-revenue company, the below measures are generally not the measures used in determining the variable
amounts of remuneration to be awarded to KMPs. As a consequence, there is no direct correlation between the statutory key
performance measures and the variable remuneration awarded.
year ended 30 June
2012
2013
2014
2015
2016
ePS
Cents
(21.6)
(0.1)
(17.3)
(21.1)
(2.0)
KmP Sti award
$
Share price at 30 June
$
304,000
140,000
76,000
322,400
211,000
3.20
2.20
1.16
0.46
0.31
31
Silex Annual Report 2016 directors’ report
Contractual arrangements with executive KmPs
Component
Total Fixed Remuneration
Contract duration
Notice by the individual
or Company
Termination of employment
(without cause)
Termination of employment
(with cause) or by the individual
CeO/md
$550,000*
Ongoing Common
Law Contract
6 months
CFO/Company Secretary
CeO - Solar Systems
$288,500
Ongoing Common
Law Contract
6 months
$400,000
Contract terminated by
redundancy 31 August 2015
6 months
Partial payment for pro-rata
STI may be applicable at the
Board’s discretion
Partial payment for pro-rata
STI may be applicable at the
Board’s discretion
Partial payment for pro-rata
STI may be applicable at the
Board’s discretion
STI/LTI not awarded
STI/LTI not awarded
STI/LTI not awarded
*Total Fixed Remuneration reduced from $800,000 to $550,000 from 1 January 2015.
g) Non-executive directors’ remuneration
Non-executive directors receive a board fee. They do not receive performance-based pay or retirement allowances.
The fees are exclusive of superannuation.
With effect from 1 April 2016, all non-executive directors agreed to reduce their remuneration with the cessation of
committee fees.
The aggregate non-executive directors’ fees are reviewed periodically by the Board taking into account comparable roles and
market data provided by an independent remuneration consultant. The non-executive director’s fees remain well within the limits
of the shareholder approved aggregate directors fee pool maximum of $750,000, as approved by shareholders at the 2011
AGM and have in the aggregate significantly reduced from $465,905 in FY2014 to $304,331 in FY2016. The process of Board
renewal continued during FY2016 with one director retiring from the Board. The Silex Board currently comprises three non-
executive directors and an executive director. The current Board size is deemed appropriate in light of the current activities of the
Company.
The current fee structure is outlined below:
Board
Committee
Chair
100,000
–
member
80,000
–
Additional fees may be payable to non-executive directors should they undertake specific consulting projects for the Company in
the areas of their expertise.
32
Silex Annual Report 2016 directors’ report
h) directors’ and KmP remuneration
The table below has been prepared in accordance with the requirements of the Corporations Act 2001 and relevant accounting
regulations in Australia. This table details the remuneration for the Company’s KMP for the current and previous financial year.
Fixed remuneration
Variable remuneration
Cash
salary
and
fees*
$
Non
mone-
tary
benefits
$
long
service
leave
$
Post-
employment
benefits -
super-
annuation
$
Name
year
executive directors
Dr M P
Goldsworthy
2016
2015
515,664
10,624
(659)
631,293
16,554
(1,189)
Non-executive directors (Ned)
Dr L M
McIntyre
Mr R A R Lee
(from 1/7/2015)
Mr C D Wilks
Mr A M Stock
(until 31/8/2015)
2016
2015
2016
2015
2016
2015
2016
2015
110,500
114,000
89,164
–
121,500
132,625
15,667
94,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Other key management personnel and group executives
267,604
265,190
– 10,803
–
4,361
2016
2015
2016
2015
2016
Ms J E Ducie
Mr C R Murray
(until 31/8/2015)
total
executive
directors and
other KmP
total Ned
remuneration
total KmP
remuneration
352,368
14,626
829,455
23,597
2015
1,248,851
31,180
2016
2015
336,831
340,625
–
–
2016
1,166,286
23,597
2015
1,589,476
31,180
682
9,008
3,854
–
–
9,008
3,854
* Inclusive of movement in annual leave accruals.
