Integrated Research
Annual Report 2009
For more information visit our website at www.prognosis.com or email info@prognosis.com
Germany
Integrated Research Ltd
Bockenheimer Landstr.
17-19
D-60325, Frankfurt
t: +49 (69) 710 455 255
f: +49 (69) 710 455 450
e: info.germany@prognosis.com
Asia Pacific/M.East/Africa
Integrated Research Ltd
Level 9, 100 Pacific Hwy
North Sydney NSW 2060
Australia
t: +61 (2) 9966 1066
f: +61 (2) 9966 1042
e: info.ap@prognosis.com
Americas - West Coast
Integrated Research Inc.
8055 East Tufts Avenue,
Suite 950
Denver, CO 80237
t: +1 (303) 390 8700
f: +1 (303) 390 8777
e: info.usa@prognosis.com
Americas - East Coast
Integrated Research Inc.
1818 Library Street,
Suite 500
Reston, VA 20190
t: +1 (703) 956 3025
f: +1 (303) 390 8777
e: info.usa@prognosis.com
United Kingdom
Integrated Research UK Ltd
Orchard Lea, Winkfield Lane
Windsor Berkshire
SL4 4RU
t: +44 (0) 1344 894 200
f: +44 (0) 1344 890 851
e: info.europe@prognosis.com
www.prognosis.com
Performance monitoring software for business-critical systems
Corporate Directory
IT infrastructure
IP telephony
VoIP
Directors
Steve Killelea
Chairman and Non-Executive Director
Mark Brayan
Managing Director and CEO
Alan Baxter
Independent Non-Executive Director
John Brown
Independent Non-Executive Director
Kate Costello
Independent Non-Executive Director
Clyde McConaghy
Non-Executive Director
ATM
POS
Web applications
Virtualisation
Payments
Healthcare
Communications
Consulting
Reporting
Secretary
David Leighton
Registered Office
Level 9, 100 Pacific Highway
North Sydney, NSW, 2060
Phone: (+61 2) 9966 1066
Share Registry
Computershare Investor Services Pty Limited
Auditors
Solicitors
Deloitte Touche Tohmatsu
225 George Street
Sydney, NSW, 2000
Blake Dawson
Level 36, Grosvenor Place
225 George Street
Sydney, NSW, 2000
Bankers
Westpac Banking Corporation
Stock Exchange Listing
Country of Incorporation
Australian Stock Exchange
Code IRI
Integrated Research Limited, incorporated and domiciled in
Australia, is a publicly listed company limited by shares.
Notice of Annual General Meeting
The Annual General Meeting of Integrated Research Limited will be
held at 3:00pm on Thursday, 12th November 2009, at the Museum
of Sydney, Corner of Phillip and Bridge Streets, Sydney.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
97
Innovation, customer engagement and teamwork
These are the core values that drive everyday life at Integrated
Research. They infuse the way we work together, and the way
that we work with customers, day in, day out, to produce the
solutions that they need to run their business.
Our strategy is simple: to continually improve and extend
PROGNOSIS to provide real-time monitoring for high-
performance systems, and to use Consulting Services to create
and deliver unique solutions that provide valuable business
insight for our customers. That makes us more competitive,
and it makes our customers more competitive too.
Contents
2009 highlights
Letter from the Chairman
Chief Executive Officer’s report
Review of operations and activities
Directors and Senior management
Directors’ report
Remuneration report
Corporate governance statement
Financial report
Notes to the financial statements
Directors’ declaration
Independent audit report
Lead auditor’s independence declaration
ASX additional Information
Corporate directory
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This report is printed on Impact 100%
recycled paper and produced carbon
neutral. It’s made entirely from post
consumer waste reducing land fill.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
2009
highlights
Financial summary: In millions of AUD (except earnings per share)
Year ended 30 June
Revenue from licence fees
Total revenue
Net profit after tax
Net assets
Cash at balance date
Americas revenue
Europe revenue
Asia Pacific revenue
Earnings per share (cents per share)
Total revenue
(Dollars in millons)
Net profit after tax
(Dollars in millons)
$42.7
$37.4
$36.4
$7.9
$5.8
$5.4
2009
2008
% Change
21.7
42.7
7.9
27.2
14.5
27.0
7.3
7.3
4.72
19.6
37.4
5.8
23.8
11.1
23.1
6.4
7.4
3.47¢
11%
14%
36%
14%
31%
17%
13%
1%
36%
Revenue from licence fees
(Dollars in millons)
$19.5
$19.6
$21.7
2007
2008
2009
2007
2008
2009
2007
2008
2009
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
This way to real
time business
insight
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Letter from
the Chairman
Dear fellow shareholders,
It is my pleasure to report on the record performance of Integrated Research for the financial year to
30th June 2009. The Company’s performance can be described as highly satisfying especially given
the extremely difficult trading conditions that have been experienced over the past twelve months.
The Company saw total revenue exceed $40 million for the first time. Net profit after tax increased by
36% to a record profit of $7.9 million over the previous financial year; new sales increased by 11% to
$21.7 million and total revenue also increased by 14% to $42.7 million. The results were buoyed by a
strong fourth quarter which coincided with a mild rebound in the global economy.
Underpinning the result was strong growth in new
licence sales for both the IP Telephony and HP-Nonstop
product lines at 47% and 14% respectively on the
previous year. The revenue and profit results were also
aided by a weaker Australian dollar against both the US
dollar and the UK pound sterling. Total expenses grew
at a slower pace than revenue.
Our traditional HP NonStop management market
remained buoyant despite the Company’s strong
position in the financial services market which was one
of the market segments most affected by the economic
downturn. This can largely be explained by the critical
nature of the management services that we provide and
the importance that is placed on the essential services
that we manage.
The Company’s consulting services grew by 23% to
$1.7 million. Although this is still a modest proportion
of revenue this proportion is expected to increase in
future years as the Company places more emphasis on
providing consulting services.
The IP telephony sales performance gained momentum
this year. The Company signed a major partnership
agreement with Avaya during the year whereby Avaya is
now shipping a copy of our voice management product
with every PBX that it sells. The first 250 phones are
free and thereafter the customer must buy our product
if they wish to have systems management facilities. The
Company also continued to make significant gains with
the major Managed Services Providers. The Company
is committed to maintaining and developing market
leadership with our IP telephony products and will be
investing in the expectation of growth.
The only area that did not perform well was the
Distributed Systems (Windows, UNIX and Linux)
product line whose revenue fell mainly due to a large
one off sale in the prior financial year.
During the course of the year the board initiated a
strategic review of the Company. The review was
carried out by Boston Consulting Group with the aim
of validating the Company’s strategy, understanding
the capabilities that are needed to execute on the
strategy and to identify gaps between the Company’s
requirements and capabilities. The review has now
resulted in a clearer direction for the Company and
improved management processes.
We invested heavily in R&D in the 2008 financial
year to promote innovation and drive new product
development and revenue growth. Subsequently R&D
expenditure dropped by 5.4% in the 2009 financial
year. Expenditure in R&D was still 19% of total
revenue and in line with our historical average. There
has also been a significant improvement in our R&D
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
“Net profit after tax
increased by 36% to
a record profit of $7.9
million...”
processes during the year which has resulted in better
product quality and improved customer satisfaction.
The Company will maintain its historical levels of
investment in R&D going forward.
Despite adverse economic conditions, the underlying
business has performed very well and the Company
has managed not only to maintain its strategy but to
enhance it. Future prospects for the Company remain
strong with a cash position of $14.5 million compared
to $11.1 million in the prior financial year and the
Company remains free of debt. Our solid balance sheet
leaves the Company well positioned for the future.
The Board is pleased to announce a final dividend
of 2.5 cents per share, 5% franked, bringing the total
dividend for the year to 4.0 cents per share, which is a
33% improvement on the prior year.
Thank you for your continued support.
Steve Killelea
Chairman
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
VoIP for big business...
how do you manage that?
By giving companies the specialised tools
they need to monitor and measure voice and
call quality, and to identify and resolve the
problems within the supporting IT infrastructure,
PROGNOSIS is helping businesses reduce
operating costs, protect revenue and improve
the performance of Voice over IP (VoIP).
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
“As more organisations adopt larger scale deployments, the
ability for PROGNOSIS to manage highly distributed or very large
environments will position the company as leading vendor for a
variety of deployment sizes.”
George Hamilton, Director, Yankee Group
Customers include:
AT&T l Accenture l Airbus l Alpha West/Optus l ARUP l BAE Systems l BellSouth l Brigham Young University l British Airways
l British Telecom l Del Monte l Dimension Data l Equant l Fannie Mae l France Telecom l General Motors l Getronics l IBM l
HSBC l Intel l NASDAQ l NCR l Salesforce.com l Singapore Polytechnic l Sprint l Standard Life l State of Arizona
l TD Financial Corp. l Tecnologico de Monterey l Thiess l Time Warner Cable l Touchbase l Verizon l T-Systems
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Why do the world’s financial
institutions bank on PROGNOSIS?
Whether it is EFTPOS systems, ATM networks,
phone and internet banking, or any other
transaction processing application, PROGNOSIS
gives retailers and financial institutions the insight
they need to identify and fix transaction problems,
to uncover the details of cardholder issues in
seconds, and to improve customer satisfaction.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
“When cardholders present their cards for payment, they expect
them to work every time. PROGNOSIS helps us deliver that level of
performance to our clients and their customers.”
Phillip Patrick, Director of Technical Support, TSYS
Customers include:
ANZ Bank l Arab National Bank l Bankserv South Africa l BNI Bank Indonesia l Burgan Bank Kuwait l Citibank l
Emirates Bank UAE l Fiserv l Global Trust Bank India l HDFC Bank l ICICI Bank India l Kmart l KNET Kuwait
l Kotak Mahindra Bank l Kuwait Finance House l Link UK l MasterCard l Qatar Central Bank l Royal Bank of Canada l
Standard Bank South Africa l Target l Walgreens l Washington Mutual l Westpac Bank
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Ensuring the health of critical
computer systems... it’s in our DNA
When computer systems perform poorly it can
either be a small inconvenience, a matter of life
and death, or financial ruin. PROGNOSIS offers
aviation companies, hospitals and healthcare
providers, stock exchanges and insurers, power
companies and telcos the tools they need to
monitor, diagnose and troubleshoot critical
computer systems that simply must keep running.
0 INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
“The real benefit for us is the ability to deliver services to our
patients and physicians as promised... even a short delay
in returning test results to a physician or availing prescribed
medication to a patient could have serious repercussions.”
Barbara Baldwin, CIO, University of Virginia’s Medical Center
Customers include:
AstraZeneca l AT&T l BT Syntegra l Bank of Tokyo l Bank Verlag l Charles Schwab l E-Funds l Exxon l France Telecom l
First Data International l GE Healthcare (IDX) l Henry Ford Health Systems l Mayo Clinic l Mercy Health Plans
l MasterCard l NASDAQ l Royal Bank of Canada l Optus l Sabre Systems l South Western Bell l SK Telecom l Sprint l
Sungard l Toronto Stock Exchange l University of Virginia Health l Verizon l Vodacom
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
For every problem there is a
possible solution. Let PROGNOSIS
help you find yours.
Sometimes problems require specialist solutions.
Our Consulting Services team builds unique
solutions for previously unsolveable problems
by extending and building upon the power of
PROGNOSIS. We assess requirements, build,
integrate and deploy solutions, train staff, and
help customers maximise their PROGNOSIS
investment to gain the critical business insight
needed to drive their business forward.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
“Now we know how to check application consumption on heavily
utilized UNIX servers running several applications. It’s become
much easier to distribute precise costs to applications.”
Fabian Kroll, Head of UNIX System Services, Bank Verlag
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Chief Executive
Officer’s report
Dear shareholders,
I am very pleased to report another year of growth for Integrated Research. New licence sales grew
11% on last year to $21.7 million, total revenue grew 14% to $42.7 million and net profit after tax
increased 36% on FY2008 to $7.9 million.
Our results this year are particularly pleasing after
> Our IP Telephony sales were supported by our
the many management and personnel changes in
partnership with Avaya which will help grow our
FY2008 and the poor trading conditions of FY2009.
customer base and drive future sales. PROGNOSIS is
Our performance is a testimony to the strength of our
shipped with every new Avaya PBX and is available
products, the quality of our customer service and the
to every Avaya customer. The potential scale of this
hard work and innovative spirit of our staff.
partnership is substantial. We have deployed web-
> New licence sales of our Non-Stop product line
increased 14% on FY2008.
> We invested in the development of new features
for the NonStop product line including support for
HP’s Blade architecture. This ensures that Non-
Stop users who migrate to Blade technology can
continue to benefit from PROGNOSIS and also
means that we extend the usability of this important
product line.
> Our maintenance renewal rate for our NonStop
products was 92% this year, which is a solid result
in a year when many of our customers have been
questioning all IT expenses.
> New licence sales of our growth platform, our
IP Telephony products, grew 47% on last year.
This reinforces the value of our products and our
strong position in this market. This result was
very satisfying given IP Telephony line shipments
dropped on a global basis this year. Analysts
predict that growth will return to this market in 2010
and we are very well positioned to exploit that.
based customer services and are building a reseller
network to support the potential growth.
> We benefitted from a trend by businesses to
outsource the installation and management of their
IP Telephony requirements to specialist Managed
Service Providers (MSPs). We signed up new MSPs
in FY2009, and sold more licences to existing MSP
customers as they grew their business.
> We invested heavily in new features as well as the
scalability and quality of our IP Telephony products
this year. Scalability tests satisfied our most
demanding customers and positions PROGNOSIS to
support extremely large IP Telephony deployments.
> Although new licence sales of our Distributed
Systems (Windows, UNIX and Linux) product line
were generally in line with historic results, they were
not as strong as last year due to a very large sale in
FY2008. We continue to invest in this product line
to ensure we offer a migration path for our NonStop
customers that move to distributed systems.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
“New licence sales of
our NonStop product
line increased 14% on
FY2008.”
Mark Brayan
CEO
> We have provided more PROGNOSIS Consulting
Services this year and have increased our services
revenue by 23% to $1.7 million in response
to customer demand. Growing our Consulting
business is part of our strategy to help our
customers derive more value from PROGNOSIS, it
includes the creation of customised solutions that,
in many cases, can be replicated and re-sold to
similar customers. This strategy introduces another
point of value to our customers and Company.
> We have implemented new processes in R&D and
Support that have improved the efficiency of our
R&D and increased customer satisfaction.
> We were not immune to the impact of the global
financial crisis. Our first-half sales were down on
last year, but we delivered a strong second half to
record overall growth for the year.
> The fluctuating Australian dollar provided both
benefits and challenges for us in FY2009. The
average exchange rate against the US dollar
declined 17% over last year which increased
revenue, but also increased costs form the US.
We’re pleased to report however that we delivered
real growth in local currencies in key segments.
Our success in FY2010 will continue to be
underpinned by the ability of our products to deliver
real-time monitoring to mission critical computing
platforms in key segments such as communications
and payments. It will also rely on our ability to
develop and sell valuable and high-quality products
and services based on our core PROGNOSIS
architecture. Integrated Research remains committed
to these goals.
I would like to thank our customers for the business
they provide us, and our employees for their hard
work and dedication to the strength and future of
Integrated Research.
Thank you for your support.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Review of
operations
and activities
Principal activities
emergency services, stock trading applications, and
telecommunications systems including IP telephony
The Company’s principal activities during the year
were the design, development and sale of systems
systems.
and applications management computer software for
The Company has developed its PROGNOSIS products
business-critical computing and IP telephony networks.
around a fault-tolerant, highly distributed software
The Company increased its investment in and revenue
from PROGNOSIS-based consulting services during the
year and expect to increase this further in future years.
Group overview
Integrated Research has a twenty-one year heritage
of providing performance monitoring and diagnostics
software solutions for business-critical computing
environments.
Since its establishment in 1988, the Company has
provided its core PROGNOSIS products to a cross
section of large organisations requiring high levels of
computing performance and reliability.
The PROGNOSIS product range is an integrated suite
of monitoring and management software, designed to
give an organisation’s technical personnel operational
insight into their HP NonStop, Windows, UNIX and
Linux servers, and IP Telephony environments and the
business applications that run on these platforms.
Typical business environments where PROGNOSIS
is used include automated teller machine (ATM) and
EFTPOS transaction systems, web applications such as
online banking or online shopping, hospital systems,
architecture, designed to achieve high levels of
functionality, scalability and reliability with a low total
cost of ownership.
Integrated Research services customers in more
than 50 countries through direct sales offices in the
USA, UK, Germany and Australia, and via a global,
channel-driven distribution network. The Company’s
customer base consists of many of the world’s largest
organisations and includes major stock exchanges,
banks, credit card companies, telecommunications
companies, computer companies and hospitals.
The Company generates most of its revenue from
upfront licence fees, recurring maintenance and
recurring licence fees.
