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FinancialReport
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ContentstoFinancialReport
CorporateInformation.............................................................................................................1
DirectorsReport......................................................................................................................2
AuditorsIndependenceDeclaration.....................................................................................29
CorporateGovernanceStatement.........................................................................................30
ConsolidatedStatementofFinancialPosition.......................................................................40
ConsolidatedStatementofComprehensiveIncome.............................................................41
ConsolidatedStatementofCashFlows.................................................................................42
ConsolidatedStatementofChangesinEquity.......................................................................43
Notesto
the
Consolidated
Financial
Statements
..................................................................
44
DirectorsDeclaration..........................................................................................................108
IndependentAuditReport...................................................................................................109
ASXAdditionalInformation.................................................................................................111
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INTEGRATEDLEGALHOLDINGSLIMITED
ACN
120
394
194
CorporateInformation
1
ABN20120394194
DirectorsTheHonJohnDawkins,NonexecutiveChairman
AnneTregonning,NonexecutiveDirector
GraemeFowler,ManagingDirectorandChiefExecutive
CompanySecretary
JeanMarieRudd
Registeredoffice
Level8,WesfarmersHouse
40TheEsplanade
Perth
WA
6000
Principalplaceofbusiness
HeadOffice
Level22
1MarketStreet
Sydney NSW 2000
Tel: (02)82636600
ShareRegister
ComputershareInvestorServicesPtyLimited
Level2
45StGeorgesTerrace
Perth WA 6000
Tel: (08)93232000
IntegratedLegalHoldingsLimitedsharesarelistedontheAustralianStockExchange.
Solicitors
TalbotOlivier ArgyleLawyers
Level8,WesfarmersHouse Level22
40TheEsplanade 1MarketStreet
Perth
WA
6000
Sydney
NSW
2000
Bankers
NationalAustraliaBankLimited
100StGeorgesTerrace
Perth WA 6000
Auditor
Ernst&Young
11MountsBayRoad
Perth WA 6000
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Yourdirectorssubmittheirreportfortheyearended30June2011.
DIRECTORS
The names and details of the Companys directors in office during the financial year and until the
date of this report are as follows. Directors were in office for this entire period unless otherwise
stated.
Names,qualifications,experienceandspecialresponsibilities
TheHonJohnDawkins,AO,B.Ec(NonexecutiveChairman)
MrDawkinswasChairmanofLawCentralfromitsearlybeginningsinMarch2000untilMarch2006.
Hisother
board
appointments
include
Chairman
of
the
Archer
Exploration
Ltd,
TVET
Australia
Ltd
andSovereignGoldLtdandDirectorofM&CSaatchiDirectPtyLtd. Forover10years,until2005,he
served on the board of Sealcorp Holdings, now Asgard Wealth Solutions, and he is a former
chairmanofEldersRuralBankandRetailEnergyMarketCompanyLtd.
MrDawkinshasconsultedtoseverallargeAustralianandoverseascompanies,theWorldBankand
the OECD. Until his retirement from politics in 1994 he served as a Minister in the Federal
Governmentfor10yearsandintheHouseofRepresentativesfor18years.
He isagraduate inEconomicsfromtheUniversityofWesternAustralia,andhehasbeenawarded
honorary doctorates from The University of South Australia and the Queensland University of
Technology.
Duringthepastthreeyears,MrDawkinsservedasadirectorofthefollowinglistedcompanies:
MGMWirelessLtdappointed17August2010*
ArcherExplorationLtdappointed30April2010*
SovereignGoldCompanyLimitedappointed16September2010*
GeneticTechnologiesLtdappointed24November2004;resigned19November2010
*denotescurrentdirectorship
AnneTregonning,B.Com,FCA,
GAICD
(Non
executive
Director)
MsTregonninghasextensiveexperienceinfinanceandriskmanagementinbothpublicpracticeand
commerce. Senior positions previously held include General Manager Finance and Risk, Wealth
Management Division,St George Bank, Director Group Finance, Sealcorp Holdings (now ASGARD
WealthSolutions),andSeniorManagerCorporateBanking,BankWest.
Ms Tregonning is a nonexecutive director of Retail Energy Market Company Ltd and the Breast
Cancer Research Centre Western Australia. She is a past executive director of ASGARD Capital
ManagementLimited,apastStateChairmanoftheInstituteofCharteredAccountantsandmember
of itsNationalCouncil,andapastdirectorofotherpubliccompanyandnotforprofit/professional
organisations.
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Ms Tregonning is a graduate of The University of Western Australia, a Fellow of The Institute of
CharteredAccountantsandgraduateoftheAustralianInstituteofCompanyDirectors.
MsTregonningdidnothaveanydirectorshipsinotherlistedcompaniesduringthepastthreeyears.
GraemeFowler,B.Bus,CPA,MAICD(ManagingDirectorandChiefExecutive)
Mr Fowler was previously Chief Executive Officer of listed accounting and financial services
consolidator WHK Group Limited. He brings specific experience in the successful consolidation of
professionalservicesfirms.Hespentover15yearsinseniormanagementroleswiththeBTFinancial
GroupincludingGroupChiefFinancialOfficer,ChiefExecutiveOfficerofBTFundsManagementNZ,
and Chief Executive Officer of BT Portfolio Services (including BT Wrap). Mr Fowler is also non
executivedirectorofCountplusLimited.
Mr Fowler is a business studies graduate of The University of Technology, Sydney and a Certified
PracticingAccountant.
Duringthepastthreeyears,MrFowlerservedasadirectorofthefollowinglistedcompany:
CountplusLimitedappointed19August2010*
*denotescurrentdirectorship
Beneficialinterestsinthesharesofthecompanyandrelatedbodiescorporate
Asatthedateofthisreport,thebeneficialinterestsofthedirectorsinthesharesofIntegratedLegal
HoldingsLimitedwere:
Numberof
OrdinaryShares
JDawkins 2,950,129
ATregonning 416,001
GFowler 4,860,613
COMPANYSECRETARY
JeanMarieRudd,B.Com,CA,GAICD
MrsRuddisalsotheChiefFinancialOfficer(CFO)oftheIntegratedLegalHoldingsLimitedgroupof
companies.
Mrs Rudd was previously the Western Australian Finance Director of national law firm, Minter
Ellison, bringing industryspecific experience to her roles with Integrated Legal Holdings Limited.
Mrs Rudd has over 20 years experience in CFO/Company Secretary roles including senior
managementroleswiththeHeytesburyGroupandThinkSmartLimited.
MrsRuddisagraduateofCurtinUniversity,Perth,aCharteredAccountantandagraduateofthe
AustralianInstituteofCompanyDirectors.
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PRINCIPALACTIVITIES
Theprincipal
activity
of
the
entities
of
the
consolidated
Group
is
the
provision
of
legal
services
and
onlinelegaldocumentservicesinAustralia.
OPERATINGANDFINANCIALREVIEW
GroupOverview
AdetailedreviewoftheoperationsoftheGroupduringthefinancialyear,itsfinancialpositionand
businessstrategiesandprospectsforfuturefinancialyearsissetoutbelow.
OperatingResultsfortheYear
Consolidated operating revenues of $28,475,476 were 19% higher than the previous year which
reported $23,874,988 operating revenues. Revenue from ordinary activities increased due to a
combinationoforganicgrowthandtheacquisitionofWojtowiczKellyLegalinFebruary2011.
For the year ended 30 June 2011, the consolidated entity generated a net profit after tax of
$1,286,670comparedtotheyearended30June2010of$853,494,anincreaseof51%.
Earningspersharefortheyearwere1.41centspershare,comparedto1.18centspershareforthe
yearended30June2010,anincreaseof19%.
TheDirectorsconsiderthattheCompanyiswellplacedforthefuture,inparticularnoting:
TheCompanyhasgoodbusinesseswithstrongmarketpositionsandgrowthprospects.
The Company is successfully building a strong culture of likeminded people, with common
aspirationsforabovemarketgrowthandbusinessimprovement.
TheCompanyhasdemonstratedanabilitytoachievestrongandconsistentrevenuegrowth.
OrganicandacquisitiongrowthopportunitiesfortheGroupandformemberfirms.
TheCompanyhasastrongbalancesheetandavailablefundingforfurthergrowth.
Scopeforbusinessperformanceimprovementinallmemberfirms,providinganopportunityfor
increasedprofitabilityovertime.
In particular, an opportunity exists to increase profitability by achieving increased scale at both a
Groupandmemberfirmlevel.
AtaGrouplevelthismeanssecuringmorememberfirmstosharethefixedoverheadburdenofthe
Corporateoffice.
Andatamemberfirmlevel,thismeansachievingorganicandacquisitiongrowthtooptimisetheuse
ofexistingpremises,andtosharetheprofessionalmanagementandinfrastructurecoststhatthese
firmsnowhaveinplace.
The
Directors
believe
that
longterm
competitive
advantage
can
be
achieved
by
the
Company
supportingmemberfirmsindevelopingscaletounderpinfuturegrowthandprofitability.
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AfullercommentaryontheresultsforthereportingperiodiscontainedintheASXreleasedated18
August2011.
ShareholderReturns
TheCompanysreturntoshareholdersisasfollows:
Growth 2011 2010
Basicanddilutedprofitpershare(cents) 19% 1.41 1.18
PerformanceIndicators
Management and the Board monitor the Groups overall performance, from the execution of its
strategic plan through to the performance of the Group against operating plans and financial
budgets.