** Other includes termination payments paid to Mr C R Murray.
46,187
12,973
(1,136)
18,688 229,284
–
37,012
– 102,400
83,504 229,284 211,000
34,908
34,983
10,498
10,830
8,471
–
11,543
12,599
1,488
8,930
29,908
29,983
Other**
$
Cash
bonus
$
Options
$
deferred
rights
$
total
$
– 140,000
–
24,725
725,262
– 140,000 100,797
125,981 1,048,419
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
71,000
80,000
–
–
–
–
–
33,566
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
120,998
124,830
97,635
–
133,043
178,790
17,155
102,930
2,970
2,962
–
–
382,285
382,496
305,996
507,088
27,695 1,413,543
101,978
– 322,400 100,797
128,943 1,938,003
32,000
32,359
–
–
–
–
–
33,566
–
–
368,831
406,550
115,504 229,284 211,000
–
27,695 1,782,374
134,337
– 322,400 134,363
128,943 2,344,553
33
Silex Annual Report 2016 directors’ report
The relative proportions of remuneration that are linked to performance and those that are fixed are as follows:
Name
Fixed remuneration
at risk- Sti
at risk - lti *
2016
2015
2016
2015
2016
2015
directors
Dr L M McIntyre
Dr M P Goldsworthy
Mr R A R Lee
Mr C D Wilks
Mr A M Stock
Other executive KmP
Ms J E Ducie
Mr C R Murray
100.0%
77.3%
100.0%
100.0%
100.0%
80.6%
100.0%
100.0%
65.0%
–
81.2%
100.0%
78.3%
79.8%
N/a
19.3%
N/a
N/a
N/a
18.6%
0.0%
N/A
13.4%
–
N/A
N/A
20.9%
20.2%
N/a
3.4%
N/a
N/a
N/a
0.8%
0.0%
N/A
21.6%
–
18.8%
N/A
0.8%
0.0%
*This relates to options and deferred shares issued on a LTI basis with the percentages based on the value of amounts expensed during
the year.
i) details of share-based compensation and bonuses
Options
No grant of options affected remuneration in the current reporting period or will affect remuneration in a future reporting period.
There were no options granted or any options exercised by any individual during FY2016 (or FY2015).
Sti bonuses
For each STI award for the year ended 30 June 2016 (payable in the form of a cash bonus), the percentage of the bonus
awarded or forfeited is set out below:
2016
Dr M P Goldsworthy
Ms J E Ducie *
Ms J E Ducie
total opportunity
$
awarded
%
Forfeited
%
200,000
20,000
60,000
70%
100%
85%
30%
0%
15%
*This relates to a retention based bonus with eligibility criteria expiring 30 September 2015. The criteria were met and the bonus was paid in
FY2016.
34
Silex Annual Report 2016
directors’ report
lti deferred rights
For each LTI award for the year ended 30 June 2016 (payable in the form of deferred rights), the percentage of the bonus
awarded or forfeited is set out below:
2016
Dr M P Goldsworthy
Ms J E Ducie
awarded %
Forfeited %
Performance period
0%
0%
100%
100%
3 years ending 30/06/2016
3 years ending 30/06/2016
The bonuses were subject to performance criteria comprising Total Shareholder Return over a 3-year period ending 30 June
2016 and a share price hurdle of $5.40.
lti cash incentive
For each LTI award for the year ended 30 June 2016 (payable in the form of cash), the percentage of the bonuses awarded or
forfeited is set out below:
2016
Mr C R Murray
awarded %
Forfeited %
Performance period
0%
100%
No set period
The bonus was in relation to closing a transaction for the Solar Systems business or assets.
equity instruments held by KmP
The below table shows the number of ordinary shares in the Company that were held during the financial year by KMP of the
Company, including by entities related to them:
2016
directors of Silex
Systems limited
Dr L M McIntyre
Dr M P Goldsworthy
Mr R A R Lee
Mr C D Wilks
Former directors*
Mr A M Stock
Other executive KmP
Ms J E Ducie
Former executive KmP*
Mr C R Murray
balance at the
start of the year
received during
the year on
the exercise
of options
received on
vesting of rights
to shares
Other changes
during the year
balance at the
end of the year
48,230
5,979,055
–
2,814,021
–
3,759
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
48,230
5,979,055
–
2,814,021
N/A
3,759
N/A
*This information relates to the period these individuals were Directors/KMP.
35
Silex Annual Report 2016
directors’ report
The below table shows the number of options over ordinary shares in the Company that were held during the financial year by
KMP of the Company, including by entities related to them:
balance
at the
start of
the year
Granted
during the
year as
compen-
sation
lapsed
during
the year
Forfeited
during
the year
exercised
during
the year
balance
at the
end of
the year
Vested and
exercisable
at the end
of the year
unvested
2016
Name
directors of Silex
Systems limited
Dr M P Goldsworthy
1,102,207
Mr C D Wilks
367,035
–
–
–
–
Other executive KmP
Ms J E Ducie
100,000
–
(40,000)
–
–
–
– 1,102,207
–
367,035
–
–
1,102,207
367,035
–
60,000
60,000
–
j) Shares under option
Unissued ordinary shares of Silex Systems Limited under option at the date of this report are as follows:
Number of options
issue Price of shares
Grant date
expiry date
1,469,242
$2.04
8 December 2011
7 December 2016
No option holder has any right under the options to participate in any other share issue of the Company or any other entity.
