<br />
Meso<br />
Annua<br />
<br />
blas<br />
l Repo<br />
<br />
t Limited<br />
rt 2008 Mesoblast Limite<br />
Annual Report 2008T<br />
<br />
Contents Page<br />
<br />
Message from the Chairman 1<br />
<br />
Executive Direc<br />
Messa<br />
ge fro<br />
m the Chairman<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
When I joined Mesoblast last November, my expectation<br />
was that Mesoblast was an organisation with great<br />
potential and solid capability to produce excellent results<br />
<br />
Execu<br />
tive Di<br />
rector’s Report<br />
<br />
<br />
<br />
<br />
<br />
<br />
<br />
During 2008 Mesoblast continued to make signi?cant<br />
advances in the clinical and commercial development of our<br />
unique adult stem cell platform technology. After le<br />
the need for autograft and the potential complications<br />
of this second surgical procedure. These preclinical<br />
results are supported by encouraging initial results from<br />
Mesoblast’s ongoing Phase 2 clini<a title="Mesoblast v2 page 1" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=1"> Meso Annua blas l Repo t Limited rt 2008 Mes</a>oblast Limite Annual Report 2008T
<a title="Mesoblast v2 page 2" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=2"> Contents </a> Page Message from the Chairman 1 Executive Direc
<a title="Mesoblast v2 page 3" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=3"> Messa ge fro m the Chairman When I joined </a>Mesoblast last November, my expectation was that Mesoblast was an organisation with great potential and solid capability to produce excellent results
<a title="Mesoblast v2 page 4" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=4"> Execu tive Di rector’s Report During 2008 </a>Mesoblast continued to make signi?cant advances in the clinical and commercial development of our unique adult stem cell platform technology. After le
<a title="Mesoblast v2 page 5" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=5"> the need for autograft and the potential complica</a>tions of this second surgical procedure. These preclinical results are supported by encouraging initial results from Mesoblast’s ongoing Phase 2 clini
<a title="Mesoblast v2 page 6" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=6"> In October 2008, Angioblast announced successful </a>early safety results in the world’s ?rst clinical trial to use allogeneic, or “off-the-shelf”, adult stem cells from an unrelated donor to treat patie
<a title="Mesoblast v2 page 7" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=7"> Making a diff erence </a> Courtesy of HWT Patient Tony Giancola, 36, with the Principal Investigator of the non-healing, long bone f
<a title="Mesoblast v2 page 8" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=8"> Stem cells heal where surgery fails Adult stem c</a>ells could improve healing of serious fractures, writes Lynnette Hoffman in The Weekend Australian By the time Dean Spizzirri arrived at the Royal M
<a title="Mesoblast v2 page 9" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=9"> Dean Spizzirri, 51, had three operations to heal </a>his fractured tibia, including autograft and Bone Morphogenetic Protein, but with no success. After 33 months, he was implanted with Mesoblast’s propr
<a title="Mesoblast v2 page 10" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=10"> Direct ors’ Re port The Board of Directors </a>of Mesoblast Limited has resolved to submit the following annual ?nancial report of the Company for the ?nancial year ended 30 June 2008. In order to
<a title="Mesoblast v2 page 11" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=11"> Principal Activities & Strategy Mesoblast Limite</a>d is an Australian biotechnology company committed to the development of innovative biological products in the emerging and potentially highly lucrati
<a title="Mesoblast v2 page 12" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=12"> Intervertebral Disc Repair For patients with earl</a>ier-stage intervertebral disc disease, Mesoblast is developing an allogeneic adult stem cell product which can be injected by a minimally invasive app
<a title="Mesoblast v2 page 13" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=13"> Expenditure In line with the Company’s policy and</a> to comply with accounting standards, all costs associated with research and development are fully expensed in the period in which they are incurred a
<a title="Mesoblast v2 page 14" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=14"> Share Options Shares under option Unissued ordina</a>ry shares of Mesoblast Limited under option at the date of this directors’ report are as follows: N
<a title="Mesoblast v2 page 15" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=15"> Signi?cant Changes in the State of Affairs No si</a>gni?cant changes occurred in the state of affairs of the Company during the ?nancial year other than those disclosed in the review of operations. Mat
