Building a Successful Global Business

Building a SuccessfulGlobal Business

Financial Report 2007

VCR Financials Cover 17/9/07 9:42 AM Page 2


Ventracor Limited Financial Report 2007 1

Directors’ Report 2

Auditors’ Independence Declaration 30

Corporate Governance Statement 31

Income Statements 37

Balance Sheets 38

Statements of Changes in Equity 39

Cash Flow Statements 40

Notes to the Financial Statements

1. Summary of significant accounting policies 41

2. Financial risk management 48

3. Critical accounting estimates and assumptions 49

4. Segment information 50

5. Revenue 52

6. Other Income 53

7. Expenses 53

8. Income tax expense 54

9. Current assets – Cash and cash equivalents 55

10. Current assets – Receivables 56

11. Current assets – Other 56

12. Non-current assets – Receivables 56

13. Non-current assets – Property, plant and equipment 57

14. Non-current assets – Other financial assets 59

15. Current liabilities – Payables 59

16. Provisions 59

17. Contributed equity 59

18. Reserves 60

19. Accumulated losses 61

20. Key management personnel disclosures 61

21. Auditors’ remuneration 68

22. Contingent liabilities and contingent assets 68

23. Commitments for expenditure 69

24. Share-based payments 70

25. Related parties 73

26. Subsidiaries 74

27. Events occurring after the balance sheet date 75

28. Notes to cash flow statements 75

29. Earnings per share 76

Directors’ Declaration 77

Independent Audit Report to the members 78

Additional Information 81

Ventracor Limited

ABN: 46 003 180 372

This financial report covers both Ventracor

Limited as an individual entity (Parent Entity)

and the Consolidated Entity consisting of

Ventracor Limited and its controlled entities.

The Financial Report is presented in the

Australian currency.

Ventracor Limited is a public company

limited by shares, incorporated and

domiciled in Australia.

The registered office is:

C/o Clayton Utz

71 Eagle Street

Brisbane QLD 4000

Australia

The principal place of business is:

126 Greville Street

Chatswood NSW 2067

Australia

A description of the nature of the

consolidated entity’s operations and its

principal activities is included in the

Directors’ Report.

The financial report was authorised for issue

by the Directors on 15 August 2007. The

Company has the power to amend and

reissue the Financial Report.

Through the use of the internet, the

Company has ensured that its corporate

reporting is timely, complete and available

globally at minimum cost to the Company. All

Australian Stock Exchange announcements,

press releases, financial reports, corporate

governance policies, Board charters and

other information are available on its website

www.ventracor.com

For queries in relation to the Company’s

reporting please call +61 2 9406 3100 or

email [email protected]

Financial Report30 June 2007

Ventracor Limited and its controlled entities

Ventracor AR Fins 07_15.qxd 17/9/07 9:42 AM Page 1

2 Ventracor Limited Financial Report 2007

Directors’ Report

Your Directors present their report on the consolidated entity consisting of Ventracor Limited and the entities itcontrolled at the end of, or during, the year ended 30 June 2007. Ventracor Limited and its controlled entitiestogether are referred hereafter in the Directors’ Report as ‘Ventracor’, the ‘Company’, and the ‘Consolidated Entity’.

1. DirectorsThe Directors of Ventracor Limited in office during the financial year and up to the date of this report are asfollows:

John Massey (Chairman)Peter Crosby (Managing Director, appointed 1 August 2006)William Curran (Appointed 2 May 2007) Jeffrey Goodman (Appointed 15 August 2007)Ross HarricksElizabeth NosworthyColin Sutton (Retired on 31 July 2006)John WardKatherine Woodthorpe (Retired on 30 June 2007).

2. Principal activitiesVentracor is a global medical device company that has developed an implantable blood pump, the VentrAssistleft ventricular assist device (LVAD), designed as therapy for patients in end stage heart failure.

The principal activities of the Company are the research, development, manufacture, clinical trials andcommercialisation of the VentrAssist LVAD and related technologies.

3. DividendsNo dividends were paid or declared during the financial year and no dividend is recommended for this financial year.

4. Review of operations and resultsRevenue

Ventracor reported significant growth in product revenue in each of the markets in which it operates – with 64 implants in total in Australasia, Europe and the USA. The sales of $4,913,000 (2006: $1,096,000) are a direct result of European approval in December 2006, increased clinical trial activity in the US, and the ability to charge for devices in Australia upon completion of the CE Mark clinical trial.

As at the date of this report there have been 137 implants of the VentrAssist in 19 centres worldwide, equivalentto more than 65 years of cumulative experience, with the longest ongoing implant duration of over 1000 days.

Operating Loss

The net loss for the year was $36,471,000 (2006: $30,073,000). This result reflects the planned increase in the Company’s global activities compared with the previous year. As expected, Company expenditure has increased in regulatory, clinical affairs and marketing as the Company transitions from a research anddevelopment focus to achieving regulatory approval and commercialisation of the VentrAssist.

The net loss also includes a non-cash employee share plan expense of $3,350,000 associated with thegranting of Performance Shares and Performance Rights under the Ventracor Long-Term Incentive Plan and the expensing of inventory on hand at 30 June in accordance with the Company’s accounting policy.

Depreciation expense increased during the year to $3,069,000 from $2,321,000 in the prior year.

The Company’s Headquarters, Research and Development and Manufacturing facilities are in Chatswood, a suburb of Sydney, Australia, with approximately 130 employees. The US operations employ approximately 10 people, with an office in Foster City, in the San Francisco Bay Area, California. In Europe, the Companyemploys approximately ten people, and has a logistics centre in Heesch, in the Netherlands.



4. Review of operations and results (cont’d)This organisation and facilities have been implemented in FY2007 to support the Company’s growing globalexpansion expected to continue in FY2008.

Australasia

Commercial Ready GrantOn 23 January 2007, the Australian Federal Government through AusIndustry announced that Ventracor hadbeen awarded a $2,800,000 Commercial Ready Grant. The grant will assist Ventracor to adopt new high value-add manufacturing technologies in Australia for products to be sold domestically and for export.

Research and Development Research and Development expense for the year was $7,880,000 (2006: $5,887,000). In line with the Company’saccounting policy, all research and development expenditure is expensed in the year in which it is incurred.

The Company continued its commitment to research and development on a pipeline of advanced technologyto maintain the Company’s long-term competitive position. The next major release will have improved patientcomponents (batteries & external controller). A key long-term goal of the R&D group is to produce a fullyimplantable rechargeable power source, which will eliminate the wire through the skin, with the target ofreduced infection risk and improved patient acceptance.

Manufacturing and QualityDuring the year, the Company completed its program to bring all key manufacturing in house, and themanufacturing capacity is sufficient to meet the Company’s short-term needs. The Quality Management System passed an audit by British Standards Institute to the international standard EN13485, a pre-requisite for CE Mark approval, and subsequently an audit by the Australian Therapeutic Goods Administration (TGA).

Regulatory Approval and SalesOn 1 August 2007, the Company announced that it had achieved regulatory approval from the TGA to sell in Australia. The next step will be to seek reimbursement, as at present no LVAD is reimbursed in the Australian market.

During the CE Mark Trial, all devices were required to be supplied free of charge. After completion of this trial, theAustralian Special Access Scheme (SAS) allowed devices to be sold, and revenue in Australia grew significantly.

US

Ventracor’s overall objective is to gain approval from the US Food and Drug Administration (FDA) to market theVentrAssist in the US as soon as possible. Reaching this objective requires the conduct of two major clinicaltrials, under the regulations of the FDA. The procedure for implantation of an LVAD is fully reimbursed duringUS clinical trials, and the VentrAssist is sold during US clinical trials and contributes to revenue.

Bridge to Transplant Pivotal TrialThe Bridge to Transplant Trial (BTT) is to investigate the safety and efficacy of the VentrAssist in patients whoare on the heart transplant list, but whose own heart may deteriorate before a donor heart becomes available.

The first stage was a Feasibility Trial that was started in July 2005, and the target enrolment was achieved on 5 January 2007. The initial enrolment rate was slowed by the FDA requirement that patients in the feasibilitytrial remain in hospital or an intermediate care facility. The catalyst to accelerate and complete the targetenrolment was the FDA’s approval in November 2006 of the Company’s request to allow patients to bedischarged home.

The FDA granted unconditional approval for the BTT Trial on 5 April 2007, and the first patient enrolment in the BTT Trial was announced on 6 June 2007.

The BTT Trial is a single arm non-randomised trial of approximately 140 patients, where the end point is strokefree survival to heart transplantation, or 180 days, compared to an objective performance criterion of 75% success.

Destination Therapy TrialThe use of an LVAD in end stage heart failure patients who are not eligible for heart transplantation is calledDestination Therapy (DT). The FDA granted conditional approval for a novel design of a DT trial, which was announced on 22 December 2006. A patent has been applied for which covers key aspects of this

Directors’ Report (cont’d)




4. Review of operations and results (cont’d)clinical trial design. This trial design has two modules. Module A (required for FDA approval) is a prospectiverandomised controlled trial of up to 180 patients with 2:1 randomisation of the VentrAssist to the control arm.Patients in the control arm receive ‘standard of care’ for heart failure therapy (usually medical managementincluding drugs), and may be implanted with an LVAD approved by the FDA for DT at any time greater than six weeks after randomisation. The end point is stroke free survival, and the hypothesis being tested is that the patients in the VentrAssist arm will have a statistically significant reduced risk of death compared to patientsin the control arm. Module B (Observational) is a prospective randomised controlled trial of approximately 45 patients which, is randomised 2:1 to the VentrAssist or an LVAD approved by the FDA for DT (the ThoratecHeartmate I XVE).

Early start to the DT Trial recruitment has been inhibited by the challenge of obtaining full reimbursement for the LVAD procedure for Medicare patients in the absence of unconditional FDA approval, but the first enrolmentis expected soon.

It is intended that US clinical trial centres will participate in both BTT and DT trials. There are now approval or submissions to the Institutional Review Board (IRB) at over 25 leading US clinical centres, and training oftheir clinical teams is well underway.

Europe

The clinical end point for the first 30 patients in the CE Mark Bridge Trial was announced on 24 July 2006, and led to a submission for CE Mark approval, which was granted in December 2006. Detailed clinical resultsof all 33 patients enrolled were presented at the International Society of Heart and Lung Transplantation in San Francisco in April 2007, and showed 82% of patients transplanted or still alive with the VentrAssist sixmonths after implant. This result exceeded the target end point of 75% success, and provides optimism thatthe US BTT clinical trial will meet the target end point.

CE Mark Trial

CE Mark approval allows Ventracor to market and sell the VentrAssist throughout Europe. The importance ofCE Mark approval is highlighted by the observation that 17 of the 23 devices implanted in Europe during theyear occurred in the second half, after CE Mark approval. The number of centres implanting the VentrAssistgrew from two centres at the start of the year, to 12 centres trained (with nine centres having performed an implant) at the date of this report, and continues to grow.

BRACE Study

The BRACE Study launched in Stockholm in September 2006 continues to gain momentum, with additionalcentres enrolling during the year. The BRACE study is an important element of the Company’s marketingstrategy that is based on excellent clinical results of multiple trials published in major international journals world wide by key opinion leaders to help drive market acceptance. The purpose of the BRACE study is to contribute data for presentations and publications, provide a mechanism to test ideas on patient selectionand management, and train surgeons, physicians and sites.

Balance Sheets

As at 30 June 2007, the Company had cash reserves of $48,632,000 (2006: $51,868,000). Ventracorsuccessfully completed an institutional placement of 10% of issued capital and a Share Purchase Plan, raising$28,458,000 in gross proceeds during year. Share issue transaction costs amounted to $922,000. This capitalraising was undertaken to further finance the global clinical, regulatory, development and commercialisationobjectives of the VentrAssist left ventricular assist device (LVAD), including the investigation and development of advanced products that will add to the Company’s technology portfolio.

Total capital expenditure for year was $2,376,000 down from $3,681,000 in the previous year.

Cash Flow Statements

Net cash outflow from operating activities for the year was $28,570,000 (2006 $26,396,000).



5. Earnings per share2007 2006

Cents Cents

Basic earnings per share (loss) (13.8) (14.3)Diluted earnings per share (loss) (13.8) (14.3)

6. Significant changes in the state of affairsApart from the matters identified in the review of operations and results, there were no further significantchanges in the state of affairs of the Company during the financial year.

7. Matters subsequent to the end of the financial yearOn 1 August 2007, the Company received approval from the Therapeutic Goods Administration (TGA) tomarket and sell the VentrAssist device in Australia. TGA approval means the VentrAssist is included on theAustralian Register of Therapeutic Goods (ARTG) and Australian hospitals may purchase the device.

On 15 August 2007, Mr Jeffrey Goodman was appointed as a non-executive Director of Ventracor Ltd. Details of Mr Goodman’s qualifications and experience are detailed in Section 10 of the Directors’ Report.

Apart from the matters outlined above, since 30 June 2007 no other matter or circumstance has arisen that has significantly affected or may affect:

• the Consolidated Entity’s operations in future financial years, or

• the results of the operations in future financial years, or

• the Consolidated Entity’s state of affairs in future financial years.

8. Likely developments and expected results of operationsInformation on likely developments in Ventracor’s operations and expected results of operations have not been included in this report because the Directors believe it would be likely to result in unreasonable prejudiceto the Company.

9. Environmental regulationVentracor’s operations are not subject to any significant environmental regulation under either Commonwealthor State legislation. The Board, however, considers that appropriate systems are in place to manage the Company’sobligations and is not aware of any breach of environmental requirements as they relate to the Company.





10. Information on Directors during or since the end of the financial yearParticulars of Directors’

interests in shares and options

of Ventracor Limited

Director Experience Shares LTIs

Independent non-executive Chairman since July 1998, Chairman of the Remuneration and Nominations Committees.

John became a full-time Company Director in December 1997, andbrings to the Board his extensive and broadly based commercialexperience, leadership and strategic development skills developedover many years as a Chairman, Director and CEO spanning manyindustries. He is currently Chairman of Cardno Ltd and SymbiosisGroup Ltd.

Other Directorships over the past three years are Chairman of AV Syntec and a Director of the Australian Institute of CompanyDirectors (AICD), Dairy Australia, KR Castlemaine Foods Group and South East Queensland Water Corporation Ltd. His previousappointments include being a Director of the Kerwee Pastoral Groupand the Chief Executive Officer of Grainco, QDL Pharmaceuticals andThomas Cook. In 2006, John was made a Life Fellow of the AICD for‘eminence in the field of directorship and for distinguished service tothe Institute’ of which he was previously National Director, NationalTreasurer and Queensland President.

Appointed non-executive Director from 2 May 2007, William is amember of the Audit and Nominations Committee.

William is a New York-based company director with extensive experiencein the medical device industry, including a successful career withPhilips from 1976 until 2004, involving a mix of functional and seniorgeneral management experience. His ten years at Philips MedicalSystems included positions of Chief Operating Officer and ChiefFinancial Officer, and while at Philips Electronics North America, hewas President and Chief Executive Officer and Chief Financial Officer.

William is presently Chairman of Resonant Medical, a companyspecialising in three dimensional ultrasound image guided adaptiveradiotherapy products, and was formerly Director of the listedcompanies: FEI Company; MedQuist, and Navigation Technologies.

Appointed non-executive Director from 15 August 2007, Jeffrey is amember of the Remuneration and Nominations Committee.

Jeffrey is a US-based Australian executive with extensive experiencein the global medical device industry, who is currently Executive VicePresident and President International of Boston Scientific Corporation,which he joined in 1999 after 25 years with Baxter International Inc,starting in Australia. With Baxter, Jeffrey started as an Area Managerin Sydney then advanced to become the Director of Australia andNew Zealand before being transferred to the United States asPresident, Biotech North America. He is also currently a Director of Lionbridge Technologies Inc, which operates in 44 locations in 25 countries with over 4,000 staff.

837,917 –ChairmanJohn MasseyBCom CPA FAICD

FAIM (Life)

Age 61

_ _

_ _

William CurranBSci MBA

Age 58

Jeffrey GoodmanBS Accting

Age 59

Non-executive Directors




10. Information on Directors during or since the end of the financial year (cont’d)Particulars of Directors’





Independent non-executive Director since November 2004 andmember of the Remuneration and Nominations Committees.

Ross has extensive international medical device experience. He is founder and Executive Director of AtCor Medical Pty Ltd, anAustralian Cardiovascular medical device company active in the USA and Europe.

Ross was a director of Resmed for five years until 1995. Prior to this,he was Group Marketing Executive with the Nucleus Groupresponsible for international markets and based in the USA from1985. There were no other directorships held over the past threeyears other than those indicated above.

Independent non-executive Director since July 2002 and member of the Audit Risk and Compliance and Nominations Committees.

Elizabeth is a lawyer and a former partner of national legal firm,Freehills. She had more than 20 years’ experience as a commerciallawyer before she left the law in 1995 to follow a career as a full-timenon-executive Director.

Elizabeth has held a number of directorships in both the private andthe public sectors. She is currently Chairman of Queensland WaterCommission and Commander Communications Ltd and DeputyChairman of Babcock and Brown Ltd and a Director of GPT Group.She is an Adjunct Professor of Law at the University of Queenslandand a member of the Business Roundtable for SustainableDevelopment.

Other directorships during the past three years are Chairman ofStanwell Corporation Ltd and Prime Infrastructure Management Ltdand Council Member of the National Gallery of Australia.

Her previous appointments also include directorships of TelstraCorporation Ltd, Australian National Industries Ltd, Port of BrisbaneCorporation, Australia TradeCoast, Brisbane Airport CorporationLimited, Queensland Treasury Corporation and David Jones Limited.She is an ex-Chairman of the Qld Biotechnology Advisory Counciland Deputy-Chairman of the Clean Coal Technology Board and wasa member of the National Competition Council for five years.

Elizabeth is the winner of the AICD (Qld Division) 2001 Gold MedalAward for Outstanding Director.

_ _

134,584 –

Ross HarricksBSc BMech Eng MBA

(INSEAD)

Age 63

Elizabeth NosworthyAO BA LLB LLM

LLD (Hon) FAICD

Age 61




Independent non-executive Director since August 2001 andChairman of the Audit Risk and Compliance Committee and memberof the Nominations Committee.

John is a professional Company Director and managementconsultant. He was formerly Managing Director and Chief Executiveof Qantas Airways Limited. This culminated a 25-year career with the airline in a variety of corporate and line management rolescovering Australia, Asia, Europe and North America. Subsequent tothat, he spent seven years at News Corporation where his focus wasprimarily on the development and commercialisation of convergenceopportunities in media, technology and communications.

John is currently Chairman of Wolseley Private Equity, a Director ofAdelaide Airport Limited and Brisbane Airport Holdings Limited. He isan Honorary Life Governor of the Research Foundation of InformationTechnology. His other positions during the past three years were asChairman of Transonic Travel Limited and Director of Tourism NSW.