Share trading Policy
The Silex Share Trading Policy applies to all staff including KMP. It prohibits staff from buying or selling Silex securities at
times when they are in possession of inside information. In addition, KMP are only permitted to trade in Silex securities during
certain open periods. The policy applies other restrictions with regard to hedging arrangements. KMP must not enter into any
hedging arrangements.
36
Silex Annual Report 2016 directors’ report
12. Indemnification and insurance of directors
The Company has entered into agreements to indemnify the directors of the Company against all liabilities to persons (other
than the Company or related body corporate) which arise out of the performance of their normal duties as directors or executive
officers unless the liability relates to conduct involving lack of good faith. The Company has agreed to indemnify the directors
and executive officers against all costs and expenses incurred in defending an action that falls within the scope of the indemnity.
The Directors’ & Officers’ Liability Insurance provides cover against all costs and expenses involved in defending legal actions
and any resulting payments arising from a liability to persons (other than the Company) incurred in their position as a director or
executive officer unless the conduct involves a wilful breach of duty or an improper use of inside information or position to gain
advantage. The insurance policy does not allow specific disclosure of the nature of the liabilities insured against or the premium
paid under the policy.
13. Environmental regulation
The parent entity is subject to the environmental and health and safety regulations applicable to tenants of the Lucas Heights
Science and Technology Centre. The parent entity is also bound by the rules and regulations set out in the Australian Radiation
Protection and Nuclear Safety Act, 1998, and is a licensee under the Act. Solar Systems was subject to a number of regulations
including VIC Occupational Health and Safety Act 2004, VIC Occupational Health and Safety Regulations 2007, VIC Dangerous
Goods Act 1985, VIC Dangerous Goods (Storage and Handling) Interim Regulations 2011.
To the best of the Directors’ knowledge, all environmental and health and safety regulatory requirements have been met and
there have been no claims made during the financial year.
14. Non-audit services
The Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s
expertise and experience with the Company and/or the consolidated entity are important.
Details of the amounts paid or payable to the auditor (PricewaterhouseCoopers) for non-audit services provided during the year
are set out below.
The Board of Directors has considered the position and, in accordance with the advice received from the Audit Committee,
is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors
imposed by the Corporations Act 2001. The directors are satisfied that the provision of non-audit services by the auditor, as set
out below, did not compromise the auditor independence requirements of the Corporations Act 2001 for the following reasons:
• all non-audit services have been reviewed by the Audit Committee to ensure they do not impact the impartiality and objectivity
of the auditor
• none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics
for Professional Accountants.
37
Silex Annual Report 2016 directors’ report
During the year the following fees were paid or payable for non-audit services provided by the auditor of the parent entity, its
related practices and non-related audit firms:
Other assurance services
PricewaterhouseCoopers Australian firm
Audit of government grants
total remuneration for other assurance services
Other services
Corporate services
total remuneration for other services
total remuneration for non-audit services
2016
$
–
–
–
–
–
2015
$
5,000
5,000
20,400
20,400
25,400
15. Auditors
PricewaterhouseCoopers continues in office in accordance with section 327 of the Corporations Act 2001.
16. Auditor’s independence declaration
A copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on
page 39.
This report is made in accordance with a resolution of the Directors.
dr m P Goldsworthy
CEO/MD
Sydney, 22 September 2016
mr C d Wilks
Director
38
Silex Annual Report 2016
directors’ report
Auditor’s Independence Declaration
As lead auditor for the audit of Silex Systems Limited for the year ended 30 June 2016, 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
22 September 2016
PricewaterhouseCoopers, ABN 52 780 433 757
Darling Park Tower 2, 201 Sussex Street, GPO BOX 2650, SYDNEY NSW 1171
T +61 2 8266 0000, F +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation
39
Silex Annual Report 2016 Corporate Governance
Statement
Silex Systems Limited (the Company) and the Board are committed to achieving and demonstrating the highest standards
of corporate governance. The Company has reviewed its corporate governance practices against the Corporate
Governance Principles and Recommendations (3rd edition) published by the ASX Corporate Governance Council.
The 2016 Corporate Governance Statement is dated as at 30 June 2016 and reflects the corporate governance practices
in place throughout the 2016 financial year. The 2016 Corporate Governance Statement was approved by the Board on
22 September 2016 and lodged with the ASX Appendix 4G, on 22 September 2016. A description of the Company’s
current corporate governance practices is set out in the Company’s Corporate Governance Statement which can be
viewed at www.silex.com.au/Corporate-Governance.
40
Silex Annual Report 2016 Concise
Financial
report
30 June 2016
CONteNtS
Financial statements
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the financial statements
Directors’ declaration
Independent auditor’s report to the members
42
43
44
45
46
47
51
52
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 2016. 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.