The Board, together with management have identified key performance indicators (KPIs) that are
used to monitor performance. Directors receive the KPIs for review prior to each monthly Board
meetingallowingalldirectorstoactivelymonitortheGroupsperformance.
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ReviewofFinancialCondition
Liquidityand
Capital
Resources
The statement of cash flows illustrates that there was a net cash inflow of $1,231,739 from
operatingactivitiesduringtheyear(2010:$1,448,161).
Cashflowsusedforinvestingactivitiesamountedto$1,188,744(2010:$802,129)ofwhich$209,596
related to the acquisition of plant and equipment (2010: $802,129) and $979,148 related to the
acquisitionofbusinessesduringtheyear(2010:nil).
Totalcashinflowsweresupplementedby$546,545(2010:$766,027)receivedtofinanceequipment
acquisitions and annual professional indemnity insurance premiums and $1,000,000 (2010:
$227,000)additional
draw
down
of
bank
floating
bill
facilities
early
in
the
financial
year.
Finally, there was a cash outflow of $441,556 (2010: $131,122) for the payment of dividends and
paymentsforshareissueexpensesof$17,389(2010:$115,058).
ThenettangibleassetbackingoftheGroupwas5.23centspershare(2010:6.54cents)areduction
of20%overtheprioryear. ThisreductionisprimarilyduetotheacquisitionofWojtowiczKellyLegal
(refer note 29) in February 2011 which is not expected to add materially to profitability until the
2012financialyear.
Assetandcapitalstructure
CONSOLIDATED
2011 2010
$ $
Netassets 18,012,663 16,197,914
Less:Cashandcashequivalentsnetof
overdrafts (2,435,615) (1,948,949)
Totalcapitalemployed 15,577,048 14,248,965
The level of gearing in the Company is within acceptable limits set by the directors given the
implicationsofthebusinessacquisitionsandpaymentoftaxliabilitiesduringtheyear.
Shareissues
during
the
year
TheCompanyhasissued10,679,662shares(2010:17,138,488shares)duringtheyear:
884,550sharestoemployeesundertheDeferredEmployeeSharePlan;
2,143,112 shares to shareholders under the dividend reinvestment plan for the 2011 interim
dividend(May2011);
1,800,000 shares to the vendors of The Argyle Partnership in final satisfaction of deferred
considerationpayable(September2010);
125,000sharesinpartsatisfactionof2010profitshareentitlements(December2010);and
5,727,000sharestovendorsofthelegalpracticeofWojtowiczKellyLegal(February2011).
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7
RiskManagement
TheGroup
takes
a
proactive
approach
to
risk
management.
The
Board
is
responsible
for
ensuring
thatrisks,andalsoopportunities,areidentifiedonatimelybasisandthattheGroupsobjectivesand
activitiesarealignedwiththerisksandopportunitiesidentifiedbytheBoard.
The Board has established a separate Audit and Risk Management Committee. With respect to
recognisingandmanagingrisk,theCommitteeisresponsibleforensuringtheCompanyhasasound
system of risk oversight, management and internal control. This system is designed to identify,
analyse, action, monitor and report risks; including governance, strategic, operational and
compliancerisk;andinformtheBoardofmaterialchangestotheGroupsriskprofile.
The Board has a number of mechanisms in place to ensure that managements objectives and
activitiesare
aligned
with
the
risks
identified
by
the
Board.
These
include
the
following:
Boardapprovalofastrategicplan,whichencompassestheGroupsvision,mission,strategies,
goalsandpriorities,designedtomeetstakeholdersneedsandmanagebusinessrisk;
Implementation of Board approved budget and Board monitoring of progress against budget,
includingtheestablishmentandmonitoringoffinancialKPIs;and
Theestablishmentofcommitteestoreportonspecificbusinessrisks.
SIGNIFICANTCHANGESINTHESTATEOFAFFAIRS
The
acquisition
of
Wojtowicz
Kelly
Legal
on
1
February
2011
has
further
strengthened
the
legal
services division of the Group. Wojtowicz Kelly Legal (incorporating Civic Legal, the Simpson Kelly
Group,GibsonTovey&Associates,AllPropertyConveyancingandJanSimpsonSettlements)merged
with existing member firm Tax Lawyers Australia Pty Ltd trading as Brett Davies Lawyers and the
mergedbusinessnowtradesasCivicLegal.
Wojtowicz Kelly Legal is an established and well regarded Perth CBD based commercial law firm
delivering services to commercial enterprises and private individuals predominantly in Western
Australia,butalsotoenterprisesbasedinSoutheastAsiawithAustralianinterests. Thebusinesswas
establishedin1994andhasdevelopedarangeoflegalservicesincludingcorporateandcommercial,
property,litigation,family,migrationadvice,localgovernmentlawandsettlements(conveyancing).
TheCivicLegalbusinessalsohasanofficeinRockingham,southofPerth,andarepresentativeoffice
inSingapore.
Therehavebeennoothersignificantchanges inthestateofaffairsduringtheyearended30June
2011.
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SIGNIFICANTEVENTSAFTERTHEREPORTINGDATE
AcquisitionoflegalpracticeofPLNLawyers
On 1 August 2011 the Company acquired the legal practice of PLN Lawyers (PLN) under tuckin
arrangementswiththeexistingmemberfirmArgyleLawyers.
PLNisanestablishedandhighlyregardedSydneybasedcommerciallawfirm.PLNsmissionistobe
the leading provider of legal and business advisory services to corporations and international
institutions operating in the Pacific region. PLNs clients include Australian, Asian, American and
European based companies and financial institutions with business interests in the AsiaPacific
region.
PLNprovides
a
range
of
legal
services
including
Corporate
and
Financial
Services,
Travel
and
Tourism,
Aviation Industry services, Infrastructure and Development, Insurance, Insolvency, Mergers,
AcquisitionsandIPO's,MiningandPetroleum,TelecommunicationsandInformationTechnology.
PLN will tuckin with existing member firm Argyle, with the combined firm having 6 Principals,
approximately40staffandannualfeeincomeofmorethan$10m.
Furtherdetailsoftheacquisitionareprovidedinnote33andintheASXreleaseon1August2011.
DeclarationofFinalDividend
The
Directors
have
declared
a
fully
franked
final
dividend
of
0.6
cents.
The
dividend
will
have
a
recorddateof14October2011andapaymentdateof4November2011.Therewillbeadividend
reinvestmentplanavailable.
RenewalofBankFundingFacilities
After balance date the Company renegotiated bank funding facilities which were due to expire in
September2011.
As at 30 June 2011, the Company had $3.05m in bank funding facilities available of which $1.95m
was drawn down. After balance date, the facilities were renegotiated with an increased limit of
$3.50m,with
renewal
dates
of
September
2012
and
September
2013.
Furtherdetailsareprovidedinnote33.
LIKELYDEVELOPMENTSANDEXPECTEDRESULTS
Integrated Legal Holdings Limited will continue to seek growth in earnings per share through the
developmentandgrowthofexistingmemberfirmsandtheacquisitionofadditionalmemberfirms
throughoutAustralia.
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ENVIRONMENTALREGULATION
TheGroups
operations
are
not
subject
to
any
significant
environmental,
Commonwealth
or
State,
regulationsorlaws.
INDEMNIFICATIONANDINSURANCEOFDIRECTORSANDOFFICERS
Each of the directors and secretary of the Company has entered into a deed with the Company
wherebytheCompanyhasprovidedcertaincontractualrightsofaccesstobooksandrecordsofthe
Company to those directors and secretary and to effect and maintain insurance in respect of the
directorsandofficersliabilityandprovidecertainindemnitiestoeachofthedirectors,totheextent
permittedbysection199BoftheCorporationsAct2001.
The Company has put in place Prospectus Insurance and Directors and Officers Liability Insurance.
The contract prohibits the disclosure of the nature of the liability and/or the amount of the
premium.
DIRECTORSMEETINGS
Thenumberofmeetingsofdirectors(includingmeetingsofcommitteesofdirectors)heldduringthe
yearandthenumberofmeetingsattendedbyeachdirectorwasasfollows:
DirectorsMeetings
Auditand
Risk
Management
CommitteeMeetings
Eligibleto
attend Attended
Eligibleto
attend Attended
JDawkins 11 10 8 7
ATregonning 11 11 8 8
GFowler 11 11 8 8
Committeemembership
As at the date of this report, the Company had an Audit and Risk Management Committee of the
BoardofDirectors.
TheAuditandRiskManagementCommitteecomprisesallmembersoftheBoardofdirectorsandis
chairedbyMsTregonning.
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AUDITORINDEPENDENCEANDNONAUDITSERVICES
Acopy
of
the
auditors
independence
declaration
received
by
the
directors
in
relation
to
the
audit
fortheyearisprovidedwiththisreportonpage29.
NONAUDITSERVICES
Nonauditserviceswereprovidedbytheentitysauditor,Ernst&Young. Thedirectorsaresatisfied
thattheprovisionofnonauditservicesiscompatiblewiththegeneralstandardofindependencefor
auditors imposed by theCorporationsAct2001. The nature and scope of each type of nonaudit
serviceprovidedmeansthatauditorindependencewasnotcompromised.