Review and results of operations
The Company achieved a 36% increase in net profit
after tax over the previous financial year to $7.9 million.
Total revenue for the Company increased 14% over the
prior year to $42.7 million. The strong growth in profit
was brought about by strong second half new licence
sales in both the IP Telephony and HP NonStop product
lines as well as favourable movements in currency
between the Australian dollar and US dollar.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
The Company continued its strong commitment to
research and development with a net investment of
$8.2 million. New products were released during the year
and further innovative developments are in the pipeline
to respond to customer needs and market demands.
Revenue
Revenue for the year was $42.7 million, an increase of
14% over 2008. Licence fees made up 51% of revenue,
increased by 11% whilst maintenance fees increased
by 18%.
Currency exchange rates were volatile over the course
of the 2009 financial year but our consolidated
revenues generally benefited from the translation of
our overseas operations from a lower Australian dollar.
The average US exchange rate for the 2009 financial
year was 17% lower than the equivalent prior year.
Both the Americas and Europe regions reported
strong revenue growth over the prior year of 17% and
13% respectively. Revenue in Asia Pacific was flat
between years.
Revenue for the year was $42.7
million, an increase of 14% over
2008. Licence fees made up
51% of revenue, increased by
11% whilst maintenance fees
increased by 18%.
by 369% over the same period. The first half results
were reasonably subdued as a result of the global
financial crisis.
Many analysts have described the last eighteen months
as the toughest economic conditions since the Second
World War. Our major business segment is finance and
the economic downturn affected this sector more than
any other part of the economy. However, our sales into
IP Telephony new licence sales grew strongly in the
our traditional market, HP NonStop, have stood up well.
second half of the year. IP Telephony new licence
This can be mainly attributed to the critical nature of the
sales in the Americas grew by 25% in the second half
systems that we manage. Expenditure on these systems
over the equivalent prior half while Asia Pacific grew
was deemed too critical not to be maintained.
Complex problems?
Real solutions.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Review of operations and activities
Expenses
Total expenses for the year were $33.3 million, an increase of 10% over the prior year. The increase in
costs can be attributed to three factors. Firstly, costs increased as a result of translating the Company’s
American operations at lower currency exchange rates into Australian dollars compared to the prior year.
Secondly, the Company experienced higher bad debt expense directly attributed to some corporate failures
in the United States as a consequence of the global financial crisis. Thirdly, the Company incurred higher
professional fees associated with a thorough review of the Company’s corporate strategy (refer to the
Chairman’s report).
Staff numbers declined from 147 at 30 June 2008 to 142 at 30 June 2009.
Net research and development expenses are represented as follows:
In thousands of AUD
Gross research and development spending
Capitalisation of development expenses
Amortisation of capitalised expenses
Net research and development expenses
Shareholder returns
2009
9,001
(5,790)
5,033
8,244
2008
10,098
(7,255)
5,874
8,717
Returns to shareholders increased through the payment of partly franked dividends:
Net profit
Basic EPS
Dividends per share
Return on equity
Financial position
2009
2008
2007
7,863,000
$5,776,000
$5,433,000
4.72¢
4.0¢
28.9%
3.47¢
3.0¢
24.3%
3.27¢
3.0¢
22.5%
The consolidated entity continues to hold a strong financial position being free of debt and with cash at 30
June 2009 of $14.5 million, compared to $11.1 million at the same time last year. Net cash flow provided by
operating activities was $7.6 million, compared to $5.9 million for the same period last year.
Net cash flow provided by operating activities
$7,644,000
$5,946,000
$7,638,000
Current ratio (current assets to current liabilities)
Net tangible asset backing per ordinary share
1.98
8.35¢
1.85
6.69¢
1.86
7.85¢
2009
2008
2007
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Outlook and Strategy for 2010
The Company’s products continue to deliver value for our customers by supporting the performance
management of their mission-critical, high-availability computing environments in segments such as payments
and communications.
In FY2009 the Company undertook an extensive review of its strategy. This review validated our longstanding
strategy of maximising the core features of PROGNOSIS, and underlined the importance of continuing to
improve and extend our products to deliver real time insight into critical business processes and transactions.
The review also highlighted the value of investing in our Consulting Services business which allows us to
work together with customers to find, build and deliver unique solutions that solve real problems and deliver
additional value to our clients.
Our HP NonStop business remains healthy. Despite the economic downturn and its impact on the financial
segment, we received regular orders as customers continued to rely on PROGNOSIS to drive more operational
efficiency and improve the performance of their existing infrastructure. We expect no changes to these
conditions and will maintain our ongoing investment in new features for this product line.
Our Distributed Systems (Windows, UNIX and Linux) products are often sold alongside our NonStop products
as customers seek a common monitoring interface for all platforms, or as they convert applications from one
platform to another. We will exploit this ongoing trend and invest to extend our Distributed Systems platform
coverage in 2010.
IP telephony is central to our growth in 2010. Our relationship with Avaya has served to validate the quality and
features of our IP Telephony products and will drive sales this year. We also anticipate continued growth from
our Managed Service Provider customer base as businesses outsource the installation and management of
their IP telephony environments to specialist providers. Investing in our IP Telephony products to add features
and improve performance is key to capitalising on these opportunities.
The payments segment is also an exciting growth area for Integrated Research and we are investing in R&D,
Marketing and Sales this year to exploit this opportunity. Payments technology and processes are becoming
increasingly important for banks, card providers, retailers, service providers and other businesses to support
the growing trend to cashless payments. PROGNOSIS is ideally suited to the large-scale, real-time monitoring
demands of payments infrastructures.
Consulting Services around PROGNOSIS, such as implementation, customisation and training, are a small but
rapidly growing part of our business. Our customers tell us often that they have difficult problems and face
challenges that no off-the-shelf product has been able to solve. We will invest in personnel and processes to
use Consulting Services to build unique solutions to solve these real problems, and to increase our customers’
use of PROGNOSIS. This combination of software and services can then be replicated and resold to similar
clients, increasing both our, and our customers’, competitive advantage.
Lastly, we are looking to continually improve our strategic capabilities and critical operational processes in
order to drive greater productivity and performance throughout the Company.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Directors The directors of the Company at any time
during or since the end of the financial year:
Steve Killelea, MAICD
Non-Executive Director and Chairman
Mark Brayan, MBA
Managing Director and Chief Executive Officer
Steve founded Integrated Research in August
1988 and held the position of Managing Director
and Chief Executive Officer until retiring from
his executive position in November 2004. He
was appointed as a Non-Executive Director in
November 2004 and elected Chairman in July
2005. Steve’s current term will expire no later than
the close of the 2010 Annual General Meeting.
Former listed companies directorships held in the
past three years: None. Age 60 years.
Mark Brayan joined Integrated Research in
September 2007 and is responsible for the overall
strategy and leadership of the Company. Mark
has over twenty years experience in the software
industry, most recently he was COO of outsourcer
Talent2 and previously CEO of the listed software
company Concept Systems before its merger with
Talent2. Mark has a strong understanding of the
systems management market through his time with
BMC Software. As Managing Director, Mark is not
required to seek re-election to the Board. Former
listed companies directorships held in the past three
years: None. Age 45 years.
Kate Costello, LLB, FAICD
Independent Non-Executive Director
John Brown, B Com, FCA, MAICD
Independent Non-Executive Director
Kate was appointed as a Director in August
2005. She is a lawyer and has over twenty years
experience in corporate governance and strategy
development. She is also a Director of Governance
Matters Pty Ltd, listed company, LabTech Systems
Ltd, and a number of other private companies.
Kate’s current term will expire no later than the
close of the 2011 Annual General Meeting. Former
listed companies directorships held in the past
three years: None. Age 57 years.
John was appointed a Director in July 2007. He was
a partner with KPMG for over 26 years and since
retiring in 2006 has been appointed to be the chair
or member of the audit committee of a number
of NSW and Federal public sector entities. John is
also a Director and Chair of the Audit Committee of
Sydney Water Corporation and a Director of The Gift
Of Life Foundation. John’s current term will expire
no later than the close of the 2010 Annual General
Meeting. Former listed companies directorships
held in the past three years: None. Age 61 years.
0 INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Alan Baxter, BSc, Dip Ed
Independent Non-Executive Director
Clyde McConaghy, B.Bus., MBA, MAICD, MIOD - UK
Non-Executive Director
Alan was appointed as a Director in June 2009. Alan
has nearly forty years experience in Information
Technology covering a broad range of the industry’s
activities. These include many years in a variety
of roles with IBM Australia, CEO of DMR Consulting
in Australia and COO of Fujitsu Consulting’s global
operations from London. He was Non-Executive
Chairman of Fujitsu Australia & New Zealand, a director
of Mincom Ltd and is currently Chairman of Konekt
Limited and also of Innogence Limited. Konekt Ltd is a
publicly listed company. Alan’s current term will expire
no later than the close of the 2011 Annual General
Meeting. Former listed company directorships held in
the past three years: None. Age 64 years.
Clyde was appointed a Director in December
2007. He has two decades of international
strategic market development experience in the
technology, media and online industries. Clyde is
managing director of Smarter Capital Pty Limited,
another company associated with Mr Steve
Killelea, Chairman of Integrated Research. Clyde’s
current term will expire no later than the close of
the 2011 Annual General Meeting. Former listed
companies directorships held in the past three
years: None. Age: 47 years.
David Boyles, BA, MA, MBA, MAICD
Independent Non-Executive Director
David Leighton, MBA, FCPA, ACIS
Company Secretary
David is a member of Chartered Secretaries
Australia. He has been Company Secretary since
October 2000.
(Resigned from office November 2008)
David had been a Director since July 2003 and was
Deputy Chairman since September 2005. He has
over twenty years senior management experience
with US and Australian multinational companies.
Former listed companies directorships held in
the past three years: director of ERG Group from
December 2003 to June 2005, and was appointed
a director of Infosys Technologies in July 2005.
Age 60 years.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Senior management
Peter Adams, B.Com, CA
Chief Financial Officer
Alex Baburin, B.App. Sc
General Manager, Research and Development
Peter joined Integrated Research in March 2008
and is responsible for overseeing the Company’s
finance and administration, including regulatory
compliance and investor relations. Peter is a
Qualified Chartered Accountant with over 20
years experience. He has held a number of senior
accounting and finance roles, including seven
years as CFO with Infomedia (an ASX-listed
technology company), six years with Renison
Goldfields (ex ASX top 100 Resources Company)
and two years with Transfield Pty Ltd. Peter’s
career began with Arthur Andersen, where he was
responsible for managing large audit clients.
Alex Baburin joined Integrated Research in
November 2006 and is responsible for the
Company’s software development and global
support activities. Alex has 20 years experience
in the development, creation and management
of high-technology hardware and software
products for Honeywell and Siemens. Before
joining Integrated Research he was responsible
for general management of the Siemens Access
Control product line globally and for much of that
time was based in Germany.
Rick Ferguson, Dip T
Vice President Asia Pacific
Pierre Semaan, BEng, MBA
General Manager, Product Management and Marketing
Rick joined Integrated Research in April 2008 and is
responsible for all business operations in the Asia
Pacific region. Rick has over 20 years experience in
the IT industry and has worked in Europe, Africa,
Asia Pacific and Australia. Rick was previously Vice
President of Sales and Marketing for Asia Pacific for
Wyse Technology. Prior to Wyse, Rick held a number
of senior management positions for Unisys and
Cisco Systems. Rick has a wealth of IP networking
experience, and has overseen the deployment of
VoIP and IP Telephony solutions to enterprises and
SMBs across the region.
Pierre joined Integrated Research in June 2008
and is responsible for the management and
strategic direction of all product lines and strategic
marketing. Pierre has over 15 years international
experience managing teams delivering technology
innovations. He was most recently the Senior Vice
President of Technology for Sage CRM solutions,
which included leading the ACT!, SalesLogix and
Mobility R&D organizations. Prior to Sage, Pierre
worked at Citrix as the Chief of Operations & Director
of the CTO Office and Advanced Products Group.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Geoff Bryant, M.Mgt, MAICD
Vice President Consulting
Andre Cuenin, BSc, MBA
President Americas
Geoff joined Integrated Research in June 2009 and
is responsible for all consulting services activities,
which includes professional services and training.
With 20 years experience in operations and services
positions in the technology sector, Geoff brings
expertise that will help ensure Integrated Research
customers receive world class consulting services to
optimise the value of their PROGNOSIS investments.
Prior to Integrated Research he held a number of
business and management positions in Asia Pacific,
Europe and North America with Cognos, IDS Scheer,
Novell, and Software AG.
Andre joined Integrated Research in October 2008
and is responsible for all business operations
in the Americas region. Andre has over 20 years
experience in IT sales, most recently as VP of Field
Operations at Stratavia, where he was responsible
for sales and professional services marketing
worldwide. Prior to this he spent 15 years with CA
(previously known as Computer Associates) in
several senior management positions including VP
of Worldwide Sales Operations.
Julie Skinner, BEd (Hons)
Human Resource Manager
David Stark, BA, MBA
Vice President Europe
Julie Skinner joined Integrated Research in
June 2009 and is responsible for the overall
implementation and delivery of the HR strategy and
policies to support the execution of the corporate
vision. Julie has over 20 years experience in HR
Consulting and Business Development positions
amassed in IT Software development houses (DACA
Software, Timewise Systems), HR Consulting firms
(Lyncroft, Carter & Stone, Leadership Management
Australia) and in IT multi-national companies, IBM
and Lenovo. Most recently Julie was the Human
Resource Business Partner for Lenovo’s ‘Centre of
Excellence’ across Asia Pacific.
Based in the Company’s European headquarters
in Windsor, England, David joined Integrated
Research in March 2008. He is responsible for all
business operations across Europe and the UK.
David has previously held senior management and
sales positions at NCR, ICL, AT&T, QAD, PeopleSoft,
Siebel and Princeton Softech. He served as the
Vice President and Managing Director of Siebel
for the UK, South Africa and Ireland and Vice
President for Northern EMEA with Princeton
Softech. David has established and led highly
successful teams that have achieved market-
leading revenue and profit growth.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Directors’
Report
The directors present their report together with the Financial Report of Integrated Research
Limited (“the Company”) and of the consolidated entity, being the Company and its
controlled entities, for the year ended 30 June 2009 and the Auditor’s Report thereon.
Results
The net profit of the consolidated entity for the 12 months ended 30 June 2009 after income tax expense was $7.9 million.
Dividends
Dividends paid or declared by the company since the end of the previous financial year were:
Final 2008 – Ordinary shares
Unfranked
Interim 2009 – Ordinary shares
Unfranked
Final 2009 – Ordinary shares
5% franked
1.5
1.5
2.5
2,501
2,502
4,170
12 Sep 2008
9 Mar 2009
18 Sep 2009
Cents Per Share
Total Amount $’000
Date of Payment
Principal activities and review of operations
Detail of the principal activities and review of operations of the consolidated entity are set out on pages 16 to 19.
Events subsequent to reporting date
For dividends declared after 30 June 2009 see Note 21 in the financial statements. The financial effect of dividends
declared and paid after 30 June 2009 has not been brought to account in the financial statements for the year ended 30
June 2009 and will be recognised in subsequent financial reports.
No other transaction or event of a material or unusual nature has arisen in the interval between the end of the financial
year and the date of this report which is likely, in the opinion of the directors of the company, to affect significantly the
operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity, in
future financial years.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Directors’ Report
Future developments
Likely developments in the operations of the consolidated entity in future financial years and the expected
results of those operations are referred to generally in the Review of Operations and Activities Report.
Further information on likely developments including expected results would in the Directors’ opinion, result in
unreasonable prejudice to the company and has therefore not been included in this Report.
Directors and company secretary
Details of current directors’ qualifications, experience, age and special responsibilities are set out on page 20.
Details of the company secretary and his qualifications are set out on page 21.
Officers who were previously partners of the audit firm
No officers of the company during the financial year were previously partners of the current audit firm.
Directors’ meetings
The numbers of meetings of the company’s board of directors and of each board committee held during the
year ended 30 June 2009, and the numbers of meetings attended by each director were:
Board
Meetings
Audit and Risk
Committee Meetings
Nomination and
Remuneration
Committee Meetings
Strategy
Committee
Meetings
Alan Baxter
David Boyles
John Brown
Mark Brayan
Kate Costello
Steve Killelea
Clyde McConaghy
A
1
5
12
12
11
12
12
B
1
5
12
12
12
12
12
A
-
1
3
-
-
-
3
B
-
1
3
-
-
-
3
A
-
2
-
-
3
3
-
B
-
2
-
-
3
3
-
A
-
-
-
9
9
9
8
B
-
-
-
9
9
9
9
A: Number of meetings attended.
B: Number of meetings held during the time the directors held office or was a member of the board or committee during the year.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
State of affairs
In the opinion of the directors there were no significant changes in the state of affairs of the consolidated entity that
occurred during the financial year under review.