ABN 69 003 372 067
41
Consolidated income statement
for the year ended 30 June 2016
revenue from continuing operations
Other income
Research and development materials
Development expenditure
Finance costs
Depreciation and amortisation expense
Employee benefits expense
Consultants and professional fees
Printing, postage, freight, stationery and communications
Rent, utilities and property outgoings
Net foreign exchange losses
Other expenses from continuing activities
(loss) before income tax expense
Income tax expense
Net (loss) from continuing operations
Note
3
4
2016
$
2015
$
1,617,655
3,674,860
1,467,828
42,475
(60,107)
(154,296)
(2,550,261)
–
(55)
(27,191)
(349)
(59,821)
(3,091,636)
(4,017,953)
(951,041)
(99,574)
(433,766)
(642,304)
(117,893)
(474,107)
(143,418)
–
(429,193)
(4,700,759)
(535,605)
(2,284,993)
–
–
(4,700,759)
(2,284,993)
Net profit/(loss) from discontinued operations
Net (loss) for the year
5
1,303,871
(3,396,888)
(33,659,803)
(35,944,796)
Net (loss) is attributable to:
Owners of Silex Systems Limited
earnings per share for (loss) from continuing operations attributable
to the ordinary equity holders of the company
Basic earnings per share
Diluted earnings per share
earnings per share for (loss) attributable to the ordinary equity holders
of the company
Basic earnings per share
Diluted earnings per share
(3,396,888)
(35,944,796)
Cents
Cents
(2.8)
(2.8)
(2.0)
(2.0)
(1.3)
(1.3)
(21.1)
(21.1)
The above consolidated income statement should be read in conjunction with the accompanying notes.
42
Silex Annual Report 2016 Consolidated statement
of comprehensive income
for the year ended 30 June 2016
Net (loss) for the year
Other comprehensive income
Items that may be reclassified to profit or loss:
Changes in the fair value of available-for-sale financial assets
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
total comprehensive income for the year
Total comprehensive income for the period attributable to owners
of Silex Systems Limited arises from:
Continuing operations
Discontinued operations
2016
$
2015
$
(3,396,888)
(35,944,796)
(283,451)
–
(51,181)
(334,632)
275,747
275,747
(3,731,520)
(35,669,049)
(3,731,520)
(3,731,520)
(35,669,049)
(35,669,049)
(4,700,759)
969,239
(3,731,520)
(2,284,993)
(33,384,056)
(35,669,049)
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
43
Silex Annual Report 2016 Consolidated balance sheet
as at 30 June 2016
assets
Current assets
Cash and cash equivalents
Held to maturity investments - term deposits
Trade and other receivables
Assets classified as held for sale
Total current assets
Non-current assets
Available-for-sale financial assets
Property, plant and equipment
Deferred tax assets
Intangible assets
Total non-current assets
total assets
liabilities
Current liabilities
Trade and other payables
Provisions
Note
30 June 2016
$
30 June 2015
$
1,581,746
49,700,328
3,466,276
54,748,350
987,777
54,173,451
5,214,694
60,375,922
5
350,000
1,575,487
55,098,350
61,951,409
1,624,251 –
80,001
1,796
–
1,706,048
56,804,398
64,061
2,702
688
67,451
62,018,860
1,799,049
472,837
2,271,886
968,673
425,919
1,394,592
Liabilities associated with discontinued operations
5
678,379
3,057,022
Total current liabilities
Non-current liabilities
Provisions
Total non-current liabilities
total liabilities
Net assets
equity
Contributed equity
Reserves
Accumulated losses
total equity
2,950,265
4,451,614
104,728
104,728
3,054,993
53,749,405
113,110
113,110
4,564,724
57,454,136
231,752,170
231,753,076
9,989,496
10,296,433
(187,992,261)
(184,595,373)
53,749,405
57,454,136
The above consolidated balance sheet should be read in conjunction with the accompanying notes.