Independent non-executive Director since June 1998 and member of the Remuneration and Nominations Committees to her retirementfrom the Board on 30 June 2007.

Katherine is the Chief Executive Officer of the Australian PrivateEquity and Venture Capital Association (AVCAL). She is a Director of Insearch Limited, and a member of the Council of the University of Technology, Sydney. She is the Chairman of the CooperativeResearch Centre for Antarctic Climate and Ecosystems.

Her previous roles including directorships over the past three years wereDirector of Environmental Biotechnology CRC Ltd, Earthcheck PtyLtd, Australian Cancer Technologies Limited and The Warren Centre.

57,486 –John WardBSc FAICD FAIM FAMI

FCILT

Age 61

275,000* –KatherineWoodthorpeBSc PhD FAICD

Age 51





Non-executive Directors (cont’d)

* As at the date of their respective retirements.








Executive Directors – Managing Director and Chief Executive Officer

Appointed Chief Executive Officer from 1 July 2006, and ManagingDirector from 1 August 2006, and a member of the NominationsCommittee. Peter was Chief Operating Officer of Ventracor Limiteduntil his appointment as CEO and has been President of VentracorInc since January 2005.

Peter has more than 25 years’ experience in bringing medical devicesto the global market. He is a dual citizen of Australia and the USA,and has served on several public and private company Boards. Priorto joining Ventracor, he served as CEO of four medical device companiesin three countries. Until mid-2004, he was President and CEO ofIschemia Technologies, a US-based company, which developed anew diagnostic test for cardiac ischemia.

From early 1996, he was the president and CEO of Seattle-basedNeoVision Corporation, a development stage medical device companyworking in the diagnosis of breast cancer, which was sold in 1997 toUS Surgical Corp. Until 1995, he held leadership positions at TelectronicsPacing Systems, an Australian company that was a pioneer in thedevelopment and commercialisation of cardiac pacemakers andimplantable defibrillators, which was sold to St Jude Medical in 1995.Prior to that he was CEO of Ausonics Limited in Sydney, and was oneof the founding team of Cochlear from 1981. He is an inventor on 18 Issued US patents in the field of medical devices and diagnosticsand has authored numerous papers on biomedical engineeringtopics. He holds a Bachelor of Science in Electrical Engineering anda Master of Engineering Science from the University of Melbourne.

Appointed Managing Director and Chief Executive Officer fromNovember 2003, retiring as CEO on 1 July 2006, and as ManagingDirector on 31 July 2006. Member of the Nominations Committee.

Colin Sutton was Chief Executive Officer, Sirtex Medical Ltd from 2000to 2003 where he was responsible for the commercialisation of a newliver cancer therapy. This included undertaking an initial public offering,clinical trials and establishing markets in the USA, Europe and Asia.

Prior to this he was Director Asia Pacific for Air-Shields Inc, aPhiladelphia based manufacturer of neonatal equipment, where hewas responsible for sales in the region. Before joining Air-Shields hehad an 18-year career with Telectronics Limited, a manufacturer ofimplantable pacemakers, defibrillators and other medical devices.Commencing in 1975 as International Marketing Executive, he laterheld various Chief Executive positions in North America, Asia Pacific and Europe covering marketing, research & development,manufacturing and clinical affairs. Colin was appointed to the boardof various companies within the Telectronics Group and was amember of the Executive Committee.

He is a member of the National Medical Health & Research Council,the IR&D Board’s Biological Committee and a non-executive Directorof NewSouth Innovations, the UNSW Foundation and the NorthshoreHeart Research Foundation. Over the past three years, he has servedas Chairman of Polartechnics Limited and was on the boards ofGradipore Ltd and Sirtex Medical Ltd.

58,334* –Colin Sutton PhD FAICD

Age 65

1,050,000 3,381,750Peter Crosby BE (Elec) MEngSci FAICD

Age 54

* As at the date of their respective retirements.




11. Company SecretaryThe position of Company Secretary is held jointly by Graeme Fallet CA, BBus (Accounting) and CamillaNewcombe BA, LLB, LLM.

Mr Fallet is a Chartered Accountant who is experienced in governance, financial and treasury compliance and risk management. Prior to joining the Company he was Chief Financial Officer of the ASX listed company,Gasnet Limited.

Ms Newcombe is a corporate solicitor who is experienced in governance, legal compliance and medicaldevices. Prior to joining the Company, she held the position of Legal Counsel with listed medical devicemanufacturer, Cochlear Limited, following several years experience in private practice, primarily with Mallesons Stephen Jaques.

12. Meetings of DirectorsThe numbers of meetings of the Company’s Directors (including meetings of committees of directors) heldduring the year ended 30 June 2007 and the numbers of meetings attended by each Director were:

13. Remuneration ReportThe Remuneration report is set out under the following main headings:

Principles used to determine the nature and amount of remuneration

A. Details of remunerationB. Service AgreementsC. Share-based compensationD. Additional information

The information provided under headings A-D includes remuneration disclosures that are required underAccounting Standard AASB 124 Related Party Disclosures. These disclosures have been transferred from the Financial Report and have been audited. The disclosures in Section E are additional disclosures required by the Corporations Act 2001 and the Corporations Regulations 2001 that have not been audited.

Committee Meetings

Board of Audit Risk

Director Directors and Compliance Nominations Remuneration

A B A B A B A B

John Massey 7 7 4 4 1 1 2 2

Peter Crosby 7 7 * * 1 1 * *

William Curran 2 2 1 1 * * * *

Ross Harricks 7 7 * * 1 1 * *

Elizabeth Nosworthy 7 7 4 4 1 1 * *

Colin Sutton† – – * * * * * *

John Ward 7 7 4 4 1 1 * *

Katherine Woodthorpe 7 7 * * 1 1 2 2

A – Number of meetings held during time the Director held office or was a member of the Committee during the year

B – Number of meetings attended

* – Not a member of the specified Committee during the year

† – Retired 31 July 2006




13. Remuneration Report (cont’d)A. Principles used to determine the nature and amount of remuneration (audited)

The Board has adopted a formal Remuneration Committee Charter with the objective of the Committee beingto assist the Board of Directors to discharge its responsibilities in relation to the compensation of the Company’sDirectors, senior executives and staff. This charter can be found on the www.ventracor.com website underInvestor Centre.

The responsibilities of the Remuneration Committee include;

• Oversee the Company’s Remuneration Policy;

• Ensure an induction process is in place to assist new Directors and senior executives in gaining anunderstanding of the business and the environment in which Ventracor operates;

• Review and recommend to the Board corporate goals and objectives, and key performance indicators(‘KPIs’), for the CEO and Senior Executives;

• Evaluate the CEO against KPIs established by the Board;

• Recommend the CEO’s annual compensation;

• Make recommendations to the Board with respect to incentive compensation plans for senior executives and staff;

• Review and make recommendations to the Board in relation to salary packages needed to attract and retainsenior management;

• Conduct an annual performance evaluation of and recommend a framework for remuneration of Directors.

As the Company transitions from an Australian Research and Development organisation to a commercialisedglobal medical device organisation, the Company must provide a globally competitive remuneration frameworkto reward and retain executives to drive the Company’s future success.

The objective of the Company’s executive reward framework is to ensure reward for performance is competitiveand appropriate for the results delivered. The framework aligns the executive reward with the achievement ofstrategic objectives and the creation of value for shareholders. The Board ensures that executive rewardsatisfies the following key criteria for good reward governance practices:

• competitiveness and reasonableness

• alignment/linkage of performance to executive compensation

• transparency

The Company has structured an executive remuneration framework that is market competitive and complementaryto the reward strategy of the organisation. The Company’s remuneration framework is aligned to shareholders’interests as a core component of its design and serves to attract and retain high calibre executives on theglobal market. The framework provides a mix of fixed remuneration and performance related remuneration.

Non-executive Directors’ Remuneration Policy

The Board’s principal responsibility is the oversight of the management of the Company and providing strategicdirection for and approving the Company’s business strategies. Non-executive Director remuneration is notlinked to the Company’s short-term financial performance and these Directors do not receive short-termincentives as part of their remuneration.

The Remuneration Committee takes into account the level and structure of fees being paid by peer groupcompanies as well as recognising the evolving needs of the Company. In making its recommendation to theBoard, the Remuneration Committee usually seeks independent advice to ensure market relativity. Non-executiveDirectors’ fees are determined within an aggregate Directors’ fee pool limit, which is periodically recommendedfor approval by shareholders. This maximum currently stands at $450,000 as approved at the Company’s AnnualGeneral Meeting in November 2003. The current base remuneration was last reviewed with effect from 1 July 2006.




13. Remuneration report (cont’d)The Chairman’s fees are determined independently of the fees of non-executive Directors, based on comparativeroles in the external market. The Chairman is not present during discussions about his remuneration. Non-executiveDirectors do not receive conditional share entitlements. The Company does not provide retirement allowancesfor non-executive Directors. However, they may salary sacrifice an amount of their fees to superannuation.

Executive Remuneration Policy

The Company’s executive remuneration policy is designed to be competitive to attract and retain high qualityexecutives. The aim of the policy is to provide executives including Executive Directors with appropriatebalance of fixed and performance related remuneration.

Remuneration is set at a level competitive with global market rates. The performance related remunerationensures that a significant proportion of executive remuneration is at risk by linking reward to the achievement of personnel and corporate objectives, business performance and regulatory milestones.

The executive pay and reward framework has three components which comprise the executive’s totalremuneration:

• fixed remuneration

• short-term performance incentives (STIs); and

• long-term incentives through participation in the Ventracor Long-Term Incentive plans (LTIs).

Broadly, an executive will have fixed remuneration and a potential short-term incentive from 10% to 50% offixed remuneration depending on an executive’s seniority level. In addition, an executive may participate inspecific one-off Board approved incentive arrangements relating to key corporate objectives.

During the 2007 financial year, executives were also able to participate in the Company’s LTIs. Under thisarrangement, the Board determines the allocation level to each executive based on the executive’s seniority at the discretion of the Board.

The total remuneration levels for Key Management Personnel are detailed in the tables on page 14 of this report.

Fixed Remuneration

Depending on the country in which the executive is employed, an executive’s fixed remuneration is expressedas ‘Total Employment Cost’ (TEC) or as salary plus benefits.

With the TEC approach, an executive’s fixed remuneration comprises benefits the executive has elected to receive in lieu of salary inclusive of any associated costs such as fringe benefits tax and mandatorysuperannuation, with the balance taken in cash salary. Where a salary plus benefits approach is adopted, the salary is specified and the Company provides benefits to an executive consistent with the labour marketpractices in that jurisdiction.

The level of fixed remuneration paid to each executive is based on the executive’s performance, skills andexperience, the requirements of the role and the relevant labour market in terms of particular industry andgeographical location. An executive’s fixed remuneration is reviewed annually to ensure that it remains marketcompetitive and reflects any changes in an executive’s role. There are no guaranteed remuneration increases in any executive contracts.

Executives participate in the Company’s group salary continuance scheme. These contributions are excludedfrom the remuneration disclosures in section B as the premium paid is not specified in respect of the individualparticipants within the plan.



13. Remuneration report (cont’d)Performance based remuneration

Short-term incentives (STI)

Short-term incentives may be awarded to employees based on their annual performance as evaluated underthe Ventracor performance review system. Short-term incentives are paid in cash and are linked to theCompany’s annual key corporate milestones and the employee’s individual objectives.

Typically, the performance objectives and assessment criteria are established at the commencement of thefinancial year and are consistent with the corporate objectives of the business plan approved by the Board. The 2007 performance objectives for the key management personnel consisted of meeting targets for acombination of revenue and number of implants, plus regulatory and product development milestones. Theperformance objectives required to achieve full STI are set as stretch goals at the commencement of thefinancial year.

Details of bonus incentives applicable to the Chief Executive Officer and the other key management personnelare disclosed in section C of this report.

Long-term incentives plans (LTI)

Information on shareholder approved share, rights and option plans is set out in section D. The company hassuspended the issue of options under the Ventracor Option Plan and also of performance shares under theVentracor Executive Share Plan approved at the Company’s 2004 Annual General Meeting and of performancerights under the International Performance Rights Plan approved at the Company’s 2005 Annual General Meeting.

B. Details of remuneration (audited)

Details of the remuneration of each Director of Ventracor Limited and the key management personnel (as definedin AASB 124 Related Part Disclosures) of the Company and the Consolidated Entity are set out in the followingtables. The key management personnel of Ventracor Consolidated Entity include the Directors and the executiveofficers listed in the tables below. This list is also comprised of the five highest paid executives of the parentcompany, Ventracor Limited.


Key management personnel of the Ventracor Consolidated Entity:

2007 Short-term employee benefits Post- Long- Share-employment term base

benefits benefits payments

PerformanceCash Non- Termination Long share and

salary Cash monetary Super- /retirement service performanceand fees bonus benefits annuation benefits leave rights1 Total

Name $ $ $ $ $ $ $ $


John Massey 114,679 – – 10,321 – – – 125,000

Chairman

John Ward 55,000 – – 4,950 – – – 59,950

Katherine Woodthorpe 50,000 – – 4,500 – – – 54,500

Elizabeth Nosworthy 50,000 – – 4,500 – – – 54,500

Ross Harricks 50,000 – – 4,500 – – – 54,500

William Curran3 9,083 – – – – – – 9,083

Sub-total non-executive

Directors 328,762 – – 28,771 – – – 357,533




13. Remuneration report (cont’d)Key management personnel of the Ventracor Consolidated Entity (cont’d):

2007 Short-term employee benefits Post- Long- Share-employment term base

benefits benefits payments

PerformanceCash Non- Termination Long share and

salary Cash monetary Super- /retirement service performanceand fees bonus benefits annuation benefits leave rights1 Total

Name $ $ $ $ $ $ $ $

Executive Directors

Peter Crosby4 615,596 169,650 126,149 35,549 – 2,666 1,533,314 2,482,924

Chief Executive Officer

Colin Sutton12 33,284 – – 5,838 48,310 – – 87,432


(retired on 31 July 2006)

Sub-total Executive

Directors 648,880 169,650 126,149 41,387 48,310 2,666 1,533,314 2,570,356

Other key managementpersonnel13

John Begg 175,328 35,275 7,681 16,997 – 12,523 149,345 397,149Product Marketing Manager

Graeme Fallet5 194,128 45,650 13,427 18,102 – 122 234,081 505,510

Chief Financial Officer

Thomas Gould8 253,418 30,706 1,354 16,340 – – 155,192 457,010

Vice President US

Sales and Marketing

Roman Greifeneder 163,609 24,143 – 15,276 – 1,663 143,292 347,983

Vice President of

Manufacturing

Jeff Lee 159,020 24,143 – 14,740 – 1,346 141,399 340,648

Vice President, Quality

Assurance

Charles Love9 293,133 16,005 35,694 18,915 71,578 – 111,912 547,237

Vice President, Clinical

and Regulatory Affairs

Michael Sloggett 229,357 32,625 – 23,090 – 446 153,053 438,571

Vice President, Research

and Development

John Woodard 321,102 36,540 – 28,633 – 39,059 267,258 692,592

Chief Scientific Officer

Vanio Calgaro10 43,308 – 5,758 – – – 49,066

Financial Controller

Guy Sohie6 65,251 – – – – – – 65,251

Chief Operating Officer

Pascal Barrier7 356,015 – – – 118,349 – 86,132 560,496

Vice President, European

Operations

Sub-total Other Key

Management Personnel 2,902,549 414,737 184,305 199,238 238,237 57,825 2,974,978 6,971,869

Total 3,231,311 414,737 184,305 228,009 238,237 57,825 2,974,978 7,329,402





2006 Short-term benefits Post- Share-based paymentsemployment

benefits

PerformanceCash Non- shares /

salary Cash monetary Super- performanceand fees bonus benefits annuation rights1 Options2 Total

Name $ $ $ $ $ $ $


John Massey 40,700 – – 62,850 – 3,774 107,324

Chairman

John Ward 55,000 – – 4,950 – 2,265 62,215

Katherine Woodthorpe 50,000 – – 4,500 – 2,265 56,765

Elizabeth Nosworthy 50,000 – – 4,500 – – 54,500

Ross Harricks 50,000 – – 4,500 – – 54,500

Executive Director

Colin Sutton 399,412 120,000 – 100,588 63,083 – 683,083


Key Management

Personnel

John Begg 162,602 10,237 – 14,974 44,075 3,774 235,662

Product Marketing

Manager

Vanio Calgaro 157,046 22,847 2,899 17,035 40,524 – 240,351

Financial Controller

Peter Crosby 383,217 172,283 – 49,995 260,209 – 865,704


Thomas Gould 117,242 10,864 – 11,530 58,269 – 197,905

Director of Field

Operations

Roman Greifeneder 133,628 12,509 – 13,474 34,158 – 193,769

Vice President of

Manufacturing

Jeff Lee 87,300 9,611 3,735 27,812 31,056 – 159,514

Quality Assurance

Manager

Charles Love 111,867 22,295 – 12,075 57,629 – 203,866

Vice President, Clinical

and Regulatory Affairs

Michael Sloggett 114,678 26,938 – 12,385 – – 154,001

Vice President of

Research and

Development

John Woodard 241,421 24,226 – 85,014 86,803 3,774 441,238

Chief Scientific Officer

Total Key Management

Personnel 1,908,413 431,810 6,634 344,882 675,806 7,548 3,375,093

Totals 2,154,113 431,810 6,634 426,182 675,806 15,852 3,710,397





1 The Performance Rights and Performance Shares have been valued with reference to the market price of an ordinary share in Ventracor Ltd at the grant date.The amounts disclosed in remuneration have beendetermined by allocating the values of the PerformanceRights and Performance Shares over the period fromgrant date to the vesting date for each tranche awardedin accordance with applicable accounting standards.

2 Details in relation to the assessed fair value of optionsare provided in section D of this report.

3 William Curran was appointed non-executive Director on 2 May 2007 and he is located in the US.

4 Peter Crosby was appointed Chief Executive Officer of Ventracor Limited on 1 July 2006. Before thisappointment, he was employed by a wholly ownedsubsidiary company, Ventracor Inc as Chief OperatingOfficer and was located in the US.

5 Graeme Fallet was appointed Chief Financial Officer and Company Secretary on 25 September 2006.

6 Guy Sohie was appointed Chief Operating Officer on 10 May 2007 and is engaged by Ventracor Inc, a whollyowned US subsidiary of Ventracor Limited.

7 Pascal Barrier ceased providing services under hisconsulting agreement on 22 June 2007.

8 Tom Gould is employed by Ventracor Inc, a whollyowned subsidiary company of Ventracor Limited which is located in the US.

9 Charles Love was employed by Ventracor Inc, a wholly owned US subsidiary company of Ventracor Limited. Mr Love ceased employment with the Company on 29 June 2007.