<a title="Mesoblast v2 page 16" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=16"> Information on Directors Brian Jamieson, Non-exe</a>cutive Chairman – FCA Shares held: 125,000 Options held: - Mr Jamieson has over 30 years experience in providing advice and audit services to
<a title="Mesoblast v2 page 17" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=17"> Byron McAllister, Non-executive Director – BS M.A</a>gr Shares held: - Options held: 150,000 Mr McAllister has extensive expertise in product development, quality assurance, and obtaining FDA re
<a title="Mesoblast v2 page 18" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=18"> Meetings of Directors The number of meetings of </a>the Company’s directors (including committee meetings of directors) held during the year ended 30 June 2008 and the numbers of meetings attended by ea
<a title="Mesoblast v2 page 19" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=19"> Remuneration Report The directors of the Com</a>pany present the following remuneration report, which forms part of the directors’ report and has been prepared in accordance with s300A of the Corpor
<a title="Mesoblast v2 page 20" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=20"> (iii) Long term performance incentives Performanc</a>e conditions were attached to the following options granted to key management personnel in previous ?nancial years, which may form part of their remun
<a title="Mesoblast v2 page 21" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=21"> Relationship between remuneration policy and comp</a>any performance 16 December 2004 (date 30 June 30 June 30 June 30 June
<a title="Mesoblast v2 page 22" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=22"> Details of the remuneration of each director of M</a>esoblast Limited and the other key management personnel of the Company are set out below: Short term
<a title="Mesoblast v2 page 23" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=23"> </a> Performance Remuneration based Termination consisti
<a title="Mesoblast v2 page 24" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=24"> (i) All bonuses reported in the above table are</a> 100% of the bonus entitlement for each relevant executive. Bonuses forfeited during the year as a
<a title="Mesoblast v2 page 25" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=25"> D. Share-Based Compensation Options to purchase f</a>ully paid shares of the Company were granted as remuneration during the year as follows: Grant Date
<a title="Mesoblast v2 page 26" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=26"> Options held by key management personnel that ves</a>ted and were exercised during the year: Number of options exercised Number o
<a title="Mesoblast v2 page 27" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=27"> PricewaterhouseCoopers ABN 52 780 433 757 Freshw</a>ater Place 2 Southbank Boulevard SOUTHBANK VIC 3006 GPO Box 1331L MELBOURNE VIC 3001 DX 77 Telephone 61 3 8603 1000 Facsimile 61 3 8603 1999 Website:w
<a title="Mesoblast v2 page 28" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=28"> Corpo rate G overnance The Board of Direct</a>ors of Mesoblast Limited is responsible for the corporate governance of the Company. The Board guides and monitors the business and affairs of the Com
<a title="Mesoblast v2 page 29" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=29"> Principle 2. Structure the Board to add value 2.1</a> Board composition and independence During the 2008 year, the Board of Directors initially comprised four Directors (two executives and two non-execut
<a title="Mesoblast v2 page 30" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=30"> by the Company. These Codes of Conduct cover con?</a>icts of interest, con?dentiality, fair dealing, protection of assets, compliance with laws and regulations, whistle blowing, security trading and comm
<a title="Mesoblast v2 page 31" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=31"> • procedures for the selection and appointment of</a> the external auditor and for the rotation of external audit engagement partners; • recommendations for the appointment or removal of
<a title="Mesoblast v2 page 32" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=32"> Principle 8. Encourage enhanced performance The </a>performance of key executives of the Company is reviewed annually and assessed against the overall Company objectives, and speci?c milestones where ap
<a title="Mesoblast v2 page 33" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=33"> Remuneration policies The expected outcomes of th</a>e remuneration structure are to retain and motivate key executives, attract quality management and provide performance incentives which align performa
<a title="Mesoblast v2 page 34" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=34"> </a>
<a title="Mesoblast v2 page 35" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=35"> Financ atements for the ye 30 </a>June 2008 ial St ar ended Contents Page Income Statement