44
Silex Annual Report 2016 Consolidated statement
of changes in equity
for the year ended 30 June 2016
Contributed
equity
$
reserves
$
accumulated
losses
$
Non-
controlling
interests
$
total
$
total
$
balance at 30 June 2014
231,671,231
9,882,811 (148,650,577)
92,903,465
(818,382)
92,085,083
Net (loss) for the year
–
–
(35,944,796)
(35,944,796)
–
(35,944,796)
Other comprehensive income
–
275,747
–
275,747
–
275,747
total comprehensive
income for the year
–
275,747
(35,944,796)
(35,669,049)
–
(35,669,049)
transactions with owners in their capacity as owners
Transfer of non-controlling
interest on derecognition
Transaction costs from the
issue of shares
Employee shares and options
- value of employee services
Transfer from share based
payments reserve
Deferred tax recognised
directly in equity
–
– –
–
818,382
818,382
(3,228)
– –
(3,228)
–
(3,228)
–
222,737 –
222,737 –
222,737
84,862
(84,862)
–
–
–
–
211 – –
211 –
211
81,845
137,875 –
219,720
818,382
1,038,102
balance at 30 June 2015
231,753,076
10,296,433 (184,595,373)
57,454,136
–
57,454,136
Net (loss) for the year
–
–
(3,396,888)
(3,396,888)
–
(3,396,888)
Other comprehensive income
–
(334,632)
–
(334,632)
–
(334,632)
total comprehensive
income for the year
–
(334,632)
(3,396,888)
(3,731,520)
–
(3,731,520)
transactions with owners in their capacity as owners
Employee shares and options
- value of employee services
Deferred tax recognised
directly in equity
–
27,695 –
27,695 –
27,695
(906)
– –
(906)
–
(906)
27,695 –
26,789
–
(906)
26,789
balance at 30 June 2016
231,752,170
9,989,496 (187,992,261)
53,749,405
–
53,749,405
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
45
Silex Annual Report 2016
Consolidated statement of cash flows
for the year ended 30 June 2016
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
2016
$
2015
$
5,467,115
14,506,671
(13,835,072)
(24,718,382)
1,942,298
(67)
2,284,445
(1,805)
(6,425,726)
(7,929,071)
Proceeds from held to maturity investments - term deposits
4,473,123
6,582,588
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
Transaction costs from issue of shares
Net cash (outflows) from financing activities
(42,608)
-
2,586,838
7,017,353
(215,990)
(651,570)
14,636
5,729,664
-
-
(3,228)
(3,228)
Net increase/(decrease) in cash held
591,627
(2,202,635)
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 the financial year *
987,777
2,342
1,581,746
3,178,811
11,601
987,777
*Held to maturity investments excluded from Cash and cash equivalents
49,700,328
54,173,451
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
46
Silex Annual Report 2016
Notes to the financial statements
30 June 2016
Note 1 Significant changes in the current accounting period
The financial position and performance of the Company continued to be affected by the implementation of the outcomes of
the strategic review announced by the Board on 30 June 2014 that has resulted in the return of the Company’s focus to the
development of the Company’s foundation technology and core asset – the SILEX laser uranium enrichment technology. The
resulting restructure has seen a number of significant changes in the year ended 30 June 2016, including the cessation of
the Solar Systems business operations as announced on 30 July 2015. This resulted in the sale of the assets including the
properties at Bridgewater and Mildura and the termination of the lease and exit of the manufacturing facility at Abbotsford. In
July 2016, the Company completed the sale of the IP and associated manufacturing assets.
A License and Assignment Agreement between Translucent Inc and IQE Plc was executed on the 15 September 2015. The
Agreement provides for the completion of product development and commercialisation activities during the 30-month license
period by IQE. As a result, the Translucent technology has been transferred to IQE’s facility in North Carolina and the Translucent
facility in Palo Alto, California was vacated in December 2015.
Silex announced on 2 May 2016 that it had signed a term sheet with GE-Hitachi Nuclear Energy (GEH) to provide a framework
for the parties to negotiate a mutually acceptable restructure of GE-Hitachi Global Laser Enrichment LLC (GLE). This followed
GEH’s notification that they were looking to exit GLE. Under the term sheet, Silex has agreed to reimburse GEH its pro-rata
share of funding for GLE Wilmington operations for CY2016 whilst conducting a search to identify new investors for GLE and the
commercialisation program.
Note 2 Segment information
Segment revenue and segment result information provided to the board of directors for the Silex segment, the one reportable
segment for the year ended 30 June 2016 is contained in the consolidated income statement.
Segment assets were $54,594,394 at 30 June 2016 compared to $59,794,515 at 30 June 2015.
Segment liabilities were $2,376,614 at 30 June 2016 compared to $1,507,702 at 30 June 2015.
(i) Segment result
The Board of Directors assess the performance of the operating segment based on a result that excludes exchange gains
and losses on intercompany loans which eliminate on consolidation. Solar Systems and Translucent have been disclosed as
discontinued operations and not as reportable segments. A reconciliation of the segment result to Net (loss) from continuing
operations is provided as follows.