10 Vanio Calgaro ceased being a member of the KeyManagement Personnel on 25 September 2006 andresigned as Financial Controller on 22 December 2006.

11 Reimbursed relocation costs and short-term travel andaccommodation costs, in relocating Mr Crosby and Mr Fallet to Sydney are not included as benefits.

12 Colin Sutton upon his retirement continued with theCompany as a consultant for five months to ensure asmooth CEO transition.

13 Other than Charles Love, Tom Gould and Guy Sohie, all other Key Management Personnel Remunerationdisclosures should be read as being included in the Parent Company disclosures. The remuneration tablesabove also include the five highest remunerated executives in the Parent Company.

Fixed 2007 Fixed 2006 At risk ‘STI’ At risk ‘STI’ At risk ‘LTI’ At risk ‘LTI’

Name 2007 2006 2007 2006

Executive Director

Peter Crosby 31% 50% 7% 20% 62% 30%

Colin Sutton 100% 73% – 18% – 9%

Key Management

personnel

Pascal Barrier 85% – – – 15% –

John Begg 54% 75% 9% 4% 37% 21%

Vanio Calgaro 100% 74% – 10% – 16%

Graeme Fallet 45% – 9% – 46% –

Thomas Gould 59% 65% 7% 5% 34% 30%

Roman Greifeneder 52% 76% 7% 6% 41% 18%

Jeff Lee 51% 75% 7% 6% 42% 19%

Charles Love 77% 61% 3% 11% 20% 28%

Michael Sloggett 58% 83% 7% 17% 35% –

Guy Sohie 100% – – – – –

John Woodard 56% 74% 5% 5% 39% 21%

Remuneration Components as Proportion of Total Remuneration

The proportions of remuneration that are linked to performance and those that are fixed are as follows:




13. Remuneration report (cont’d)C. Director and Executive Service Agreements (audited)


Non-executive Directors are subject to ordinary election and rotation requirements as stipulated in the ASXListing Rules and the Company’s Constitution. Accordingly, there are no specific contracts of employment with non-executive Directors.

Executive Key Management Personnel

All Executive Key Management Personnel are employed under service agreements. Each agreement outlinesthe key terms of employment including the executive’s fixed remuneration. The potential short-term incentivemay be stipulated in the contract or be governed by the Company’s remuneration policy.

All key management personnel have also entered into an agreement addressing issues of confidentiality andrestraint of trade. Certain officers of the Company have also entered into a deed of indemnity in which theCompany agrees to insure the officer against certain risks and to indemnify the officer in respect of certainliabilities incurred while acting as an officer of the Company.

The major provisions of the agreements with key management personnel relating to remuneration earnedduring the reporting period are set out below.

Peter Crosby, Chief Executive Officer

• Term of agreement – two years commencing on 1 July 2006, and extended by mutual agreement.

• Total TEC for the year ended 30 June 2007 of $650,000.

• Health insurance, disability plan benefits, preparation of tax returns, relocation expenses are provided in addition to the base salary.

• Short-term incentive of up to 50% of total TEC based on the attainment of agreed corporate, departmental and individual milestones.

• Payment of a termination benefit other than for gross misconduct, equal to 12 months’ TEC, plus a pro-rata amount of any bonus payable under the STI.

• Performance Rights as approved by shareholders at the 2006 Annual General Meeting.

Colin Sutton, Chief Executive Officer

• No fixed term of agreement – Retired as Chief Executive on 1 July 2006.

• Total TEC for the year ended 30 June 2006 of $500,000.

• Short-term incentive, based on annual performance criteria set by the Remuneration Committee, of up to a maximum of $150,000 per annum.

• Payment of a termination benefit other than for gross misconduct, equal to six months’ TEC, plus a pro-rata amount of any bonus payable under the Bonus incentive scheme and subject to Board approval, the value of any incentive share scheme.

• Participation in the Company’s LTIs.

John Begg, Product Marketing Manager

• No fixed term of agreement.

• Total TEC for the year ended 30 June 2007 of $180,000 to be reviewed annually.

• Payment of a termination benefit other than for gross misconduct equal to six months’ TEC.






13. Remuneration report (cont’d)Graeme Fallet, Chief Financial Officer and Company Secretary

• No fixed term of agreement – Commencing 25 September 2006.


• Short-term incentive scheme of up to 40% of total TEC based on the attainment of agreed corporate,departmental and individual milestones.

• Payment of a termination benefit other than for gross misconduct, equal to three months TEC in the first 12 months of service and six months’ TEC thereafter.


Thomas Gould, Vice President US Sales and Marketing


• Total salary for the year ended 30 June 2007 of US$200,000 to be reviewed annually.

• Health insurance, disability plan benefits and 401k plan benefits are provided in addition to the base salary.

• Payment of a termination benefit other than for gross misconduct, equal to three months’ salary.

• Short-term incentive of up to 25% of base salary based on the attainment of agreed corporate, departmental and individual milestones.


Roman Greifeneder, Vice President of Manufacturing



• Payment of termination benefit other than for gross misconduct, equal to six months’ TEC.


• Participation the Company’s LTIs.

Jeff Lee, Vice President of Quality Assurance



• Payment of termination benefit other than for gross misconduct equal to six months’ TEC.

• Bonus incentive scheme of up to 25% of total TEC based on the attainment of agreed corporate,departmental and individual milestones.


Charles Love, Vice President Clinical and Regulatory (until June 2007)

• No fixed term of Agreement.

• Total salary for the year ended 30 June 2007 of US$250,000 to be reviewed annually.

• Health insurance, disability plan benefits, 401k plan benefits and living away from home expenses are provided in addition to the base salary.

• Payment of a termination benefit other than for gross misconduct, equal to six months’ salary.

• Short-term incentive of up to 25% of base salary based on the attainment of agreed corporate, departmental and individual milestones.





13. Remuneration report (cont’d)Michael Sloggett, Vice President of Research and Development



• Payment of termination benefit other than for gross misconduct, equal to six months’ TEC.


• Participation in Company’s LTIs.

John Woodard, Chief Scientific Officer



• Payment of a termination benefit other than for gross misconduct, equal to nine months’ TEC.

• Short-term scheme of up to 20% of total TEC based on the attainment of agreed corporate, departmental and individual milestones.


Pascal Barrier, Vice President, European Operations (until June 2007)


• Remuneration under Consulting Agreement for the year ended 30 June 2007 of EUR4,000 per month, for five days per month, with any additional days worked payable at EUR1,000 per day.

• Payment on termination of consulting agreement equal to one month’s base remuneration.


Guy Sohie, Chief Operating Officer

• No fixed term of agreement – Commencing on 10 May 2007.

• Remuneration under Consulting Agreement for the year ended 30 June 2007 of US$30,000 per month.

• Payment of termination benefit on termination of consulting agreement equal to one month’s remuneration.




13. Remuneration report (cont’d)D. Share-based compensation (audited)

Offer to Peter Crosby under contract of employment

Upon appointment as Chief Executive Officer of Ventracor on 1 July 2006 Peter Crosby was awarded threemillion Performance Rights and one million Outperformance Rights as part of his overall remuneration package.The grants of Performance Rights and Outperformance Rights were subsequently approved at the 2006Annual General Meeting on 24 October 2006.

Vesting Schedule and Performance Hurdles

The performance hurdles are based on the milestones listed in the Rights Prospectus issued on 13 March2006 and vest according to the following schedule. The Performance Rights will vest in seven different tranchessubject to the achievement of certain performance milestones. The Outperformance Rights will vest 12 monthsafter all tranches have vested in full.

The vesting conditions for the Performance Rights and the Outperformance Rights are as follows:

• Rights in a tranche related to a milestone will vest when the milestone is achieved.

• 100% of a Relevant Tranche will vest if the milestone is achieved at or before the target date.

• 50% of the Relevant Tranche will lapse if a milestone is not achieved by the target date; the remaining 50% otherwise vests if the milestone is achieved within six months of the target date.

• All rights in a relevant Tranche will lapse if the milestone is not achieved within six months of the target date.

• Outperformance Rights will be eligible for vesting only if the Board is satisfied that:

– all milestones have been achieved;

– no tranches have lapsed in full, and

– Tranches 5 and 7 are achieved before their respective target dates.

• Outperformance Rights will vest one year after target date for Tranche 7 has been achieved.

• The exercise of Outperformance Rights will not be subject to further performance hurdles. However, if theCEO resigns prior to the vesting date, the Outperformance Rights will lapse.

Tranche Vested Target Date Performance Hurdle

Performance

Rights

1 5% 31 December 2006 FDA approval of US BTT Pivotal Trial protocol

2 10% 31 March 2007 CE Mark approval

3 5% 31 March 2007 FDA approval of DT Protocol and agreement to start enrolling once

feasibility trial results accepted

4 15% 31 March 2007 FDA acceptance of feasibility trial results and approval to proceed

to US BTT Pivotal Trial

5 20% 30 June 2008 50% of patients in DT Trial recruited

6 20% 30 September 2008 Recruitment complete in US BTT Pivotal Trial

7 25% 30 September 2009 Pre-market approval submission for US BTT Pivotal Trial

Out-

performance

Rights

1 100% All Performance Rights tranches received in full. Tranches 5 and 7

achieved ahead of target dates.



13. Remuneration report (cont’d)• The Outperformance Rights will be exercisable on a change in control or death of the CEO.

• The Board retains a discretion to permit some or all of the rights in a Relevant Tranche to vest if a target dateis missed by a period that it determines is minor and, in view of all the circumstances, it believes that a strictapplication of the conditions would operate such that the plan did not adequately reward value created in theCompany.

• On a change in control, performance hurdles will be waived and unvested Performance Rights andOutperformance Rights will vest.

The Company has four components of its share-based Long-Term Incentive (LTI) plan:

• Ventracor Employee Share Plan

• Ventracor Executive Share Plan

• Ventracor International Performance Rights Plan

• Ventracor Option Plan

Employee Share Plan (ESS)

The ESS approved at the 2006 Annual General Meeting is an incentive scheme designed to provide employeeswho do not participate in the Executive LTI plans an opportunity to acquire an ownership interest in Ventracor.

The general terms of the ESS are:

• An employee must have completed one year’s continuous service before being eligible to participate in the ESS.

• An employee will not be eligible to participate in the ESS while he or she is participating in the ExecutiveShare Plan.

• Annual grant of shares to the value of up to 5% of an employee’s annual salary, excluding bonuses, at thediscretion of the Board.

• Subject to a holding lock for a period of one year from grant of the shares.

• The shares are granted at no cost to the employee.

Executive Share Plan (ESP)

The intention of the ESP is to provide an incentive to executives and senior employees to drive continuousimprovement, ensure that the Company attains its regulatory milestones and to provide executives with anopportunity to acquire an ownership interest in the Company.

Under the ESP, eligible employees are granted Performance Shares in the Company, which vest according toachievement of certain performance hurdles. Upon vesting, each Performance Share allows the participant toacquire one ordinary share in the company at no cost.

The ESP was first approved by shareholders on 25 October 2004 with Performance Hurdles broadly in line withthe performance of the S&P ASX 200 index. During the 2007 financial year, the Board aligned the PerformanceHurdles so as the vesting of any performance shares were aligned with the Company’s regulatory milestonesannounced in the Rights Issue Prospectus dated 13 March 2006. The ESP was subsequently approved byshareholders at the Company’s Annual General Meeting on 24 October 2006.

In the event of a reorganisation of capital, a participant’s conditional entitlement to shares will be adjusted inaccordance with the plan rules to ensure that the participant does not receive a benefit that holders of ordinarysecurities do not receive.

Where a participant in the plan ceases to be employed prior to vesting of the shares, the Board may, at itsdiscretion, determine that any offered Performance Shares to which the executive was conditionally entitled, will be allocated notwithstanding that the Performance Hurdles may not have been satisfied or that the vestingdate be brought forward. This discretion will only be exercised in exceptional circumstances and where theexecutive leaves the Company in good standing. In all other circumstances, any conditional entitlement of theparticipant to any non-vested shares will automatically lapse.

Where the Board determines that an executive has acted fraudulently or dishonestly, has committed an act ofharassment or discrimination, is in serious breach of a duty owed to Ventracor or has brought Ventracor intodisrepute, any shares to which the executive is conditionally entitled are forfeited by the executive.





13. Remuneration report (cont’d)Vesting and Performance Hurdles

ESP as approved at Annual General Meeting on 25 October 2004

Performance is based on Total Shareholder Return (TSR) over the performance period. The Board has set the following performance criteria under the plan:

• 100% vesting if the Company’s performance equals or exceeds the 75th percentile of the constituentcompanies in the S&P ASX 200 over the performance period;

• Pro-rata vesting if the Company’s performance equals or exceeds the 50th percentile of the constituentcompanies in the S&P ASX 200 over the performance period, such that for every 1% movement in theCompany’s relative ranking between the 50th and 75th percentile, 1/25th of the shares available will vest;

• Should the performance hurdles not be met, 50% of the balance of the non-vesting shares are carriedforward and added to the number of shares available for vesting in the following year. The other 50% will vest at the end of the five year vesting period if the Company’s performance over the previous five yearsmeets the same performance hurdle but based on the cumulative performance of the Company over theprevious five years. Any carried forward shares from year five will carry forward for 12 months and be subject to the same performance hurdle.

ESP as approved at Annual General Meeting on 24 October 2006

The performance hurdles are based on the milestones listed in the Rights Prospectus issued on 13 March2006. 75% of the Performance Shares will vest in tranches in accordance with the following vesting scheduleand performance hurdles. The remaining 25% will vest if all of the milestones below have been achieved, alltranches have vested in full, and tranches five and seven are achieved before their respective target dates.

• The target date for achievement of the milestone is the last day of the nominated quarter in the nominatedcalendar year.

• 100% of a relevant tranche will vest if the milestone is achieved at or before the target date.

• 50% of a relevant tranche will lapse if a milestone is not achieved by the target date.

• The remaining 50% vests if the milestone is achieved within six months of the target date. All Rights in atranche will lapse if the milestone is not achieved within six months of the target date.

• The Board retains a discretion to permit some or all of the rights in a relevant tranche to vest if a target date is missed by a period that it determines is minor and, in view of all the circumstances, it believes that a strict application of the conditions would operate such that the plan did not adequately reward value created in the Company.


1 5% 31 December 2006 FDA approval of US BTT Pivotal protocol




4 15% 31 March 2007 FDA acceptance of feasibility trial results and approval to proceed

to US BTT Pivotal Trial



7 25% 30 September 2009 Pre-market approval submission for US BTT Pivotal Trial



13. Remuneration report (cont’d)International Performance Rights Plan (IPRP)

The intention of this plan is to provide an LTI that mirrors the ESP for executives and senior employees outsideAustralia. Under the IPRP, eligible employees are granted Performance Rights to shares in the Company, whichvest according to achievement of certain performance hurdles. Upon vesting, each Performance Right allowsthe participant to acquire one ordinary share in the company at no cost.

The IPRP was first approved by shareholders on 25 October 2005 with performance hurdles broadly in line with the performance of the S&P ASX 200 index. During the 2007 financial year the Board aligned theperformance hurdles so as the vesting of any Performance Rights were aligned with the Company’s regulatorymilestones announced in the Rights Prospectus issued on 13 March 2006. The IPRP was subsequentlyapproved by shareholders at the Company’s Annual General Meeting on 24 October 2006.

In the event of a reorganisation of capital, a participant’s conditional entitlement to shares will be adjusted inaccordance with the plan rules to ensure that the participant does not receive a benefit that holders of ordinarysecurities do not receive.

Where a participant in the plan ceases to be employed prior to vesting of the shares, the Board may, at itsdiscretion, determine that any offered shares to which the executive was conditionally entitled, will be allocatednotwithstanding that the performance hurdles may not have been satisfied or that the vesting date be broughtforward. This discretion will only be exercised in exceptional circumstances and where the executive leaves thecompany in good standing. In all other circumstances, any conditional entitlement of the participant to any non-vested shares will automatically lapse.

Where the Board determines that an executive has acted fraudulently or dishonestly, has committed an act of harassment or discrimination, is in serious breach of duty owed to Ventracor or has brought Ventracor into disrepute any shares to which the executive is conditionally entitled are forfeited by the executive.

Vesting Schedule and Performance Hurdles

IPRP as approved at Annual General Meeting on 25 October 2005

Performance is based on Total Shareholder Return (TSR) over the performance period. The Board has set the following performance criteria under the plan:

• 100% vesting if the Company’s performance equals or exceeds the 75th percentile of the constituentcompanies in the S&P ASX 200 over the performance period; and

• Pro-rata vesting if the Company’s performance equals or exceeds the 50th percentile of the constituentcompanies in the S&P ASX 200 over the performance period, such that for every 1% movement in theCompany’s relative ranking between the 50th and 75th percentile, 1/25th of the shares available will vest.

• Should the performance hurdles not be met, 50% of the balance of the non-vesting shares are carried forwardand added to the number of shares available for vesting in the following year. The other 50% will vest at theend of the five year vesting period if the Company’s performance over the previous five years meets thesame performance hurdle but based on the cumulative performance of the company over the previous fiveyears. Any carried forward shares from year five will carry forward for 12 months and be subject to the sameperformance hurdle.





13. Remuneration report (cont’d)IPRP as approved at Annual General Meeting on 24 October 2006

The performance hurdles are based on the milestones listed in the Rights Prospectus issued on 13 March2006. 75% of the Performance Shares will vest in tranches in accordance with the following vesting scheduleand performance hurdles. The remaining 25% will vest if all of the milestones below have been achieved, alltranches have vested in full and tranches five and seven are achieved before their respective target dates.

• The target date for achievement of the milestone is the last day of the nominated quarter in the nominatedcalendar year.

• 100% of a relevant tranche will vest if the milestone is achieved at or before the target date.

• 50% of a relevant tranche will lapse if a milestone is not achieved by the target date.

• The remaining 50% otherwise vests if the milestone is achieved within six months of the target date. All Rights in a tranche will lapse if the milestone is not achieved within six months of the target date.

• The Board retains a discretion to permit some or all of the rights in a relevant tranche to vest if a target date is missed by a period that it determines is minor and, in view of all the circumstances, it believes that a strict application of the conditions would operate such that the plan did not adequately reward value created in the Company.

Ventracor Option Plan

The issue of options under the Ventracor Option Plan has been suspended, and no options were grantedduring the financial year.

During the financial year one employee exercised 7,500 options at $0.73 per option. During the financial year a total of 2,845,000 lapsed. Details of lapsed options applicable to key management personnel are detailed in Note 20. There are no unissued ordinary shares under option at the date of this Report.