Ernst&
Young
received
or
are
due
to
receive
the
following
amounts
for
the
provision
of
non
audit
services:
CONSOLIDATED
2011 2010
$ $
Taxcompliance 17,500 31,453
Taxationservices 5,500
17,500 36,953
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REMUNERATIONREPORT(audited)(continued)
12
There
were
no
other
changes
to
KMP
after
the
reporting
date
and
before
the
date
the
financial
reportwasauthorisedforissue.
2.
Remunerationataglance
IntegratedLegalHoldingsLimitedsremunerationstrategyisdesignedtoattract,motivateandretain
employees and nonexecutive directors (NEDs) by identifying and rewarding high performers and
recognisingthecontributionofeachemployeetothecontinuedgrowthandsuccessoftheGroup.
The remuneration policy is to position total employment cost close to the median of its defined
talentmarket
to
ensure
a
competitive
offering.
Forthe2011performanceperiod,100%oftheshorttermincentivepaymentisbasedonattainment
of a financial measure (net profit before tax or earnings per share). In recognition of the
performanceoftheGroupandtheexecutivesduringtheyear,atotalof$704,234 incashbonuses
waspaidtoGroupKMPsduringthe2011financialyear.
Long term incentive awards consisting of shares that vest on attainment of a predetermined
performancegoalareawardedtoselectedexecutives. TheCompanyusesearningspershareasthe
performancemeasurefortheshareawards. Nosharesvestednorwereawardedor issuedduring
the2011financialyear.
The remuneration of NEDs of the Company consists only of directors fees and committee fees.
Directorandcommitteefeeswereindexedforinflationovertheprioryearfees.
3.
Boardoversightofremuneration
Remunerationassessmentandapprovalprocess
TheBoardofDirectorsoftheCompany isresponsiblefordeterminingandreviewingremuneration
arrangementsfortheBoardandexecutives.
TheBoardwillassesstheappropriatenessofthenatureandamountofremunerationofNEDsand
executives on a periodic basis by reference to relevant employment market conditions, with the
overallobjectiveofensuringmaximumstakeholderbenefitfromtheretentionofahighperforming
directorandexecutiveteam.
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13
Remunerationstrategy
IntegratedLegalHoldingsLimitedsremunerationstrategyisdesignedtoattract,motivateandretain
employeesandNEDsbyidentifyingandrewardinghighperformersandrecognisingthecontribution
ofeachemployeetothecontinuedgrowthandsuccessoftheGroup.
To this end, key objectives of the Companys reward framework are to ensure that remuneration
practices:
arealignedtothegroupsbusinessstrategy;
offercompetitiveremunerationbenchmarkedagainsttheexternalmarket;
providea
strong
linkage
between
individual
and
group
performance
and
rewards;
aligntheinterestsofexecutiveswithshareholdersthroughmeasurementofshareholderreturn;
haveaportionofexecutiveremunerationatrisk;and
establishappropriate,demandingperformancehurdlesforvariableexecutiveremuneration.
Remunerationstructure
In accordance with best practice corporate governance, the structure of NED and executive
remunerationisseparateanddistinct.
4.
Nonexecutivedirectorremunerationarrangements
Remunerationpolicy
TheBoardseekstosetaggregateremunerationatalevelthatprovidestheCompanywiththeability
to attract and retain directors of the highest calibre, whilst incurring a cost that is acceptable to
shareholders.
The amount of aggregate remuneration sought to be approved by shareholders and the fee
structure is reviewed annually against inflation and fees paid to NEDs of comparable companies.
TheBoardmayalsoconsideradvicefromexternalconsultantswhenundertakingtheannualreview
process.
The Companys Constitution and the ASX Listing Rules specify that the aggregate remuneration of
NEDs shall be determined from time to time by a general meeting. The current aggregate
remuneration level for nonexecutive directors, as approved by shareholders, is $250,000 (2010:
$250,000)perannum.
TheBoardwillnotseekanyincreasefortheNEDspoolatthe2011AGM.
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14
Structure
The remuneration of NEDs consists of directors fees and committee fees. NEDs do not receive
retirementbenefits,nordotheyparticipateinanyincentiveprograms.
EachNEDreceivesabasefeeof$46,597(2010:$45,000)forbeingbothadirectoroftheCompany
and member of the Audit and Risk Management Committee. An additional fee of $46,597 (2010:
$45,000)isalsopaidiftheDirectoristheChairmanoftheBoardand$18,639(2010:$18,000)ifthe
directorisaChairmanoftheAuditandRiskManagementCommittee.
TheremunerationofNEDsforthefinancialyearisdetailedintable1onpage26ofthisreport.
5.
Executiveremunerationarrangements
Remunerationlevelsandmix
TheGroupaimstorewardexecutiveswithalevelandmixofremunerationcommensuratewiththeir
positionandresponsibilitieswithintheGroupsoasto:
Reward executives for Group, subsidiary and individual performance against targets set by
referencetoappropriatebenchmarks;
Alignthe
interests
of
executives
with
those
of
shareholders;
and
Ensuretotalremunerationiscompetitivebymarketstandards.
Structure
In the 2011 financial year, the executive remuneration framework consisted of the following
components:
Fixedremuneration
Variableremuneration:
o
Shorttermincentive(STI)
o
Longterm
incentive
(LTI)
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15
The
table
below
illustrates
the
structure
of
Integrated
Legal
Holdings
Limiteds
executive
remunerationarrangements:
Remuneration
ComponentVehicle Purpose
Linkto
Performance
Fixedremuneration Comprisesbasesalary,
superannuation
contributionsand
otherbenefits
Setwithreferencetorole,
marketandexperience.
Executivesaregiventhe
opportunitytoreceivetheir
fixedremunerationina
varietyofformsincluding
cashand
fringe
benefits
suchasparking.Itis
intendedthatthemanner
ofpaymentchosenwillbe
optimalfortherecipient
withoutcreatingunduecost
fortheGroup.
Remunerationlevelis
determinedannually
andisbasedona
financialscalelinked
toindividual
performanceinthe
previousfinancial
year.
STIcomponent Awardsaremadein
theformofcash
paymentsorshare
basedpayments
(equitysettled).
Rewardsexecutivesfor
theircontributionto
achievementofGroupand
businessunitoutcomes,as
wellas
individual
KPIs.
Linkedtofinancial
measuresincluding
earningspershareand
achievementof
profitabilitytargets.
LTIcomponent Awardsaremadein
theformofcash
paymentsorshare
basedpayments
(equitysettled).
Rewardsexecutivesfor
theircontributiontothe
creationofshareholder
valueoverthelongerterm.
Earningspershareis
thekeyfinancial
metric.
Fixedremuneration
FixedremunerationisreviewedannuallybytheBoard.TheprocessconsistsofareviewofCompany,
subsidiaryandindividualperformance,relevantcomparativeremunerationexternallyandinternally
and,where
appropriate,
external
advice
on
policies
and
practices.
The
Board
has
access
to
external
adviceindependentofmanagement,whereappropriate.
Thefixedremunerationcomponentofexecutivesisdetailedintable1onpage26.
Variableremuneration shorttermincentive(STI)
TheobjectiveoftheSTIprogramistolinktheachievementoftheGroupsoperationaltargetswith
the remuneration received by the executives charged with meeting those targets. The total
potentialSTIavailableissetatalevelsoastoprovidesufficientincentivetotheexecutivetoachieve
theoperationaltargetsandsuchthatthecosttotheGroupisreasonableinthecircumstances.
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16
STIawards
vest
at
the
end
of
the
period
over
which
the
performance
targets
are
measured,
and
are
forfeitedifemploymentisterminatedbeforethevestingdate. However,theBoardhasdiscretionto
approveproratapaymentsuptotheterminationdate,takingintoaccountthecircumstances.
ManagingDirectorandChiefExecutive
The Managing Director and Chief Executive is entitled to a maximum performance bonus of
$130,000 (2010:$160,000)payable in cashorshares at the discretionof theBoard, subject tothe
achievementofspecificearningspershare(EPS)performancetargets,calculatedbasedonearnings
beforeperformancebonusexpenserecognisedforthe2011financialyear. Thetargetsforthe2011
financialyearwere:
ThemaximumperformancebonusispayablewheretheGroupachieves25%EPSgrowth.
WheretheGroupachievesbetween15%and25%EPSgrowth,theamountpayableis40%ofthe
maximumbonus,plusanadditional6%(ofmaximumbonus)forevery1%inexcessof15%EPS
growth,toamaximumof100%bonusat25%EPSgrowth.
Wherethegroupachievesbetween10%and15%EPSgrowth,theamountpayableis20%ofthe
maximumbonus,plusanadditional4%(ofmaximumbonus)forevery1%inexcessof10%EPS
growth,toamaximumof40%bonusat15%EPSgrowth.
Where
the
Group
achieves
less
than
10%
EPS
growth
for
the
2011
financial
year,
any
bonus
payableisatthediscretionoftheBoard.
These targets are measured using financial reporting information and reviewed by the Board. If
performancetargetsarenotachieved,theperformancebonusmaystillbepaidatthediscretionof
theBoard,takingintoaccountthecircumstances.