Segment result
Net (loss) before income tax from continuing operations
2016
$
(4,700,759)
(4,700,759)
2015
$
(2,284,993)
(2,284,993)
47
Silex Annual Report 2016
Notes to the financial statements
30 June 2016
Note 3 Revenue
From continuing operations
Recoverable project costs from GLE
Interest income
From discontinued operations (note 5)
License fees
Recoverable project costs from IQE
Sale of goods
Services
Interest income
Note 4 Other income
From continuing operations
Research and development tax incentive
Foreign currency exchange gains (net)
Profit on sale of property, plant and equipment
From discontinued operations (note 5)
Research and development tax incentive
Government grants
Profit on sale of property, plant and equipment
2016
$
2015
$
–
1,617,655
1,617,655
1,493,766
2,181,094
3,674,860
1,821,297
216,786
93,151
–
22,717
2,153,951
2016
$
1,459,095
-
8,733
1,467,828
–
–
132,924
35,168
14,921
183,013
2015
$
-
42,475
-
42,475
2,002,079
4,508,336
-
1,340,055
3,342,134
668,276
14,636
5,191,248
(i) Government grants
Government solar project grants of $nil (2015: $602,603) 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 $nil (2015: $65,673) was recognised as Other income during the financial year by Solar Systems.
There are no unfulfilled conditions attached to these grants.
(ii) research and development tax incentive
Research and development tax incentive income of $3,461,174 (2015: $4,508,336) was recognised as Other income by the
Company during the year. The Company has met the conditions of the tax incentive.
48
Silex Annual Report 2016
Notes to the financial statements
30 June 2016
Note 5 Discontinued operations and Assets held for sale
In accordance with the continued implementation of the outcome of the Company’s major strategic review and resulting
restructure, the Solar Systems and Translucent businesses have been disclosed as discontinued operations.
On 30 July 2015, Silex announced a decision had been made to cease business operations at Solar Systems. During the year
ended 30 June 2016, many of the assets were sold, including the properties and Bridgewater and Mildura, and the leased
facility at Abbotsford was vacated.
On 15 September 2015, Silex announced that Translucent had signed a License and Assignment Agreement with IQE Plc with
the technology commercialisation program to be transferred to IQE. Under the terms of the License and Assignment Agreement,
IQE was required to pay an initial License Fee of US$1.415 million and this was received in March 2016. IQE has 30 months
in which to elect to acquire Translucent’s technology with the payment of a further US$5 million. As a result, these two former
business segments, net of cash, held to maturity investments, some receivables and Available-for-sale financial assets (shares in
IQE) are reported as held for sale.
A summary of the results of the discontinued operations is provided below.
Revenue (note 3)
Other income (note 4)
Expenses
Profit/(loss) before income tax
Income tax expense
Profit/(loss) after income tax of the discontinued operations
Net cash (outflows) from operating activities
Net cash inflows/(outflows) from investing activities
Net cash inflows/(outflows) from the discontinued operations
Trade and other receivables
Inventories
Property, plant and equipment
Intangible assets
total assets of disposal group held for sale
Trade and other payables
Provisions
total liabilities associated with discontinued operations
2016
$
2,153,951
3,342,134
(4,192,214)
1,303,871
2015
$
183,013
5,191,248
(39,034,064)
(33,659,803)
–
–
1,303,871
(33,659,803)
2016
$
(2,114,844)
3,064,790
949,946
2016
$
–
–
175,000
175,000
350,000
2016
$
(303,819)
(374,560)
(678,379)
2015
$
(6,237,983)
(812,586)
(7,050,569)
2015
$
320,658
18,228
1,236,601
–
1,575,487
2015
$
(936,805)
(2,120,217)
(3,057,022)
49
Silex Annual Report 2016
Notes to the financial statements
30 June 2016
Note 6 Contingent liabilities and commitments in accordance
with Purchase and Sale Agreement Term Sheet
(i) Contingent liabilities
In April 2016, Silex signed a Non-Binding Purchase and Sale Agreement (PSA) Term Sheet with GENE Holdings (GENE),
GE-Hitachi Nuclear Energy Americas LLC (GEHA) and General Electric Company (GE). The Term Sheet sets out details of a
proposed Purchase and Sale Agreement (PSA) whereby Silex may acquire the shares owned by GENE and GEHA together
representing 76% of the issued capital of GE-Hitachi Global Laser Enrichment LLC (GLE). Whilst the Term Sheet is principally
Non-Binding, there are certain Binding Obligations. Under the Term Sheet, Silex has a Binding Funding Obligation and is
required to make certain reimbursement payments to the Sellers (GENE and GEHA). Expenses recorded in the current year
amounted to $2,550,261.
In addition, if a PSA is signed then Silex is required to make additional funding payments to GENE and GEHA The amount of this
additional funding amounts (a contingent liability) is US$500,000 for the period to 30 June 2016 and a further US$500,000 for
the 6 months to 31 December 2016 i.e. US$1m in total, in the event a PSA is executed. At the current point in time, the timing
of any outflow of funds is uncertain and subject to Silex signing a PSA.