Fair Value of Options granted as remuneration

The assessed fair value at grant date of options granted to directors and key management personnel wasallocated equally over the period from grant date to vesting date, and the amount is included in the remunerationtables included in section B above. Fair values at grant date are independently determined using the Black-Scholes option pricing model which takes into account the exercise price, the term of the option, the vestingand performance criteria, the impact of dilution, the non-tradeable nature of the option, the share price at grantdate and expected price volatility of the underlying share, the expected dividend yield and the risk-free interestrate for the term of the option.


1 5% 31 December 2006 FDA approval of US BTT Pivotal protocol




4 15% 31 March 2007 FDA acceptance of feasibility trial results and approval to proceed to

BTT Pivotal Trial



7 25% 30 September 2009 Pre-market approval submission of US BTT Pivotal Trial



13. Remuneration report (cont’d)Ventracor Limited has adopted the Australian Securities and Investments Commission Practice Note – NewFinancial Reporting and Procedural Requirements, and accordingly has calculated the attributable value ofoptions for the year using the Black-Scholes option pricing model. The following key assumptions as at thedate of issue have been adopted: risk-free rate of interest: 4.75%; volatility of share price: 40%; dividend yield:nil; expected life of options: period from grant date to expiry date.

Summary of LTIs granted, exercised, forfeited and lapsed during the year

The following table sets out the number of LTIs awarded during the financial year to key managementpersonnel of the consolidated entity.

The lapsed LTIs in the above table relate to Directors and executives who were unable to exercise options that were expiring on 30 November 2006 as at or around the expiry date, they were aware of incomplete andconfidential information that may have had an impact on Ventracor’s Clinical and Regulatory Timeline stated in its 2006 Prospectus. The insider trading provisions prohibit Directors and executives from exercising optionsif they are aware of any incomplete and confidential information not otherwise disclosed to the ASX.


LTIs awarded LTIs exercised LTIs lapsed LTIs forfeited

Number Number Number Number

John Massey – – 500,000 –

John Ward – – 300,000 –

Katherine Woodthorpe – – 300,000 –

Peter Crosby 4,000,000 1,050,000 – –

Colin Sutton – – – 400,000

John Begg 340,000 – 500,000 –

Pascal Barrier 340,000 89,250 – 298,050

Vanio Calgaro – – – 99,300

Graeme Fallet 650,000 – – –

Thomas Gould 340,000 89,250 – –

Roman Greifeneder 340,000 – – –

Jeff Lee 340,000 – – –

Charles Love 374,000 98,175 – 379,425

Michael Sloggett 425,000 – – –

John Woodard 595,000 – 375,000 –




13. Remuneration report (cont’d)E. Additional information – unaudited

Relationship between Company performance & executive remuneration

Ventracor has designed its current compensation policies to ensure significant linkage between remunerationrewards and specific operational milestones that in the opinion of the Directors will increase shareholder wealth.

In assessing the link between company performance and compensation policy, one must acknowledge thatbiotechnology companies such as Ventracor, that develop and pursue commercialisation of their productsthrough an exhaustive clinical trial process generally do not earn sustained profits or pay dividends until theproduct receives regulatory approval. Furthermore, the biotechnology sector as a whole is a highly volatilesector, significantly driven by market sentiment and inherent high risk. Therefore, the Board considers that theachievement of key regulatory and clinical milestones are a more meaningful measure of company performancethan performance measures such as Total Shareholder Return (TSR), net earnings and dividends at this stageof the Company’s development.

Accordingly, during this financial year, the Board after shareholder approval at the 2006 Annual General Meetingon 24 October 2006 granted the CEO, executives and senior employees LTIs with performance hurdles consistentwith the regulatory milestones detailed in the Rights Issue Prospectus dated 13 March 2006.

The performance of the Company relative to the milestones is detailed in the following table.

With regard to the past five years, the consolidated entity has been in developmental and clinical phases in terms of its major product, the VentrAssist. Accordingly, the consolidated entity has not been profitable during thisperiod or in a position to pay a dividend to shareholders.

Performance remuneration

The following table details for each 2007 cash bonus and grant of LTIs, the percentage of the available bonusor grant that was paid, or that vested, in the financial year, and the percentage that was forfeited because theperson did not meet the service and performance criteria or is no longer employed by the Company.

No part of the STI bonuses is payable in future years.

Clinical and Regulatory Milestones Target Date Status

FDA approval of US BTT Pivotal Trial protocol 31 December 2006 Achieved

CE Mark approval to market VentrAssist in Europe 31 March 2007 Achieved

FDA approval of DT Trial Protocol and agreement to start enrolling once

feasibility trial results accepted 31 March 2007 Achieved

FDA acceptance of feasibility trial results and approval to proceed to

BTT Pivotal trial 31 March 2007 Achieved

50% of patients in DT trial recruited 30 June 2008 –

Recruitment complete in US BTT Pivotal Trial 30 September 2008 –

Pre-market approval submission of US BTT Pivotal Trial 30 September 2009 –



13. Remuneration report (cont’d)The table also details the LTIs that will vest over the next four years provided that the performance hurdles aremet (refer section D).


Name Cash Bonus Long-term Incentives

Min Value Max Value

For- For- Future of grant of grant

Paid feited Year Equity Vested feited years of yet to vest yet to vest

% % Granted Type1 % % vesting $ $

Directors:

Peter Crosby 52% 48% 2007 PR 0% 0% 2008 – 2011 Nil 665,511

Peter Crosby – – 2007 PR 26% 0% 2008 – 2011 Nil 1,138,868

Peter Crosby – – 2006 PR 0% 0% 2008 – 2011 Nil 57,302

Peter Crosby – – 2005 PR 0% 0% 2008 – 2010 Nil 69,808

Key Management

Personnel:

Pascal Barrier – – 2007 PR 26% 74% 2008 – 2011 Nil Nil

Pascal Barrier – – 2006 PR 0% 100% 2008 – 2011 Nil Nil

John Begg 52% 48% 2007 PS 26% 0% 2008 – 2011 Nil 152,958

John Begg – – 2004 PS 0% 0% 2008 – 2010 Nil 22,324

Graeme Fallet 52% 48% 2007 PS 26% 0% 2008 – 2011 Nil 292,419

Thomas Gould 52% 48% 2007 PR 26% 0% 2008 – 2011 Nil 152,958

Thomas Gould – – 2006 PR 0% 0% 2008 – 2011 Nil 36,578

Roman Greifeneder 52% 48% 2007 PS 26% 0% 2008 – 2011 Nil 152,958

Roman Greifeneder – – 2004 PS 0% 0% 2008 – 2010 Nil 17,301

Charles Love 20% 80% 2007 PR 26% 74% 2008 – 2011 Nil Nil

Charles Love – – 2006 PR 0% 100% 2008 – 2011 Nil Nil

Michael Sloggett 52% 48% 2007 PS 26% 0% 2008 – 2011 Nil 191,197

Jeff Lee 52% 48% 2007 PS 26% 0% 2008 – 2011 Nil 152,958

Jeff Lee – – 2004 PS 0% 0% 2008 – 2010 Nil 15,730

John Woodard 52% 48% 2007 PS 26% 0% 2008 – 2011 Nil 267,676

John Woodard – – 2004 PS 0% 0% 2008 – 2010 Nil 43,965

PS = Performance Shares

PR = Performance Rights




14. Insurance of officersDuring the financial year, Ventracor Limited paid premiums of $153,412 to insure officers of the Company andits controlled entities. The officers covered by the insurance policy include the Directors, company secretaries,CEO and all other executive officers of the Group. The liabilities insured include costs and expenses that maybe incurred in defending civil or criminal proceedings that may be brought against the officers in their capacityas officers of the Company or a controlled entity.

The Company has entered into an agreement to indemnify the officers of the Company, including the Directors,company secretaries, CEO and certain other officers, to the extent permitted by law, in respect of any liabilitythat relates to:

(a) a third party (other than the consolidated entity or a related body corporate) unless the liability arises out of conduct involving a lack of good faith; and

(b) for legal costs incurred in successfully defending civil or criminal proceedings or in connection withproceedings in which relief is granted under the Corporations Act 2001.

No liability has arisen under these indemnities as at the date of this Report.

15. Non-audit servicesIn addition to statutory audit assignments, the Company has utilised the auditor’s expertise and experience with the Company and the consolidated entity by engaging the auditor on assignments for advice on taxationand assurance, unrelated to the audit assignment.

Details of amounts paid or payable to the auditor (PricewaterhouseCoopers) for audit, other assurance andtaxation services provided during the year are set out below.

The Board of Directors has considered the position and is satisfied that the provision of taxation services by the auditor is compatible with the general standard of independence for auditors imposed by the CorporationsAct 2001. The Directors are satisfied that the provision of these services, as set out below, did not compromisethe auditor independence requirements of the Corporations Act 2001 for the following reasons:

• the provision of these services has been reviewed by the Audit Committee to ensure that they would notimpact upon the impartiality and objectivity of the auditor; and

• none of the services undermine the general principles relating to auditor independence as set out in APES110 Code of Ethics for Professional Accountants.

A copy of the Auditors’ Independence Declaration as required under section 307C of the Corporations Act2001 is set out on page 30.



15. Non-audit services (cont’d)Consolidated Consolidated

2007 2006

$ $

Assurance services

1. Audit services

PricewaterhouseCoopers Australian firm:

Audit and review of financial reports and otheraudit work under the Corporations Act 2001 105,500 88,490

AIFRS assurance services – 17,500

Total remuneration for audit services 105,500 105,990

2. Other assurance services


Due diligence services related to 2006 capital raising – 63,853

Total remuneration for other assurance services – 63,853

Total remuneration for assurance services 105,500 169,843

Taxation services


Tax compliance services, including review ofcompany income tax returns 113,235 63,900

Total remuneration for taxation services 113,235 63,900

16. Rounding of amountsThe Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities andInvestments Commission, relating to the ‘rounding off’ of amounts in the financial report. Amounts in theFinancial Report have been rounded off in accordance with that Class Order to the nearest thousand dollars, orin certain cases to the nearest dollar.

17. AuditorPricewaterhouseCoopers continues in office in accordance with section 327B of the Corporations Act 2001.

This report is made in accordance with a resolution of Directors.

John C MasseyChairman

Sydney15 August 2007




Auditors’ Independence Declaration

As lead auditor for the audit of Ventracor Limited for the year ended 30 June 2007, 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

(a) no contraventions of any applicable code of professional conduct in relation to the audit.

This declaration is in respect of Ventracor Limited and the entities it controlled during the period.

MW ChiangPartnerPricewaterhouseCoopers


Liability limited by a scheme approved under Professionals Standards Legislation

PricewaterhouseCoopersABN 52 780 433 757

Darling Park Tower 2201 Sussex StreetGPO BOX 2650SYDNEY NSW 1171DX 77 SydneyAustraliawww.pwc.com/auTelephone +61 2 8266 0000Facsimile +612 8266 9999



Corporate Governance Statement

Ventracor’s corporate governance is the system by which the Company is directed and managed.

Within this framework:

• The Board of Directors is accountable to shareholders for the performance of the Company;

• The Company’s goals to achieve milestones are set and promulgated;

• The risks of the business are identified and managed; and

• The Company’s established values and principles underpin the way in which it undertakes its operations.

Ventracor has in place an entrenched, highly developed governance culture, which has its foundations in the ethical values of the Board, management and staff bring to the Company, and their commitment topositioning the Company as a world leader in artificial heart technology.

This statement is organised under headings based on the Australian Stock Exchange Corporate Governance Council’s (ASXCGC) Ten Essential Principles of Good Corporate Governance and Best Practice Recommendations of 10 March 2003. Charters and policies referred to are available on the Company’s website.

Ventracor prescribes the respective roles and responsibilities of the Board and management (ASXCGC Principle 1)

The Board’s focus is to enhance the interests of the shareholders while recognising the interests of other key stakeholders and to ensure the diligent and prudent management of Ventracor. Its responsibilities, as set out in the Board Charter, include:

(a) Reviewing and approving the strategic direction, financial objectives and organisational capability of Ventracor and monitoring the implementation and achievement of those directions, strategies and objectives;

(b) Assessing major risks facing Ventracor and reviewing options for their mitigation and management;

(c) Compliance with corporate governance guidelines as established by the Board for the effective andappropriate monitoring of both compliance and performance;

(d) Monitoring compliance with the ethical standards and regulatory framework within which Ventracoroperates to ensure the efficacy, safety and reliability of Ventracor’s products; and

(e) Appointing, monitoring and reviewing the performance of the CEO and overseeing overall successionplanning.

The Board delegates day-to-day management of the business to the CEO, who oversees the implementation of strategies approved by the Board and the day-to-day running of the business. The CEO’s responsibilitiesand terms of employment, including termination entitlements, are set out in a services contract, as are the termsof engagement of key executives. Details of the services contracts are set out in the Remuneration Report.

Ventracor has a Board of effective composition, size and commitment to discharge its responsibilitiesand duties (ASXCGC Principle 2)

The Board of Directors is responsible to shareholders for the Company’s performance. The Board approves the Company’s goals and objectives, strategic direction, and performance targets within an appropriateframework having regard to the interests of all stakeholders.

Board of Directors

The Company’s Board comprises six non-executive independent Directors and one executive Director – the Chief Executive Officer who has also been appointed the Managing Director. Information about the Directors is included in the Directors’ Report.

The independence of a Director is determined by the Board taking into account the criteria set out in the ASX Corporate Governance Council guidelines. Each of the non-executive Directors, including the Chairman, is independent of Ventracor and its management, having no material business or other relationships that could compromise his or her autonomy as a Director.


The Board operates under a formal Board Charter. It ensures that the appropriate systems, policies andprocedures, within a structure of governance and ethical values, are in place and that these are subject toverification and performance monitoring against an agreed risk profile.

The Board has at least seven scheduled meetings per year and may also hold strategy meetings and otherunscheduled meetings on an informal basis as deemed necessary. Meeting attendance by the Directors,including committee attendance is set out in the Directors’ Report.

Directors may obtain independent professional advice at the Company’s expense regarding matters arising in the course of their duties, after first consulting the Chairman.

Committees

To increase its effectiveness, the Board has established three committees with Board-approved Charters.Current committees of the Board are the Audit Risk & Compliance, Nominations and RemunerationCommittees. The CEO and other executives attend meetings of Board Committees by invitation. Minutes of these meetings are approved and signed by the Committee Chairman at the subsequent meeting of theCommittee or Board and distributed to all Directors. The membership of these Committees and the frequency of Committee meetings is disclosed on page 10.

Election of Directors

The Nominations Committee considers, where appropriate, the appointment of new Directors and criteria fornew appointees, focusing on the skills and experience required to meet the Company’s objectives from time totime. Non-executive Directors are subject to re-election by rotation at least every three years and, under theCompany’s constitution, must retire on their 72nd birthday. Newly appointed non-executive Directors must seek re-election at the first annual general meeting after they have been appointed by the Board.

Ventracor actively promotes ethical and responsible decision making (ASXCGC Principle 3)

The dignity, safety, wellbeing and privacy of all patients are of primary concern to the Company. Its focus is onthe pursuit of medical technology in line with the highest medical, ethical and safety standards and thescientific integrity of the clinical trials.

Code of Conduct

The Board has endorsed a Code of Conduct that requires all Directors and staff members to act with thehighest standards of integrity and objectivity, striving at all times to enhance the reputation and performance of the Company.

Dealing in Company shares

The Company has a policy that gives Directors, senior employees, staff and consultants the opportunity to buyand sell shares in the Company during periods when they are not in possession of price sensitive information.The ‘trading window’ policy is not considered appropriate given the nature of the Company’s operations,therefore the Board has adopted a ‘No Objection’ approach. This involves the Company Secretaries issuing anotice on receipt of written confirmation from a Director or executive officer wishing to trade, that they are notin receipt of any price sensitive information. Directors and executive officers may trade once a ‘No Objection’notice has been issued but only until the earlier of 10 days after the issue of the Notice or the date on whichthey become aware of unpublished price sensitive information. Staff members must receive a ‘No Objection’notice before being allowed to trade with permission to trade being granted by the Chairman or CompanySecretaries. The Company Secretaries maintain a register of all ‘No Objection’ notices. The Company’s ShareTrading Policy also prohibits the hedging of unvested securities.

Both the Code of Conduct and Share Trading Policy form part of the induction training required to beundertaken by all staff. All share dealings undertaken by the Directors are promptly notified to the ASX.


Corporate Governance Statement (cont’d)




Ventracor has a structure to independently verify and safeguard the integrity of the Company’s financialreporting (ASXCGC Principle 4)

Audit Risk & Compliance Committee

The Audit Risk & Compliance Committee is chaired by John Ward, the other members being ElizabethNosworthy and John Massey until 19 June 2007, when Mr Massey resigned from the Committee and William Curran was appointed. All of its members are independent, non-executive Directors. The external audit firm partner in charge of the Company audit attends committee meetings by invitation, together with the CEO and the CFO.

The Committee meets at least four times per year. Its members have appropriate financial expertise and arange of commercial and financial skills as well as business acumen including local and international businessexperience. The Committee advises the Board on all aspects of internal and external audit, the adequacy ofaccounting and risk management procedures, systems, controls and financial reporting. Specific responsibilitiesinclude advising the Board on the appointment of external auditors, the yearly audit plan and the yearly and halfyearly financial reports.

The Company has established a comprehensive system of risk management underpinned by a formal riskmanagement policy. The Committee advises on the framework of internal controls and reviews significantbusiness risk and its management. In addition, the Committee advises the Board and reports on the status of business risk and the effectiveness of the implementation of the systems and processes to address it.

Senior managers provide the CEO and CFO with an annual sign off of their compliance with current riskmanagement policies. The CEO and CFO, who are present for Board discussion of financial matters, arerequired to state to the Board, in writing, that the Company’s financial reports present a true and fair view, in all material respects, of the financial position and performance of the Company and are in accordance with relevant accounting standards and the Corporations Act 2001.

External auditors

PricewaterhouseCoopers was appointed external auditor by shareholders at the Company’s annual general meeting in November 2002. In line with CLERP 9, it is PricewaterhouseCoopers’ policy to rotate audit engagement partners for listed companies at least every five years. The next audit partner rotation is scheduled to occur during the 2008 financial year.

An analysis of fees paid to the external auditor, including a breakdown of fees for non-audit services, isprovided in the Directors’ Report and in Note 21 to the Financial Statements. The external auditor annuallyconfirms its independence within the meaning of applicable legislation and professional standards.

Any proposal to engage the Company’s auditors to provide non-audit services requires pre-approval by theChairman of the Audit Risk and Compliance Committee where the fees are expected to exceed $10,000.Approval will not be given if the services might impair the auditors’ judgement or independence.

Ventracor promotes timely and balanced disclosure of all material matters concerning the Company (ASXCGC Principle 5)

Continuous Disclosure and Shareholder Communications

The Company has in place a Continuous Disclosure Policy which focuses on compliance with the ASX ListingRules, namely, the timely disclosure to the market of any information concerning the Company that a reasonableperson would expect to have a material effect on the Company’s share price. The Code of Best Practice forReporting by Life Science Companies is considered in the drafting of announcements.