MemberFirmPrincipals
Actual STI payments are granted to subsidiary member firms dependent on the extent to which
specific performance hurdles are met. The STI payments are calculated as a percentage of an
amount
by
which
profitability
of
a
subsidiary
exceeds
a
predetermined
profit
hurdle
for
that
subsidiary.
ProfithurdlesareapprovedbytheBoardatthetimeofacquisitionofamemberfirm.
The STI payment for a subsidiary is then allocated between Principals of that subsidiary based on
predeterminedKPIs,includingfeeincomeattributabletoeachPrincipal.
STI payments may be paid as a cash bonus, up to a maximum of 40% of the accrued bonus, at
quarterly intervals during the financial year subject to satisfaction of member firm KPI targets.
Accruedbonusesthatremainunpaidatyearendaredeliveredasacashbonusorshareswithin10
daysafter
the
release
of
the
audited
financial
statements
each
financial
year.
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18
MemberFirm
Principals
The Managing Director reviews the STI bonus payments for a subsidiary for subsequent allocation
between Principals of that subsidiary based on predetermined key performance indicators, which
may include fee income attributable to each Principal,which is measured using financial reporting
information.
ThemaximumSTIcashbonusiscalculatedasapercentageofanamountbywhichprofitabilityofa
subsidiaryexceedsapredeterminedprofithurdleforthatsubsidiary. TheminimumSTIcashbonus
payableisnil.
Duringthe
2011
financial
year,
the
bonus
achieved
and
vested
for
Mr
Taylor,
Managing
Principal
of
Talbot Olivier, was $74,846 (2010: $44,103), forMr Bobbin, Managing Principal of Argyle Lawyers,
was$238,394(2010:$300,000),forMrDouglass,PrincipalofArgyleLawyers,was$238,394(2010:
$400,000), for Mr Ireland, Principal of Argyle Lawyers, was nil (2010: $50,000), for Mr Davies,
Managing Principal of Brett Davies Lawyers (to 31 January 2011), was nil (2010: nil) and for Mr
Quahe,ManagingPrincipalofCivicLegal(from1February2011),wasnil(2010:n/a).
The bonuses achieved and vested during 2011 will be paid within 10 days after the release of the
2011AnnualReport,subjecttoachievementofKPItargetsinrelationtofirmdebtormanagement.
TherehavebeennoalterationstotheSTIbonusplanduringtheyear.
ChiefFinancialOfficerandCompanySecretary
TheManagingDirectorapprovedtheSTIbonuspaymentforthesixmonthsended31August2010.
Themaximumcashbonusis$7,000andtheminimumisnil.
$5,000(2010:$5,400)ofSTIawardsinrespectofthesixmonthperiodended31August2010vested
during the 2011 financial year with 29% (2010: 10%) forfeited. Board discretion was given to the
payment of a cash bonus given that performance conditions were not fully met. This was paid in
cashinOctober2010.
Under
the
new
STI
bonus
arrangements,
commencing
from
1
September
2010
and
afterconsiderationofperformanceagainstKPIs,theBoarddeterminedthattheamounttobepaidtothe
Chief Financial Officer and Company Secretary would be $17,600 (2010: $10,400). Payment was
accruedat30June2011andpaid incash inSeptember2011. ThemaximumSTIbonusachievable
was$17,600andtheminimumwasnil.
Other than the new arrangements from 1 September 2010 noted above, there were no other
alterationstotheChiefFinancialOfficerandCompanySecretarysSTIbonusplanduringtheyear.
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19
Variableremuneration
long
term
incentives
(LTI)
ChiefFinancialOfficerandCompanySecretary
TheLTIbenefitsaredeliveredonadiscretionarybasisbytheBoardintheformofordinarysharesin
theCompanyundertheDeferred EmployeesSharePlan. Suchgrantsareonlymadeto executives
who are able to influence the generation of shareholder wealth and thus have an impact on the
Groupsperformanceagainsttherelevantlongtermperformancehurdle.
NosharesweregrantedtotheChiefFinancialOfficerandCompanySecretaryduringtheyear(2010:
40,000shares).
Sharesissuedinprioryearswillvestinstagesduringthethreeyearperiodfromissuedatefollowing
thesuccessfulachievementoftheperformancecriteriaspecifiedbelow,andprovidedthattheChief
Financial Officer and Company Secretary remains in the employment of the Company for each
vestingperiod. ShouldtheChiefFinancialOfficerandCompanySecretaryceaseemploymentprior
tothisdate,unvestedshareswillbeforfeited.
Performancecriteriaattachedtothesharesareasfollows:
100% of shares will vest if cumulative growth in the Companys earnings per share over the
threeyeartermis45%ormore.
Shareswillcommencevestingafterachieving30%growthintheCompanysearningspershare.
50% of shares will vest at 30% growth in earnings per share, with an additional 5% of shares
vestingforevery1.5%ofearningspersharegrowthabove30%.
Ifperformancetargetsarenotachieved,thesharesmaystillvestatthediscretionoftheBoard,
takingintoaccountthecircumstances.
Performance criteria will be measured using financial reporting information. At 30 June 2011, no
sharesundertheLTIplanhavevested(2010:nil)andnonewereforfeited(2010:nil).
Executiveshare
trading
policy
TheCompanyhas inplaceasharetradingpolicywhich imposestradingrestrictionsonofficersand
employeesoftheCompanyanditsrelatedentitiesthatareconsideredtobeinpossessionofinside
information.
Executives and directors are prohibited from using derivatives or hedge instruments or otherwise
entering intotransactions(includingmargin loans)thatoperateorare intendedtooperateto limit
theeconomicriskofsecurityholdingsovervestedorunvestedshares intheCompanywithoutthe
writtenpermissionoftheBoard.
Thisis
monitored
by
the
Company
Secretary
on
a
monthly
basis
through
review
of
statements
from
theshareregistryserviceprovider,ComputershareInvestorServicesPtyLimited.
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20
Furthermore,executives
and
directors
are
required
to
declare
their
intention
to
trade
in
shares
to
theCompanySecretary,whichisthenpresentedtotheBoard.
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21
6.
Companyperformanceandthelinktoremuneration
IntegratedLegalHoldingsLimitedsremunerationpolicyaimstoconnecttheremunerationreceived
byexecutiveswithearningsandthecreationofshareholderwealth.
Group performance is reflected in the movement of the Groups EPS over time. The graph below
showsIntegratedLegalHoldingsLimitedsEPShistorysinceincorporationinJune2006:
*Fortheperiodfromincorporationon26June2006to30June2007
The2007EPSresultof65.50wasaffectedbythevaluationofsharesissuedtofoundationpartners
and supporters at a deemed value of 50 cents per share prior to listing of the Company and
acquisitionoflegalpractices.
In the 2008 financial year, the EPS was positively impacted through the acquisition of four legal
practicesandaninformationtechnologybusiness.
Inthe2009financialyearanumberoffactorsinfluencedthereductionofEPS. Corporateexpenses
increasedwith
the
full
year
effect
of
the
costs
of
a
Managing
Director
and
Chief
Executive
and
Chief
Financial Officer and Company Secretary, the foundation member firms required additional
investment to take advantage of the growth opportunities available to them, the prevailing
economicconditions negativelyaffectedrevenues, andthedecisiontowriteoff anumberofaged
debtorbalanceswhichhadbecomeunrecoverableasaresultoftheeconomicenvironment.
The increase in EPS during the 2010 financial year represented the full year effect of business
acquisitionsintheprioryearandnormalisedtradingactivitiesacrosstheGroupandintheCorporate
office.
Inthe2011financialyear,EPScontinuedtobestrongwitha19%increaseovertheprioryear. The
increasewas
driven
by
growth
in
business
performance
(51%
increase
in
net
profit
after
tax)
and
improvementinbestpracticestosupportimprovedmarginsandcostefficiencies.
(65.50)
2.66 0.89 1.18 1.41
70.00
60.00
50.00
40.00
30.00
20.00
10.00
0.00
10.00
2007* 2008 2009 2010 2011
EPS
(cents/share)
Year
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22
TheCompany
has
good
businesses
with
strong
market
positions
and
growth
prospects.
The directors believe that the business model remains strong and the company is on target to
achieveitsobjectives.
ThetablebelowsummarisestheconsequenceoftheGroupsperformanceonshareholdervaluefor
the financial year and the previous four financial years in the form of changes in share price and
returnonequity(inaccordancewiththerequirementsoftheCorporationsAct2001):
Financialyearended30June 2007 2008 2009 2010 2011
Closingshareprice
centspershareasat30June
50.0* 11.0 14.5 10.0 12.0
Dividendspershare(cents) 0.0 2.2 0.00 0.75 0.90
Returnonequity 0% 20% 0% 8% 8%
*The2007sharepricehadadeemedvalueof50centspersharepriortolistingoftheCompanyandacquisitionoflegal
practices.
7. Executivecontractualarrangements
ManagingDirectorandChiefExecutive
ThereisanemploymentcontractinplacebetweenMrFowlerandIntegratedLegalHoldingsLimited
for Mr Fowlers appointment as Managing Director and Chief Executive of the Company. The
contractcommencedon28April2008andcontinuesindefinitelyunlessterminatedaccordingtothe
provisionsofthecontract.
Mr Fowler receives fixed remuneration of $325,000 (2010: $272,500) per annum (inclusive of
superannuation).