(ii) Commitments in accordance with Purchase and Sale agreement term Sheet
Under the Term Sheet, Silex is required to reimburse the Sellers for a further US$2,100,000 for expenditure for the 6 months
to 31 December 2016.
Note 7 Dividends
No dividends were declared or paid during the year or in the prior year.
Note 8 Events occurring after reporting date
Between 30 June 2016 and 22 September 2016, the IQE Plc share price (LON: IQE) has increased considerably. Combined
with movements in exchange rates the value of the shares (disclosed as Available-for-sale financial assets) has increased by
approximately $1,160,000 since 30 June 2016. Gains or losses arising from changes in the fair value of shares classified as
available-for-sale are recognised in other comprehensive income. The financial effects of the movements in fair value since
30 June 2016 will be recognised in the financial statements for the year ended 30 June 2017.
The consolidated entity is not aware of any other matters or circumstances which are not otherwise dealt with in the financial
statements that have significantly, or may significantly, affect the operations of the consolidated entity, the results of its
operations or the state of the consolidated entity in subsequent years other than those referred to in this report.
Note 9 Basis of preparation
This concise financial report relates to the consolidated entity consisting of Silex Systems Limited and the entities it controlled
at the end of, or during, the year ended 30 June 2016. The accounting policies have been consistently applied to all years
presented, unless otherwise stated below.
The financial statements in this report are presented in Australian dollars.
50
Silex Annual Report 2016 directors’ declaration
30 June 2016
The directors declare that in their opinion, the concise financial report of the consolidated entity for the year ended 30 June 2016
as set out on pages 41 to 50 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 2016. 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
CEO/MD
mr C d Wilks
Director
Sydney, 22 September 2016
51
Silex Annual Report 2016
independent auditor’s report
to the members of Silex Systems limited
report on the concise financial report
We have audited the accompanying concise financial report of Silex Systems Limited (the company), which comprises the
consolidated balance sheet as at 30 June 2016, the consolidated income statement, consolidated statement of comprehensive
income, consolidated statement of changes in equity and consolidated statement of cash flows for the year ended on that
date and related notes, derived from the audited financial report of the company for the year ended 30 June 2016 for Silex
Systems Limited Group (the consolidated entity). The concise financial report does not contain all the disclosures required
by the Australian Accounting Standards and accordingly, reading the concise financial report is not a substitute for reading
the audited financial report.
directors’ responsibility for the concise financial report
The directors of the company are responsible for the preparation of the concise financial report in accordance with Accounting
Standard AASB 1039 Concise Financial Reports, and the Corporations Act 2001, and for such internal control as the directors
determine are necessary to enable the preparation of the concise financial report.
auditor’s responsibility
Our responsibility is to express an opinion on the concise financial report based on our audit procedures which were conducted
in accordance with Auditing Standard ASA 810 Engagements to Report on Summary Financial Statements. We have conducted
an independent audit, in accordance with Australian Auditing Standards, of the financial report of the consolidated entity
for the year ended 30 June 2016. We expressed an unmodified audit opinion on that financial report in our report dated
22 September 2016. 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
T +61 2 8266 0000, F +61 2 8266 9999, www.pwc.com.au
Liability limited by a scheme approved under Professional Standards Legislation
52
Silex Annual Report 2016 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 consolidated entity for the year ended 30 June 2016 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 2016.
We have audited the remuneration report included in pages 26 to 36 of the directors’ report for the year ended 30 June 2016.
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 2016 complies with section
300A of the Corporations Act 2001.
PricewaterhouseCoopers
Stephen Humphries
Partner
Sydney
22 September 2016
53
Silex Annual Report 2016
Shareholders’ information
30 June 2016
1. Information relating to shareholders as at 12 September 2016
(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
Prudential Plc (M&G Group)
2,057
2,557
843
1,124
141
6,722
55.40%
2,767
Ordinary shares
29,801,030
12,786,077
54
Silex Annual Report 2016
Shareholders’ information
30 June 2016 (continued)
(b) Names of twenty largest Holders as at 12 September 2016
Name
Jardvan Pty Ltd
HSBC Custody Nominees (Australia) Limited
Majenta Holdings Pty Ltd
Mr Paul Cozzi
J P Morgan Nominees Australia Limited
Polly Pty Ltd
Citicorp Nominees Pty Limited
National Nominees Limited
Throvena Pty Ltd
Hamlac Pty Ltd
Mr Christopher David Wilks
Felson Holdings Pty Ltd
Quintal Pty Ltd
Sporran Lean Pty Ltd
Old Digger Pty Ltd
Quadrangle Nominees Limited
Mithena Holdings Pty Ltd
Mr Xiangyang Wu
Mr Luca Rotter + Ms Jane Louise Abbott
Hillboi Nominees Pty Ltd
Number of
securities
29,801,030
20,511,723
Percentage
held
17.48%
12.03%
5,703,923
4,800,000
4,319,093
4,073,863
3,529,036
3,079,351
2,978,203
2,525,937
2,405,070
2,251,000
2,002,952
1,650,000
1,145,000
847,245
817,139
685,655
655,000
651,295
3.35%
2.82%
2.53%
2.39%
2.07%
1.81%
1.75%
1.48%
1.41%
1.32%
1.17%
0.97%
0.67%
0.50%
0.48%
0.40%
0.38%
0.38%
94,432,515
55.40%
55
Silex Annual Report 2016 Shareholders’ information
30 June 2016 (continued)
2. Interest of directors in shares as at 12 September 2016
Dr L M McIntyre
Dr M P Goldsworthy
Mr R A R Lee
Mr C D Wilks
Ordinary shares
48,230
5,979,055
–
interest held
Beneficially
Personally/Beneficially
N/A
2,814,021
Personally/Beneficially
3. Securities subject to voluntary escrow as at 12 September 2016
As at 12 September 2016, no securities were subject to voluntary escrow.