Environmental regulation
The consolidated entity’s operations are not subject to significant environmental regulations under either Commonwealth
or State legislation.
Directors’ interests
The relevant interest of each director in the shares or options over such shares issued by the companies in the consolidated
entity and other relevant bodies corporate, as notified by the directors to the Australian Stock Exchange in accordance with
S205G(1) of the Corporations Act 2001, at the date of this report is as follows:
Ordinary shares
Directly held
Beneficially held
-
25,000
50,000
-
94,497,339
-
-
-
-
200,000
337,612
-
Total
-
25,000
50,000
200,000
94,834,951
-
Options
Number of Options
-
1,000,000
-
-
-
-
Alan Baxter
Mark Brayan
John Brown
Kate Costello
Steve Killelea
Clyde McConaghy
Share options
Options granted to directors and senior executives
During or since the end of the financial year, the company granted options for no consideration over unissued ordinary shares in
Integrated Research Limited to the following named executive officers of the consolidated entity as part of their remuneration:
Alex Baburin
Andre Cuenin
Pierre Semaan
Number of options granted
Exercise price
40,000
300,000
200,000
$0.31
$0.31
$0.35
Expiry date
Oct 2013
Oct 2013
Jul 2013
The options were granted under the Integrated Research Limited Employee Share Option Plan. 25% of options vest and may be
exercised from each of the first to fourth anniversaries of the issue date. In addition, the ability to exercise options is conditional
on the consolidated entity achieving certain performance hurdles. Unexercised options expire five years after the issue date or 3
months after termination of the employee’s employment.
No options were granted to any non-executive directors of the consolidated entity during or since the end of the financial year.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Directors’ Report
Unissued shares under option
Unissued ordinary shares of Integrated Research Limited under option at the date of this report are as follows:
Expiry
date
July 2009
Nov 2009
Feb 2010
Sep 2010
May 2011
Jan 2012
Jun 2012
Exercise
price
$0.40
$0.57
$0.52
$0.54
$0.41
$0.50
$0.48
Number
of shares
246,000
400,000
293,000
430,000
546,000
160,000
721,000
Expiry
date
Sep 2012
Feb 2013
Mar 2013
Apr 2013
July 2013
Oct 2013
May 2014
Total unissued ordinary shares of Integrated Research Limited under option
Exercise
price
$0.42
$0.38
$0.43
$0.38
$0.35
$0.31
$0.28
Number
of shares
1,000,000
350,000
350,000
300,000
200,000
340,000
1,660,000
6,996,000
Options do not entitle the holder to participate in any share issue of the company or any other body corporate.
Shares issued on the exercise of options
During or since the end of the financial year, the company issued ordinary shares as a result of the exercise of options as
follows (there were no amounts unpaid on the shares issued):
Number of shares
Amount paid on each share
47,250
10,000
0.22
0.26
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Indemnification and insurance of officers and auditors
Indemnification
The company has agreed to indemnify the directors of the company on a full indemnity basis to the full extent permitted by
law, for all losses or liabilities incurred by the director as an officer of the company including, but not limited to, liability for
negligence or for reasonable costs and expenses incurred, except where the liability arises out of conduct involving a lack of
good faith.
Insurance
During the financial year Integrated Research Limited paid a premium to insure the directors and executive officers of the
consolidated entity and related bodies corporate.
The liabilities insured include costs and expenses that may be incurred in defending civil or criminal proceedings that may be
brought against officers in their capacity as officers of the consolidated entity.
The company has not otherwise, during or since the financial year, indemnified or agreed to indemnify an officer or auditor of
the company or any related body corporate against a liability incurred as such on officer or auditor.
Remuneration report
The company’s Remuneration Report, which forms part of this Directors’ Report, is on pages 31 to 39.
Corporate governance
A statement describing the company’s main corporate governance practices in place throughout the financial year is on pages
40 to 47 of this Annual Report.
Non-audit services
During the year Deloitte Touche Tohmatsu, the company’s auditor, has performed certain other services in addition to their
statutory duties.
The board has considered the non-audit services provided during the year by the auditor and in accordance with written advice
provided by resolution of the Audit & Risk Committee, is satisfied that the provision of those non-audit services during the year
by the auditor is compatible with, and did not compromise, the auditor independence requirements of the Corporations Act
2001 for the following reasons:
>
>
All non-audit services were subject to the corporate governance procedures adopted by the company and have been
reviewed by the Audit & Risk Committee to ensure they do not impact the integrity and objectivity of the auditor, and
The non-audit services provided do not undermine the general principles relating to auditor independence as set out in
Professional Statement F1 Professional independence, as they did not involve reviewing or auditing the auditor’s own
work, acting in management or decision making capacity for the company, acting as an advocate for the company or
jointly sharing risks and rewards.
A copy of the auditors’ independence declaration as required under Section 307C of the Corporations Act is attached on
page 94 on the annual report and forms part of the Directors’ Report.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Directors’ Report
Rounding of amounts to nearest thousand dollars
The company is of a kind referred to in ASIC Class Order 98/100 dated 10 July 1998 and in accordance with that Class order,
amounts in the Financial Report and the Directors’ Report have been rounded off to the nearest thousand dollars, unless
otherwise stated.
This report is made in accordance with a resolution of the directors.
Steve Killelea
Chairman
Mark Brayan
Chief Executive Officer
Dated at North Sydney this 7th day of September 2009
0 INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Remuneration
report
Remuneration policies
Remuneration levels for key management personnel and secretaries of the Company, and relevant key management
personnel of the consolidated entity are competitively set to attract and retain appropriately qualified and experienced
directors and senior executives. The Nomination and Remuneration Committee obtains independent advice on the
appropriateness of remuneration packages given trends in comparative companies both locally and internationally and the
objectives of the Company’s remuneration strategy.
Key management personnel (including directors) have authority and responsibility for planning, directing and controlling
the activities of the Company and the consolidated entity.
The remuneration structures explained below are designed to attract suitably qualified candidates, reward the achievement
of strategic objectives, and achieve the broader outcome of creation of value for shareholders. The remuneration structure
takes into account:
>
>
>
The capability and experience of the directors and senior executives
The directors’ and senior executives’ ability to control the relevant segment’s performance
The consolidated entity’s performance including:
- The consolidated entity’s earnings
- The growth in share price and returns on shareholder wealth
Remuneration packages include a mix of fixed and variable remuneration and short and long-term performance based incentives.
Fixed remuneration
Fixed remuneration consists of base remuneration (which is calculated on a total cost basis and includes any FBT charges
related to employee benefits including motor vehicles), as well as employer contributions to superannuation funds.
Remuneration levels are reviewed annually through a process that considers individual, segment and overall performance
of the consolidated entity. In addition, external consultants provide periodic analysis and advice to ensure the directors’
and senior executives’ remuneration is competitive in the market place. A senior executive’s remuneration is also reviewed
on promotion.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Remuneration report
Performance-linked remuneration
Performance-linked remuneration includes both short-term and long-term incentives and is designed to reward executive
directors and senior executives for exceeding their financial and personal objectives. The short-term incentive (STI) is an
“at risk” bonus provided in the form of cash, while the long-term incentive (LTI) is provided as options over ordinary shares
of Integrated Research Limited under the rules of the Employee Share Option Plan (ESOP).
Short-term incentive bonus
The Nomination and Remuneration Committee is responsible for setting the key performance indicators (KPIs) for the Chief
Executive Officer, and for approving the KPIs for the senior executives who report to him. The KPIs generally include measures
relating to the consolidated entity, the relevant segment, and the individual, and include financial, people, customer, strategy
and risk measures. The measures are chosen as they directly align the individual’s reward to the KPIs of the consolidated
entity and to its strategy and performance.
The financial performance objectives vary with position and responsibility and are aligned with each respective year’s
budget. The non-financial objectives vary with position and responsibility and include measures such as achieving strategic
outcomes and staff development.
At the end of the financial year the Nomination and Remuneration Committee assesses the actual performance of the CEO
against the KPIs set at the beginning of the financial year. A percentage of the predetermined maximum amounts for each
KPI is awarded depending on results. The committee recommends the cash incentive to be paid to the CEO for approval by
the board.
Long-term incentive
Options are issued to executive directors and other senior executives under the ESOP. The ability of executive directors
and other senior executives to exercise options is conditional on the consolidated entity achieving certain profit after tax
(PAT) performance hurdles over the vesting period. PAT was considered the most appropriate performance hurdle given its
intrinsic link to creating shareholder wealth.
Consequences of performance on shareholder wealth
In considering the consolidated entity’s performance and benefits for shareholder wealth, the Nomination and
Remuneration Committee has regard to the following indices in respect of the current financial year and the previous four
financial years:
2009
2008
2007
2006
2005
New licences
Net profit
$21,723,000
$19,623,000
$19,517,000
$18,633,000
$17,790,000
$7,863,000
$5,776,000
$5,433,000
$6,975,000
$6,238,000
Dividends paid
$5,003,000
$5,826,000
$4,152,000
$4,146,000
$3,310,000
Change in share price
($0.06)
($0.23)
$0.185
($0.005)
$0.05
Net profit and new licence sales are considered in setting the STI, as two of the financial performance targets are “profit
after tax” and “new sales”.
The Nomination and Remuneration Committee considers that the above performance-linked structure is generating the
desired outcomes.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Key Management Personnel
The following were key management personnel of the consolidated entity at any time during the reporting period and
unless otherwise indicated were key management personnel for the entire period:
Directors (full year)
Steve Killelea (Chairman)
Directors (part year)
Alan Baxter (appointed June 2009)
Mark Brayan (Chief Executive Officer)
David Boyles (resigned November 2008)
John Brown
Kate Costello
Clyde McConaghy
Other key management personnel (full year)
Other key management personnel (part year)
Peter Adams (Chief Financial Officer)
Andre Cuenin (President, Americas, appointed October 2008)
Alex Baburin (GM, Research & Development)
Kurt Roscow (Vice President, Americas, resigned July 2008)
Rick Ferguson (Vice President, Asia Pacific)
David Leighton (Company Secretary)
Pierre Semaan (GM, Product Management & Marketing)
David Stark (Vice President, Europe)
Service agreements
Service contracts for executive directors and senior executives are unlimited in term but capable of termination by either
party according to a period specified in the employment contract, and the consolidated entity retains the right to terminate
the contract immediately by payment in lieu of notice or a severance payment or an amount for redundancy equal to the
scale of payments prescribed in the NSW Employment Protection Act.
Mr Mark Brayan, Chief Executive Officer, has a contract of employment with Integrated Research Limited dated 29 August
2007, which provides for specific notice and severance undertakings of up to four months compensation depending on the
particular circumstances. Mr Brayan can terminate his employment by giving four months prior notice in writing.
Mr Peter Adams, Chief Financial Officer, has a contract of employment with Integrated Research Limited dated 23 January
2008, which provides for specific notice and severance undertakings of up to three months compensation depending on
the particular circumstances. Mr Adams can terminate his employment by giving three months prior notice in writing.
Mr Alex Baburin, General Manager Research & Development, has a contract of employment with Integrated Research
Limited dated 18 October 2006, which provides for specific notice and severance undertakings of up to one month’s
compensation depending on the particular circumstances. Mr Baburin can terminate his employment by giving one
month’s prior notice in writing.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Remuneration report
Mr Andre Cuenin, President Americas, has a contract of employment with Integrated Research Limited dated 22 September
2008, which provides for specific notice and severance undertakings of one month’s compensation depending on the
particular circumstances. Mr Cuenin can terminate his employment by giving one month prior notice in writing.
Mr Rick Ferguson, Vice President Asia Pacific, has a contract of employment with Integrated Research Limited dated
20 February 2008, which provides for specific notice and severance undertakings of up to three months compensation
depending on the particular circumstances. Mr Ferguson can terminate his employment by giving three months prior notice
in writing.
Mr Pierre Semaan, General Manager Product Management & Marketing, has a contract of employment with Integrated
Research Limited dated 22 May 2008, which provides for specific notice and severance undertakings of one month’s
compensation depending on the particular circumstances. Mr Semaan can terminate his employment by giving one month
prior notice in writing.
Mr David Stark, Vice President Europe, has a contract of employment with Integrated Research Limited dated 22 January
2008, which provides for specific notice and severance undertakings of up to three months compensation depending on
the particular circumstances. Mr Stark can terminate his employment by giving three months prior notice in writing.
Non-executive directors
Total remuneration for all non-executive directors last voted upon at a special meeting of shareholders in October 2000 is
not to exceed $500,000 per annum.
Directors’ base fees in FY2009 were $45,000 per annum plus compulsory superannuation. The chairman receives the base
fee by a multiple of two and the deputy chairman receives the base fee by a multiple of 1.5. Directors’ fees cover all main
board activities and committee membership. Directors can elect to salary sacrifice their directors fees into superannuation.
Non-executive directors do not receive performance-related compensation or retirement benefits.
Directors’ and executive officers’ remuneration
Details of the nature and amount of each major element of the remuneration of each director of the Company and each of
the executives and relevant group executives receiving the highest remuneration are reported below.
The estimated value of options disclosed is calculated at the date of grant using the binomial option-pricing model,
adjusted to take into account the inability to exercise options during the vesting period. Further details of options granted
during the year are set out above under “Share options”.
“Executive officers” are officers who are involved in, or who take part in, the management of the affairs of Integrated
Research Limited and/or related bodies corporate. Remuneration for overseas-based employees has been translated to
Australian dollars at the average exchange rates for the year.
No director or executive appointed during the year received a payment as part of his or her consideration for agreeing to
hold the position.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Short Term
Salary
& fees
$
Bonus
$
Non-
cash
benefits
$
Post-
employment
Super-
annuation
contribution
$
Share-
based
payments
Value of
options
(A)
$
Other
compen-
sation
Termina-
tion
benefit
$
Proportion of
remuneration
Perfor-
mance
related
Value of
options
Total
$
In AUD
Directors: Non-executive
Alan Baxter
(appointed
June 2009)
David Boyles
(resigned
November 2008)
John Brown
(appointed
July 2007)
Alex Kennedy
(resigned
September 2007)
Kate Costello
2009
1,603
2008
2009
2008
-
-
-
2009
45,000
2008
42,676
2009
2008
2009
2008
-
-
-
-
Steve Killelea
2009
90,000
2008
90,000
2009
33,750
2008
2009
-
-
2008
86,886
Clyde McConaghy
(appointed
December 2007)
Directors: Executive
Keith Andrews
(resigned
September 2007)
Mark Brayan
(appointed
September 2007)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
144
-
26,773
73,575
4,050
3,841
-
9,997
49,050
49,050
8,100
8,100
15,300
28,613
-
12,136
5,444
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,747
-
26,773
73,575
49,050
46,517
-
9,997
49,050
49,050
98,100
98,100
49,050
28,613
-
250,000 354,466
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2009 395,468 149,870
4,532
2008
329,556
85,000
2,833
13,334
13,149
85,956
6,216
-
-
649,160
23%
436,754
19%
13%
1%
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Remuneration report
Short Term
Salary
& fees
$
Bonus
$
Non-
cash
benefits
$
Post-
employment
Super-
annuation
contribution
$
Share-
based
payments
Value of
options
$
Other
compen-
sation
Termina-
tion
benefit
$
Proportion of
remuneration
Total
$
Perfor-
mance
related
Value
of
options
In AUD
Executive officers (excluding directors)
The Company
Peter Adams
(appointed
March 2008)
2009
229,950
49,330
1,133
2008
58,221
11,250
-
Alex Baburin
2009
188,503
41,870
David Leighton
2009
45,000
2008
102,500
2009
-
-
-
-
2008
185,445
35,800
2009
-
-
2008
110,140
30,500
2,446
5,057
2009
206,851
115,725
4,532
2008
44,818
17,500
18,918
5,240
16,965
16,690
-
18,617
4,163
4,050
4,050
-
4,532
4,532
-
-
-
-
-
20,306
754
13,068
1,644
-
-
17,178
547
-
1,020
-
-
2008
124,817
20,000
19,229
5,287
2009
207,436
41,889
4,532
16,932
8,831
2008
17,154
2009
-
-
-
2008
58,198
10,477
2009
162,847
143,965
2008
2009
-
-
-
-
2008
115,762
60,954
2009
11,691
-
2008
187,881
116,863
2009
265,217
118,559
2008
91,386
33,708
378
1,544
-
-
-
-
-
-
-
-
-
-
-
4,090
-
-
-
-
-
-
-
-
-
-
-
8,689
-
-
-
-
539
22,463
953
2009
1,883,316 661,208
19,261
192,233
176,491
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
319,637
75,465
264,938
244,111
-
15%
15%
16%
15%
-
148,143
21%
362,903
67,028
49,050
107,570
-
169,333
279,620
19,076
-
32%
26%
-
-
-
12%
15%
-
-
50,000
122,765
9%
6%
1%
5%
1%
-
-
5%
1%
-
1%
-
-
3%
-
-
-
-
-
-
-
-
-
-
-
-
315,501
46%
3%
-
-
-
-
176,716
34%
11,691
-
305,283
38%
-
-
-
-
-
406,239
126,047
29%
27%
6%
1%
2,932,509
2008 1,645,440 422,052
41,554
237,890
11,673
300,000 2,658,609
2009
1,443,561
398,684
19,261
192,233
145,339
-
2,199,078
2008
1,250,411
210,527
41,554
237,890
10,181
300,000
2,050,563
Nathan Brumby
(resigned
November 2007)
Rick Ferguson
(appointed
March 2008)
Stephen Rorie
(resigned
November 2007)
Pierre Semaan
(appointed
June 2008)
David Taylor
(resigned
October 2007)
Consolidated
Andre Cuenin
(appointed
October 2008)
Steve Douglas
(resigned
December 2007)
Kurt Roscow
(resigned
July 2008)
David Stark
(appointed
March 2008)
Total
compensation:
key management
(consolidated)
Total
compensation:
key management
(company)
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Analysis of bonuses included in remuneration
Details of the vesting profile of the short-term incentive cash bonuses awarded as remuneration to each director of the
Company and each of the named Company executives and relevant group executives are detailed below:
Included in remuneration $ (A)
% vested in year
% forfeited in year (B)
Short term incentive bonuses
Directors
Mark Brayan
Executives
Peter Adams
Alex Baburin
Andre Cuenin
Rick Ferguson
Pierre Semaan
David Stark
149,870
49,330
41,870
143,965
115,725
41,889
118,559
75%
99%
105%
79%
83%
84%
47%
25%
1%
-
21%
17%
16%
53%
(A) Amounts included in remuneration for the financial year represents the amount that vested in the financial year
based on achievement of personal goals and satisfaction of specified performance criteria. No amounts vest in future
financial years in respect of the short-term incentive bonus scheme for the 2009 financial year.