Underthetermsofthecontract,MrFowlersdutiesinclude,butarenotlimitedto:
ImplementingthebusinessplanasdeterminedbytheCompany;
Carrying
out
such
lawful
directions
as
given
by
the
Company;
and
Expandinganddevelopingthebusiness.
TheagreementmaybeterminatedwithoutnoticebyIntegratedLegalHoldingsLimitedif:
MrFowlercommitsaseriousbreachoftheagreement;
MrFowlercommitsanyactthatamountstoarepudiationoftheagreement;
MrFowlerengagesinseriousorwilfulmisconduct;or
Itispermittedforanyreasonunderrelevantlegislation.
The agreement may also be terminated by either party with six months notice in writing of
termination. Inlieuofnotice,MrFowlerwouldbeentitledtopaymentequivalenttosixmonthsof
hissalary
at
the
time
notice
is
given.
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23
MemberFirm
Principals
BDaviesManagingPrincipal,BrettDaviesLawyers(to31January2011)
Mr Davies is employed under an initial three year term contract and continues indefinitely unless
terminatedbyeitherpartywithsixmonthsnoticeinwritingoftermination.
MrDavieswaspaidasalaryof$200,000perannum(inclusiveofsuperannuation)(2010:$200,000)
upto31January2011,andpotentiallyabonus paidasanadditionalsalary(the bonus payment is
calculated at a percentage of the amount by which the audited net profit before tax of the
Principalslawfirmexceedsapredeterminedprofithurdle).
The employment contract may be terminated without notice if the employee commits a serious
breach of any provision of their contract, is unable to or is prohibited from holding a license to
practicelaw,commitsanyactthatamountstorepudiationofthecontractorengagesinseriousand
wilfulmisconduct.
Mr Davies is subject to strict solicitation and competition restraints for a period of 12 months
followingtermination.
In lieuofnotice,MrDavieswouldbeentitledtopaymentequivalenttosixmonthsofhissalaryat
thetimenoticeisgiven.
Mr Davies ceased to be the Managing Principal of Brett Davies Lawyers and a KMP on 31 January
2011,whenthebusinessmergedwithnewlyacquiredmemberfirm,WojtowiczKellyLegal. Thenew
business trades under the name Civic Legal with Anthony Quahe as Managing Principal and Mr
DaviesasPrincipal.
BTaylorManagingPrincipal,TalbotOlivier
Mr Taylor is employed under an initial four year term contract and continues indefinitely unless
terminatedbyeitherpartywithsixmonthsnoticeinwritingoftermination.
MrTaylor
is
paid
a
salary
of
$412,000
per
annum
(inclusive
of
superannuation)
(2010:
$400,000)
and
potentiallyabonuspaidasanadditionalsalary(thebonuspayment iscalculatedasashareofthe
TalbotOlivierbonuspool,beingapercentageoftheamountbywhichtheauditednetprofitbefore
taxofthePrincipalslawfirmexceedsapredeterminedprofithurdle).
The employment contract may be terminated without notice if the employee commits a serious
breach of any provision of their contract, is unable to or is prohibited from holding a license to
practicelaw,commitsanyactthatamountstorepudiationofthecontractorengagesinseriousand
wilfulmisconduct.
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24
MrTaylor
is
also
subject
to
strict
solicitation
and
competition
restraints
for
a
period
of
12
months
followingtermination.
Inlieuofnotice,MrTaylorwouldbeentitledtopaymentequivalenttosixmonthsofhissalaryatthe
timenoticeisgiven.
PBobbinManagingPrincipal,ArgyleLawyers
AIrelandandMDouglassPrincipals,ArgyleLawyers
Messrs Bobbin, Ireland and Douglass are employed under an initial four year term contract and
continue indefinitely unless terminated by either party with six months notice in writing of
termination.
Messrs Bobbin, Ireland and Douglass are paid a salary of $422,300 per annum (inclusive of
superannuation) (2010: $410,000) and potentially a bonus paid as an additional salary (the bonus
payment is calculated at a share of the Argyle Lawyers bonus pool, being a percentage of the
amount by which the audited net profit before tax of the Principals law firm exceeds a pre
determinedprofithurdle).
The employment contracts may be terminated without notice if the employees commit a serious
breachofanyprovisionoftheircontract,areunabletoorareprohibitedfromholdinga licenseto
practicelaw,commitsanyactthatamountstorepudiationofthecontractorengagesinseriousand
wilfulmisconduct.
MessrsBobbin,IrelandandDouglassarealsosubjecttostrictsolicitationandcompetitionrestraints
foraperiodof12monthsfollowingtermination.
Inlieuofnotice,MessrsBobbin,IrelandandDouglasswouldbeentitledtopaymentequivalenttosix
monthsoftheirsalaryatthetimenoticeisgiven.
AQuaheManagingPrincipal,CivicLegal
Mr Quahe is employed under an initial four year term contract and continues indefinitely unless
terminatedby
either
party
with
six
months
notice
in
writing
of
termination.
Mr Quahe is paid a salary of $225,000 per annum (inclusive of superannuation) (2010: nil) and
potentiallyabonuspaidasanadditionalsalary(thebonuspayment iscalculatedasashareofthe
CivicLegalbonuspool,beingapercentageoftheamountbywhichtheauditednetprofitbeforetax
ofthePrincipalslawfirmexceedsapredeterminedprofithurdle).
The employment contract may be terminated without notice if the employee commits a serious
breach of any provision of their contract, is unable to or is prohibited from holding a license to
practicelaw,commitsanyactthatamountstorepudiationofthecontractorengagesinseriousand
wilfulmisconduct.
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MrQuahe
is
also
subject
to
strict
solicitation
and
competition
restraints
for
a
period
of
12
months
followingtermination.
In lieuofnotice,MrQuahewouldbeentitledtopaymentequivalenttosixmonthsofhissalaryat
thetimenoticeisgiven.
ChiefFinancialOfficerandCompanySecretary
TheChiefFinancialOfficerandCompanySecretaryhasastandardcontract.MrsRuddreceivesfixed
remunerationof$176,000perannum(inclusiveofsuperannuation)(2010:$160,000).
TheCompany
may
terminate
the
employment
agreement
by
providing
one
month
written
notice
or
providingpaymentinlieuofthenoticeperiod(basedonthefixedcomponentofremuneration).The
Companymayterminatethecontractatanytimewithoutnoticeifseriousmisconducthasoccurred.
Whereterminationwithcauseoccurs,theexecutiveisonlyentitledtothatportionofremuneration
thatisfixed,andonlyuptothedateoftermination.
MrsRuddscontractcontainsstandardobligationstoperformthedutiesofanemployee.
In lieuofnotice,MrsRuddwouldbeentitledtopaymentequivalenttoonemonthofhersalaryat
thetimenoticeisgiven.
8.
Equityinstrumentsdisclosures
Unissuedshares
TheCompanyhasnotissuedanyoptionsduringtheyear.
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Remunerationofkeymanagementpersonnel(KMP)andthefivehighestpaidexecutivesoftheCompanyandtheGroupTable1:Remunerationfortheyearended30June2011
Shortterm PostEmployment Longterm
Salary&
Fees
Cash
Bonus
Non
monetary
benefits Superannuation
LongService
benefits
Other
Benefits1
$ $ $ $ $ $
Nonexecutivedirectors
JDawkins 62,662 30,000
ATregonning 42,168 22,696
Subtotalnonexecutivedirectors 104,830 52,696
Executivedirectors
GFowler1 305,850 130,000 19,150 3,218 31,5
Subtotalexecutivedirectors 305,850 130,000 19,150 3,218 31,5
Otherkeymanagementpersonnel
BTaylor2 424,447 74,846 15,199 5,849
PBobbin2 372,299 238,394 50,000 2,493
MDouglass2 373,118 238,394 50,000 2,244
AIreland 372,299 50,000 2,493
AQuahe2 49,326 45,000
BDavies3 122,324 11,009 2,146
JMRudd2 159,021 22,600 14,312 1,990
SubtotalotherKMP 1,872,834 574,234 235,520 17,215
Total 2,283,514 704,234 307,366 20,433 31,5
1RelatestotheinterestfreecomponentofloanstoKMP(note27(c)).
2Cashbonusesof$699,234accruedasat30June2011werepaidinthe2012financialyear. Afurther$5,000incashbonusesrelatingtotheyearended30June2011waspaidinthe2011financ
2MrQuahebecameaGroupexecutivefrom1February2011.
3MrDaviesceasedtobeaGroupexecutiveon31January2011.
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Remunerationofkeymanagementpersonnel(KMP)andthefivehighestpaidexecutivesoftheCompanyandtheGroupTable2:Remunerationfortheperiodended30June2010
Shortterm
Post
Employment Longterm
Salary&
Fees
Cash
Bonus
Nonmonetary
benefits Superannuation
LongService
benefits
O
Be
$ $ $ $ $
Nonexecutivedirectors
JDawkins 67,000 30,000
ATregonning 42,376 24,999
Subtotalnonexecutivedirectors 109,376 54,999
Executivedirectors
GFowler1 270,833 64,000 24,375 1,372 1
Subtotalexecutivedirectors 270,833 64,000 24,375 1,372 1
Otherkeymanagementpersonnel
BTaylor2 385,539 44,103 14,461 5,353
PBobbin2 360,000 300,000 49,999 665
MDouglass2,3
370,000 400,000 49,999 640
AIreland2,3
360,000 50,000 49,999 665
BDavies 129,969 11,697
JMRudd2 157,030 5,400 14,312 858
SubtotalotherKMP 1,767,026 799,503
190,467 8,181
Total 2,147,235 863,503 269,841 9,553 1
1RelatestotheinterestfreecomponentofloanstoKMP(note27(c)).