All information disclosed to the ASX is posted on the Company’s website after the ASX has confirmed its release. When analysts are briefed on aspects of the Company’s operations, the material used in thepresentation is released to the ASX. The Company secretaries and legal counsel are responsible forcommunications with the ASX.




Ventracor respects the rights of shareholders and facilitates the effective exercise of those rights (ASXCGC Principle 6)

Ventracor strives to communicate to shareholders those milestones that must be met to enable the Company’sbroader strategic objectives to be achieved in accordance with ASX and Ausbiotech Code of Practicegoverning what information relating to clinical trials will be announced. The annual report and other informationto shareholders is presented in clear language and where appropriate, supported by pictures, tables andphotographs.

The Board encourages active participation of shareholders at the Company’s annual general meeting, to ensurea high level of accountability. As part of this process, the Company ensures that issues requiring shareholderapproval are presented as separate resolutions and that time is allotted to allow for shareholder questioning.

The audit partner or representative from PricewaterhouseCoopers attends the annual general meeting toanswer shareholders’ questions concerning the conduct of the audit and the preparation and content of theaudit report and financial accounts.

Ventracor has a sound system of risk oversight and management and internal control (ASXCGCPrinciple 7)

Risk assessment and management

The Board, through the Audit, Risk & Compliance Committee, is responsible for ensuring there are adequatepolicies in place for managing risk. Considerable importance is placed on maintaining a strong risk controlenvironment. There is a formal organisational structure which draws lines of accountability and delegation of authority.

Managers within the Company are required to ensure that they design, resource and operate effective riskmanagement policies, which are subject to monitoring by both internal audits and external third party audits.The Company’s risk management policy and the operation of the risk management and compliance systems ismanaged by the risk management group whose membership includes the CEO and executives with operationaland financial responsibility and other senior managers with specific input from the risk and reliability engineers.

The Audit, Risk & Compliance Committee receives and reviews risk reports from management regularly. TheBoard receives reports which identify issues that represent business, financial and compliance risks, whichinclude updated information on the overall management systems.

The risk management strategy details its principles, tolerance levels, key controls and monitoring processes for managing the risks identified. The risk management process includes a framework of self assessmentquestions posed to and answered by management relating to the effectiveness of risk management processesand internal controls and a sign-off to the Board from the CEO and CFO regarding risk management andinternal compliance and control systems as well as the integrity of the financial reports.

The risk management group identifies, assesses and designs controls for risk having regard to the Company’sbusiness and compliance requirements, in particular compliance with international standards with whichmedical device companies must comply. Major business risks arise from such matters as actions bycompetitors, technological developments, third party suppliers and government policy changes. Where theserisks cannot be mitigated to an acceptable degree using internal controls they are transferred to third partiesthrough insurance cover where available to the extent considered appropriate.




Ventracor actively encourages enhanced board and management effectiveness (ASXCGC Principle 8)

The relationship between the Board and senior management is critical to the long-term success of Ventracor. TheDirectors are responsible to the shareholders for the Company’s performance in both the short and longer term.

The Board aims to ensure that the Directors and key executives have the knowledge and information they needto operate effectively. To help Directors maintain their understanding of the business and to assess its management,Directors are regularly briefed by members of the executive team and periodically tour the Company’s premisesto view operations and meet with staff members. Executives of the Company’s foreign subsidiaries meet withthe Directors to inform them about the Company’s international operations.

The Chairman and CEO brief new Directors on their roles and responsibilities and new Directors receive aDirector’s information kit containing copies of all policies and procedures affecting the Board. They also receivea letter of appointment setting out the Company’s expectations, the Director’s responsibilities and the rightsand terms of engagement.

All Directors have access to the Company Secretaries who are responsible to the CEO and, through theChairman, the Board on corporate governance matters.

Performance assessment of the Board

The Board undertakes an annual process of assessing the performance of the Board, its committees andindependent, non-executive Directors. To ensure this process is objective and constructive, external advisorsmay assist the Board and provide independent advice to enhance and improve the process and the Board’sperformance. During this reporting period, the Board undertook a performance review and the effectiveness of the relationship between the Chairman, each of the Directors and the CEO were considered in the review.

Ventracor ensures that the level and composition of remuneration is sufficient and reasonable and thatits relationship to corporate and individual performance is defined (ASXCGC Principle 9)

The Company’s policy is to reward executives with a combination of fixed remuneration and short and long-termincentives, structured to drive improvements in shareholder value. Non-executive Directors receive no incentivepayments other than their fixed remuneration and in the case of three non-executive Directors, share optionswhich were granted in November 2001 and expired in November 2006.

Remuneration Committee

The Remuneration Committee meets periodically during the year. The Committee has comprised John Massey(Chairman) and Katherine Woodthorpe, until her retirement as a Director on 30 June 2007 with Jeffrey Goodmanand Ross Harricks being appointed to the Committee, effective from 15 August 2007. The Committee considersand reports to the Board on matters of remuneration policy and practice regarding the compensation of Directors,senior executives and staff. It evaluates the performance of the CEO against pre-agreed goals and makesrecommendations to the Board on remuneration of the CEO and senior managers reporting to him.

The Remuneration Report contained in section 13 of the Directors’ Report includes further details of theCompany’s remuneration policy and its relationship with the Company’s performance during the year. Details of the remuneration of Directors and key executives last year are also set out in the Remuneration Report.

Nominations Committee

The Nominations Committee which comprises the full Board, meets as required in order to fulfil itsresponsibilities, which are to:

• determine the composition of the Board and its Committees;

• identify suitably qualified and experienced individuals to become Board members; and

• oversee the evaluation of the Board and its Committees.

The Committee met once during 2007 to consider the appointment of new Directors.




Ventracor recognises its legal and other obligations to all legitimate stakeholders (ASXCGCPrinciple 10)

The Company’s Code of Conduct reinforces its commitment to giving proper regard to the interests of peopleand organisations dealing with the Company. Every staff member is required to respect and abide by theCompany’s obligations to fellow staff members, shareholders, customers, suppliers and communities in whichthe Company operates.

An important part of Ventracor’s governance includes regard for its stakeholders in the conduct of human clinicaltrials and for this purpose, the Company has adopted principles in relation to these trials for their benefit.

The Board has developed policies in other key areas including safety, health, quality and the environment,privacy, indemnification of employees and financial delegations. The Company’s Whistleblower Policy, which is published on the Company’s intranet, provides that a staff member will not be subject to retaliation by theCompany for reporting, in good faith, a possible violation of the Code of Conduct.

Conclusion

Ventracor considers that the above corporate governance practices comply with the ASX CorporateGovernance Council’s Principles of Good Corporate Governance and Best Practice Recommendations. The Company’s corporate governance framework is kept under review on a regular basis.

Statement as at 15 August 2007.



Consolidated Parent Entity

2007 2006 2007 2006Note $’000 $’000 $’000 $’000

Revenue from continuing operations

Sale of goods 5 4,913 1,096 7,623 1,444

Other revenue 2,480 1,558 4,331 2,017

7,393 2,654 11,954 3,461

Other Income 6 1,427 246 1,451 155

Expenses 7

Cost of goods sold (2,927) (900) (4,878) (1,425)

Research and development (7,880) (5,887) (7,880) (5,887)

Manufacturing and quality assurance (9,909) (10,817) (8,219) (10,293)

Regulatory and clinical affairs (6,209) (4,728) (2,801) (3,555)

Marketing and clinical support (9,182) (4,380) (2,595) (1,923)

Management and administration (9,184) (6,261) (8,345) (6,007)

Loss before income tax (36,471) (30,073) (21,313) (25,474)

Income tax expense 8 – – – –

Net loss for the year (36,471) (30,073) (21,313) (25,474)

Net loss attributable to members of Ventracor Limited (36,471) (30,073) (21,313) (25,474)

Earnings per share for loss attributable to the ordinary equity holders of the company

Cents Cents

Basic earnings per share (loss) 29 (13.8) (14.3)

Diluted earnings per share (loss) 29 (13.8) (14.3)

Income StatementsFor the year ended 30 June 2007

The above income statements should be read in conjunction with the accompanying notes.






2007 2006 2007 2006Note $’000 $’000 $’000 $’000

ASSETS

Current assets

Cash and cash equivalents 9 48,632 51,868 47,936 51,687

Receivables 10 1,976 783 8,923 381

Other 11 694 481 577 448

Total Current Assets 51,302 53,132 57,436 52,516

NON-CURRENT ASSETS

Receivables 12 – – 15,217 7,210

Property, plant and equipment 13 8,231 8,932 7,674 8,889

Other financial assets 14 – – 2 2

Total Non-Current Assets 8,231 8,932 22,983 16,101

Total Assets 59,533 62,064 80,329 68,617

LIABILITIES

Current liabilities

Payables 15 6,550 3,334 5,083 3,008

Provisions 16 53 61 53 61

Total Current Liabilities 6,603 3,395 5,136 3,069

NON-CURRENT LIABILITIES

Provisions 16 172 105 172 105

Total Non-Current Liabilities 172 105 172 105

Total Liabilities 6,775 3,500 5,308 3,174

NET ASSETS 52,758 58,564 75,021 65,443

EQUITY

Contributed equity 17 199,580 172,039 199,580 172,039

Reserves 18 6,161 3,037 6,467 3,117

Accumulated losses 19 (152,983) (116,512) (131,026) (109,713)

TOTAL EQUITY 52,758 58,564 75,021 65,443

Balance SheetsAs at 30 June 2007

The above balance sheets should be read in conjunction with the accompanying notes.





2007 2006 2007 2006Note $’000 $’000 $’000 $’000

Total equity at the beginning of the financial year 58,564 38,301 65,443 40,482

Exchange differences on translation of foreign operations 18 (226) (99) – –

Net expenses (income) recognised directly in equity (226) (99) – –

Net Loss for the year 19 (36,471) (30,073) (21,313) (25,474)

Total recognised income and expense for the year (36,697) (30,172) (21,313) (25,474)

Transactions with equity holders in their capacity as equity holders:

Contributions of equity, net of transaction costs 17 27,536 49,015 27,536 49,015

Employee share options 17 5 (23) 5 (23)

Employee share plan reserves 24(f) 3,350 1,443 3,350 1,443

30,891 50,435 30,891 50,435

Total equity at the end of the financial year 52,758 58,564 75,021 65,443

Statements of Changes in EquityFor the year ended 30 June 2007

The above statements of changes in equity should be read in conjunction with the accompanying notes.





2007 2006 2007 2006Note $’000 $’000 $’000 $’000

Cash flows from operating activities

Cash receipts in the course of operations (inclusive of GST) 3,941 695 1,064 65

Payments to suppliers and employees (inclusive of GST) (36,268) (28,559) (25,543) (24,901)

Interest received 2,536 1,447 2,531 1,446

Other revenue received – 21 – 29

Government grant received 1,221 – 1,221 –

Net cash outflow from operating activities 28(b) (28,570) (26,396) (20,727) (23,361)

Cash flows from investing activities

Payments for plant and equipment 13 (2,303) (3,682) (1,727) (3,651)

Proceeds from sale of property, plant & equipment – 2 – –

Loans to related parties – – (8,952) (3,133)

Net cash outflow from investing activities (2,303) (3,680) (10,679) (6,784)

Cash flows from financing activities

Proceeds from issues of shares 17 28,463 51,686 28,463 51,686

Share issue transaction costs (808) (2,694) (808) (2,694)

Net cash inflow from financing activities 27,655 48,992 27,655 48,992

Net increase/(decrease) in cash and cash equivalents (3,218) 18,916 (3,751) 18,847

Cash and cash equivalents at the beginning of the financial year 51,868 32,947 51,687 32,840

Effect of exchange rate changes on cash and cash equivalents (18) 5 – –

Cash and cash equivalents at the end of the financial year 28(a) 48,632 51,868 47,936 51,687

Cash Flow StatementsFor the year ended 30 June 2007

The above cash flow statements should be read in conjunction with the accompanying notes.


Notes to the Financial StatementsFor the year ended 30 June 2007



1. Summary of significant accounting policiesThe principal accounting policies adopted in the preparation of the financial report are set out below.These policies have been consistently applied to all the years presented, unless otherwise stated. Thefinancial report includes separate financial statements for Ventracor Limited as an individual entity and the consolidated entity consisting of Ventracor Limited and its subsidiaries.

(a) Basis of Preparation

This general purpose Financial Report has been prepared in accordance with Australian AccountingStandards, other authoritative pronouncements of the Australian Accounting Standards Board, Urgent Issues Group Interpretations and the Corporations Act 2001.

Compliance with IFRS

Australian Accounting Standards include Australian equivalents to International Financial ReportingStandards (AIFRS). Compliance with AIFRS ensures that the consolidated financial statements andnotes of Ventracor Limited comply with International Financial Reporting Standards (IFRS). The ParentEntity financial statements and notes also comply with IFRS except that it has elected to apply therelief provided to parent entities in respect of certain disclosure requirements contained in AASB132Financial Instruments: Presentation and Disclosure.

Historical cost convention

These financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, financial assets and liabilities (including derivativeinstruments) at fair value through profit or loss, certain classes of property, plant and equipment andinvestment property.

Critical accounting estimates

The preparation of Financial Statements in conformity with AIFRS requires the use of certain criticalaccounting estimates. It also requires management to exercise its judgement in the process ofapplying the Group’s accounting policies. The areas involving a higher degree of judgement orcomplexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3.

(b) Principles of Consolidation

Subsidiaries

The consolidated Financial Statements incorporate the assets and liabilities of all subsidiaries ofVentracor Limited (‘Company’ or ‘Parent Entity’) as at 30 June 2007 and the results of all subsidiariesfor the year then ended. Ventracor Limited and its subsidiaries together are referred to in this FinancialReport as the Consolidated Entity.

Subsidiaries are all those entities over which the Group has the power to govern the financial andoperating policies, generally accompanying a shareholding of more than one half of the voting rights.The existence and effect of potential voting rights that are currently exercisable or convertible areconsidered when assessing whether the Group controls another entity.

Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group.



Notes to the Financial Statements (cont’d)For the year ended 30 June 2007


1. Summary of significant accounting policies (cont’d)Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of theimpairment of the asset transferred. Accounting policies of subsidiaries have been changed wherenecessary to ensure consistency with the policies adopted by the Group.

Investments in subsidiaries are accounted for at cost in the individual Financial Statements of Ventracor Limited.

(c) Segment Reporting

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different to those of other business segments. A geographical segment is identified when products or services are provided within a particulareconomic environment subject to risks and returns that are different from those of segments operating in other economic environments.

(d) Foreign Currency Translation

Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using thecurrency of the primary economic environment in which the entity operates (‘the functional currency’).The consolidated financial statements are presented in Australian dollars, which is both the functionaland presentation currency of Ventracor Limited.

Transactions and balances

Foreign currency transactions are translated into Australian currency using the exchange ratesprevailing at the dates of the transactions. Foreign exchange gains and losses resulting from thesettlement of such transactions and from the translation at year-end exchange rates of monetaryassets and liabilities denominated in foreign currencies are recognised in the income statement, exceptwhen deferred in equity as qualifying cash flow hedges and qualifying net investment hedges or areattributable to part of the net investment in a foreign operation.

Group companies

The results and financial position of all the Group entities (none of which has the currency of ahyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;

• income and expenses for each income statement are translated at average exchange rates (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and

• all resulting exchange differences are recognised as a separate component of equity.

On consolidation, exchange differences arising from the translation of any net investment in foreignentities, and of borrowings and other currency instruments designated as hedges of such investments,are taken to shareholders’ equity. When a foreign operation is sold or any borrowings forming part ofthe net investment are repaid, a proportionate share of such exchange differences are recognised inthe income statement, as part of the gain or loss on sale where applicable.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assetsand liabilities of the foreign entities and translated at the closing rate.





1. Summary of significant accounting policies (cont’d)(e) Revenue Recognition

Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosedas revenue are net of returns, trade allowances, rebates, duties and taxes paid. Revenue is recognisedfor the major business activities as follows:

Revenue from the sale of goods is recognised when control of the goods passes to the customer. For goods on consignment with the customer revenue is recognised upon perforation of the sterileseal or implant of the device. Revenue from the sale of goods to distributors is recognised uponshipment of the goods to the distributor.

Interest income is recognised on an effective yield basis taking into account the interest ratesapplicable to the financial assets.

(f) Government Grants

Grants from governments are recognised at their fair value where there is a reasonable assurance that the grant will be received and the Group will comply with all attached conditions.

Government grants relating to costs are deferred and recognised in the income statement over theperiod necessary to match them with the costs that they are intended to compensate.

(g) Income Tax

The income tax expense or revenue for the period is the tax payable on the current period’s taxableincome based on the national income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences and to unused tax losses.

Deferred income tax is provided in full, using the liability method, on temporary differences arisingbetween the tax bases of assets and liabilities and their carrying amounts in the consolidated financialstatements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of thetransaction affects neither accounting nor taxable profit or loss. Deferred income tax is determinedusing tax rates (and laws) that have been enacted or substantially enacted by the balance sheet dateand are expected to apply when the related deferred income tax asset is realised or the deferredincome tax liability is settled.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differencesand losses.

Deferred tax liabilities and assets are not recognised for temporary differences between the carryingamount and tax bases of investments in controlled entities where the Parent Entity is able to controlthe timing of the reversal of the temporary differences and it is probable that the differences will notreverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset currenttax assets and liabilities and when the deferred tax balances relate to the same taxation authority.Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offsetand intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Current and deferred tax balances attributable to amounts recognised directly in equity are alsorecognised directly in equity.





1. Summary of significant accounting policies (cont’d)Tax consolidation legislation

Ventracor Limited and its wholly owned Australian controlled entities have elected to form a taxconsolidation group for income tax purposes with effect from 1 July 2002. The Australian TaxationOffice has been notified and has confirmed the decision. Ventracor Limited as the head entityrecognises current tax expense and tax losses of the tax consolidated group (after elimination ofintragroup transactions).

The Company has entered into a tax sharing agreement with the members of the tax consolidationgroup. The agreement is aimed at achieving an allocation of the group’s income tax expense tosubsidiaries within the tax consolidated group as if they were operating on a stand-alone basis. Thesubsidiaries party to the agreement will reimburse Ventracor Limited for an amount calculated as if itwere on a stand-alone basis. Similarly, Ventracor Limited will reimburse subsidiaries for losses whenthey are utilised to reduce group tax payable.

The financial effects of the tax sharing agreement are eliminated in accordance with Note 1(b).

(h) Leases

A distinction is made between finance leases which effectively transfer from the lessor to the lesseesubstantially all the risks and benefits incidental to ownership of leased non-current assets, andoperating leases under which the lessor effectively retains substantially all such risks and benefits.