(B)
The amounts forfeited are due to the performance or service criteria not being met in relation to the current financial year.
Equity instruments
All options refer to options over ordinary shares of Integrated Research Limited, which are exercisable on a one-for-one
basis under the ESOP.
Options and rights over equity instruments granted as compensation
Details of options over ordinary shares in the company that were granted as compensation to each key management person
during the reporting period and details on options that were vested during the reporting period are as follows:
Executives
Grant date
Number of
options granted
in 2009
Number of
options vested
during 2008
Fair value
of option at
grant date
Exercise price
per option
Expiry date
Alex Baburin
40,000
Andre Cuenin
300,000
Oct 2008
Oct 2008
Pierre Semaan
200,000
Jul 2008
-
-
-
$0.13
$0.13
$0.15
$0.31
$0.31
$0.35
Oct 2013
Oct 2013
Jul 2013
No options have been granted to named executives since the end of the financial year. The above options were provided at
no cost to the recipients.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Remuneration report
All options expire on the earlier of their expiry date or termination of the individual’s employment, except for termination
due to retirement. The options are exercisable on an annual basis on the first to fourth anniversaries of the grant date. In
addition to a continuing employment service condition, the ability of executives to exercise options is conditional on the
consolidated entity achieving certain performance hurdles.
Further details, including grant dates and exercise dates regarding options granted to executives under the ESOP are in
note 18 to the financial statements.
Exercise of options granted as compensation
During the reporting year no shares were issued to executives on the exercise of options previously granted as compensation.
Analysis of movement in options
The movement during the reporting period, by value, of options over ordinary shares in the company held by each company
director and each of the named company executives and relevant group executives is detailed below:
In AUD
Executives
Alex Baburin
Andre Cuenin
Pierre Semaan
Granted in year (A) $
Exercised in year (B) $
Forfeited in year (C) $ Total options value in year (D) $
Value of options
5,191
38,933
29,305
73,429
-
-
-
-
-
-
-
-
4,597
8,689
8,831
22,117
(A)
The value of options granted in the year is the fair value of the options calculated at the grant date using a binomial
option-pricing model. The total value of the options granted is included in the table above. This amount is allocated
to remuneration over the vesting period, and is before adjusting the value for the probability the options will vest.
(B)
The value of options exercised during the year is calculated as the market price of shares of the Company on the
Australian Stock Exchange as at the close of trading on the date the options were exercised after deducting the price
paid to exercise the option.
(C)
There were no options forfeited during the year, except for those held by executives whose employment was
terminated during the year. No value has been assigned to those options as either the exercise price exceeded the
market price of the Company’s shares, or had not vested.
(D)
Total options value in year represents the fair value of options granted apportioned over the vesting period, adjusting
the value for the probability the options will vest.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Analysis of options and rights over equity instruments granted as compensation
Details of vesting profile of the options granted to each director of the company and each of the named executives are
detailed below:
Options granted
Number
Date
% vested
in year
% Forfeited
in year (A)
Financial year in
which grant expires
Directors
Mark Brayan
1,000,000
Sep 2007
25%
Executives
Peter Adams
350,000
Mar 2008
Alex Baburin
160,000
Aug 2006
40,000
Oct 2008
Andre Cuenin
300,000
Oct 2008
Rick Ferguson
300,000
Apr 2008
Kurt Roscow
300,000
Apr 2004
Pierre Semaan
200,000
Jul 2008
David Stark
350,000
Mar 2008
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100%
-
-
2012
2013
2012
2013
2013
2013
-
2013
2013
Value yet to vest ($)
Min (B) Max (C)
nil
$108,075
nil
nil
nil
nil
nil
nil
nil
nil
$58,861
$25,748
$5,191
$38,933
$50,453
n/a
$29,305
$63,000
(A)
The percentage forfeited in the year represents the reduction from the maximum number of options available to vest
due to the performance hurdles not being achieved or due to the resignation of the executive.
(B)
The minimum value of options yet to vest is $nil as the executives may not achieve the required performance hurdles
or may terminate their employment prior to vesting.
(C)
The maximum values presented above are based on the values calculated using the binomial option-pricing model as
applied in estimating the value of options for employee benefit expense purposes.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Corporate
Governance
Statement
This statement outlines the main corporate governance practices that were in place
throughout the financial year, which comply with the ASX Corporate Governance Council
recommendations, unless otherwise stated.
Board of directors and its committees
Role of the board
The board’s primary role is the protection and enhancement of long-term shareholder value.
To fulfil this role, the board is responsible for the overall corporate governance of the consolidated entity including
formulating its strategic direction, approving and monitoring capital expenditure, setting remuneration, appointing,
removing and creating succession policies for directors and senior executives, establishing and monitoring the
achievement of management goals and ensuring the integrity of internal control and management information systems. It
is also responsible for approving and monitoring financial and other reporting. Details of the board’s charter are located on
the company’s website (www.ir.com).
Board process
To assist in the execution of its responsibilities, the Board has established a number of board committees including a
Nomination and Remuneration Committee, an Audit and Risk Committee and a Strategy Committee. These committees
have written mandates and operating procedures, which are reviewed on a regular basis. The board has also established a
framework for the management of the consolidated entity including board-endorsed policies, a system of internal control, a
business risk management process and the establishment of appropriate ethical standards.
The full board currently holds twelve scheduled meetings each year and any extraordinary meetings at such other times as
may be necessary to address any specific matters that may arise.
The agenda for its meetings is prepared in conjunction with the chairman, chief executive officer and company secretary.
Standing items include strategic matters for discussion, the CEO’s report, financial reports, key performance indicator
reports and presentations by key executives and external industry experts. Board papers are circulated in advance.
Directors have other opportunities, including visits to operations, for contact with a wider group of employees.
During the 2009 financial year the board undertook an evaluation of its performance. The evaluation resulted in the board
reordering its standing agenda, expanding its annual calendar to include all prior-known activities, agreeing to schedule
some presentations/meetings with industry experts and major partners/customers and scheduling regular reviews of all
board-endorsed policies.
0 INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Director education
The consolidated entity follows an induction process to educate new directors about the nature of the business, current
issues, the corporate strategy and expectations of the consolidated entity concerning performance of directors. Directors
also have the opportunity to visit consolidated entity facilities and meet with management to gain a better understanding
of business operations. In addition executives make regular presentations to the board to ensure its familiarity with
operational matters. Directors are expected to access external continuing education opportunities to update and enhance
their skills and knowledge.
Independent advice and access to company information
Each director has the right of access to all relevant company information and to the company’s executives and, subject to prior
consultation with the chairman, may seek independent professional advice from a suitably qualified adviser at the consolidated
entity’s expense. A copy of the advice received by the director is made available to all other members of the board.
Composition of the board
The names of the directors of the company in office at the date of this report are set out on page 20 of this report.
The company’s constitution provides for the board to consist of between three and twelve members. At 30 June 2009 the
board members were comprised as follows:
>
>
>
>
>
>
Mr Steve Killelea – non executive director (Chairman)
Mr Alan Baxter – independent non executive director
Mr John Brown – independent non executive director
Ms Kate Costello – independent non executive director
Mr Clyde McConaghy – non executive director
Mr Mark Brayan – executive director (Chief Executive Officer)
Mr David Boyles retired from his position as an independent non executive director in November 2008.
Mr Alan Baxter was appointed as an independent non executive director in June 2009.
The Board consists of three independent non executive directors, two non executive directors who are not independent
(Mr McConaghy and Mr Killelea) and one executive director (Mr Brayan). Mr McConaghy is Managing Director of Smarter
Capital Pty Limited, another company associated with Mr Steve Killelea, Chairman of Integrated Research. This does
not comply with the ASX Corporate Governance Council recommendation that the majority of directors be independent.
However, the board considers the directorship of Mr McConaghy, who has two decades of international strategic market
development experience in the technology, media and online industries, to be beneficial to the company and is satisfied
that he will exercise independent judgement as a non executive director.
The election of Mr Killelea, who holds a majority of the company’s issued shares, as non-executive chairman, does not
comply with the ASX Corporate Governance Council recommendation that the chairman be an independent director.
However, the board is satisfied that the company benefits from Mr Killelea’s experience and knowledge gained through his
long involvement with Integrated Research and his associations throughout the information industry. Mr Killelea founded
Integrated Research in 1988 and was the CEO and managing director of the company until his retirement in November 2004.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Corporate Governance Statement
At each Annual General Meeting one-third of directors, any director who has held office for three years and any director
appointed by directors in the preceding year must retire, then being eligible for re-election. The CEO is not required to retire
by rotation.
The composition of the board is reviewed on a regular basis to ensure that the board has the appropriate mix of expertise
and experience. When a vacancy exists, through whatever cause, or where it is considered that the board would benefit
from the services of a new director with particular skills, the Nomination and Remuneration Committee, in conjunction with
the board, determines the selection criteria for the position based on the skills deemed necessary for the board to best
carry out its responsibilities. The committee then selects a panel of candidates and the board appoints the most suitable
candidate who must stand for election at the next general meeting of shareholders.
Nomination and Remuneration Committee
The Nomination and Remuneration Committee is a committee of the board of directors and is empowered by the board to
assist it in fulfilling its duties to shareholders and other stakeholders. In general, the committee has responsibility to: 1)
ensure the company has appropriate remuneration policies designed to meet the needs of the company and to enhance
corporate and individual performance and 2) review board performance, select and recommend new directors to the board
and implement actions for the retirement and re-election of directors.
Responsibilities regarding remuneration
The Committee reviews and makes recommendations to the board on:
>
>
>
>
>
>
>
The appointment, remuneration, performance objectives and evaluation of the chief executive officer
The remuneration packages for senior executives
The company’s recruitment, retention and termination policies and procedures for senior executives
Executive remuneration and incentive policies
Policies on employee incentive plans, including equity incentive plans
Superannuation arrangements
The remuneration framework and policy for non-executive directors.
Remuneration levels are competitively set to attract and retain the most qualified and experienced directors and senior
executives. The Remuneration Committee obtains independent advice on the appropriateness of remuneration packages,
given trends in comparative companies and industry surveys. Remuneration packages include a mix of fixed remuneration,
performance-based remuneration and equity-based remuneration.
Responsibilities regarding nomination
The Committee develops and makes recommendations to the board on:
>
>
>
>
The CEO and senior executive succession planning
The range of skills, experience and expertise needed on the board and the identification of the particular skills,
experience and expertise that will best complement board effectiveness
A plan for identifying, reviewing, assessing and enhancing director competencies
Board succession plans to maintain a balance of skills, experience and expertise on the board
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
>
>
>
Evaluation of the board’s performance
Appointment and removal of directors
Appropriate composition of committees.
The terms and conditions of the appointment of non-executive directors are set out in a letter of appointment, including
expectations for attendance and preparation for all board meetings, expected time commitments, procedures when dealing
with conflicts of interest, and the availability of independent professional advice.
The members of the Nomination and Remuneration Committee during the year were:
>
>
>
>
Ms Kate Costello (Chairperson) – Independent Non-Executive
Mr David Boyles – Independent Non-Executive (to November 2008)
Mr Alan Baxter – Independent Non-Executive (from June 2009)
Mr Steve Killelea – Non-Executive
The Nomination and Remuneration Committee meets at least twice a year and as required. The Committee met three times
during the year under review.
Audit and Risk Committee
In November 2008, the Board endorsed changes to the Audit Charter to incorporate risk management and consequentially
the Committee was reconstituted to become the Audit and Risk Committee.
The Audit and Risk Committee has a documented charter, approved by the board. All members must be non-executive
directors with a majority being independent. The chairman may not be the chairman of the board. The committee advises
on the establishment and maintenance of a framework of risk management, internal control and appropriate ethical
standards for the management of the consolidated entity.
The members of the Audit and Risk Committee during the year were:
>
>
>
>
Mr John Brown (Chairman) – Independent Non-Executive
Mr David Boyles – Independent Non-Executive (to November 2008)
Mr Alan Baxter – Independent Non-Executive (from June 2009)
Mr Clyde McConaghy – Non-Executive
During the year, the Audit and Risk Committee provided the Board with updates to the Company’s risk management policy,
risk management register and risk management plan (with the Board approving each of these documents).
The external auditor, chief executive officer and chief financial officer are invited to Audit and Risk Committee meetings
at the discretion of the committee. The committee met three times during the year and committee members’ attendance
record is disclosed in the table of directors’ meetings on page 26.
The external auditor met with the audit committee/board three times during the year, two of which included time without the
presence of executive management. The Chief Executive Officer and the Chief Financial Officer declared in writing to the board that
the company’s financial reports for the year ended 30 June 2009 comply with accounting standards and present a true and fair
view, in all material respects, of the company’s financial condition and operational results. This statement is required annually.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Corporate Governance Statement
The Audit and Risk Committee’s charter is available on the Company’s website and includes information on procedures for
selection and appointment of the external auditor, and for rotation of external audit engagement partners.
The main responsibilities of the Audit and Risk Committee include:
>
>
>
>
>
>
>
>
>
Serve as an independent party to monitor the financial reporting process and internal control systems
Review the performance and independence of the external auditors and make recommendations to the board
regarding the appointment or termination of the auditors
Review the scope and cost of the annual audit, negotiating and recommending the fee for the annual audit to the board
Review the external auditor’s management letter and responses by management
Provide an avenue of communication between the auditors, management and the board
Monitor compliance with all financial statutory requirements and regulations
Review financial reports and other financial information distributed to shareholders so that they provide an accurate
reflection of the financial health of the company
Monitor corporate risk management and assessment processes, and the identification and management of strategic
and operational risks
Enquire of the auditors of any difficulties encountered during the audit, including any restrictions on the scope of
their work, access to information or changes to the planned scope of the audit.
The Audit and Risk Committee reviews the performance of the external auditors on an annual basis and normally meets
with them during the year as follows:
>
To discuss the external audit plans, identifying any significant changes in structure, operations, internal controls or
accounting policies likely to impact the financial statements and to review the fees proposed for the audit work to
be performed
>
Prior to announcement of results:
- To review the half-year and preliminary final report prior to lodgement with the ASX, and any significant
adjustments required as a result of the auditor’s findings
- To recommend the Board approval of these documents
>
To finalise half-year and annual reporting:
- Review the results and findings of the auditor, the adequacy of accounting and financial controls, and to monitor
the implementation of any recommendations made
- Review the draft financial report and recommend board approval of the financial report
>
As required, to organise, review and report on any special reviews or investigations deemed necessary by the board.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Strategy Committee
The Strategy Committee has a documented charter, approved by the board, and is responsible for reviewing strategy and
recommending strategies to the board to enhance the company’s long-term performance. The committee is comprised of at
least three members, including the chairman of the board and the Chief Executive Officer. The board appoints a member of
the committee to be chairman.
The members of the Strategy Committee during the year were:
>
>
>
>
Mr Steve Killelea (Chairman) – Non-Executive
Mr Mark Brayan – Executive
Mr Clyde McConnaghy – Non-Executive
Ms Kate Costello – Independent Non-Executive
The Strategy Committee is responsible for:
>
>
>
>
Review and assist in defining current strategy
Assess new strategic opportunities, including M&A proposals and intellectual property developments or acquisitions
Stay close to the business challenges and monitor operational implementation of strategic plans
Endorse strategy and business cases for consideration by the full board.