2Cashbonusesof$841,440accruedasat30June2010werepaidinthe2011financialyear. Afurther$12,063incashbonusesrelatingtotheyearended30June2010waspaidinthe2010finan
3MrDouglassandMrIrelandbecameGroupexecutivesfrom1July2009.
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Signedinaccordancewitharesolutionofthedirectors.
GFowler
ManagingDirector
Sydney,28September2011
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Liability limited by a scheme approved
under Professional Standards LegislationGHM:MJ:ILH:063
Auditors Independence Declaration to the Directors of Integrated Legal
Holdings Limited
In relation to our audit of the financial report of Integrated Legal Holdings Limited for the financial year
ended 30 June 2011, to the best of my knowledge and belief, there have been no contraventions of the
auditor independence requirements of the Corporations Act 2001or any applicable code of professional
conduct.
Ernst & Young
G H Meyerowitz
Partner
28 September 2011
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CorporateGovernanceStatement
30
The Board of directors of Integrated Legal Holdings Limited is responsible for the corporate
governance oftheGrouphaving regardtotheASX CorporateGovernance Council(CGC) published
guidelinesas
well
as
its
corporate
governance
principals
and
recommendations.
The
Board
guides
and monitors the business and affairs of Integrated Legal Holdings Limited on behalf of the
shareholdersbywhomtheyareelectedandtowhomtheyareaccountable.
TheCorporateGovernancepoliciesdisclosed inthisreportrepresentsthe latestguidancereleased
bytheAustralianStockExchange(ASX)forwhich,applicationisnotmandatoryforthe2011financial
yearbutisrequiredforthe2012financialyear.
ThetablebelowsummarisestheCompanyscompliancewiththeCGCsrecommendations:
RecommendationComplyYes/No
Reference/explanation
ASXListing
Rule/CGCrecommendations
Principal1Laysolidfoundationsformanagementandoversight
1.1 Companiesshouldestablishthefunctionsreservedtothe
Boardandthosedelegatedtoseniorexecutivesanddisclose
thosefunctions.
Yes ASXCGC1.1
1.2 Companiesshoulddisclosetheprocessforevaluatingthe
performanceofseniorexecutives.
Yes ASXCGC1.2
1.3 Companiesshouldprovidetheinformationindicatedinthe
guidetoreportingonPrincipal1.
Yes ASXCGC1.3
Principal2StructuretheBoardtoaddvalue
2.1
Amajority
of
the
Board
should
be
independent
directors.
Yes
(a)
ASX
CGC
2.1
2.2 Thechairshouldbeanindependentdirector. Yes (a) ASXCGC2.2
2.3 Therolesofchairandchiefexecutiveofficer(CEO)shouldnot
beexercisedbythesameindividual.
Yes ASXCGC2.3
2.4 TheBoardshouldestablishanominationcommittee. No (b) ASXCGC2.4
2.5 Companiesshoulddisclosetheprocessforevaluatingthe
performanceoftheBoard,itscommitteesandindividual
directors.
Yes ASXCGC2.5
2.6 Companiesshouldprovidetheinformationindicatedinthe
guidetoreportingonPrincipal2.
Yes ASXCGC2.6
Principal3Promoteethicalandresponsibledecisionmaking
3.1 Companiesshouldestablishacodeofconductanddisclose
thecodeorasummaryofthecodeasto:
thepracticesnecessarytomaintainconfidenceinthe
Companysintegrity
thepracticesnecessarytotakeintoaccounttheirlegal
obligationsandthereasonableexpectationsoftheir
stakeholders
theresponsibilityandaccountabilityofindividualsfor
reportingandinvestigatingreportsofunethicalpractices.
Yes ASXCGC3.1
3.2 Companiesshouldestablishapolicyconcerningdiversityand
disclosethepolicyorasummaryofthatpolicy. Thepolicy
shouldincluderequirementsfortheBoardtoestablish
measurableobjectivesforachievinggenderdiversityfortheBoardtoassessannuallyboththeobjectivesandprogressin
achievingthem.
Yes ASXCGC3.2
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Recommendation
Comply
Yes/No
Reference/
explanation
ASXListing
Rule/CGC
recommendations
Principal3Promoteethicalandresponsibledecisionmaking
(continued)
3.3 Companiesshoulddiscloseineachannualreportthe
measurableobjectivesforachievinggenderdiversitysetby
theBoardinaccordancewiththediversitypolicyand
progresstowardsachievingthem.
Yes ASXCGC3.3
3.4 Companiesshoulddiscloseineachannualreportthe
proportionofwomenemployeesinthewholeorganisation,
womeninseniorexecutivepositionsandwomenonthe
Board.
Yes ASXCGC3.4
3.5 Companiesshouldprovidetheinformationindicatedinthe
guideto
reporting
on
Principal
3.
Yes ASXCGC3.5
Principal4Safeguardintegrityinfinancialreporting
4.1 TheBoardshouldestablishanauditcommittee. Yes ASXCGC4.1
4.2 Theauditcommitteeshouldbestructuredsothatit:
consistsonlyofnonexecutivedirectors
consistsofamajorityofindependentdirectors
ischairedbyanindependentchair,whoisnotchairofthe
Board
hasatleastthreemembers.
No (c) ASXCGC4.2
ASXLR12.7
4.3 Theauditcommitteeshouldhaveaformalcharter. Yes ASXCGC4.3
4.4
Companiesshould
provide
the
information
indicated
in
the
guidetoreportingonPrincipal4.
Yes
ASXCGC
4.4
Principal5Maketimelyandbalanceddisclosure
5.1 Companiesshouldestablishwrittenpoliciesdesignedto
ensurecompliancewithASXListingRuledisclosure
requirementsandtoensureaccountabilityatasenior
executivelevelforthatcomplianceanddisclosethose
policiesorasummaryofthosepolicies.
Yes ASXCGC5.1
5.2 Companiesshouldprovidetheinformationindicatedinthe
guidetoreportingonPrincipal5.
Yes ASXCGC5.2
Principal6Respecttherightsofshareholders
6.1
Companiesshould
design
a
communications
policy
for
promotingeffectivecommunicationwithshareholdersand
encouragingtheirparticipationatgeneralmeetingsand
disclosetheirpolicyorasummaryofthatpolicy.
Yes
ASXCGC
6.1
6.2 Companiesshouldprovidetheinformationindicatedinthe
guidetoreportingonPrincipal6.
Yes ASXCGC6.2
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32
Recommendation
Comply
Yes/No
Reference/
explanation
ASXListing
Rule/CGC
recommendations
Principal7Recogniseandmanagerisk
7.1 Companiesshouldestablishpoliciesfortheoversightand
managementofmaterialbusinessrisksanddisclosea
summaryofthosepolicies.
Yes ASXCGC7.1
7.2 TheBoardshouldrequiremanagementtodesignand
implementtheriskmanagementandinternalcontrolsystem
tomanagetheCompanysmaterialbusinessrisksandreport
toitonwhetherthoserisksarebeingmanagedeffectively.
TheBoardshoulddisclosethatmanagementhasreportedto
itastotheeffectivenessoftheCompanysmanagementof
thismaterialbusinessrisks.
Yes ASXCGC7.2
7.3 TheBoard
should
disclose
whether
it
has
received
assurance
fromtheCEO(orequivalent)andthechieffinancialofficer
(CFO)[orequivalent]thatthedeclarationprovidedin
accordancewithsection295AoftheCorporationsActis
foundedonasoundsystemofriskmanagementandinternal
controlandthatthesystemisoperatingeffectivelyinall
materialrespectsinrelationtofinancialreportingrisks.
Yes
ASXCGC
7.3
7.4 Companiesshouldprovidetheinformationindicatedinthe
guidetoreportingonPrincipal7.
Yes ASXCGC7.4
Principal8Remuneratefairlyandresponsibly
8.1 TheBoardshouldestablisharemunerationcommittee. No (d) ASXCGC8.1
8.2
Theremuneration
committee
should
be
structure
so
that
it:
consistsofamajorityofindependentdirectors
ischairedbyanindependentchair
hasatleastthreemembers.
No
(d)
ASXCGC
8.2
8.3 Companiesshouldclearlydistinguishthestructureofnon
executivedirectorsremunerationfromthatofexecutive
directorsandseniorexecutives.
Yes ASXCGC8.3
8.4 Companiesshouldprovidetheinformationindicatedinthe
guidetoreportingonPrincipal8.
Yes ASXCGC8.4
Integrated Legal Holdings Limiteds corporate governance practices were in place throughout the
yearended
30
June
2011.
ThefollowingarereferencenotestothePrincipalRecommendationtable:
a) Whilst both nonexecutive directors of Integrated Legal Holdings Limited own shares in the
Company,theyareconsideredtobeindependentastheyareindependentofmanagementand
free from any business or other relationship that could materially interfere with or could
reasonably be perceived to materially interfere with the exercise of their unfettered and
independentjudgement. The number of shares held by both nonexecutive directors are not
considered material by management or by the Chair of the Audit and Risk Management
Committee.