4. Unquoted equity securities as at 12 September 2016
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 Number of holders
1,469,242
2
56
Silex Annual Report 2016
Important
Notice
Forward Looking Statements and Business Risks:
Some risk factors that could affect future results and
commercial prospects include, but are not limited to: the
outcome of the GLE restructure which Silex is participating
in, results from the SILEX uranium enrichment engineering
development program being conducted jointly by the
Company and GLE; the demand for natural uranium and
enriched uranium; the time taken to develop the SILEX
technology; results from IQE’s commercialisation program and
the demand for cREO™ products, the potential development
of competing technologies; the potential for third party claims
against the Company’s ownership of Intellectual Property; the
potential impact of government regulations or policies in the
USA, Australia or elsewhere; and the outcomes of various
commercialisation strategies undertaken by the Company
and/or its Licensees GLE and IQE.
Silex Systems is a research and development Company
whose primary asset is the SILEX laser uranium enrichment
technology, originally developed at the Company’s technology
facility in Sydney, Australia. The SILEX technology, licensed
exclusively to GE-Hitachi Global Laser Enrichment LLC (GLE)
in the USA, is currently in the engineering development
stage and plans for commercial deployment remain distant
and high risk.
Silex also has an interest in a unique semiconductor
technology known as ‘cREO™’ through its ownership
of subsidiary Translucent Inc. The cREO™ technology is
exclusively licensed to IQE Plc based in the UK. IQE is
progressing the cREO™ technology towards commercial
deployment in various advanced semiconductor products.
The outcome of IQE’s commercialisation program remains
high risk.
The commercial potential of these two technologies is
currently unknown. Accordingly, the statements in this report
regarding the future of the SILEX technology, the cREO™
technology and any associated 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.
SIlEx SyStEmS
lImItED
ABN 69 003 372 067
Company
Directory
Directors
Dr L M McIntyre – Chair
Dr M P Goldsworthy – CEO/MD
Mr R A R Lee
Mr C D Wilks
Audit Committee
Mr R A R Lee – Chair
Dr L M McIntyre
Mr C D Wilks
People & Remuneration
Committee
Dr L M McIntyre – Chair
Mr R A R Lee
Mr C D Wilks
Company Secretary
Ms J E Ducie
Registered Office and
Principal Place of
Business
Suite 8.01, Level 8
56 Clarence Street
Sydney NSW 2000, Australia
Stock Exchange
Listed on the Australian Stock
Exchange, Ticker: SLX
Listed on the OTCQX International,
Ticker: SILXY
Postal address: PO Box 364, Sydney
NSW 2001, Australia
Auditors
📞 +61 2 9704 8888
📠 +61 2 9704 8851
✉
💻 www.silex.com.au
investor.relations@silex.com.au
Share Registry
Computershare Registry Services
Pty Limited
Level 5, 115 Grenfell Street, Adelaide,
South Australia 5000, Australia
GPO Box 1903 Adelaide
South Australia 5001, Australia
📞 Enquiries:
Within Australia: 1300 556 161
Outside Australia: +61 8 8236 2300
✉ web.queries@computershare.com.au
💻 www.computershare.com.au
PricewaterhouseCoopers
Solicitors
Baker & McKenzie
Bankers
Australia and New Zealand Banking
Group Limited
American Depository
Receipts (ADR)
Information
Silex Systems Limited’s ADRs may be
purchased on the US OTCQX market.
Details are as follows:
Ratio: 1 ADR = 5 ordinary shares
Symbol: SILXY
CUSIP: 827046 10 3 9414F102
Exchange: OTCQX
Country: Australia
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www.silex.com.au
Annual Report
2016