The Committee met nine times during the year under review.
At the commencement of the 2009 financial year, the board approved the services of The Boston Consulting Group (“BCG”)
who worked with the Strategy Committee in developing a detailed revision of the Company’s strategy including review
of the Company’s vision statement, analysis of opportunities in the market including growth initiatives, review of the
Company’s core capabilities (including “gap” analysis) and identification of appropriate key performance indicators to
measure delivery on the strategy.
Risk management
Under the November 2008 revised Audit and Risk Charter, the Audit and Risk Committee reviews the status of business
risks to the consolidated entity through integrated risk management programs ensuring risks are identified, assessed
and appropriately managed and communicated to the board. Major business risks arise from such matters as actions by
competitors, government policy changes and the impact of exchange rate movements.
Comprehensive policies and procedures are established such that:
>
>
>
>
Capital expenditure above a certain size requires board approval
Financial exposures are controlled, including the use of forward exchange contracts
Risks are identified and managed, including internal audit, privacy, insurances, business continuity and compliance
Business transactions are properly authorised and executed.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Corporate Governance Statement
The Chief Executive Officer and the Chief Financial Officer have declared in writing to the board that the company’s financial
reports are founded on a sound system of risk management and internal compliance and control which implements the
policies adopted by the board.
Internal control framework
The board is responsible for the overall internal control framework, but recognises that no cost-effective internal control
system will preclude all errors and irregularities. The board has instigated the following internal control framework:
>
>
>
>
Financial reporting – Monthly actual results are reported against budgets approved by the directors and revised
forecasts for the year are prepared monthly
Continuous disclosure – Identify matters that may have a material effect on the price of the Company’s securities, notify
them to the ASX and post them to the Company’s website
Quality and integrity of personnel – Formal appraisals are conducted at least annually for all employees
Investment appraisals – Guidelines for capital expenditure include annual budgets, detailed appraisal and review
procedures and levels of authority.
Internal Audit
The Company does not have an internal audit function but utilises its financial resources as needed to assist the board in
ensuring compliance with internal controls.
Ethical standards
All directors, managers and employees are expected to act with the utmost integrity and objectivity, striving at all times to
enhance the reputation and performance of the consolidated entity. Every employee has a nominated supervisor to whom
they may refer any issues arising from their employment.
Conflict of interest
Directors must keep the board advised, on an ongoing basis, of any interest that could potentially conflict with those of the
Company. Where the board considers that a significant conflict exists the director concerned does not receive the relevant
board papers and is not present at the meeting whilst the item is considered. The board has developed procedures to
assist directors to disclose potential conflicts of interest. Details of director-related entity transactions with the Company
and consolidated entity are set out in Note 27.
Code of conduct
The consolidated entity has advised each director, manager and employee that they must comply with the code of conduct.
The code aligns behaviour of the board and management with the code of conduct by maintaining appropriate core values
and objectives. It may be reviewed on the company’s website and includes:
>
>
>
Responsibility to the community and fellow employees to act with honesty and integrity, and without prejudice
Compliance with laws and regulations in all areas where the company operates, including employment opportunity,
occupational health and safety, trade practices, fair dealing, privacy, drugs and alcohol, and the environment
Dealing honestly with customers, suppliers and consultants
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
>
>
Ensuring reports and other information are accurate and timely
Proper use of company resources, avoidance of conflicts of interest and use of confidential or proprietary information.
Trading in company securities by directors and employees
Directors and employees may acquire shares in the company, but are prohibited from dealing in company shares whilst in
possession of price sensitive information, and except in the periods:
>
>
From 24 hours to 28 days after the release of the company’s half-yearly results announcement or following the wide
dissemination of information on the status of the corporation and current results
From 24 hours after the release of the company’s annual results announcement to a maximum of 28 days after the
annual general meeting.
Directors must obtain the approval of the Chairman of the board and notify the Company Secretary before they buy or sell
shares in the company, subject to board veto. The company advises the ASX of any transactions conducted by directors in
shares in the company.
The consolidated entity’s trading policy may be reviewed on the company’s website.
Communication with shareholders
The board provides shareholders with information using a comprehensive continuous disclosure policy which includes
identifying matters that may have a material effect on the price of the company’s securities, notifying them to the ASX,
posting them on the company’s website (www.ir.com), and issuing media releases. Disclosures under this policy are in
addition to the periodic and other disclosures required under the ASX Listing Rules and the Corporations Act. More details
of the policy are available on the company’s website.
The Chief Executive Officer and the Chief Financial Officer are responsible for interpreting the Company’s policy and where
necessary informing the board. The Company Secretary is responsible for all communication with the ASX.
The board encourages full participation of shareholders at the Annual General Meeting to ensure a high level of
accountability and identification with the consolidated entity’s strategy and goals. Important issues are presented to the
shareholders as single resolutions. The external auditor is requested to attend the Annual General Meetings to answer any
questions concerning the audit and the content of the auditor’s report.
The shareholders are requested to vote on the appointment and aggregate remuneration of directors, the granting of
options and shares to directors, the Remuneration report and changes to the Constitution. Copies of the Constitution are
available to any shareholder who requests it.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Financial Report
Income statements
Statements of recognised income and expense
Balance sheets
Statements of cash flows
Notes to the financial statements
1.
2.
3.
4.
5.
6.
7.
8.
9.
Significant accounting policies
Segment reporting
Other income
Expenses
Personnel expenses
Auditors’ remuneration
Income tax expense
Earnings per share
Cash and cash equivalents
10.
Trade and other receivables
11. Other current assets
12.
Investments
13. Other financial assets
14.
Property, plant and equipment
15. Deferred tax assets and liabilities
16.
17.
18.
Intangible assets
Trade and other payables
Employee benefits
19. Provisions
20. Other liabilities
21. Capital and reserves
22.
Financial instruments
23. Operating leases
24. Consolidated entities
25. Reconciliation of cash flows from operating activities
26. Key management personnel disclosures
27.
Related parties
28. Subsequent events
50
51
52
53
54
61
63
63
63
64
64
65
66
66
67
67
68
68
69
71
72
72
76
76
77
79
84
84
85
86
90
90
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
49
Financial Report
Income statements
For the year ended 30 June 2009
In thousands of AUD
Revenue
Revenue from licence fees
Revenue from maintenance fees
Consolidated
The Company
Notes
2009
2008
2009
2008
21,723
19,623
15,052
13,299
19,217
16,344
12,281
11,603
Revenue from consulting and other services
1,744
1,417
285
759
Total revenue
Research and development expenses
Sales, consulting and marketing expenses
General and administration expenses
Total expenses
Results from operating activities
Other income
Profit before tax
Income tax expense
Profit for the year
Basic earnings per share (AUD cents)
Diluted earnings per share (AUD cents)
42,684
37,384
27,618
25,661
8,244
18,932
6,142
8,717
17,114
4,345
8,244
7,936
3,102
8,717
7,874
2,958
33,318
30,176
19,282
19,549
9,366
454
9,820
1,957
7,863
7,208
462
7,670
1,894
5,776
8,336
370
8,706
1,329
7,377
6,112
1,613
7,725
1,362
6,363
4.72¢
4.71¢
3.47¢
3.47¢
4
3
7
8
8
The income statements are to be read in conjunction with the notes to the financial statements set out on pages 54 to 90.
50 INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Statements of recognised income and expense
For the year ended 30 June 2009
Consolidated
The Company
In thousands of AUD
Notes
2009
2008
2009
2008
Effective portion of changes in fair value of cash flow hedges
Foreign exchange translation differences
Net income recognised directly in equity
Profit for the year
Total recognised income and expense for the year
21
21
460
(162)
298
7,863
8,161
-
(520)
(520)
5,776
5,256
460
-
460
7,377
7,837
-
-
-
6,363
6,363
Other movements in equity arising from transactions with owners as owners are set out in note 21.
The amounts recognised directly in equity are disclosed net of tax – see note 15 for tax effect.
The statements of recognised income and expense are to be read in conjunction with the notes to the financial statements
set out on pages 54 to 90.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
51
Financial Report
Balance sheets
As at 30 June 2009
In thousands of AUD
Current assets
Cash and cash equivalents
Trade and other receivables
Current tax assets
Other current assets
Total current assets
Non-current assets
Investments
Other financial assets
Property, plant and equipment
Deferred tax assets
Intangible assets
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Provisions
Other current liabilities
Total current liabilities
Non-current liabilities
Deferred tax liabilities
Provisions
Other non-current liabilities
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
Consolidated
The Company
Notes
2009
2008
2009
2008
9
10
11
12
13
14
15
16
17
19
20
15
19
20
21
21
21
14,459
11,012
1,683
2,142
11,148
10,157
1,006
920
9,608
9,942
942
1,599
5,279
10,833
570
634
29,296
23,231
22,091
17,316
-
1,823
2,355
394
13,323
17,895
47,191
2,913
1,132
10,740
14,785
-
1,765
2,405
284
12,641
17,095
54
1,744
2,162
-
13,312
17,272
54
1,690
2,208
-
12,631
16,583
40,326
39,363
33,899
2,448
1,139
8,995
12,582
1,860
882
6,963
9,705
1,669
938
5,534
8,141
3,802
3,141
3,802
3,141
635
723
5,160
19,945
27,246
514
298
3,953
16,535
23,791
615
88
4,505
14,210
25,153
490
105
3,736
11,877
22,022
816
(44)
794
(482)
816
1,109
794
509
26,474
23,479
23,228
20,719
27,246
23,791
25,153
22,022
The balance sheets are to be read in conjunction with the notes to the financial statements set out on pages 54 to 90.
52 INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Statements of cash flows
For the year ended 30 June 2009
In thousands of AUD
Notes
2009
2008
2009
2008
Consolidated
The Company
Net cash provided by operating activities
25
7,644
5,946
Cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Cash generated from operations
Income taxes paid
Cash flows from investing activities
Payments for property, plant and equipment
Payments for intellectual property purchases
Interest received
Dividends received
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issuing of shares
Payment of dividend
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at 1 July
Effects of exchange rate changes on cash
41,513
38,420
28,570
23,541
(32,284)
(31,341)
(18,493)
(18,489)
9,229
7,079
10,077
(1,585)
(1,133)
5,052
(425)
4,627
(134)
(160)
231
1,382
1,319
(693)
9,384
(416)
(19)
370
-
(65)
(501)
(24)
454
-
(71)
(198)
(160)
462
-
104
13
114
13
114
21
(5,003)
(5,826)
(5,003)
(5,826)
(4,990)
(5,712)
(4,990)
(5,712)
2,583
11,148
728
338
11,704
(894)
4,329
5,279
-
234
5,045
-
Cash and cash equivalents at 30 June
9
14,459
11,148
9,608
5,279
The statements of cash flows are to be read in conjunction with the notes to the financial statements set out on pages 54 to 90.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
53
Notes to the
Financial
Statements
For the year ended 30 June 2009
Note 1: Significant accounting policies
Integrated Research Limited (the “Company”) is a company domiciled in Australia. The financial report of the Company for
the year ended 30 June 2009 comprises the Company and its subsidiaries (together referred to as the “consolidated entity”).
The financial report was authorised for issue by the directors on 7 September 2009.
a) Statement of Compliance
The financial report is a general purpose financial report which has been prepared in accordance with Australian
Accounting Standards, and Interpretations and the Corporations Act 2001. Accounting Standards include Australian
Equivalent to International Financial Reporting Standards (“AIFRS”). Compliance with AIFRS ensures the financial reports
of the consolidated entity and the company also comply with the measurement requirements of International Financial
Reporting Standards and interpretations adopted by the International Accounting Standards Board.
b) Basis of Preparation
The financial report is presented in Australian dollars and is prepared on the historical cost basis, with the exception of
cash flow hedges, which are at fair value.
The company is of a kind referred to in ASIC Class Order (CO) 98/100 dated 10 July 1998 (updated by CO 05/641 effective 28
July 2005 and CO 06/51 effective 31 January 2006) and in accordance with that Class Order, amounts in the financial report
and Directors’ Report have been rounded off to the nearest thousand dollars, unless otherwise stated.
The preparation of a financial report in conformity with Australian Accounting Standards requires management to make
judgements, estimates and assumptions that affect the application of policies and reported amounts of assets and
liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of
making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates. These accounting policies have been consistently applied by each entity in
the consolidated entity.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the
revision and future periods if the revision affects both current and future periods.
54 INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Standards and Interpretations issued not yet effective
At the date of authorisation of the financial report, a number of standards and Interpretations were in issue but not yet effective.
Initial application of the following Standards will not affect any of the amounts recognised in the financial report, but will
change the disclosures presently made in relation to the consolidated entity and the company’s financial report:
Standard
AASB 101 ‘Presentation of Financial Statements (revised September
2007). AASB 2007-8 ‘Amendments to Australian Accounting
Standards arising from AASB 101’
AASB 8 ‘Operating Segments’, AASB 2007-3 ‘Amendments to
Australian Accounting Standards arising from AASB 8’
Effective for annual
reporting periods
beginning on or after
Expected to be
initially applied in the
financial year ending
1 January 2009
30 June 2010
1 January 2009
30 June 2010
Initial application of the following Standards and Interpretations is not expected to have any material impact
on the financial report of the company:
AASB 2007-10 ‘Further Amendments to Australian Accounting
Standards arising from AASB 101’
AASB 123 ‘Borrowing Costs’ (revised), AASB 2007-6 ‘Amendments to
Australian Accounting Standards arising from AASB 123’
AASB 3 ‘Business Combinations’ (2008), AASB 127 ‘Consolidated and
Separate Financial Statements’ and AASB 2008-3 ‘Amendments to
Australian Accounting Standards arising from AASB 3 and AASB 127’
AASB 2008-1 ‘Amendments to Australian Accounting Standard
– Share-based Payments: Vesting Conditions and Cancellations’
1 January 2009
30 June 2010
1 January 2009
30 June 2010
Business combinations
occurring after the beginning
of annual reporting periods
beginning 1 July 2009)
30 June 2010
1 January 2009
30 June 2010
AASB 2008-2 ‘Amendments to Australian Accounting Standards –
Puttable Financial Instruments and Obligations arising on Liquidation’
1 January 2009
30 June 2010
AASB 2008-5 ‘Amendments to Australian Accounting Standards
arising from the Annual Improvements Process’
AASB 2008-6 ‘Further Amendments to Australian Accounting
Standards arising from the Annual Improvements Process’
AASB 2008-7 ‘Amendments to Australian Accounting Standards
– Cost of an Investment in a Subsidiary, Jointly Controlled Entity
or Associate’
AASB 2008-8 ‘Amendments to Australian Accounting Standards
– Eligible Hedged Items’
AASB 2009-2 ‘Amendments to Australian Accounting Standards
– Improving Disclosures about Financial Instruments’
AASB – 2009-4 ‘Amendments to Australian Accounting Standards
arising from the annual improvements process’
AASB – 2009-5 ‘Further Amendments to Australian Accounting
Standards arising from the annual improvements process’
AASB – 2009-6 ‘Amendments to Australian Accounting Standards
arising from the annual improvements process’
AASB – 2009-7 ‘Amendments to Australian Accounting Standards
arising from the annual improvements process’
1 January 2009
30 June 2010
1 July 2009
30 June 2010
1 January 2009
30 June 2010
1 July 2009
30 June 2010
1 January 2009
30 June 2010
1 July 2009
30 June 2010
1 January 2010
30 June 2011
1 January 2009
30 June 2010
1 July 2009
30 June 2010
AASB Interpretation 15 ‘Agreements for the Construction of Real Estate’
1 January 2009
AASB Interpretation 16 ‘Hedges of a Net Investment in a
Foreign Operation’
1 October 2008
30 June 2010
30 June 2010
AASB Interpretation 17 ‘Distributions of Non-Cash Assets to Owners
and AASB 2008-13 Amendments to Australian Accounting Standards
arising from AASB Interpretation 17 Distributions of Non-Cash Assets
to Owners’
1 July 2009
30 June 2010
AASB Interpretation 18 ‘Transfer of Assets from Customers’
1 July 2009
30 June 2010
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
55
Notes to the Financial Statements
Note 1: Significant accounting policies (continued)
The accounting policies set out below have been applied consistently to all periods presented in the consolidated
financial report.
c) Basis of consolidation
Subsidiaries are entities controlled by the company. Control exists when the company has the power, directly or indirectly,
to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control,
potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of
subsidiaries are included in the consolidated financial report from the date that control commences until the date that
control ceases.
Investments in subsidiaries are carried at their cost of acquisition in the company’s financial statements.