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b)
No formal nomination committee or procedures have been adopted for the identification,
appointmentandreviewoftheBoardmembership,buttheBoardiscommittedtoaninformal
assessment
process,
facilitated
by
the
Chair
in
consultation
with
the
Companys
professional
advisors.
c) TheAuditandRiskManagementCommitteemembershipincludesanexecutivedirector,being
the Managing Director and Chief Executive. Inclusion of the Managing Director and Chief
Executiveisrequiredtosatisfytherecommendationthatthecommitteemustconsistofatleast
threemembers.
d) No formal remuneration committee has been appointed. The remuneration of an executive
director will be decided by the Board, without the affected executive director participating in
thatdecisionmakingprocess. Thedeterminationofanexecutivedirectorsremunerationwill
bemade
by
the
Board
having
regard
to
the
inputs
and
value
to
the
Group
of
the
contributions
bytheexecutivedirectorinconsultantwiththeCompanysprofessionaladvisors.
The total maximum remuneration of nonexecutive directors is the subject of a shareholder
resolution in accordance with the Companys constitution, the Corporations Act and the ASX
listingrules,asapplicable. Thedeterminationofnonexecutivedirectorsremunerationwithin
thatmaximumwillbemadebytheBoardhavingregardtotheinputsandvaluetotheGroupof
therespectivecontributionsbyeachnonexecutivedirector.
Variouscorporategovernancepracticesarediscussedwithinthisstatement.
Boardfunctions
The Board seeks to identify the expectations of the shareholders, as well as other regulatory and
ethical expectations and obligations. In addition, the Board is responsible for identifying areas of
significantbusinessriskandensuringarrangementsareinplacetoadequatelymanagethoserisks.
To ensure that the Board is well equipped to discharge its responsibilities it has established
guidelinesforthenominationandselectionofdirectorsandfortheoperationoftheBoard.
TheresponsibilityfortheoperationandadministrationoftheGroupisdelegatedbytheBoardtothe
ManagingDirector
and
Chief
Executive
and
the
executive
management
team.
The
Board
ensures
thatthisteam isappropriatelyqualifiedandexperiencedtodischargetheirresponsibilitiesandhas
inplaceprocedurestoassesstheperformanceoftheManagingDirectorandChiefExecutiveandthe
executivemanagementteam.
Whilst at all times the Board retains full responsibility for guiding and monitoring the Group, in
dischargingitsstewardshipitmakesuseofsubcommittees. Specialistcommitteesareabletofocus
onaparticularresponsibilityandprovideinformedfeedbacktotheBoard.
To this end the Board has established an Audit and Risk Management Committee. The roles and
responsibilitiesofthiscommitteearediscussedthroughoutthisCorporateGovernanceStatement.
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34
TheBoard isresponsibleforensuringthatmanagementsobjectivesandactivitiesarealignedwith
theexpectationsandriskidentifiedbytheBoard. TheBoardhasanumberofmechanismsinplace
toensure
this
is
achieved
including:
Boardapprovalofastrategicplandesignedtomeetstakeholdersneedsandmanagebusiness
risk;
Ongoingdevelopmentofthestrategicplanandapprovinginitiativesandstrategiesdesignedto
ensurethecontinuedgrowthandsuccessoftheentity;and
Implementationofbudgetsbymanagementandmonitoringprogressagainstbudgetviathe
establishmentandreportingofbothfinancialandnonfinancialkeyperformanceindicators.
OtherfunctionsreservedtotheBoardinclude:
Approvalof
the
annual
and
half
yearly
financial
reports;
Approvingandmonitoringtheprogressofmajorcapitalexpenditure,capitalmanagement,and
acquisitionsanddivestitures;
Ensuringthatanysignificantrisksthatariseareidentified,assessed,appropriatelymanagedand
monitored;and
Reportingtoshareholders.
StructureoftheBoard
Theskills,experienceandexpertiserelevanttothepositionofdirectorheldbyeachdirectorinoffice
atthe
date
of
the
annual
report
is
included
in
the
Directors
Report.
Directors
of
Integrated
Legal
HoldingsLimitedareconsideredtobeindependentwhentheyareindependentofmanagementand
free from any business or other relationship that could materially interfere with or could
reasonably be perceived to materially interfere with the exercise of their unfettered and
independentjudgement.
In the context of director independence, 'materiality' is considered from both the Group and
individual director perspective. The determination of materiality requires consideration of both
quantitative and qualitative elements. An item is presumed to be quantitatively immaterial if it is
equaltoorlessthan5%oftheappropriatebaseamount.Itispresumedtobematerial(unlessthere
isqualitativeevidencetothecontrary)ifit isequaltoorgreaterthan10%oftheappropriatebase
amount.
Qualitative factors considered include whether a relationship is strategically important, the
competitive landscape, the nature of the relationship and the contractual or other arrangements
governingitandotherfactorsthatpointtotheactualabilityofthedirectorinquestiontoshapethe
directionoftheGroupsloyalty.
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In accordance with the definition of independence above, and the materiality thresholds set, the
followingdirectorsofIntegratedLegalHoldingsLimitedareconsideredtobeindependent:
Name Position
JDawkins Chairman,NonexecutiveDirector
ATregonning NonexecutiveDirector
TheBoardrecognises the CorporateGovernanceCouncilsrecommendations thattheChair should
beanindependentdirector.
Thereareproceduresinplace,agreedbytheBoard,toenabledirectorsinfurtheranceoftheirduties
toseekindependentprofessionaladviceattheCompanysexpense.
Theterm
in
office
held
by
each
director
in
office
at
the
date
of
this
report
is
as
follows:
Name TerminOffice
JDawkins 4years,11months
ATregonning 4years,11months
GFowler 3years,4months
ForadditionaldetailsregardingBoardappointments,pleaserefertoourwebsite.
Performance
Theperformance
of
the
Board
and
key
executives
is
reviewed
regularly
against
both
measurable
and
qualitativeindicators.
The performance criteria against which directors and executives are assessed are aligned with the
financialandnonfinancialobjectivesofIntegratedLegalHoldingsLimited.
Directorswhoseperformanceisconsistentlyunsatisfactorymaybeaskedtoretire.
Tradingpolicy
UndertheCompanysShareTradingPolicyanexecutiveordirectormustnottradeinanysecurities
ofthe
Company
at
any
time
when
they
are
in
possession
of
unpublished,
price
sensitive
information
inrelationtothosesecurities.
Beforecommencingtotrade,anexecutivemustfirstobtaintheapprovaloftheCompanySecretary
todosoandadirectormustfirstobtaintheapprovaloftheChairman.
AdditionalrestrictionsontradingintheCompanyssecuritiesapplytodirectorsoftheCompany,all
executives reporting directly to the Managing Director and any other employees of the Company
considered appropriate by the Managing Director and Company Secretary from time to time
(RestrictedPersons).
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Restricted Persons are prohibited from trading in the Companys securities during the following
closedperiods:
between 1 July and one trading day following the announcement of the Companys full year
results(preliminaryfinalreport);and
between 1 January and one trading day following the announcement of the Companys half
yearresults.
Restricted Persons are permitted to buy or sell Company shares during the closed periods in the
followingcircumstances:
Tradinginarightsissueduringarightstradingperiod;
Sharesareofferedpursuanttoanapprovedexecutiveoremployeeshareoroptionplan;
Sharesare
offered
pursuant
to
a
dividend
reinvestment
plan;
Shares are transferred between related entities pursuant to an internal reorganisation of a
director,officerordesignatedemployee;or
WiththepriorwrittenclearanceoftheChairman.
AsrequiredbytheASXlistingrules,theCompanynotifiestheASXofanytransactionconductedby
directorsinthesecuritiesoftheCompany.
Diversitypolicy
TheCompanyvaluesdiversityandrecognisesthebenefitsitcanbringtotheorganisationsabilityto
achieveits
goals.
Accordingly
the
Company
has
developed
a
diversity
policy.
This
policy
outlines
the
Companys diversity objectives in relation to gender, age, cultural background and ethnicity. It
includesrequirementsfortheBoardtoestablishmeasurableobjectivesforachievingdiversity,and
fortheBoardtoassessannuallyboththeobjectives,andthecompanysprogressinachievingthem.
InaccordancewiththispolicyandASXCorporateGovernancePrinciples,theBoardhasestablished
thefollowingobjectivesinrelationtogenderdiversity. Theaimistoachievetheseobjectivesover
the coming five years as director and senior executive positions become vacant and appropriately
skilledcandidatesareavailable:
Actualasat30June2011 Objective
Number % %
Numberofwomenemployeesinthewholeorganisation 127 71% 40%60%
NumberofwomenPrincipalsandinseniorexecutivepositions 7 28% 40%60%
NumberofwomenonmemberfirmsBoards 1 7% 40%60%
NumberofwomenonILHBoard 1 33% 40%60%
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37
AuditandRiskManagementCommittee
The
Board
has
established
an
Audit
and
Risk
Management
Committee,
which
operates
under
a
charter approved by the Board. It is the Boards responsibility to ensure that an effective internal
control framework exists within the entity. This includes internal controls to deal with both the
effectiveness and efficiency of significant business processes, the safeguarding of assets, the
maintenanceofproperaccountingrecords,andthereliabilityoffinancialinformationaswellasnon
financial considerations such as the benchmarking of operational key performance indicators. The
Boardhasdelegatedresponsibilityforestablishingandmaintainingaframeworkof internalcontrol
andethicalstandardstotheAuditandRiskManagementCommittee.