Finance leases are capitalised. A lease asset and liability is established at the present value ofminimum lease payments. Lease payments are allocated between the principal component of thelease liability and the interest expense.

The lease asset is amortised on a straight line basis over the term of the lease, or, where it is likely that the Company will obtain ownership of the asset, the life of the asset. Refer to Note 1(n) forexpected useful lives.

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentivesreceived from the lessor) are charged to the income statement on a straight-line basis over the periodof the lease.

(i) Acquisition of Assets

The purchase method of accounting is used for all acquisitions regardless of whether equityinstruments or other assets are acquired. Cost is measured as the fair value of the assets given up,shares issued or liabilities undertaken at the date of acquisition plus incidental costs directlyattributable to the acquisition.

(j) Impairment of Assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually forimpairment. Assets that are subject to amortisation are reviewed for impairment whenever events orchanges in circumstances indicate that the carrying amount may not be recoverable. An impairmentloss is recognised for the amount by which the asset’s carrying amount exceeds its recoverableamount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value inuse. For the purposes of assessing impairment, assets are grouped at the lowest levels for whichthere are separately identifiable cash flows (cash generating units).





1. Summary of significant accounting policies (cont’d)(k) Cash and Cash Equivalents

For the purposes of the statements of cash flows, cash includes cash at bank and on hand as well as highly liquid investments with short periods to maturity which are readily convertible to cash onhand and are subject to an insignificant risk of changes in value.

(l) Trade Receivables

Trade receivables are recognised initially at fair value and subsequently measured at amortised costusing the effective interest rate method, less provision for impairment.

Collectibility of trade receivables is reviewed on an ongoing basis. Debts which are known to beuncollectible are written off. A provision for impairment is established when there is objective evidencethat the Group will not be able to collect all amounts due according to the original terms of trade ofreceivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the effective interest rate. The amountof the provision is recognised in the income statement.

(m) Inventories

Until such time as global commercialisation of the VentrAssist is more certain and revenues from such inventories are reliable, inventories will not be capitalised as recoverability is uncertain.

(n) Depreciation of Property, Plant and Equipment

Property, plant and equipment are stated at historical cost less depreciation. Historical cost includesexpenditure that is directly attributable to the acquisition of the items. Cost may also include transfersfrom equity of any gains/losses on qualifying cash flow hedges of foreign currency purchases ofproperty, plant and equipment.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, asappropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Depreciation is calculated on a straight-line basis to write off the net cost or revalued amount of each item of property, plant and equipment over its expected useful life. Estimates of remaining usefullives are made on a regular basis for all assets, with annual reassessments for major items.

The expected useful lives are as follows:Leasehold improvements 4 – 5 yearsPlant and equipment 3 – 5 years

Major spares purchased specifically for particular plant are capitalised and depreciated on the samebasis as the plant to which they relate.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’scarrying amount is greater than its estimated amount (Note 1(j)).

(o) Intangible Assets

Research and Development Expenditure

Until such time as commercialisation of the VentrAssist and other related technologies is achieved, all research expenditure is expensed as incurred.





1. Summary of significant accounting policies (cont’d)Expenditure on development activities, being the application of research findings or other knowledge to a plan or design for the production of new or substantially improved products before the start ofcommercial production or use, is capitalised if the product is technically or commercially feasible andadequate resources are available to complete development. To date, all development expenditure on the VentrAssist has been expensed as incurred in the income statement.

Patents and Trademarks Expenditure

Until such time as global commercialisation of the VentrAssist is more certain, all patent and trademarkexpenditure is expensed as incurred as the Company.

(p) Trade and Other Creditors

These amounts represent liabilities for goods and services provided to the Group prior to the end of thefinancial year and which are unpaid. The amounts are unsecured and are usually paid within 30 days of recognition.

(q) Employee Entitlements

Wages and Salaries and annual leave

Liabilities for wages and salaries, including non-monetary benefits, and annual leave expected to be settled within 12 months of the reporting date are recognised in other payables in respect ofemployees’ services up to the reporting date and are measured at the amounts expected to be paidwhen the liabilities are settled.

Long Service Leave

The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided byemployees up to the reporting date. Consideration is given to expected future wage and salary levels,experience of employee departures and periods of service. Expected future payments are discountedusing market yields on national government bonds with terms to maturity that match, as closely aspossible, the estimated future cash outflows.

Liabilities for long service leave expected to be settled within 12 months of the reporting date arerecognised in current provisions.

Employee benefit on-costs

Employee benefit on-costs, including payroll tax, are recognised and included in employee benefitliabilities and costs when the employee benefits to which they relate are recognised as liabilities.

Share-based payments

Share-based payments are provided to employees via shareholder approved share, rights and former option plans.

Share options granted before 7 November 2002 and/or vested before 1 January 2005

The shares are recognised once the options are exercised and the proceeds received are allocated to share capital. There were no share options granted by the Company after 7 November 2002.

Executive and employee share and rights plans granted after 7 November 2002

The fair value of shares or rights granted under the Ventracor Executive, International PerformanceRights and Employee Share Plans are recognised as an employee benefit expense with acorresponding increase in equity from the date of grant. The fair value is measured as the ASX-quoted, closing market price of Ventracor shares at grant date and is recognised over the vesting period.





1. Summary of significant accounting policies (cont’d)Retirement benefit obligations

All employees of the Group are entitled to benefits on retirement, disability or death from relevantGroup company master fund superannuation plans. All Group companies are required to contributedefined employer contributions based on minimum statutory requirements as prescribed under theapplicable law.

Termination benefits

Termination benefits are payable when employment is terminated before the normal retirement date, or when the employee accepts voluntary redundancy in exchange for these benefits. The Grouprecognises termination benefits when it is demonstrably committed to terminating the employment of current employees.

(r) Contributed Equity

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of newshares are shown in equity as a deduction, net of tax, from the proceeds.

(s) Earnings per Share

Basic earnings per share

Basic earnings per share is determined by dividing the net loss attributable to equity holders of theCompany, by the weighted average number of ordinary shares outstanding during the financial year.

Diluted earnings per share

Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated withdilutive potential ordinary shares and the weighted average number of shares assumed to have beenissued for no consideration in relation to dilutive potential ordinary shares.

(t) Goods and Services Tax (GST)

Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority. In this case it is recognised as part of the cost of acquisition of the asset or as part of the expense.

Receivables and payables are stated inclusive of the amount of GST receivable or payable. The netamount of GST recoverable from, or payable to, the taxation authority is included with otherreceivables or payables in the balance sheet.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investingor financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flow.

(u) Rounding of Amounts

The Company is of a kind referred to in Class Order 98/0100, issued by the Australian Securities and Investments Commission, relating to the ‘rounding off’ of amounts in the financial report. Amountsin the financial report have been rounded off in accordance with that Class Order to the nearestthousand dollars, or in certain cases to the nearest dollar.

(v) New Accounting Standards and Interpretations

Certain new accounting standards and UIG interpretations have been published that are notmandatory for 30 June 2007 reporting periods. The Group’s and the Parent Entity’s assessment of the impact of these new standards and interpretations is set out on the following pages.





1. Summary of significant accounting policies (cont’d)AASB 7 Financial Instruments: Disclosures and AASB 2005 10 Amendments to Australian AccountingStandards [AASB 132, AASB 101, AASB 114, AASB 117, AASB 133, AASB 139, AASB 1, AASB 4,AASB 1023 & AASB 1038]

AASB 7 and AASB 2005 10 are applicable to annual reporting periods beginning on or after 1 January2007. The Group has not adopted the standards early. Application of the standards will not affect any ofthe amounts recognised in the financial statements, but will impact the type of information disclosed inrelation to the Group’s and the Parent Entity’s financial instruments.

AASB-I 10 Interim Financial Reporting and Impairment

AASB-I 10 is applicable to reporting periods commencing on or after 1 November 2006. The Group hasnot recognised an impairment loss in relation to goodwill, investments in equity instruments or financialassets carried at cost in an interim reporting period but subsequently reversed the impairment loss in theAnnual Report. Application of the interpretation will therefore have no impact on the Group’s or the ParentEntity’s Financial Statements.

2. Financial risk management The Group’s activities expose it to a variety of financial risks; market risk (including currency risk, fair value interest rate risk), credit risk, liquidity risk and cash flow interest rate risk. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimisepotential adverse effects on the financial performance of the Group. The Group is expected to enter into appropriate hedging instruments in subsequent financial years in order to mitigate those risks which are anticipated with the globalisation of the Group’s operations.

Risk management is carried out under policies approved by the Board of Directors. The Board provideswritten principles for overall risk management, as well as written policies covering specific areas, such as investing excess liquidity.

(a) Market risk

Foreign exchange risk

Foreign exchange risk arises when future commercial transactions and recognised assets and liabilitiesare denominated in a currency that is not the entity’s functional currency.

The Group operates internationally and is exposed to foreign exchange risk arising from currencyexposures to the US dollar, British pound and Euro. These risks were not considered to be material in relation to the Financial Year ended 30 June 2007.

Fair value interest rate risk

Refer to (d) below.

(b) Credit risk

Credit risk represents the extent of credit related losses that the consolidated entity may be subject to on amounts receivable from trade and other debtors. Management monitors the credit risk of alldebtors on an ongoing basis. The Group did not have any material credit risk exposure to any singletrade debtor at balance date. Transactions involving derivative financial instruments and interestbearing deposits are with counterparties with a sound credit rating.


2. Financial risk management (cont’d)(c) Liquidity risk

Prudent liquidity risk management involves maintaining sufficient cash to fund the Group’s activities.The Directors regularly monitor the Company’s cash position and on an ongoing basis consider anumber of strategic and operational plans and initiatives to ensure that adequate funding continues to be available to meet the Group’s business objectives.

(d) Cash flow and fair value interest rate risk

Due to the Group’s significant holding of interest bearing assets, the Group’s income and operatingcash flows are materially exposed to changes in market interest rates. Cash assets include bills which are generally subject to credit risk in the event of default by the acceptor. However, this risk was mitigated by ensuring that the bills at 30 June 2007 were accepted by banks. The Group as at 30 June 2007 has no external borrowings and as such is not exposed to interest-rate risk arising from either short-term or long-term borrowings.

3. Critical accounting estimates and assumptions Estimates and judgements are continually evaluated and are based on historical experience and otherfactors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances.

(a) Critical accounting estimates and assumptions

The Group makes estimates and assumptions concerning the future. The resulting accountingestimates will, by definition, seldom equal the related actual results. There are no estimates andassumptions which have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

(b) Carrying value of Related Part Receivables

The carrying value of the Parent Entity’s loan to its wholly owned subsidiaries are held at fair value andsubsequently measured at amortised cost. The Parent Entity has considered the carrying value of thereceivables at 30 June 2007. The assessment of carrying values and potential impairment involvesjudgements and assumptions relating to a number of factors including among other factors theGroup’s regulatory approval progress and the near term business outlook of the Group’s key markets.

On the basis of the impairment considerations and subject to the judgements and assumptions used,management of the Parent Entity consider the carrying value of these receivables to be appropriatelystated at the balance date.






4. Segment informationBusiness Segments

The Group is organised internationally into the VentrAssist product segment.

VentrAssist Segment

The VentrAssist segment has designed and developed a left ventricular assist device (LVAD) and relatedtechnologies. Offices have been established in the United States and in the Netherlands (for the Europeanregion), with executive appointments made to lead strategic clinical, marketing, sales and distribution in allof the segment’s major markets.

The segment utilises specialist medical companies in Australia and internationally to assist in theproduction of VentrAssist pumps for the clinical trials. Final testing and assembly of the VentrAssist iscarried out in Australia.

Geographical Segments

The consolidated entity’s divisions are managed in Australia, with operations in Australia, USA and Europe.

VentrAssist segment Consolidated

2007 2006 2007 2006Primary reporting – business segments $’000 $’000 $’000 $’000

External sales 4,913 1,096 4,913 1,096

Unallocated interest income 2,480 1,511

Revenue from ordinary activities 7,393 2,607

Segment result (38,951) (31,588) (38,951) (31,584)

Unallocated revenue 2,480 1,511

Loss from ordinary activities before income tax (36,471) (30,073)

Income tax expense – –

Net loss (36,471) (30,073)

Assets

Segment assets 10,901 10,196 10,901 10,196

Unallocated assets 48,632 51,868

Total assets 59,533 62,064

Liabilities

Segment liabilities 6,775 3,500 6,775 3,500

Unallocated liabilities – –

Total liabilities 6,775 3,500

Acquisition of non-current assets 2,376 3,682 2,376 3,682

Depreciation and amortisation 3,069 2,321 3,069 2,321




4. Segment information (cont’d)Secondary reporting – geographical segments

Acquisitions of property, Segment revenues plant and equipment,

from sales to intangibles other non- external customers Segment assets current segment assets

2007 2006 2007 2006 2007 2006$’000 $’000 $’000 $’000 $’000 $’000

Australasia 1,180 130 56,662 61,404 1,798 3,650

USA 2,009 565 1,441 368 531 26

Europe 1,724 401 1,430 292 47 6

4,913 1,096 59,533 62,064 2,376 3,682

Segment revenues are allocated based on the country in which the customer is located. Segment assetsand capital expenditure are allocated based on where the assets are located.

Notes to and forming part of the segment information

(a) Accounting Policies

Segment information is prepared in conformity with the accounting policies of the entity as disclosed in note 1 and the revised segment reporting accounting standard, AASB 114 – Segment Reporting.

Segment revenues, expenses, assets and liabilities are those that are directly attributable to a segmentand the relevant portion that can be allocated to the segment on a reasonable basis. Segment assetsinclude all assets used by a segment and consist primarily of operating cash, receivables, property,plant and equipment, net of related provisions. While most of these assets can be directly attributableto individual segments, the carrying amounts of certain assets used jointly by segments are allocatedbased on reasonable estimates of usage. Segment liabilities consist primarily of trade and othercreditors and employee entitlements. Segment assets and liabilities do not include income taxes.

(b) Inter-segment Transfers

Segment revenues, expenses and results include transfers between segments. Such transfers arepriced on an ‘arm’s-length’ basis and eliminated on consolidation.







2007 2006 2007 2006$’000 $’000 $’000 $’000

5. RevenueRevenue from continuing operations

Sales revenue

Sale of goods 4,913 1,096 1,180 130

Sale of goods – controlled entities – – 6,443 1,314

Total sales of goods 4,913 1,096 7,623 1,444

Other revenue

Interest 2,480 1,511 2,475 1,510

Interest – controlled entities – – 1,760 437

Sundry revenue – 47 96 70

Total other revenue 2,480 1,558 4,331 2,017

Total revenue 7,393 2,654 11,954 3,461





2007 2006 2007 2006$’000 $’000 $’000 $’000

6. Other incomeForeign Exchange gains 206 246 230 155

Government Grants – note (a) 1,221 – 1,221 –

Total Other Income 1,427 246 1,451 155

(a) The Australian Federal Government through AusIndustry awarded the Company a $2.8m CommercialReady Grant during the year. During the financial year $1.2m was received and recognised as otherincome by the Company. Further contributions are dependent upon adequate progress determined bya quarterly milestone review. The Company did not benefit directly from any other forms of governmentfinancial assistance during the year.

7. ExpensesAmortisation – leasehold improvements 463 425 461 425

Depreciation – plant and equipment 2,606 1,896 2,547 1,884

Loss on disposed plant & equipment 4 4 4 –

Rental expense 835 602 667 584

Research and development 7,880 5,887 7,880 5,887

Foreign exchange loss on revaluation – – 1,565 –

Superannuation contributions 1,586 1,266 1,411 1,170

Salary and wages 21,552 15,288 18,626 13,733

Share-based payments 3,350 1,444 3,350 1,444









2007 2006 2007 2006$’000 $’000 $’000 $’000

8. Income tax expenseThe income tax expense for the Financial Year differs from the amount calculated on the net loss.

The differences are reconciled as follows:

Loss from ordinary activities before income tax expense (36,471) (30,073) (21,313) (25,474)

Income tax calculated at 30% (2006: 30%) (10,941) (9,022) (6,394) (7,642)

Tax effect of permanent differences:

Share based payments 1,005 433 1,005 433

Additional deduction for Research and development expenditure (423) (118) (423) (118)

Sundry items 41 676 41 676

Effects of different rates of tax on overseas income 2,159 – – –

Income Tax adjusted for permanent differences (8,159) (8,031) (5,771) (6,651)

Future income tax benefit not recognised 8,159 8,031 5,771 6,651

Income tax expense – – – –

Unused tax losses for which no deferred tax asset has been recognised 150,187 116,360 128,749 109,643

Potential tax benefit at 30% (2006: 30%) 45,056 34,908 38,625 32,893

The potential tax benefit will only be obtained if:

(i) the consolidated entity derives future assessable income of a nature and of an amount sufficient toenable the benefit from the deductions for the losses to be realised;

(ii) the consolidated entity continues to comply with the conditions for deductibility imposed by taxlegislation; and

(iii) no changes in tax legislation adversely affect the Consolidated Entity in realising the benefit from thedeductions for the losses.


Parent Entity

2007 2006$’000 $’000

8. Income tax expense (cont’d)Franking creditsFranking credits available for subsequent financial years based on a tax rate of 30%. 108 108

The above amounts represent the balance of the franking account as at the end of the financial year,adjusted for:

(i) franking credits that will arise from the payment of the current tax liability;

(ii) franking debits that will arise from the payment of dividends recognised as a liability at the reporting date; and

(iii) franking credits that may be prevented from being distributed in subsequent financial years.

Tax consolidation legislation

Ventracor Limited and its wholly owned Australian controlled entities have elected to form a taxconsolidation group for income tax purposes with effect from 1 July 2002. The accounting policy on implementation of the legislation is set out in note 1(g).


2007 2006 2007 2006$’000 $’000 $’000 $’000

9. Current assets – cash and cash equivalentsCash at bank and on hand 9,564 753 8,868 572

Cash deposits 39,068 51,115 39,068 51,115

48,632 51,868 47,936 51,687

Cash deposits comprise cash-equivalent assets with short periods to maturity (for the balances at thereporting date, maturity was 60 days or less). These attract floating and fixed interest rates of between6.10% and 6.50% (2006: 5.08% and 5.88%).









2007 2006 2007 2006$’000 $’000 $’000 $’000

10. Current assets – receivablesTrade receivables 1,547 529 270 144

Other debtors 429 254 205 237

Amounts receivable from controlled entities (note 25) – – 8,448 –

1,976 783 8,923 381

Note: For credit and interest rate risk refer to note 2.

11. Current assets – otherPrepayments 663 467 568 445

Security Deposits 31 14 9 3

694 481 577 448

12. Non-current assets – receivablesAmounts receivable from controlled entities (note 25) – – 15,217 7,210

Note: For credit and interest rate risk refer to Note 2.