<a title="Mesoblast v2 page 36" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=36"> Income Statement for the year ended 30 June 2008 </a> 30 June 30 June 2008
<a title="Mesoblast v2 page 37" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=37"> Statement of Changes in Equity for the year ended</a> 30 June 2008 Foreign Share Based
<a title="Mesoblast v2 page 38" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=38"> Balance Sheet as at 30 June 2008 </a> 30 June 30 June 2008 2007 N
<a title="Mesoblast v2 page 39" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=39"> Cash Flow Statement for the year ended 30 June 20</a>08 30 June 30 June 2008
<a title="Mesoblast v2 page 40" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=40"> Notes to the Financial Statements for the year en</a>ded 30 June 2008 INTRODUCTION The ?nancial report covers Mesoblast Limited (“Mesoblast”), a company limited by shares whose shares are publicl
<a title="Mesoblast v2 page 41" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=41"> 1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED Goi</a>ng concern For the year ended 30 June 2008, the company incurred an operating loss of $10,062,379 (2007 loss: $8,728,131) as it continued to further i
<a title="Mesoblast v2 page 42" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=42"> Notes to the Financial Statements for the year en</a>ded 30 June 2008 1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED (b) Contributed equity Ordinary shares are classi?ed as equity. Transaction cost
<a title="Mesoblast v2 page 43" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=43"> 1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED (g)</a> Government grants Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received
<a title="Mesoblast v2 page 44" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=44"> Notes to the Financial Statements for the year en</a>ded 30 June 2008 1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED (k) Investments accounted for using the equity method Associates are all entitie
<a title="Mesoblast v2 page 45" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=45"> 1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED (o)</a> Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. The Company recognises revenue when the amount
<a title="Mesoblast v2 page 46" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=46"> Notes to the Financial Statements for the year en</a>ded 30 June 2008 1. SIGNIFICANT ACCOUNTING POLICIES CONTINUED (v) New and revised accounting standards and interpretations Certain new account
<a title="Mesoblast v2 page 47" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=47"> 30 June 30 June </a> 2008 2007 $ $ 2. REVENUE AND EXPENSES FROM CONTI
<a title="Mesoblast v2 page 48" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=48"> Notes to the Financial Statements for the year en</a>ded 30 June 2008 3. SEGMENT INFORMATION (a) Description of segments Management has determined the operating segments presented here are those
<a title="Mesoblast v2 page 49" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=49"> 3. SEGMENT INFORMATION CONTINUED (c) Segment rec</a>onciliations The following table reconciles each of the segment totals to the totals reported for the Company in the income statement and balance she
<a title="Mesoblast v2 page 50" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=50"> Notes to the Financial Statements for the year en</a>ded 30 June 2008 30 June 30 June 2008 2007
<a title="Mesoblast v2 page 51" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=51"> 30 June 30 June </a> 2008 2007 $ $ 7. CASH AND CASH EQUIVALENTS Cash
<a title="Mesoblast v2 page 52" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=52"> Notes to the Financial Statements for the year en</a>ded 30 June 2008 10. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD Entity Countr
<a title="Mesoblast v2 page 53" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=53"> 30 June 30 June </a> 2008 2007 $ $ 11. INTANGIBLE ASSETS Patents and
<a title="Mesoblast v2 page 54" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=54"> Notes to the Financial Statements for the year en</a>ded 30 June 2008 13. ISSUED CAPITAL Ordinary shares participate in dividends and the proceeds on winding up of the company in equal proportion
<a title="Mesoblast v2 page 55" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=55"> 30 June 30 June </a> 2008 2007 $ $ 14. RESERVES (a) Reconciliation of
<a title="Mesoblast v2 page 56" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=56"> Notes to the Financial Statements for the year en</a>ded 30 June 2008 30 June 30 June 2008 2007
<a title="Mesoblast v2 page 57" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=57"> 17. CONTINGENT ASSETS AND LIABILITIES (a) Conting</a>ent assets A government grant was awarded to the Company under the Commercial Ready Program for reimbursement of 50% of eligible expenditure incurred