Intragroup balances and any gains and losses or income and expenses arising from intragroup transactions, are eliminated
in preparing the consolidated financial statements.
d) Foreign currency
In preparing the financial statements of the individual entities transactions in foreign currencies are translated at the
foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign
currencies at the balance sheet date are translated to Australian dollars at the foreign exchange rate ruling at that date.
Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and
liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the
date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value
are translated to Australian dollars at foreign exchange rates ruling at the dates the fair value was determined.
On consolidation, the assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on
consolidation are translated to Australian dollars at foreign exchange rates ruling at the balance sheet date. The revenues
and expenses of foreign operations, are translated to Australian dollars at rates approximating the foreign exchange rates
ruling at the dates of the transactions. Foreign exchange differences arising on retranslation are recognised directly in a
separate component of equity.
e) Derivative financial instruments
The consolidated entity uses derivative financial instruments to hedge its exposure to foreign exchange risks arising from
operational activities. In accordance with its treasury policy, the consolidated entity does not hold or issue derivative
financial instruments for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for
as trading instruments.
Derivative financial instruments are recognised initially at cost. Subsequent to initial recognition, derivative financial
instruments are stated at fair value. The gain or loss on remeasurement to fair value is recognised immediately in profit
or loss. However, where derivatives qualify for hedge accounting, recognition of any resultant gain or loss depends on the
nature of the item being hedged.
The fair value of forward exchange contracts is their quoted market price at the balance sheet date, being the present value
of the quoted forward price.
56 INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
f) Hedging
On entering into a hedging relationship, the consolidated entity normally designates and documents the hedge
relationship and risk management objective and strategy for undertaking the hedge. The documentation included
identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the
entity will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the item’s fair value or
cash flows attributable to the hedged risk. Such hedges are expected to be highly effective offsetting changes in fair value
or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout
the financial reporting periods for which they are designated.
For cash flow hedges, the associated cumulative gain or loss is removed from equity and recognised in the income
statement in the same period or periods during which the hedged forecast transaction affects profit or loss. The ineffective
part of any gain or loss is recognised immediately in the income statement.
g) Property, plant and equipment
Items of property, plant and equipment are stated at cost or deemed cost less accumulated depreciation and impairment
losses (see accounting policy (k)). The cost of acquired assets includes (i) the initial estimate at the time of installation
and during the period of use, when relevant, of the costs of dismantling and removing the items and restoring the site on
which they are located, and (ii) changes in the measurement of existing liabilities recognised for these costs resulting from
changes in the timing or outflow of resources required to settle the obligation or from changes in the discount rate.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate
items of property, plant and equipment.
Depreciation is provided on property, plant and equipment. Depreciation is calculated on a straight line basis so as to write
off the net cost of each asset over its expected useful life to its estimated residual value. Leasehold improvements are
depreciated over the period of the lease or estimated useful life, whichever is the shorter, using the straight line method.
The estimated useful lives, residual values and depreciation method are reviewed annually, with the effect of any changes
recognised on a prospective basis.
The following useful lives are used in the calculation of depreciation:
>
>
Leasehold improvements
6 to 10 years
Plant and equipment
4 to 8 years
h) Intangible Assets
Research and development
Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and
understanding, is recognised in the income statement as an expense as incurred.
Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new
or substantially improved products and processes, is capitalised if the product or process is technically and commercially
feasible and the consolidated entity has sufficient resources to complete development.
The expenditure capitalised includes the cost of materials, direct labour and an appropriate proportion of overheads. Other
development expenditure is recognised in the income statement as an expense as incurred. Capitalised development
expenditure is stated at cost less accumulated amortisation and impairment losses (see accounting policy (k)).
Amortisation is charged to the income statement on a straight-line basis over the estimated useful life, but no more than
three years.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
57
Notes to the Financial Statements
Note 1: Significant accounting policies (continued)
Intellectual property
Intellectual property acquired from third parties is amortised over its estimated useful life.
Computer software
Computer software is stated at cost and depreciated on a straight-line basis over 2½ years.
i) Trade and other receivables
Trade and other receivables are stated at their amortised cost less impairment losses. The carrying amount of uncollectible
trade receivables is reduced by an impairment loss through the use of an allowance account.
Allowance for returns is offset against trade receivables for estimated warranty claims based upon historical experience.
j) Cash and cash equivalents
Cash and cash equivalents comprises cash balances and call deposits with an original maturity of three months or less.
Bank overdrafts that are repayable on demand and form an integral part of the consolidated entity’s cash management are
included as a component of cash and cash equivalents for the purpose of the statement of cash flows.
k) Impairment
The carrying amounts of the consolidated entity’s assets are reviewed at each reporting date to determine whether there is
any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated.
For intangible assets that are not yet available for use, the recoverable amount is estimated at each balance sheet date.
An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its
recoverable amount. Impairment losses are recognised in the income statement unless the asset has previously been
revalued, in which case the impairment loss is recognised as a reversal to the extent of that previous revaluation with any
excess recognised through the income statement.
Impairment of receivables is not recognised until objective evidence is available that a loss event has occurred. Significant
receivables are individually assessed for impairment. Impairment testing is performed by placing non-significant
receivables in portfolios of similar risk profiles, based on objective evidence from historical experience adjusted for any
effects of conditions existing at each balance date.
The recoverable amount of other assets is the greater of their fair value less costs to sell and value in use. In assessing value
in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely
independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
l) Employee benefits
Superannuation
Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement
as incurred. There are no defined benefit plans in operation.
Long-term service benefits
The consolidated entity’s net obligation in respect of long-term service benefits, other than pension plans, is the amount
of future benefit that employees have earned in return for their service in the current and prior periods. The obligation is
58 INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
calculated using expected future increases in wage and salary rates including related on-costs and expected settlement
dates, and is discounted using the rates attached to the Commonwealth Government bonds at the balance sheet date
which have maturity dates approximating to the terms of the consolidated entity’s obligations.
Share-based payment transactions
The share option programme allows the company and the consolidated entity employees to acquire shares of the Company.
The fair value of options granted is recognised as an employee expense with a corresponding increase in equity. The fair
value is measured at grant date and spread over the period during which the employees become unconditionally entitled to
the options. The fair value of the options granted is measured using a binomial option pricing model, taking into account
the terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to
reflect the actual number of share options that are expected to vest except where forfeiture is only due to share prices not
achieving the threshold for vesting.
Wages, salaries, annual leave, and non-monetary benefits
Liabilities for employee benefits for wages, salaries and annual leave represent present obligations resulting from
employees’ services provided to reporting date, calculated at undiscounted amounts based on remuneration wage and
salary rates that the consolidated entity expects to pay as at reporting date.
m) Provisions
A provision is recognised in the balance sheet when the consolidated entity has a present legal or constructive obligation
as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation.
Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and, where appropriate, the risks specific to the liability.
n) Trade and other payables
Trade and other payables are stated at their amortised cost.
o) Revenue
The consolidated entity allocates revenue to each element in software arrangements involving multiple elements based on
the relative fair value of each element. The typical elements in the multiple element arrangement are licence and maintenance
fees. The company’s determination of fair value is based on the price charged when the same element is sold separately.
Revenue from the sale of licences, where the consolidated entity has no post delivery obligations to perform is recognised
in the income statement at the date of delivery of the licence key.
Revenue from maintenance contracts is recognised rateably over the term of the service agreement, which is typically one
year. Maintenance contracts are typically priced based on a percentage of licence fees and have a one year term. Services
provided to customers under maintenance contracts include technical support and supply of software updates.
Revenue from multiple element software arrangements, where the fair value of an undelivered element cannot be reliably
measured are recognised over the period the undelivered services are provided.
Revenue from consulting services is recognised over the period the services are provided.
No revenue is recognised if there are significant uncertainties regarding the recovery of the consideration due, the costs
incurred or to be incurred cannot be measured reliably, there is a risk of return of goods or there is continuing management
involvement with the goods.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
59
Notes to the Financial Statements
Note 1: Significant accounting policies (continued)
p) Expenses
Operating lease payments
Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the
lease. Lease incentives received are recognised in the income statement as an integral part of the total lease expense and
spread over the lease term.
Financing income
Financing income comprises interest receivable on funds invested, dividend income, foreign exchange gains and losses,
and gains and losses on hedging instruments that are recognised in the income statement (see accounting policy 1(f)).
q) Segment reporting
A segment is a distinguishable component of the consolidated entity that is engaged in providing products or services
within a particular economic environment (geographical segment), which is subject to risks and rewards that are different
from those of other segments.
r) Income tax
Income tax on the income statement for the periods presented comprises current and deferred tax. Income tax is
recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case
it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted
at the balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount
of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and
liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against
which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related
tax benefit will be realised.
Additional dividend franking deficit tax that arise from the distribution of dividends are recognised at the same time as the
liability to pay the related dividend.
s) Goods and Services Tax
Revenue, expenses and assets are recognised net of the amount of goods and services tax (GST), or similar taxes, except
where the amount of GST incurred is not recoverable from the taxation authority. In these circumstances, the GST is
recognised as part of the cost of acquisition of the asset or as part of the expense.
Receivables and payables are stated with the amount of GST included. The net amount of GST recoverable or payable is
included as a current asset or liability in the balance sheet.
Cash flows are included in the statement of cash flows on a gross basis. The GST components of cash flows arising from
investing and financing activities, which are recoverable or payable are classified as operating cash flows.
60 INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
t) Significant accounting judgements, estimates and assumptions
The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future
events. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying
amounts of certain assets and liabilities within the next annual reporting period are:
Intangible assets
An intangible asset arising from development expenditure on an internal project is recognised only when the consolidated
entity can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale,
its intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the
availability of resources to complete the development and the ability to measure reliably the expenditure attributable to the
intangible asset during its development. Following the initial recognition of the development expenditure, the cost model
is applied requiring the asset to be carried at cost less any accumulated amortisation and accumulated impairment losses.
Any expenditure so capitalised is amortised over the period of expected benefits from the related project commencing
from the commercial release of the project. The carrying value of an intangible asset arising from development expenditure
is tested for impairment annually when the asset is not yet available for use or more frequently when an indication of
impairment arises during the reporting period.
Share based payment transactions
The consolidated entity measures the cost of equity-settled transactions with employees by reference to the fair value of
the equity instruments at the date at which they are granted. The fair value is determined by using a binomial option pricing
model and applying management determined probability factors relating to non-market vesting conditions.
Note 2. Segment reporting
The consolidated entity operates predominantly in a single business segment, being computer software products
business segment. Segment information is presented in respect of the consolidated entity’s geographic segments, which
is the primary basis of segment reporting. The geographic segment reporting format reflects the consolidated entity’s
management and internal reporting structure.
Inter-segment pricing is determined on an arm’s length basis.
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be
allocated on a reasonable basis. Unallocated items comprise inter segment revenue less unallocated head office
expenses, corporate and inter segment assets and liabilities.
Segment capital expenditure is the total cost incurred during the year to acquire segment assets that are expected to be
used for more than one period.
The consolidated entity is managed on a worldwide basis, but operates in the following three geographical segments:
>
>
>
The Americas. Operating from the United States with responsibility for the countries in North, Central and South America.
Europe. Operating from the United Kingdom with responsibility for the countries in Europe.
Asia Pacific. Operating from Australia with responsibility for the countries in the rest of the world, including Head
Office revenue and expenses.
In presenting information on the basis of geographical segments, segment revenue is based on the geographical location
of customers. Segment assets are based on the geographical location of the assets.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
61
Notes to the Financial Statements
Note 2. Segment reporting (continued)
Geographic
segments
In thousands
of AUD
Sales to
customers
outside the
consolidated
entity
Inter-
segment
sales
Total
segment
revenue
Total revenue
Segment
results
Results from
operating
activities
Financing
income
Income tax
expense
Profit for
the year
Segment
assets
Total assets
Segment
liabilities
Total
liabilities
Capital
expenditure**
Depreciation
and
amortisation
expenditure
Americas
Europe
Asia Pacific
Corporate
Australia*
Eliminations
Consolidated
2009
2008
2009
2008
2009
2008
2009
2008
2009
2008
2009
2008
26,988 23,050
7,276
6,428
7,317
7,358
1,103
548
-
-
42,684
37,384
-
-
-
-
-
-
19,659
17,555
(19,659)
(17,555)
-
-
26,988 23,050
7,276
6,428
7,317
7,358
20,762
18,103
(19,659)
(17,555)
42,684
37,384
42,684
37,384
829
918
201
202
687
796
7,649
5,292
-
-
9,366
7,208
9,366
7,208
454
462
(1,957)
(1,894)
7,863
5,776
16,844
15,981
3,579
4,302
6,750
5,473
32,613 28,426 (12,595)
(13,856)
47,191
40,326
47,191
40,326
15,752
15,121
2,578
3,393
6,499
5,747
7,711
6,130
(12,595)
(13,856)
19,945
16,535
52
52
38
12
-
29
435
265
56
133
38
54
41
51
5,548
6,436
19,945
16,535
525
358
5,683
6,674
-
-
-
-
* Corporate Australia includes both the corporate head office and development functions of the Company.
** Excludes internal development costs capitalised.
62 INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Note 3. Other income
In thousands of AUD
Interest income
Dividends received
Note 4. Expenses
Total expenses include:
In thousands of AUD
Depreciation and amortisation
Operating lease rental expenses
Note 5. Personnel expenses
In thousands of AUD
Wages and salaries
Other associated personnel expenses
Superannuation contributions
Employee options and share grant
Increase in liability for annual leave
Increase in liability for long service leave
Consolidated
The Company
2009
2008
2009
454
-
454
462
-
462
370
-
370
2008
231
1,382
1,613
Consolidated
The Company
2009
5,683
1,266
2008
2009
2008
6,674
5,589
6,487
1,304
843
940
Consolidated
The Company
Notes
2009
2008
2009
2008
21,270
21,666
11,754
13,705
18
1,314
1,226
881
284
19
99
837
174
167
6
991
881
284
(30)
99
1,005
837
174
208
6
23,867
24,076
13,979
15,935
Personnel expenses are shown before deduction of the capitalisation of development costs.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
63
Notes to the Financial Statements
Note 6. Auditors’ remuneration
2009 and 2008 – Deloitte Touche Tohmatsu
In AUD
Remuneration for audit and review of the financial reports of the
Company or any entity in the consolidated entity:
Audit and review of financial reports
Auditors of the company
Other auditors
Remuneration for other services by the auditors of the Company or any
entity in the consolidated entity:
Taxation services
Auditors of the company
Other auditors
Other services
Consolidated
The Company
2009
2008
2009
2008
126,796
129,335
84,953
86,654
23,333
25,521
-
-
44,604
47,544
44,604
47,544
3,229
2,813
-
-
Auditors of the company (sundry accounting advice)
10,900
9,495
10,900
9,495
Consolidated
The Company
Notes
2009
2008
2009
2008
1,743
(140)
1,603
354
1,957
1,388
56
1,444
450
1,894
1,153
(288)
865
464
1,329
806
71
877
485
1,362
Note 7. Income tax expense
Recognised in the income statement
In thousands of AUD
Current tax expense
Current year
Prior year adjustments
Deferred tax expense
Origination and reversal of temporary differences
15
Total income tax expense in income statement
64 INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Numerical reconciliation between income tax expense and profit before tax
In thousands of AUD
Profit before tax
Income tax using the domestic corporate tax rate of 30%
Increase in income tax expense due to:
Non-deductible expenses
Effect of tax rates in foreign jurisdictions
Decrease in income tax expense due to:
R&D tax incentive
Foreign sourced income (net of expense)
Other
Prior year adjustments
Income tax expense
Note 8. Earnings per share
Consolidated
The Company
2009
9,820
2,946
176
102
2008
7,670
2,301
98
97
2009
8,706
2,612
102
-
(1,065)
(658)
(1,065)
-
(63)
(139)
1,957
-
56
1,894
-
(32)
(288)
1,329
2008
7,725
2,318
46
-
(658)
(415)
-
71
1,362
The calculation of basic and diluted earnings per share at 30 June 2009 was based on the profit attributable to ordinary
shareholders of $7,863,000 (2008: $5,766,000); a weighted number of ordinary shares outstanding during the year ended
30 June 2009 of 166,778,141 (2008: 166,504,416); and a weighted number of ordinary shares (diluted) outstanding during
the year ended 30 June 2009 of 166,938,786 (2008:166,600,781), calculated as follows:
In thousands of AUD
Profit for the year
Weighted average number of shares used as the denominator
(Number)
Number for basic earnings per share:
Ordinary shares
Effect of employee share options on issue
Number for diluted earnings per share
Basic earnings per share (AUD cents)
Diluted earnings per share (AUD cents)
Consolidated
2009
7,863
2008
5,776
Consolidated
2009
2008
166,778,141
166,504,416
160,645
96,365
166,938,786
166,600,781
4.72¢
4.71¢
3.47¢
3.47¢
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
65
Notes to the Financial Statements
Note 9. Cash and cash equivalents
In thousands of AUD
Cash at bank and on hand
Note 10. Trade and other receivables
In thousands of AUD
Trade debtors
Less: Allowance for doubtful debts
Less: Allowance for returns
GST receivable
Receivable from controlled entities
Consolidated
The Company
2009
2008
2009
14,459
11,148
9,608
2008
5,279
Consolidated
The Company
2009
2008
2009
11,749
10,576
2,460
(521)
(320)
(187)
(333)
10,908
10,056
104
-
101
-
11,012
10,157
(79)
(76)
2,305
104
7,533
9,942
2008
1,508
(80)
(41)
1,387
101
9,345
10,833
The credit period on sales ranges from 30 to 90 days. No interest is charged on trade debtors.