13. Non-current assets – property, plant and equipmentPlant & Leasehold

Equipment Improvements TotalConsolidated $’000 $’000 $’000

At 1 July 2005

Cost or fair value 8,351 1,870 10,221

Less: accumulated depreciation (2,220) (425) (2,645)

Net book amount 6,131 1,445 7,576

Year ended 30 June 2006

Opening net book amount 6,131 1,445 7,576

Additions 3,344 337 3,681

Loss on sale (4) – (4)

Foreign currency translation – – –

Depreciation charged (1,896) (425) (2,321)

Closing net book amount 7,575 1,357 8,932

At 30 June 2006

Cost of fair value 11,691 2,207 13,898

Accumulated depreciation (4,116) (850) (4,966)

Net book amount 7,575 1,357 8,932



Additions 2,274 102 2,376


Foreign currency translation (4) – (4)

Depreciation charge (2,606) (463) (3,069)

Closing net book amount 7,235 996 8,231

At 30 June 2007


Accumulated depreciation (6,399) (1,313) (7,712)

Net book amount 7,235 996 8,231



13. Non-current assets – property, plant and equipment (cont’d)Plant & Leasehold

Equipment Improvements TotalParent $’000 $’000 $’000

At 1 July 2005


Less: accumulated depreciation (2,220) (425) (2,645)

Net book amount 6,102 1,445 7,547



Additions 3,314 337 3,651

Depreciation charged (1,884) (425) (2,309)

Closing net book amount 7,532 1,357 8,889

At 30 June 2006

Cost of fair value 11,635 2,207 13,842

Accumulated depreciation (4,103) (850) (4,953)

Net book amount 7,532 1,357 8,889



Additions 1,713 85 1,798


Depreciation charge (2,548) (461) (3,009)

Closing net book amount 6,693 981 7,674

At 30 June 2007


Accumulated depreciation (6,336) (1,311) (7,647)

Net book amount 6,693 981 7,674








2007 2006 2007 2006$’000 $’000 $’000 $’000

14. Non-current assets – other financial assetsShares in subsidiaries – refer Note 26 – – 2 2

15. Current liabilities – payablesTrade payables 6,550 3,334 5,083 3,008

16. ProvisionsCurrent

Employee benefits 53 61 53 61

Non-Current

Employee benefits 172 105 172 105

17. Contributed equityShare capital 299,929,162 (2006: 261,269,736) Ordinary shares fully paid 199,580 172,039 199,580 172,039

Movements in ordinary share capital of Ventracor Limited during the past two years were as follows:

Details Note No. of Shares $’000

Balance – 30 June 2005 194,897,993 123,047

Share Placement 28,963,559 22,592

Rights Issue 37,330,684 29,117

Issue of shares under Ventracor Employee Share Plan 77,500 –

Less: Sundry adjustment for employee share options – (23)

Less: Transaction costs arising on share issues – (2,694)

Balance – 30 June 2006 261,269,736 172,039

Share Placement 26,910,953 21,529

Share Purchase Plan 8,660,856 6,929

Exercise of Performance Shares under Ventracor Executive Share Plan 2,645,477 –

Exercise of Performance Rights under IPRP 387,600 –

Issue of shares under Ventracor Employee Share Plan 47,040 –

Exercise of Options under Ventracor Option Plan 7,500 5

Less: Transaction costs arising on share placement issues – (922)

Balance – 30 June 2007 299,929,162 199,580



17. Contributed equity (cont’d)Ordinary Shares

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of theCompany in proportion to the number of and amounts paid on the shares held. On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is entitled to one vote.

Treasury Shares

Performance shares issued under the Ventracor Executive Share Plan that are still subject to performancecriteria as at 30 June are reported as treasury shares. As at 30 June 2007 the Company had issued6,049,375 Treasury shares. Treasury shares will convert to ordinary shares upon vesting. The Treasuryshares are held on trust for the Company by an independent Trustee.

Options, Performance Shares and Performance Rights

Information relating to approved option plans, performance shares and performance rights includingdetails of options, performance shares and performance rights issued, exercised and lapsed during the financial year and options, performance shares and performance rights outstanding at the end of the financial year are set out in Note 24.


2007 2006 2007 2006$’000 $’000 $’000 $’000

18. ReservesForeign currency translation reserve (306) (80) – –

Share plan reserves 6,467 3,117 6,467 3,117

6,161 3,037 6,467 3,117

Movements:

Share-based payments reserve

Opening balance 3,117 1,674 3,117 1,674

Employee share plan expense 3,350 1,443 3,350 1,443

Closing balance 6,467 3,117 6,467 3,117

Foreign currency translation reserve

Opening Balance (80) 19 – –

Currency translation differences during the year (226) (99) – –

Closing balance (306) (80) – –





2007 2006 2007 2006$’000 $’000 $’000 $’000

19. Accumulated lossesAccumulated losses at the beginning of the Financial Year (116,512) (86,439) (109,713) (84,239)

Net loss for the financial year (36,471) (30,073) (21,313) (25,474)

Accumulated losses at the end of the Financial Year (152,983) (116,512) (131,026) (109,713)

20. Key management personnel disclosures Directors

The following persons were Directors of Ventracor Limited during the Financial Year:

Chairman – non-executive

John Massey

Executive Directors

Peter Crosby, Managing Director (appointed 1 August 2006) and Chief Executive Officer (appointed 1 July 2006)

Colin Sutton, Managing Director (retired 31 July 2006) and Chief Executive Officer (retired 1 July 2006)


William Curran (appointed on 2 May 2007)Ross HarricksElizabeth NosworthyJohn WardKatherine Woodthorpe (retired on 30 June 2007)

Executive key management personnel

The following persons also had authority and responsibility for planning, directing and controlling theactivities of the Company, directly or indirectly, during the financial year:

Name Position Employer

Pascal Barrier Director of European Operations Ventracor Limited

John Begg Product Marketing Manager Ventracor Limited

Vanio Calgaro Financial Controller Ventracor Limited

Graeme Fallet Chief Financial Officer and Company Secretary Ventracor Limited

Thomas Gould Vice President Sales & Marketing Ventracor Inc

Roman Greifeneder Vice President Manufacturing Ventracor Limited

Jeff Lee Vice President Quality Assurance Ventracor Limited

Charles Love Vice President Clinical & Regulatory Affairs Ventracor Inc

Michael Sloggett Vice President Research & Development Ventracor Limited

Guy Sohie Chief Operating Officer Ventracor Inc

John Woodard Chief Scientific Officer Ventracor Limited






20. Key management personnel disclosures (cont’d)All of the above persons were also key management personnel during the year ended 30 June 2007except Guy Sohie who commenced on 10 May 2007 and Graeme Fallet who commenced on 25 September 2006. Charles Love and Pascal Barrier ceased providing services to the Company on 22 June 2007 and 29 June 2007 respectively. Vanio Calgaro ceased being a member of the keymanagement personnel upon the appointment of Graeme Fallet as Chief Financial Officer.

Key management personnel compensation


2007 2006 2007 2006$ $ $ $

Short-term employee benefits 3,830,353 2,592,557 2,778,777 1,774,789

Post-employment benefits 228,009 426,182 192,754 352,582

Long-term employee benefits 57,825 – 57,825 –

Retirement/termination benefits 238,237 – 48,310 –

Share-based payments 2,974,978 691,658 2,621,742 315,551

7,329,402 3,710,397 5,699,408 2,442,922

The Company has taken advantage of the relief provided by Corporations Regulations 2M.6.04 and hastransferred the detailed remuneration disclosures to the Directors’ Report. The relevant information can befound in Section 13 of the Directors’ Report.

Equity Instrument Disclosures Relating to Key Management Personnel

(i) Options, Performance Rights and Performance Shares and shares issued in exercise of conditional entitlements

Details including terms and conditions regarding options, shares issued on the exercise of suchoptions and conditional entitlements provided as remuneration can be found in Section D of theremuneration report.

(ii) Options

The numbers of options over ordinary shares in the Company held during the financial year by eachDirector of Ventracor Limited and other key management personnel of the Consolidated Entity,including their personally related entities are set out below. Directors and key management personnelwho have a nil relevant interest in Company shares or options have been excluded from thedisclosures outlined below.




20. Key management personnel disclosures (cont’d)2007 Granted Vested and

Balance at during the Exercised Foreited Balance at exercisablethe start of year as during the during the the end of at the end

Name the year remuneration year year the year of the year

Directors of Ventracor Limited

John Massey 500,000 – – 500,000 – –

John Ward 300,000 – – 300,000 – –

Katherine Woodthorpe 300,000 – – 300,000 – –

Key management personnel of the consolidated entity

John Begg 500,000 – – 500,000 – –

John Woodard 375,000 – – 375,000 – –

2006 Granted Vested andBalance at during the Exercised Foreited Balance at exercisablethe start of year as during the during the the end of at the end



John Massey 500,000 – – – 500,000 500,000

John Ward 300,000 – – – 300,000 300,000

Katherine Woodthorpe 300,000 – – – 300,000 300,000

Key Management Personnel of the consolidated entity

John Begg 500,000 – – – 500,000 500,000

John Woodard 375,000 – – – 375,000 375,000

The Directors and executives listed in the above table were unable to exercise options that were expiringon 30 November 2006 as at or around the expiry date they were aware of incomplete and confidentialinformation that may have had an impact on Ventracor’s Clinical and Regulatory Timeline stated in its2006 Prospectus. The insider trading provisions prohibit Directors and executives from exercising optionsif they are aware of any incomplete and confidential information not otherwise disclosed to the ASX.

(iii) Offer to Peter Crosby under Employment Contract

During the year the Company granted 3,000,000 Performance Rights and 1,000,000 OutperformanceRights to Mr Peter Crosby as part of his overall remuneration package upon his appointment as ChiefExecutive Officer on 1 July 2006.

The performance hurdles and vesting schedule are detailed in Section D of the Remuneration Report.

During the year 1,050,000 Performance Rights were exercised.

(iv) Executive Share Plan

The Ventracor Executive Plan was first approved by shareholders on 26 October 2004 (ExecutiveShare Plan 1) with performance hurdles broadly in line with the performance of the S&P ASX 200index. During the 2007 financial year the Board aligned the performance hurdles so as the vesting ofPerformance Shares were aligned with the Company’s regulatory milestones announced in the RightsIssue Prospectus issued on 13 March 2006. The Executive Share Plan 2 was subsequently approvedby shareholders at the Company’s Annual General Meeting on 24 October 2006. Directors and keymanagement personnel who have a relevant interest in Performance Shares issued under both plansare detailed on page 64.






20. Key management personnel disclosures (cont’d) Executive Share Plan 1

2007 Granted Vested andBalance at during the Exercised Lapsed Balance at exercisablethe start of year as during the during the the end of at the end



Colin Sutton 400,000 – – 400,000 – –

Key management personnel of the Consolidated Entity

John Begg 108,000 – – – 108,000 –

Vanio Calgaro 99,300 – – 99,300 – –

Roman Greifeneder 83,700 – – – 83,700 –

Jeff Lee 76,100 – – – 76,100 –

John Woodard 212,700 – – – 212,700 –




Colin Sutton 400,000 – – – 400,000 –


John Begg 108,000 – – – 108,000 –

Vanio Calgaro 99,300 – – – 99,300 –

Roman Greifeneder 83,700 – – – 83,700 –

Jeff Lee 76,100 – – – 76,100 –

John Woodard 212,700 – – – 212,700 –

Executive Share Plan 2




John Begg – 340,000 – – 340,000 89,250

Graeme Fallet – 650,000 – – 650,000 170,625

Roman Greifeneder – 340,000 – – 340,000 89,250

Jeff Lee – 340,000 – – 340,000 89,250

Michael Sloggett – 425,000 – – 425,000 111,563

John Woodard – 595,000 – – 595,000 156,188




20. Key management personnel disclosures (cont’d) (v) International Performance Rights Plan

The International Performance Rights Plan was first approved by shareholders on 25 October 2005 (International Performance Rights Plan 1) with performance hurdles broadly in line with theperformance of the S&P ASX 200 index. During the 2007 financial year the Board aligned theperformance hurdles so as the vesting of any Performance Rights were aligned with the Company’sregulatory milestones announced in the Rights Prospectus issued on 13 March 2006. The IPRP wassubsequently approved by shareholders at the Company’s Annual General Meeting on 24 October2006 (International Performance Plan 2). Directors and key management personnel who have arelevant interest in Performance Rights issued under the IPRP offers are detailed below.

International Performance Rights Plan 1

2007 Granted Vested andBalance at during the Exercised Forfeited Balance at exercisablethe start of year as during the during the the end of at the end


Pascal Barrier 47,300 – – 47,300 – –

Peter Crosby 431,750 – – – 431,750 –

Thomas Gould 104,750 – – – 104,750 –

Charles Love 103,600 – – 103,600 – –



Pascal Barrier – 47,300 – – 47,300 –

Peter Crosby – 431,750 – – 431,750 –

Thomas Gould – 104,750 – – 104,750 –

Charles Love – 103,600 – – 103,600 –




Pascal Barrier – 340,000 89,250 250,750 – –

Thomas Gould – 340,000 89,250 – 250,750 –

Charles Love – 374,000 98,175 275,825 – –






20. Key management personnel disclosures (cont’d) (vi) Shareholdings

The numbers of shares in the Company held during the Financial Year by each Director of VentracorLimited and other key management personnel of the Consolidated Entity, including their personally-related entities, are set out below.

2007 Received during AcquisitionsBalance at the the year on (disposals) Balance at the

Name start of the year exercise of LTIs during the year end of the year


John Massey 825,417 – 12,500 837,917

Colin Sutton 58,334 – – 58,334

Peter Crosby – 1,050,000 – 1,050,000

Elizabeth Nosworthy 128,334 – 6,250 134,584

John Ward 51,236 – 6,250 57,486

Katherine Woodthorpe 275,000 – – 275,000


Pascal Barrier – 89,250 – 89,250

John Begg 230,000 – (230,000) –

Jeff Lee – – – –

Charles Love – 98,175 – 98,175

Thomas Gould – 89,250 – –

Roman Greifeneder – – – –

Michael Sloggett 50,000 – (50,000) –

John Woodard – – – –




20. Key management personnel disclosures (cont’d) 2006 Received during Acquisitions

Balance at the the year on (disposals) Balance at theName start of the year exercise of LTIs during the year end of the year


John Massey 707,500 – 117,917 825,417

Colin Sutton 50,000 – 8,334 58,334

Elizabeth Nosworthy 110,000 – 18,334 128,334

John Ward 43,916 – 7,320 51,236

Katherine Woodthorpe 275,000 – – 275,000


John Begg 230,000 – – 230,000

Michael Sloggett – – 50,000 50,000

John Woodard 200,000 – (200,000) –

Shareholdings of Directors and key management personnel include those that have been disclosed underrepresentation made to them by the parties within the AASB 124 Related Party Disclosures. The Directorsand key management personnel have relied upon the representations made as they have no control orinfluence over the financial affairs of the personally related entities to substantiate the shareholdingsdeclared. When a personally related entity declines to provide shareholding details, the shareholding ofthat personally related entity is assumed to be nil.







2007 2006 2007 2006$ $ $ $

21. Auditors’ remuneration During the year the following fees were paid or payable for services provided by the auditor of the Parent Entity:

Assurance services

Audit services


Audit and review of financial reports and other audit work under the Corporations Act 2001 105,500 105,990 105,500 105,990

Total remuneration for audit services 105,500 105,990 105,500 105,990

Other assurance services


Due diligence services related to 2006 capital raising – 63,853 – 63,853

Total remuneration for other assurance services – 63,853 – 63,853

Total remuneration for assurance services 105,500 169,843 105,500 169,843

Taxation services


Tax compliance services, including review of company income tax returns 113,235 63,900 113,235 63,900

Total remuneration for taxation services 113,235 63,900 113,235 63,900

It is Ventracor’s policy not to engage its external auditors for any project that would put the firm in a positionof auditing its own work or that would otherwise be inappropriate for a firm to exercise fully objective andimpartial judgment. Any proposal to engage the Company’s external auditors for non-audit services requirespre-approval by the Audit Risk and Compliance Committee where the fees are expected to exceed $10,000.

22. Contingent liabilities and contingent assetsContingent assets

ARC Grant

The Australian Research Council has advised that Ventracor has been awarded two collaborative grants to the value of $1,227,000. The grants allow Ventracor to further its clinical research and productdevelopment in partnership with the University of New South Wales and University of Technology, Sydney.

The grant with the University of New South Wales will assist in funding research into physiological controlof the LVAD and is valued at $787,000 over four years. The grant with the University of Technology,Sydney will assist in funding research into a Transcutaneous Energy Transmission System (TETS) and isvalued at $440,000 over two years. Ventracor has agreed to make cash and in-kind contributions of up to $1,700,000 under both grants.




22. Contingent liabilities and contingent assets (cont’d)A contingent asset has not been recognised as at 30 June 2007 as contributions by the ARC aredependent upon adequate progress as determined by an annual milestone based review. Liabilities in relation to Ventracor’s cash and in-kind contributions are recognised as incurred.

Commercial Ready Grant

On 23 January 2007, the Australian Federal Government through AusIndustry announced that Ventracorhad been awarded a $2,800,000 Commercial Ready Grant. The grant allows Ventracor to facilitateadoption of new high value-add manufacturing technologies in Australia for products to be solddomestically and for export. During the 2007 year, the Company received payments totaling $1,221,000.

A contingent asset for the remaining payments has not been recognised as at 30 June 2007 as furthercontributions are dependent upon adequate progress as determined by a quarterly milestone review.

Contingent Liabilities

The Directors are not aware of any circumstance or information which would lead them to believe that these liabilities would crystallise and consequently, no provisions are included in the financialstatements in respect of these matters.

Guarantees

The Parent Entity has provided a bank guarantee in respect of its rental obligations in the amount of $159,728.

Consolidated Parent entity

2007 2006 2007 2006$’000 $’000 $’000 $’000

23. Commitments for expenditureOperating leases

Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows:

Within one year 795 816 616 616

Later than one year but not later than 5 years 598 1,435 30 582

Total commitments 1,393 2,251 646 1,198

Capital commitments

Commitments for the acquisition of plant and equipment contracted for at the reporting date but not recognised as liabilities, payable:

Within one year 580 485 524 485

Other expenditure commitments

Commitments for other expenditure contracted for at the reporting date but not recognised as liabilities, payable:

Within one year 1,891 1,498 1,891 1,498

Total commitments 2,471 1,983 2,415 1,983






24. Share-based payments Ventracor Option Plan

Details in relation to approved option plans are provided in Section D of the remuneration report.

The issue of options under the Ventracor Option Plan has been suspended. There were no optionsgranted under the plan to any Director, other key management personnel or employee of the Group in either the current Financial Year or in the previous Financial Year.