<a title="Mesoblast v2 page 58" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=58"> Notes to the Financial Statements for the year en</a>ded 30 June 2008 18. SHARE-BASED PAYMENTS The Company has adopted an Employee Share Option Plan to foster an ownership culture within the Comp
<a title="Mesoblast v2 page 59" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=59"> 18. SHARE-BASED PAYMENTS CONTINUED (a) Existing </a>share-based payment arrangements (i) The following share-based payment arrangements were in existence during the
<a title="Mesoblast v2 page 60" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=60"> Notes to the Financial Statements for the year en</a>ded 30 June 2008 18. SHARE-BASED PAYMENTS CONTINUED (a) Existing share-based payment arrangements (continued) (ii) General terms
<a title="Mesoblast v2 page 61" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=61"> 18. SHARE-BASED PAYMENTS CONTINUED (a) Existing </a>share-based payment arrangements (continued) 4. Options granted are subject to the following conditions:
<a title="Mesoblast v2 page 62" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=62"> Notes to the Financial Statements for the year en</a>ded 30 June 2008 18. SHARE-BASED PAYMENTS CONTINUED (b) Fair values of share options (continued) The model inputs for the valuations of option
<a title="Mesoblast v2 page 63" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=63"> 18. SHARE-BASED PAYMENTS CONTINUED (d) Share opt</a>ions exercised during the year Option series Number exercised 2008 2(c)
<a title="Mesoblast v2 page 64" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=64"> Notes to the Financial Statements for the year en</a>ded 30 June 2008 19. KEY MANAGEMENT PERSONNEL COMPENSATION CONTINUED (b) Key management personnel compensation The aggregate compensation made
<a title="Mesoblast v2 page 65" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=65"> 19. KEY MANAGEMENT PERSONNEL COMPENSATION CONTINU</a>ED c) Key management personnel equity holdings continued Shareholdings Fully paid ordinary shares held by key management personnel or their related p
<a title="Mesoblast v2 page 66" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=66"> Notes to the Financial Statements for the year en</a>ded 30 June 2008 20. RELATED PARTY TRANSACTIONS CONTINUED (a) Equity interests in related parties Details of interests in associates are discl
<a title="Mesoblast v2 page 67" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=67"> 20. RELATED PARTY TRANSACTIONS CONTINUED (c) Tra</a>nsactions between related parties of the company Together, Mesoblast and Angioblast have been jointly developing process manufacturing and scale-up of
<a title="Mesoblast v2 page 68" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=68"> Notes to the Financial Statements for the year en</a>ded 30 June 2008 21. FINANCIAL RISK MANAGEMENT CONTINUED (a) Market risk continued The balances held at the end of the year that give rise to
<a title="Mesoblast v2 page 69" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=69"> 21. FINANCIAL RISK MANAGEMENT CONTINUED (b) Cred</a>it risk Credit risk is the risk that one party to a ?nancial instrument will fail to discharge its obligation and will therefore cause ?nancial loss t
<a title="Mesoblast v2 page 70" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=70"> Directors’ Declaration In accordance wi</a>th a resolution of directors of Mesoblast Limited, In the opinion of the directors: (a) the accompanying ?nancial sta
<a title="Mesoblast v2 page 71" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=71"> PricewaterhouseCoopers ABN 52 780 433 757 Inde</a>pendent auditor’s report to the members of Mesoblast Limited Report on the financial report Freshwater Place 2 Southbank Boulevard SOUTHBANK VIC 3
<a title="Mesoblast v2 page 72" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=72"> Independent auditor’s report to the members of Me</a>soblast Limited (continued) Our audit did not involve an analysis of the prudence of business decisions made by directors or management. We believe
<a title="Mesoblast v2 page 73" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=73"> Shareholder Information A. SUBSTANTIAL </a>SHAREHOLDERS The Company’s Holders of Relevant Interests as noti?ed by ASX Substantial Shareholders and the number of shares in which they have an in
<a title="Mesoblast v2 page 74" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=74"> Shareholder Information continued D. TWENT</a>Y LARGEST HOLDERS OF QUOTED SECURITIES The names of the 20 largest shareholders of each class of equity security as at 16 September 2008 are listed b
<a title="Mesoblast v2 page 75" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=75"> Mesoblast Limited ABN 68 109 431 870 Board of Dir</a>ectors and Company Particulars DIRECTORS Brian Jamieson Donal O’Dwyer Silviu Itescu Byron McAllister Michael Spooner COMPANY SECRETARY Kevin H
<a title="Mesoblast v2 page 76" href="http://www.zmag.dk/showmag.php?mid=wwrtps&pageid=76"> </a>
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