Ageing of past due but not impaired:
In thousands of AUD
Past due 90 days
Consolidated
The Company
2009
1,523
2008
2,047
2009
128
2008
87
66 INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
The movement in the allowance for doubtful debts in respect of trade receivables is detailed below:
In thousands of AUD
Balance at beginning of year
Amounts written off during the year
Increase/(decrease) in provision
Balance end of year
Consolidated
The Company
2009
187
(810)
1,144
521
2008
2009
2008
-
-
187
187
80
(80)
79
79
-
-
80
80
The consolidated entity has used the following basis to assess the allowance loss for trade receivables and as a result is
unable to specifically allocate the allowance to the ageing categories shown above:
>
>
>
>
a general provision based on historical bad debt experience;
the general economic conditions;
an individual account by account specific risk assessment based on past credit history; and
any prior knowledge of debtor insolvency or other credit risk.
Included in the consolidated entity’s trade receivable balance are debtors with a carrying amount of $682,000 (2008:
$1,527,000) which are past due at the reporting date which the consolidated entity has not provided for as there has
been no significant change in credit quality and the consolidated entity believes that the amounts are still considered
recoverable. The consolidated entity does not hold any collateral over these balances.
Note 11. Other current assets
In thousands of AUD
Franking deficit tax offset benefit
Other prepayments
Fair value of hedge asset
Note 12. Investments
In thousands of AUD
Consolidated
The Company
2009
2008
2009
2008
-
887
1,255
2,142
292
628
-
920
-
344
1,255
1,599
292
342
-
634
Consolidated
The Company
2009
2008
2009
2008
Shares in controlled entities at cost (refer Note 24)
-
-
54
54
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
67
Notes to the Financial Statements
Note 13. Other financial assets
In thousands of AUD
Deposits
Consolidated
The Company
2009
1,823
2008
1,765
2009
1,744
2008
1,690
Deposits are term deposits which are held to secure a bank guarantee on leased premises and a foreign exchange facility.
The carrying amount of other financial assets is a reasonable approximation of their fair value.
Note 14. Property, plant and equipment
Plant and Equipment
In thousands of AUD
At cost
Accumulated depreciation
Leasehold Improvements
In thousands of AUD
At cost
Accumulated depreciation
Consolidated
The Company
2009
4,303
2008
3,802
2009
3,443
2008
3,027
(3,448)
(3,115)
(2,738)
(2,466)
855
687
705
561
Consolidated
The Company
2009
2,026
(526)
1,500
2008
2,026
(308)
1,718
2009
1,900
(443)
1,457
2008
1,900
(253)
1,647
Total property, plant and equipment
Consolidated
The Company
In thousands of AUD
At cost
Accumulated depreciation
Total written down amount
Plant and Equipment
In thousands of AUD
Carrying amount at start of year
Additions
Depreciation expense
Carrying amount at end of year
2009
6,329
2008
5,828
2009
5,343
2008
4,927
(3,974)
(3,423)
(3,181)
(2,719)
2,355
2,405
2,162
2,208
Consolidated
The Company
2009
2008
2009
2008
687
501
(333)
855
835
193
(341)
687
561
416
(272)
705
682
129
(250)
561
68 INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Leasehold Improvements
In thousands of AUD
Carrying amount at start of year
Additions
Disposals
Depreciation expense
Carrying amount at end of year
Consolidated
The Company
2009
1,718
-
-
(218)
1,500
2008
2,058
5
(151)
(194)
1,718
2009
1,647
-
-
(190)
1,457
2008
1,772
5
-
(130)
1,647
Note 15. Deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Consolidated
In thousands of AUD
Property, plant and equipment
Intangible assets
Trade and other payables
Employee benefits
Provisions
Other current liabilities
Unrealised foreign exchange gain
Unrealised foreign exchange loss
Deferred tax assets/liabilities
Set off of deferred tax asset
Net deferred tax assets/liabilities
The Company
In thousands of AUD
Property, plant and equipment
Intangible assets
Trade and other payables
Employee benefits
Provisions
Other current liabilities
Unrealised foreign exchange gain
Unrealised foreign exchange loss
Deferred tax assets/liabilities
Set off of deferred tax asset
Net deferred tax assets/liabilities
Assets
Liabilities
Net
2009
2008
2009
2008
2009
2008
34
-
148
381
351
40
-
29
983
(589)
394
50
-
67
372
281
40
-
100
910
(626)
284
-
-
34
50
3,993
3,754
(3,993)
(3,754)
-
-
-
-
398
-
4,391
(589)
3,802
-
-
-
13
-
-
148
381
351
40
(398)
29
67
372
281
27
-
100
3,767
(626)
3,141
(3,408)
(2,857)
-
-
(3,408)
(2,857)
Assets
Liabilities
Net
2009
2008
2009
2008
2009
2008
18
-
48
340
154
-
-
29
589
37
-
26
318
145
-
-
100
626
(589)
(626)
-
-
-
-
18
37
3,993
3,754
(3,993)
(3,754)
-
-
-
-
398
-
4,391
(589)
3,802
-
-
-
13
-
-
48
340
154
-
(398)
29
26
318
145
(13)
-
100
3,767
(626)
3,141
(3,802)
(3,141)
-
-
(3,802)
(3,141)
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
69
Notes to the Financial Statements
Note 15. Deferred tax assets and liabilities (continued)
Movement in temporary differences during the year:
For year ended
30 June 2009
In thousands of AUD
Consolidated
The Company
Balance
1 Jul 08
Recognised
in income
Recognised
in equity
Balance
30 Jun 09
Balance
1 Jul 08
Recognised
in income
Recognised
in equity
Balance
30 Jun 09
Property, plant
and equipment
50
(16)
Intangible assets
(3,754)
(239)
34
37
(19)
(3,993)
(3,754)
(239)
-
-
-
-
-
-
22
22
9
13
148
381
351
40
26
318
145
(13)
-
100
-
-
-
-
-
-
18
(3,993)
48
340
154
-
(201)
(197)
(398)
(71)
-
29
(201)
(197)
(398)
(71)
-
29
Trade and
other payables
Employee benefits
Provisions
Other current liabilities
Unrealised foreign
exchange gain
Unrealised foreign
exchange loss
67
372
281
27
-
100
81
9
70
13
(2,857)
(354)
(197)
(3,408)
(3,141)
(464)
(197)
(3,802)
For year ended 30 June 2008
Consolidated
The Company
In thousands of AUD
Balance
1 Jul 07
Recognised
in income
Balance
30 Jun 08
Balance
1 Jul 07
Recognised
in income
Balance
30 Jun 08
Property, plant and equipment
Intangible assets
Trade and other payables
Employee benefits
Provisions
Other current liabilities
Unrealised foreign exchange loss
86
(3,214)
23
315
259
9
115
(2,407)
(36)
(540)
44
57
22
18
(15)
(450)
50
29
(3,754)
(3,214)
67
372
281
27
100
23
256
145
(10)
115
8
(540)
3
62
-
(3)
(15)
37
(3,754)
26
318
145
(13)
100
(2,857)
(2,656)
(485)
(3,141)
There were no deferred tax adjustments recognised directly in equity in 2008.
70 INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Note 16. Intangible assets
The amortisation is recognised in the following line item in the income statement:
In thousands of AUD
Research and development expenses
Consolidated
The Company
2009
5,132
5,132
2008
6,139
6,139
2009
5,128
5,128
2008
6,107
6,107
Cost
In thousands of AUD
Consolidated
The Company
Software
develop-
ment
Patents &
trade-
marks
Third
party
software
Total
Software
develop-
ment
Patents
& trade-
marks
Third
party
software
Total
Balance at 1 July 2007
Internally developed
Acquired
19,363
7,255
-
Balance at 30 June 2008
26,618
Balance at 1 July 2008
Internally developed
Acquired
26,618
5,790
-
Balance at 30 June 2009
32,408
33
-
-
33
33
-
-
33
941
20,337
19,363
-
7,255
7,255
160
160
-
1,101
27,752
26,618
1,101
27,752
26,618
-
24
5,790
5,790
24
-
1,125
33,566
32,408
-
-
-
-
-
-
-
-
834
20,197
-
160
994
7,255
160
27,612
994
27,612
-
19
5,790
19
1,013
33,421
Amortisation
In thousands of AUD
Consolidated
The Company
Software
develop-
ment
Patents &
trade-
marks
Third
party
software
Total
Software
develop-
ment
Patents
& trade-
marks
Third
party
software
Balance at 1 July 2007
Fully amortised & offset
Amortisation for year
8,327
-
5,874
Balance at 30 June 2008
14,201
Balance at 1 July 2008
14,201
Fully amortised & offset
Amortisation for year
-
5,033
Balance at 30 June 2009
19,234
25
-
8
33
33
-
-
33
620
8,972
8,327
-
257
877
-
-
6,139
15,111
5,874
14,201
877
15,111
14,201
-
99
-
-
5,132
5,033
976
20,243
19,234
-
-
-
-
-
-
-
-
Total
8,874
-
6,107
14,981
547
-
233
780
780
14,981
-
95
-
5,128
875
20,109
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
71
Notes to the Financial Statements
Note 16. Intangible assets (continued)
Carrying amounts
In thousands of AUD
Balance at 30 June 2008
Balance at 30 June 2009
Consolidated
The Company
Software
develop-
ment
12,417
13,174
Patents &
trade-
marks
Third
party
software
Total
Software
develop-
ment
Patents
& trade-
marks
Third
party
software
Total
-
-
224
149
12,641
13,323
12,417
13,174
-
-
214
138
12,631
13,312
Note 17. Trade and other payables
In thousands of AUD
Payable to controlled entities
Trade and other creditors
The average credit period on trade and other payables is 30 days.
Consolidated
The Company
2009
2008
2009
2008
-
2,913
2,913
-
2,448
2,448
-
1,860
1,860
-
1,669
1,669
Note 18. Employee benefits
Current
In thousands of AUD
Liability for untaken annual leave
Liability for long service leave
Non-current
In thousands of AUD
Liability for long service leave
Consolidated
The Company
2009
1,002
130
1,132
2008
2009
2008
983
156
1,139
752
130
882
782
156
938
Consolidated
The Company
2009
255
2008
130
2009
255
2008
130
72 INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Pension plans
Employees of the consolidated entity accumulate pension benefits through statutory contributions by the entities in
the consolidated entity as required by the laws of the jurisdictions in which they operate, supplemented by individual
contributions. The consolidated entity does not provide any defined benefit pension plans.
Share based payments
On 4 October 2000, the consolidated entity established a share option programme that entitles employees to purchase
shares in the entity. In accordance with this programme, options are exercisable at the market price of the shares at the
date of grant.
The terms and conditions of the grants made and number outstanding at 30 June 2009 are as follows:
>
>
>
>
All options vest at the rate of 25% per annum, starting on the first anniversary of the grant date
The contractual life of each option is five years from the grant date
Exercises are settled by physical delivery of shares
Grants marked (*) include performance hurdles as conditions for vesting
Grant
date
Exercise
Price
Number of
Instruments
Outstanding
Grant
date
Jul 2004
Nov 2004 (*)
Feb 2005
Sep 2005
May 2006
Jan 2007 (*)
Jun 2007
$0.40
$0.57
$0.52
$0.54
$0.41
$0.50
$0.48
246,000
400,000
293,000
430,000
546,000
160,000
721,000
Sep 2007 (*)
Mar 2008 (*)
Mar 2008 (*)
Apr 2008 (*)
Jul 2008 (*)
Oct 2008 (*)
May 2009
Exercise
Price
$0.42
$0.38
$0.43
$0.38
$0.35
$0.31
$0.28
Number of
Instruments
Outstanding
1,000,000
350,000
350,000
300,000
200,000
340,000
1,660,000
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
73
Notes to the Financial Statements
Note 18. Employee benefits (continued)
The number and weighted average exercise prices of share options is as follows:
Weighted
Average
exercise price
Number of
options
Weighted
Average
exercise price
Number of
options
In thousands of AUD
Outstanding at the beginning of the year
Forfeited during the year
Exercised during the year
Granted during the year
Outstanding at the end of the year
Exercisable at the end of the year (vested)
2009
$0.44
$0.41
$0.23
$0.29
$0.40
$0.47
2009
6,376
(1,523)
(57)
2,200
6,996
2,082
2008
$0.44
$0.48
$0.21
$0.41
$0.44
$0.44
2008
7,280
(2,371)
(533)
2,000
6,376
2,607
The options outstanding at 30 June 2009 have a weighted average exercise price of $0.40 and a weighted average of
contractual life of five years.
During the year ended 30 June 2009, 57,250 options were exercised (2008: 532,605).
The fair values of services received in return for share options granted to employees is measured by reference to the fair
value of share options granted. The estimate of the fair value of the services received is measured based on the Binomial
option-pricing model. The contractual life of the option (five years) is used as an input into this formula. Expectations of
early exercise are incorporated into the Binomial formula.
74 INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Fair value of share options and assumptions
For year ended 30 June 2009
Grant date
Fair value at measurement date
Share price
Exercise price
Expected volatility (expressed as weighted average volatility used in the modelling
under the Binomial formula)
18 Jul 08
16 Oct 08
5 May 09
$0.15
$0.35
$0.35
63%
$0.13
$0.31
$0.31
63%
$0.12
$0.28
$0.28
63%
Option life (expressed as weighted average life used in the modelling under the
Binomial formula)
5 years
5 years
5 years
Expected dividends
Risk-free interest rate (based on national government bonds)
5%
5.3%
5%
5.3%
5%
5.3%
For year ended 30 June 2008
Grant date
Fair value at measurement date
Share price
Exercise price
Expected volatility (expressed as weighted average
volatility used in the modelling under the Binomial
formula)
Option life (expressed as weighted average life
used in the modelling under the Binomial formula)
Expected dividends
Risk-free interest rate
(based on national government bonds)
9 Sept 07
3 Mar 08
31 Mar 08
14 Apr 08
$0.14
$0.42
$0.42
65%
$0.16
$0.38
$0.38
64%
$0.13
$0.43
$0.43
64%
$0.14
$0.38
$0.38
64%
5 years
5 years
5 years
5 years
5%
7.25%
5%
7.25%
5%
7.25%
5%
7.25%
The expected volatility is based on the historic volatility (calculated based on the weighted average remaining life of the
share options), adjusted for any expected changes to future volatility due to publicly available information.
Share options are granted under a service condition and, for grants to key management personnel, a non-market
performance condition related to profitability of the consolidated entity. Such conditions are not taken into account in
the grant date fair value measurement of the services received. There are no market conditions associated with the share
option grants.
The fair value of the options at grant date is determined based on the Binomial formula using the above model inputs.
During the year ended 30 June 2009, the company and consolidated entity recognised expense of $284,000 related to the
fair value of options granted (2008: $174,000 in company and consolidated entity).