The committee also provides the Board with additional assurance regarding the reliability of
financialinformationforinclusioninthefinancialreports.
ThemembersoftheAuditandRiskManagementCommitteeduringtheyearwere:
ATregonning Chairman
JDawkins
GFowler
QualificationsofAuditandRiskManagementCommitteemembers
The qualifications and experience of the Audit and Risk Management Committee members are
notedintheDirectorsReport.
Risk
The Board has continued its proactive approach to risk management. The identification and
effective management of risk, including calculated risktaking is viewed as an essential part of the
Companysapproachtocreatinglongtermshareholdervalue.
In recognition of this, the Board determines the Companys risk profile and is responsible for
overseeingandapprovingriskmanagement strategy andpolicies, internalcomplianceand internal
control. IndoingsotheBoardhastakentheviewthatitiscrucialforallBoardmemberstobeapart
of this process and as such, all Board members are part of the Audit and Risk Management
Committee.
The Board oversees an annual assessment of the effectiveness of risk management and internal
compliance and control. The tasks of undertaking and assessing risk management and internal
control effectiveness are delegated to management through the Managing Director and Chief
Executive, including responsibilityforthedaytodaydesignand implementationoftheCompanys
riskmanagementandinternalcontrolsystem. ManagementreportstotheBoardontheCompanys
keyrisksandtheextenttowhichitbelievestheserisksarebeingadequatelymanaged.
The Board has a number of mechanisms in place to ensure that managements objectives and
activities are aligned with the risks identified by the Board. These include the implementation of
Board
approved
operating
plans
and
budgets
and
Board
monitoring
of
progress
against
these
budgets, including the establishment and monitoring of KPIs of both a financial and nonfinancial
nature.
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As part of its duties, the Companys management conducts routine reviews with the objective of
providingassurance on the adequacy of the Companysrisk framework and the completenessand
accuracyof
risk
reporting
by
management.
Tothisend,comprehensivepracticesareinplacethataredirectedtowardsachievingthefollowing
objectivesinrelationtotherequirementsofPrincipal7:
EffectiveandefficientuseoftheCompanysresources
Compliancewithapplicablelawsandregulations
Preparationofreliablepublishedfinancialinformation
ChiefExecutiveandCFOcertification
Inaccordance
with
section
295A
of
the
Corporations
Act,
the
Chief
Executive
and
CFO
have
provided
awrittenstatementtotheBoardthat:
Their view provided on the Companys financial report is founded on a sound system of risk
management and internal compliance and control which implements the financial policies
adoptedbytheBoard;and
The Companys risk management and internal compliance and control system is operating
effectivelyinallmaterialrespects.
TheBoardagreeswiththeviewsoftheASXonthismatterandnotesthatduetoitsnature,internal
controlassurance
from
the
Chief
Executive
and
CFO
can
only
be
reasonable
rather
than
absolute.
This is due to such factors as the need forjudgement, the use of testing on a sample basis, the
inherent limitations in internal control and because much of the evidence available is persuasive
rather than conclusive and therefore is not and cannot be designed to detect all weaknesses in
controlprocedures.
Remuneration
ItistheCompanysobjectivetoprovidemaximumstakeholderbenefitfromtheretentionofahigh
quality Board and executive team by remunerating directors and key executives fairly and
appropriatelywithreferencetorelevantemploymentmarketconditions.Toassist inachievingthis
objective,the
Board
links
the
nature
and
amount
of
executive
directors
and
officers
remuneration
totheCompanysfinancialandoperationalperformance.
Theexpectedoutcomesoftheremunerationstructureare:
Retentionandmotivationofkeyexecutives.
AttractionofhighqualitymanagementtotheCompany.
Performance incentives that allow executives to share in the success of Integrated Legal
HoldingsLimited.
For a full discussion of the Companys remuneration philosophy and framework and the
remuneration
received
by
directors
and
executives
in
the
current
period,
please
refer
to
the
RemunerationReport,whichiscontainedwithintheDirectorsReport.
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Thereisnoschemetoprovideretirementbenefitstononexecutivedirectors.
The
Board
is
responsible
for
determining
and
reviewing
compensation
arrangements
for
the
directorsthemselvesandtheexecutiveteam.
Shareholdercommunicationpolicy
Pursuant to Principal 6, Integrated Legal Holdings Limiteds objective is to promote effective
communicationwithitsshareholdersatalltimes.
IntegratedLegalHoldingsLimitediscommittedto:
Ensuring that shareholders and the financial markets are provided with full and timely
information
about
Integrated
Legal
Holdings
Limiteds
activities
in
a
balanced
and
understandableway.
Complyingwithcontinuousdisclosureobligationscontained inapplicableASX listingrulesand
theCorporationsAct2001inAustralia.
Communicating effectively with its shareholders and making it easier for shareholders to
communicatewithIntegratedLegalHoldingsLimited.
To promote effective communication with shareholders and encourage effective participation at
generalmeetings,informationiscommunicatedtoshareholders:
ThroughthereleaseofinformationtothemarketviatheASX.
Throughthe
distribution
of
the
annual
report
and
Notices
of
Annual
General
Meeting.
Throughshareholdermeetingsandinvestorrelationspresentations.
Throughlettersandotherformsofcommunicationsdirectlytoshareholders.
BypostingrelevantinformationonIntegratedLegalHoldingsLimitedswebsite.
The Companys website has a dedicated section for the purposes of publishing all important
Companyinformationandrelevantannouncementsmadetothemarket.
The external auditors are required to attend the Annual General Meeting and are available to
answer any shareholder questions about the conduct of the audit and preparation of the audit
report.
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ConsolidatedStatementofFinancialPositionASAT30JUNE2011
TheaboveConsolidatedStatementofFinancialPositionshouldbereadinconjunctionwiththe
accompanyingnotes.
40
CONSOLIDATED
Note 2011 2010
$ $
ASSETS
CurrentAssets
Cashandcashequivalents 11 2,460,760 2,151,449
Tradeandotherreceivables 12 7,826,873 7,538,870
Workinprogress 13 2,499,220 1,353,354
Incometaxreceivable 8(d) 12,782
TotalCurrentAssets 12,799,635 11,043,673
NonCurrentAssets
Plantandequipment 14 1,170,294 1,181,314
Prepayments 14,614 29,230
Goodwill 15 12,900,557 10,470,600
Intangibleassets 16 29,700 65,340
Deferredtaxassets 8(d) 101,089
Financialassets 17 3,435 2,642
TotalNonCurrentAssets 14,118,600 11,850,215
TOTALASSETS 26,918,235 22,893,888
LIABILITIES
CurrentLiabilities
Tradeandotherpayables 18 3,813,598 3,317,157
Interestbearing
loans
and
borrowings
19
&
33
2,536,259 1,573,325
Incometaxpayable 8(d) 177,524
Provisions 20 986,593 687,057
Otherliabilities 21 255,769 279,933
TotalCurrentLiabilities 7,592,219 6,034,996
NonCurrentLiabilities
Tradeandotherpayables 18 37,554 75,107
Interestbearingloansandborrowings 19&33 143,325 260,913
Provisions 20 306,092 197,350
Deferredtaxliabilities 8(d) 137,038
Otherliabilities 21 689,344 127,608
TotalNonCurrentLiabilities 1,313,353 660,978
TOTALLIABILITIES 8,905,572 6,695,974
NETASSETS 18,012,663 16,197,914
EQUITY
Issuedcapital 22 33,397,152 32,160,426
Accumulatedlosses 23 (16,926,589) (16,688,184)
Reserves 24 1,542,100 725,672
TOTALEQUITY 18,012,663 16,197,914
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ConsolidatedStatementofComprehensiveIncomeFORTHEYEARENDED30JUNE2011
TheaboveConsolidatedStatementofComprehensiveIncomeshouldbereadinconjunctionwith
theaccompanyingnotes.
41
CONSOLIDATED
Note 2011 2010
$ $
Professionalfees 28,313,125 23,822,676
Interestrevenue 153,015 39,175
Dividendsreceived 126 91
Otherrevenue 7(a) 9,210 13,046
Totalrevenue 28,475,476 23,874,988
Occupancyexpenses (2,338,627) (2,114,280)
Salariesandemployeebenefitsexpenses 7(b) (18,579,646) (16,149,830)
Depreciationandamortisationexpenses 7(c) (412,841) (343,759)
Advertisingandmarketingexpenses (359,123) (222,928)
Administrativeexpenses (3,335,793) (2,889,908)
Otherexpenses 7(d) (1,351,267) (742,175)
Financecosts 7(e) (143,193) (160,597)
Sharebasedpaymentsexpense (41,415) (19,243)
Totalexpenses (26,561,905) (22,642,720)
Profitbeforeincometax 1,913,571 1,232,268
Incometaxexpense 8(a) (626,901) (378,774)
Profitafterincometax 1,286,670 853,494
Netprofitfortheyear 1,286,670 853,494
Othercomprehensiveincome
Netgains/(losses)onavailableforsalefinancialassets 792 (68)
Othercomprehensi