Set out below are summaries of options granted under the Ventracor Option Plan.

Balance at Granted Exercised Expired Balance at Exercisablestart of during the during the during the end of the at the end

Grant Expiry Exercise the year year year year year of the yeardate date price Number Number Number Number Number Number

Consolidated and parent entity – 2007

15 Nov 01 30 Nov 06 $0.73 415,000 – 7,500 407,500 – –

15 Nov 01 30 Nov 06 $1.00 812,500 – – 812,500 – –

15 Nov 01 30 Nov 06 $1.35 1,625,000 – – 1,625,000 – –

Total 2,852,500 – 7,500 2,845,000 – –


15 Nov 01 30 Nov 06 $0.73 422,500 – – 7,500 415,500 415,500

15 Nov 01 30 Nov 06 $1.00 827,500 – – 15,000 812,500 812,500

15 Nov 01 30 Nov 06 $1.35 1,655,000 – – 30,000 1,625,000 1,625,000

Total 2,905,000 – – 52,500 2,852,500 2,852,500

Ventracor recognises proceeds received as contributed equity upon the exercise of options. No remunerationexpense has been recognised in relation to the granting of options in accordance with previously applicableaccounting principles and as indicated under significant accounting policy note 1(q) (v).

Employee Share Plan

Ventracor has implemented a general purpose employee share plan as approved by shareholders on 24 October 2006.

The features of this plan are detailed below:

• An employee must have completed one year continuous service before being eligible to participate in the plan;

• An employee is ineligible to participate in the plan whilst he or she is participating in either the ExecutiveShare Plan or the International Performance Rights Plan;

• Eligible employees are entitled to an annual grant of shares to the value of up to 5% of an employee’sannual salary, excluding bonuses, at the discretion of the Board;

• Shares granted under the plan are subject to a ‘holding lock’ for a period of one year from the date of grant;

• Shares are granted at no cost to the employee; and

• There are no performance hurdles.




24. Share-based payments (cont’d)Consolidated Parent Entity

2007 2006 2007 2006

Shares issued under the plan to participating employees on 15 December 2006 (2006 – 18 October 2005) 200,810 47,040 200,810 47,040

International Performance Rights Plan (IPRP)

The International Performance Rights Plans were approved by shareholders on 25 October 2005(International Performance Rights Plan 1) and 24 October 2006 (International Performance Rights Plan 2).The intention of this plan is to provide an incentive to drive continuous improvement, ensure that theCompany attains its regulatory milestones and provide overseas executives with an opportunity to acquire an ownership in the Company.

Upon vesting each right allows the participant to acquire one ordinary share in the company. Rights takethe form of a zero-exercise price option (or ‘ZEPO’) under which the participant may exercise their rightsand receive shares without the payment of an exercise price.

Details of the performance hurdles and vesting criteria are detailed in Section D of the RemunerationReport.


Balance at Granted Exercised Forfeited Balance at Exercisablestart of during the during the during the end of the at the end



16 May 06 16 May 16 Nil 66,900 – – – 66,900 –

14 Feb 06 14 Feb 16 Nil 372,450 – – 103,600 268,850 –

30 Nov 05 30 Nov 15 Nil 314,950 – – 47,300 267,650 –

Total 754,300 – – 150,900 603,400 –


16 May 06 16 May 16 Nil – 66,900 – – 66,900 –

14 Feb 06 14 Feb 16 Nil – 372,450 – – 372,450 –

30 Nov 05 30 Nov 15 Nil – 314,950 – – 314,950 –

Total – 754,300 – – 754,300 –

Performance Rights issued under this plan have been suspended.





15 Dec 06 15 Dec 11 Nil – 2,004,900 387,600 526,575 1,090,725 138,686

Total – 2,004,900 387,600 526,575 1,090,725 138,686






24. Share-based payments (cont’d) Ventracor Executive Share Plan 1

The Ventracor Executive Share Plan was approved by shareholders at the AGM held on 26 October 2004.The intention of this plan is to provide an incentive to drive continuous improvement, ensure that theCompany attains its milestones and provide executives with an opportunity to acquire an ownershipinterest in their employer.

Details of the performance hurdles and vesting criteria are detailed in Section D of the Remuneration Report.




6 Oct 05 6 Oct 15 Nil 181,050 – – 87,650 93,400 –

25 Oct 04 24 Oct 14 Nil 1,635,900 – – 682,500 953,400 –

Total 1,816,950 – – 770,150 1,046,800 –


6 Oct 05 6 Oct 15 Nil – 221,120 – 40,070 181,050 –

25 Oct 04 24 Oct 14 Nil 2,002,300 – – 366,400 1,635,900 –

Total 2,002,300 221,120 – 406,470 1,816,950 –

Performance Shares issued under this plan has been suspended.

Ventracor Executive Share Plan 2

The Executive Share Plan was approved by shareholders at the AGM held on 24 October 2006. Theintention of this plan is to provide an incentive to drive continuous improvement, ensure that the Companyattains its regulatory milestones and provide executives with an opportunity to acquire an ownershipinterest in their employer.

Details of the performance hurdles and vesting criteria are detailed in Section D of the RemunerationReport.




15 Dec 06 15 Dec 16 Nil – 6,309,592 213,278 439,787 5,656,527 1,368,699

3 Mar 07 3 Mar 17 Nil – 96,000 – – 96,000 13,500

Total – 6,405,592 213,278 439,787 5,752,527 1,382,199




24. Share-based payments (cont’d) Expenses arising from share-based payment transactions

Total expenses arising from share-based payment transactions recognised during the period as part of the employee benefit expense were as follows:


2007 2006 2007 2006$’000 $’000 $’000 $’000

Shares issued under Employee Share Plan 162,656 57,859 162,656 57,859

Performance Shares issued under Executive Share Plan 2,441,577 961,552 2,441,577 961,552

Performance Rights issued under IPRP 745,475 423,950 745,475 423,950

3,349,708 1,443,361 3,349,708 1,443,361

25. Related partiesDirectors and key management personnel

Disclosures relating to Directors and key management personnel are set out in the Director’s Report and Note 20.

Subsidiaries

Ventracor Limited is the ultimate parent entity in the wholly owned group comprising the Company and its wholly owned controlled entities. Ownership interests in these controlled entities are set out in Note 26.

Aggregate amounts included in the determination of profit from ordinary activities before income tax thatresulted from transactions with entities in the wholly owned Group are disclosed at Note 5. Transactionsbetween Ventracor Limited and other entities in the wholly owned Group are reflected in amountsreceivable from wholly-owned controlled entities (refer Notes 10 and 12).

Transactions between Ventracor Limited and other entities in the wholly owned group during the yearended 30 June 2007 are summarised below and consisted of:

(a) Loans advanced by Ventracor Limited

(b) The payment of interest on the above loans

(c) The sale of inventory to subsidiary companies

(d) Management and administration charges

The following transactions occurred with related parties:







2007 2006 2007 2006$’000 $’000 $’000 $’000

25. Related parties (cont’d)Loans to subsidiaries

Balance at the beginning of the year – – 7,210 2,302

Loans advanced – – 8,952 3,309

Loan repayments received – – – (176)

Interest charged – – 1,760 437

Management and administration charges – – 863 24

Sales of goods – – 6,443 1,314

Revaluation of foreign currency loans (1,565) –

Balance at the end of the year – – 23,665 7,210

The above transactions were made on normal commercial terms and conditions and at market rates,except that there are no fixed terms for the repayment of principal on loans advanced by VentracorLimited. The average interest rate charged on the loans during the year was 12.48% (2006: 11.75%).

There have been no transactions during the Financial Year that have arisen between any of the entities in the wholly owned group resulting from the election to form a tax consolidation group.

No provisions for doubtful debts have been raised in relation to any outstanding balances, and noexpense has been recognised in respect of bad or doubtful debts due from related parties.

26. SubsidiariesCarrying Value of Investment

Country of 2007 2006Name of Entity Incorporation $ $

VentrAssist Pty Ltd Australia 2 2

Micromedical Industries Pty Ltd Australia 2 2

Ventracor (UK) Ltd UK 2 2

Ventracor BV Netherlands – –

Ventracor Inc USA 1,904 1,904

Micromedical Systems Inc USA 2 2

1,912 1,912

Note: All controlled entities are 100% controlled by Ventracor Limited. All share capital consists of ordinaryshares. During the year, Ventracor BV was incorporated as a 100% owned subsidiary of Ventracor (UK) Ltd.




27. Events occurring after the balance sheet date On 1 August 2007 the Company received approval from the Therapeutic Goods Administration (TGA) tomarket and sell the VentrAssist device in Australia. TGA approval means the VentrAssist is included on theAustralian Register of Therapeutic Goods (ARTG) and Australian hospitals may purchase the device.

On the 15 August 2007 Mr Jeffrey Goodman was appointed as a non-executive Director of Ventracor Ltd.Details of Mr Goodman’s qualifications and experience are detailed in section 10 of the Directors’ Report.

Apart from the matters outlined above, since 30 June 2007 no other matter or circumstance has arisenthat has significantly affected or may affect:

• the Consolidated Entity’s operations in future financial years, or

• the results of the operations in future financial years, or

• the Consolidated Entity’s state of affairs in future financial years.


2007 2006 2007 2006$’000 $’000 $’000 $’000

28. Notes to cash flow statementsa. Reconciliation of cash

Cash at bank and on hand 9,564 753 8,868 572

Cash deposits and bank bills 39,068 51,116 39,068 51,115

Cash at the end of the financial year as per Statements of cash flows 48,632 51,868 47,936 51,687

b. Reconciliation of net loss to net cash outflow from Operating Activities

Net loss (36,471) (30,073) (21,313) (25,474)

Depreciation and amortisation 3,069 2,318 3,008 2,309

Net loss on disposal of plant and equipment 4 4 4 –

Foreign Currency exchange loss – 8 – –

Share based payments expense 3,350 1,346 3,350 1,444

Changes in operating assets and liabilities

(Increase)/decrease in:

Receivables (1,194) (467) (7,596) (1,928)

Other assets (216) (205) (129) (171)

Increase/(decrease) in:

Payables 2,829 604 1,889 390

Provisions 59 69 59 69

Net cash outflow from operating activities (28,570) (26,396) (20,727) (23,361)






29. Earnings per shareConsolidated

2007 2006

Basic earnings per share (loss) – cents (13.8) (14.3)

Weighted average number of ordinary shares used as the denominator in calculating basic earnings per share 264,733,918 210,203,743

Diluted earnings per share (loss) – cents (13.8) (14.3)

Weighted average number of ordinary shares and potential Ordinary shares used as the denominator in calculating diluted earnings per share 264,733,918 210,203,743

Information concerning earnings per share

Earnings for the purpose of the calculation of basic earnings per share and diluted earnings per share isthe net loss.

Shares and International Performance Rights granted to executives under the Executive Share Plan areexcluded from the calculation of basic earning per share. As the Company reported a net loss for theperiod and the performance criteria for exercise of the Performance Rights and Shares has not yet beenmet, the Performance Rights and Shares are not included in the calculation of diluted earnings per shareas they do not have a dilutive impact.




In the Directors’ opinion:

(a) the accompanying Financial Statements and notes are in accordance with the Corporations Act 2001,including:

(i) complying with Accounting Standards, the Corporations Regulations 2001 and other mandatoryprofessional reporting requirements; and

(ii) giving a true and fair view of the Company’s and Consolidated Entity’s financial position as at 30 June 2007 and of their performance for the Financial Year ended on that date; and

(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and whenthey become due and payable; and

(c) the audited remuneration disclosures as set out on in the Directors’ Report comply with AccountingStandards AASB 124 Related Party Disclosures and the Corporations Regulations 2001.

The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officerrequired by section 295A of the Corporations Act 2001.

This declaration is made in accordance with a resolution of the Directors.

John C MasseyChairman


Directors’ declaration




Report on the financial report and AASB 124 Remuneration disclosures contained in the Directors’ Report

We have audited the accompanying financial report of Ventracor Limited (the Company), which comprises thebalance sheet as at 30 June 2007, and the income statement, statement of changes in equity and cash flowstatement for the year ended on that date, a summary of significant accounting policies, other explanatorynotes and the Directors’ declaration for both Ventracor Limited and the Ventracor Group (the consolidatedentity). The consolidated entity comprises the company and the entities it controlled at the year’s end or from time to time during the financial year.

We have also audited the remuneration disclosures contained in the Directors’ Report. As permitted by theCorporations Regulations 2001, the Company has disclosed information about the remuneration of Directorsand executives (‘remuneration disclosures’), required by Accounting Standard AASB 124 Related PartyDisclosures, under the heading ‘remuneration report’ in pages 10 to 25 of the Directors’ Report and not in the financial report.

Directors’ responsibility for the financial report and the AASB 124 Remunerations disclosures contained in the Directors’ Report

The Directors of the Company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) andthe Corporations Act 2001. This responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whetherdue to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimatesthat are reasonable in the circumstances. In Note 1, the Directors also state, in accordance with AccountingStandard AASB 101 Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards ensures that the financial report, comprising the financialstatements and notes, complies with International Financial Reporting Standards.

The Directors of the Company are also responsible for the remuneration disclosures contained in the Directors’ Report.

Auditors’ responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our auditin accordance with Australian Auditing Standards. These Auditing Standards require that we comply withrelevant ethical requirements relating to audit engagements and plan and perform the audit to obtain

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Liability limited by a scheme approved under the Professional Standards Legislation


reasonable assurance whether the financial report is free from material misstatement. Our responsibility is toalso express an opinion on the remuneration disclosures contained in the Directors’ Report based on our audit.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial report and the remuneration disclosures contained in the Directors’ Report. The procedures selecteddepend on the auditor’s judgement, including the assessment of the risks of material misstatement of thefinancial report and the remuneration disclosures contained in the Directors’ Report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’spreparation and fair presentation of the financial report and the remuneration disclosures contained in theDirectors’ 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. An audit also includesevaluating the appropriateness of accounting policies used and the reasonableness of accounting estimatesmade by the Directors, as well as evaluating the overall presentation of the financial report and theremuneration disclosures contained in the Directors’ Report.

Our procedures include reading the other information in the Annual Report to determine whether it contains any material inconsistencies with the financial report.

For further explanation of an audit, visit our website http://www.pwc.com/au/financialstatementaudit.

Our audit did not involve an analysis of the prudence of business decisions made by Directors or management.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for ouraudit opinions.

Matters relating to the electronic presentation of the audited financial report

This audit report relates to the financial report and remuneration disclosures of Ventracor Limited (theCompany) for the financial year ended 30 June 2007 included on the Ventracor Limited website. TheCompany’s Directors are responsible for the integrity of the Ventracor Limited website. We have not beenengaged to report on the integrity of this website. The audit report refers only to the financial report andremuneration disclosures identified above. It does not provide an opinion on any other information which mayhave been hyperlinked to/from the financial report or remuneration disclosures. If users of this report areconcerned with the inherent risks arising from electronic data communications they are advised to refer to thehard copy of the audited financial report and remuneration disclosures to confirm the information included inthe audited financial report and remuneration disclosures presented on this web site.

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.

Auditor’s opinion on the financial report

In our opinion:

(a) the financial report of Ventracor Limited is in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June2007 and of their performance for the year ended on that date; and

(ii) complying with Australian Accounting Standards (including the Australian Accounting Interpretations) andthe Corporations Regulations 2001; and

(b) the consolidated financial statements and notes also comply with International Financial ReportingStandards as disclosed in Note 1.




Auditors’ opinion on the AASB 124 Remuneration disclosures contained in the Directors’ Report

In our opinion, the remuneration disclosures that are contained in pages 10 to 25 of the Directors’ Reportcomply with Accounting Standard AASB 124.

PricewaterhouseCoopers

MW Chiang SydneyPartner

15 August 2007


20 largest shareholders as at 31 August 2007Name Number of Shares %

AMP Life Limited 9,438,434 3.08National Nominees Limited 8,136,431 2.66Pacific Custodians Limited 7,174,694 2.34HSBC Custody Nominees (Australia) Limited 4,876,486 1.59HSBC Custody Nominees (Australia Limited A/C 2) 4,542,669 1.48JP Morgan Nominees Australia Limited 3,891,032 1.27Mr Yew Chan Lim + Ms Guat Leng Tan 2,862,005 0.94Citicorp Nominees Pty Ltd 2,372,143 0.78Pearlarm Pty Ltd 1,915,877 0.63ANZ Nominees Limited 1,551,513 0.51Walscene Pty Ltd 1,516,236 0.50Obi-Wan Investments Pty Ltd 1,300,000 0.42Speedy Target Limited 1,163,400 0.38Mr Peter Crosby 1,050,000 0.34Mr Gregory Edward Bailey + Margaret Ethel Bailey 1,011,086 0.33Citicorp Nominees Pty Ltd 977,087 0.32Warnford Nominees Pty Ltd 968,800 0.32Dr Kong Hai Goh 894,627 0.29RBC Dexia Investor Services Australia Nominees Pty Ltd 858,679 0.28Mrs Joyce Noela Slaughter + Mr Noel Roy Slaughter 845,000 0.28

Total 57,346,199 18.74

Distribution of shareholders Number of Shareholders Number of Shares %

Totals for Security Code VCR1 – 1,000 2,653 1,828,033 0.60

1001 – 5,000 7,347 20,611,479 6.745,001 – 10,000 3,651 27,832,236 9.10

10,001 – 100,000 5,020 132,933,844 43.45100,001 and Over 342 122,772,945 40.13

Total 19,013 305,978,537 100.00

The number of security investors holding less than a marketable parcel of 820 securities based on the share price at 31 August 2007, is 1,556 and they hold 750,441 securities.

At 31 August 2007, the Company had issued a total of 10,844,400 unquoted securities distributed among 85 security holders.

Additional Information




Australia

Ventracor Limited126 Greville StreetChatswood NSW 2067Sydney AustraliaT: +61 2 9406 3100F: +61 2 9406 3101E: [email protected]: www.ventracor.com

USA

Ventracor Inc101 Lincoln Centre Drive Suite 420Foster City CA 94404 USAT: +1 866 882 5089 (US Toll Free)

+1 650 356 5900 (Outside US) F: +1 650 356 5901

Europe

Ventracor BVCereslaan 345384 VT, HeeschNetherlandsT: +31 412 487 140 F: +31 412 487 145

Ventracor, the circle device, VentrAssist and VentraVision are trademarks of Ventracor Limited and VentrAssist Pty Ltd. The VentrAssist™ LVAD incorporates technologies describedin US patents 6,609,883; 6,227,797; 6,638,011; 6,866,625 and other patents pending. US CAUTION: The VentrAssist™ LVAD is an investigational device and limited by law toinvestigational use only. © Ventracor Limited Sydney Australia 2007 ISSN 1448-6369


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