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
75
Notes to the Financial Statements
Note 19. Provisions
Current
In thousands of AUD
Employee benefits
Non-current
In thousands of AUD
Employee benefits
Lease make good
Other
Note 20. Other liabilities
Current
In thousands of AUD
Deferred revenue
Non-current
In thousands of AUD
Deferred revenue
Consolidated
The Company
2009
1,132
2008
1,139
2009
882
2008
938
Consolidated
The Company
2009
2008
2009
2008
255
360
20
635
130
360
24
514
255
360
-
615
130
360
-
490
Consolidated
The Company
2009
10,740
2008
8,995
2009
6,963
2008
5,534
Consolidated
The Company
2009
723
2008
298
2009
2008
88
105
76 INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Note 21. Capital and reserves
Reconciliation of movement in capital and reserves attributed to equity holders in the parent:
Consolidated
In thousands of AUD
Balance at 1 July 2007
Total recognised income and expense
Transfer from translation reserve to
retained earnings
Expensed employee options
Shares issued
Dividends to shareholders
Balance at 30 June 2008
Balance at 1 July 2008
Total recognised income and expense
Lapsed employee options
Expensed employee options
Shares issued
Dividends to shareholders
Balance at 30 June 2009
The Company
In thousands of AUD
Balance at 1 July 2007
Total recognised income and expense
Expensed employee options
Lapsed employee options
Shares issued
Dividends to shareholders
Balance at 30 June 2008
Balance at 1 July 2008
Total recognised income and expense
Expensed employee options
Lapsed employee options
Shares issued
Dividends to shareholders
Balance at 30 June 2009
Share
capital
Hedging
reserve
Translation
reserve
Employee
benefit
reserve
Retained
earnings
Total
680
-
-
-
114
-
794
794
-
-
-
22
-
816
-
-
-
-
-
-
-
-
460
-
-
-
-
(985)
(520)
514
-
-
-
(991)
(991)
(162)
-
-
-
-
460
(1,153)
415
24,043
-
-
174
(80)
-
509
509
-
(135)
284
(9)
-
649
5,776
(514)
-
-
(5,826)
23,479
23,479
7,863
135
-
-
(5,003)
26,474
24,153
5,256
-
174
34
(5,826)
23,791
23,791
8,161
-
284
13
(5,003)
27,246
Share
capital
Hedging
reserve
Translation
reserve
Employee
benefit
reserve
Retained
earnings
Total
680
-
-
-
114
-
794
794
-
-
-
22
-
816
-
-
-
-
-
-
-
-
460
-
-
-
-
460
-
-
-
-
-
-
-
-
-
-
-
-
-
-
415
-
174
-
(80)
-
509
509
-
284
(135)
(9)
-
649
20,182
21,277
6,363
6,363
-
-
-
(5,826)
20,719
20,719
7,377
-
135
-
(5,003)
23,228
174
-
34
(5,826)
22,022
22,022
7,837
284
-
13
(5,003)
25,153
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
77
Notes to the Financial Statements
Note 21. Capital and reserves (continued)
Share capital
In thousands of shares
On issue 1 July
Issued for cash against employee options exercised under ESOP
On issue 30 June
Ordinary shares
2009
2008
166,735
166,203
57
532
166,792
166,735
Effective 1 July 1998, the Company Law reform Act abolished the concept of par value shares and the concept of authorised
capital. Accordingly, the company does not have authorised capital or par value in respect of its issued shares.
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote
per share at meetings of the Company. All shares rank equally with regard to the Company’s residual assets.
Hedging reserve
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging
instruments related to hedged transactions that have not yet occurred.
Translation reserve
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of
foreign operations where their functional currency is different to the presentation currency of the reporting entity, as well as
from the translation of liabilities that hedge the Company’s net investment in a foreign subsidiary.
Employee benefit reserve
The employee benefit reserve arises on the grant of share options to employees under the consolidated entity’s Employee
Share Option Plan. Amounts are transferred out of the reserve and into share capital when the options are exercised. Refer
to note 18 for further detail.
Dividends
Dividends recognised in the current year by the company are:
In thousands of AUD
Cents per share
Total amount
Franked/unfranked
Date of payment
2009
Final 2008
Interim 2009
Total amount
2008
Final 2007
Interim 2008
Total amount
1.5¢
1.5¢
2.0¢
1.5¢
2,501
2,502
5,003
3,326
2,500
5,826
Unfranked
Unfranked
12 Sep 08
9 Mar 09
Unfranked
Unfranked
14 Sep 07
7 Mar 08
78 INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
After the balance sheet date, the following dividend was proposed by the directors. The declaration and subsequent
payment of dividends has no income tax consequences. The financial effect of this dividend has not been brought to
account in the financial statements for the year ended 30 June 2009 and will be recognised in subsequent financial reports:
In thousands of AUD
Cents per share
Total amount
Franked/ unfranked
Date of payment
Final 2009
2.5¢
4,170
5% franked
18 Sep 09
The final dividend declared of 2.5 cents together with the interim dividend paid in March 2009 of 1.5 cents takes total
dividends for the 2009 financial year to 4.0 cents.
Note 22. Financial instruments
Capital risk management
The company and consolidated entity manages its capital to ensure that controlled entities will be able to continue as a
going concern while maximising the return to stakeholders through the optimisation of treasury management.
The capital structure of the company and consolidated entity consists of cash and cash equivalents and equity attributable
to equity holders of the company, comprising issued capital, reserves, and retained earnings as disclosed in Notes 9 and
21 respectively.
Significant accounting policies
Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset,
financial liability and equity instrument are disclosed in Note 1 to the financial statements.
Financial risk management objectives
The Board of Directors has overall responsibility for the establishment and oversight of the company and consolidated
entity’s financial management framework. The Board has an established Audit and Risk Committee, which is responsible
for developing and monitoring the consolidated entity’s financial management policies. The Committee provides regular
reports to the Board of Directors on its activities.
The Audit and Risk Committee oversees how Management monitors compliance with risk management policies and
procedures and reviews the adequacy of the risk management framework in relation to the risks.
The main risk arising from the company and consolidated entity’s financial instruments are currency risk, credit risk,
liquidity risk and cash flow interest rate risk.
The company and consolidated entity seeks to minimise the effects of these risks, where deemed appropriate, by using
derivative financial instruments to hedge these risk exposures. The use of financial derivatives is governed by the company
and consolidated entity’s policies on foreign exchange risk, credit risk, the use of financial derivatives and non-derivative
financial instruments, and the investment of excess liquidity. The company and consolidated entity does not enter into or
trade financial instruments, including derivative financial instruments, for speculative purposes.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
79
Notes to the Financial Statements
Note 22. Financial instruments (continued)
Market risk
The company and consolidated entity’s activities expose it primarily to the financial risks of changes in foreign currency
exchange rates and cash flow interest rate risks. The company and consolidated entity enters into foreign exchange forward
contracts to hedge the exchange rate risk arising from transactions not recorded in an entity’s functional currency.
Foreign currency risk management
The company and consolidated entity undertakes certain transactions denominated in foreign currencies, hence exposures
to exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters utilising
forward foreign exchange contracts.
The carrying amount of the company and the consolidated entity’s foreign currency denominated monetary assets and
monetary liabilities at the reporting date that are denominated in a currency that is different to the functional currency of
the respective entities undertaking the transactions is as follows:
In thousands of AUD
Consolidated
The Company
Liabilities
Assets
Liabilities
Assets
2009
2008
-
-
-
-
-
-
2009
1,388
720
61
2008
1,201
-
-
2009
2008
-
-
-
-
-
-
2009
8,374
9
599
2008
9,108
-
1,437
US Dollar
Euro
UK Sterling
(i) Foreign currency sensitivity
At 30 June 2009, if the US Dollar, Euro and UK sterling weakened against the Australian dollar by the percentage shown,
with all other variables held constant, net profit for the year would increase (decrease) by:
In thousands of AUD
2009
Net profit
Retained earnings
Consolidated
USD Impact
Euro Impact
Sterling Impact
2009
2008
2009
2008
2009
2008
154
154
133
133
80
80
-
-
7
7
158
158
Change in currency (i) – 10% decrease
In thousands of AUD
2009
Net profit
Retained earnings
The Company
USD Impact
Euro Impact
Sterling Impact
2009
2008
2009
2008
2009
2008
930
930
1012
1012
1
1
-
-
67
67
158
158
Change in currency (i) – 10% decrease
80 INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
(i) This has been based on the change in the exchange rate against the Australian dollar in the financial years ended 30
June 2009 and 30 June 2008.
The sensitivity analysis has been based on the sensitivity rates used when reporting foreign currency risk internally to key
management personnel and represents management’s assessment of the possible change in foreign exchange rates based
on historical volatility.
In management’s opinion, the sensitivity analysis is not fully representative of the inherent foreign exchange risk as the
year end exposure does not necessarily reflect the exposure during the course of the year. The consolidated entity includes
certain subsidiaries whose functional currencies are different to the consolidated entity presentation currency. The main
operating entities outside of Australia are based in the United States and the United Kingdom. As stated in the company
and consolidated entity’s accounting policies per Note 1, on consolidation the assets and liabilities of these entities are
translated into Australian dollars at exchange rates prevailing on the balance sheet date. The income and expenses of
these entities is translated at the average exchange rates for the year. Exchange differences arising are classified as equity
and are transferred to a foreign exchange translation reserve. The company and consolidated entity’s future reported profits
could therefore be impacted by changes in rates of exchange between the Australian Dollar and the United States Dollar
and the Australian Dollar and the UK Sterling.
Forward foreign exchange contracts
The company and consolidated entity is exposed to foreign currency risk on sales and purchases that are denominated in a
currency other than the AUD. The currencies giving rise to this risk are primarily United States Dollar and UK Sterling.
The company and consolidated entity uses forward exchange contracts to hedge its foreign currency risk. The forward
exchange contracts have maturities of less than two years after the balance sheet date.
The company and consolidated entity classifies its forward exchange contracts hedging forecasted transactions as
cash flow hedges and measures them at fair value. The following table details the forward foreign currency contracts
outstanding as at reporting date:
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
81
Notes to the Financial Statements
Note 22. Financial instruments (continued)
Outstanding contracts
Average
exchange rate
Consolidated
2009
2008
Foreign Currency
Contract Value
Fair Value
2009
FC’000
2008
FC’000
2009
A$’000
2008
A$’000
2009
A$’000
2008
A$’000
Sell US Dollar
Less than 3 months
3 to 6 months
6 to 9 months
9 to 12 months
12 to 15 months
0.64
0.72
0.72
0.71
0.71
Sell UK Sterling
Less than 3 months
0.40
Sell Euros
Less than 3 months
3 to 6 months
6 to 9 months
9 to 12 months
0.56
0.55
0.55
0.55
-
-
-
-
-
-
-
-
-
-
1,675
1,600
2,050
750
250
100
50
100
100
100
-
-
-
-
-
-
-
-
-
-
2,622
2,230
2,830
1,058
354
254
90
181
182
182
-
-
-
-
-
-
-
-
-
-
549
238
260
110
36
47
2
5
4
4
1,255
-
-
-
-
-
-
-
-
-
-
-
Outstanding contracts
Average
exchange rate
The Company
2009
2008
Foreign Currency
Contract Value
Fair Value
2009
FC’000
2008
FC’000
2009
A$’000
2008
A$’000
2009
A$’000
2008
A$’000
Sell US Dollar
Less than 3 months
3 to 6 months
6 to 9 months
9 to 12 months
12 to 15 months
0.64
0.72
0.72
0.71
0.71
Sell UK Sterling
Less than 3 months
0.40
Sell Euros
Less than 3 months
3 to 6 months
6 to 9 months
9 to 12 months
0.56
0.55
0.55
0.55
-
-
-
-
-
-
-
-
-
-
1,675
1,600
2,050
750
250
100
50
100
100
100
-
-
-
-
-
-
-
-
-
-
2,622
2,230
2,830
1,058
354
254
90
181
182
182
-
-
-
-
-
-
-
-
-
-
549
238
260
110
36
47
2
5
4
4
1,255
-
-
-
-
-
-
-
-
-
-
-
82 INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Interest rate risk management
The consolidated and parent are exposed to interest rate risk on the cash held in bank deposits. Cash deposits of
$16,282,000 and $11,352,000 were held by the consolidated entity and parent entity respectively at the reporting date,
attracting an average interest rate of consolidated entity: 2.79%, parent entity: 3.26% (2008: Consolidated Entity:3.45%,
parent entity 3.31%). If interest rates had been 50 basis points higher or lower and all other variables were held constant,
the consolidated entity’s net profit would increase by $57,000 (2008: $47,000) and the parent’s net profit would increase
by $39,000 (2008: $24,000).
Credit risk management
Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to
the company and consolidated entity. The company and consolidated entity has adopted a policy of only dealing with
creditworthy counterparties and obtaining sufficient collateral where appropriate, as a means of mitigating the risk of
financial loss from defaults.
Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas.
Ongoing credit evaluation is performed on the financial condition of accounts.
The company and consolidated entity does not have any significant credit risk exposure to any single counterparty or
any consolidated entity of counterparties having similar characteristics. The credit risk on liquid funds and derivative
financial instruments is limited because the counterparties are banks with high credit ratings assigned by international
credit-rating agencies.
Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the board of directors, who have built an appropriate
liquidity risk management framework for the management of the company and consolidated entity’s short, medium and
long-term funding and liquidity management requirements.
The company and consolidated entity manages liquidity risk by maintaining adequate reserves, by continuously monitoring
forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities.
All creditor and other payables shown in note 17 for both 2009 and 2008 carry no interest obligation and have a maturity of
less than three months.
Fair value of financial instruments
The carrying value of financial assets and financial liabilities of the company and consolidated entity is a reasonable
approximation of their fair value.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
83
Notes to the Financial Statements
Note 23. Operating leases
Non-cancellable operating lease rentals is for office space with payables as follows:
In thousands of AUD
Less than one year
Between one and five years
Greater than five years
Note 24. Consolidated entities
Parent entity:
Integrated Research Limited
Subsidiaries:
Integrated Research, Inc
Integrated Research UK Limited
Consolidated
The Company
2009
1,136
2,406
-
2008
1,016
3,371
-
2009
813
2,169
-
2008
813
2,983
-
3,542
4,387
2,982
3,796
Country of
Ownership interest
incorporation
2009
2008
Australia
USA
UK
100%
100%
100%
100%
In the financial statements of the company, investments in controlled entities are measured at cost.
84 INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Note 25. Reconciliation of cash flows from operating activities
In thousands of AUD
Profit for the year
Depreciation and amortisation
Provision for doubtful debts
Allowance for returns
Interest received
Dividend received
Net exchange differences
Change in operating assets and liabilities
(Increase)/decrease in trade debtors
(Increase)/decrease in future income tax benefit
Consolidated
The Company
2009
7,863
5,683
334
(13)
2008
5,776
6,674
187
(69)
2009
7,377
5,589
(1)
35
(454)
(462)
(370)
-
(729)
-
894
-
-
2008
6,363
6,487
80
(56)
(231)
(1,382)
-
(1,172)
(110)
1,030
(35)
(952)
2,120
-
-
(Increase)/decrease in other operating assets
(7,749)
(7,086)
(5,371)
(8,984)
Increase/(decrease) in trade creditors
Increase/(decrease) in other operating liabilities
Increase/(decrease) in provision for income taxes payable
Increase/(decrease) in provision for deferred income taxes
Increase/(decrease) in other provisions
Increase/(decrease) in reserves
Net cash from operating activities
465
2,170
-
661
114
581
7,644
253
(1,448)
-
485
173
(426)
5,946
192
1,412
-
661
69
743
414
(977)
-
485
214
94
9,384
4,627
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
85
Notes to the Financial Statements
Note 26. Key management personnel disclosures
The following were key management personnel of the consolidated entity at any time during the reporting period and
unless otherwise indicated were key management personnel for the entire period:
Directors (full year)
Steve Killelea – Chairman
Directors (part year)
Alan Baxter (appointed June 2009)
Mark Brayan – Chief Executive Officer
David Boyles (resigned November 2008)
John Brown
Kate Costello
Clyde McConaghy
Other key management personnel (full year)
Other key management personnel (part year)
Peter Adams – Chief Financial Officer
Andre Cuenin – President, Americas (appointed October 2008)
Alex Baburin – (GM, Research & Development)
Kurt Roscow – VP, Americas (resigned July 2008)
Rick Ferguson – (Vice President, Asia Pacific)
David Leighton – Company Secretary
Pierre Semaan – (GM, Product Management & Marketing)
David Stark – (Vice President, Europe)
Key management personnel compensation
The key management personnel compensation included in “personnel expenses” (see note 5) are as follows:
In AUD
Short-term benefits
Post-employment benefits
Termination benefits
Consolidated
The Company
2009
2008
2009
2008
2,563,785
2,109,046
1,861,506
1,502,492
192,233
237,890
192,233
237,890
-
300,000
-
300,000
Equity compensation benefits
176,491
11,673
145,339
10,181
2,932,509
2,658,609
2,199,078
2,050,563
Individual directors and executives compensation disclosures
Information regarding individual directors and executives compensation is provided in the remuneration report on pages
31 to 39.
Apart from the details disclosed in this note, no director has entered into a material contract with the company or the
consolidated entity since the end of the previous financial year and there were no material contracts involving directors’
interests existing at year-end.
86 INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Key management personnel transactions with the company or its controlled entities
It is the consolidated entity’s policy that service contracts for executive directors and senior executives be unlimited in
term but capable of termination by either party on one months notice and that the consolidated entity retains the right
to terminate the contract immediately by payment in lieu of notice or a severance payment within two to four months
remuneration or up to an amount for redundancy equal to the scale of payments prescribed in the NSW Employment
Protection Act.
Information regarding individual key management personnel’s service contracts is provided in the remuneration report on
pages 31 to 39.
Equity instruments
All options refer to options over ordinary shares of Integrated Research Limited, which are exercisable on a one-for-one
basis under the Employee Share Option Plan (ESOP).
Options and rights over equity instruments granted as compensation
The movement during the reporting year in the number of options over ordinary shares in Integrated Research Limited held,
directly, indirectly or beneficially, by each key management person, including their related parties, is as follows:
Current Year
Held at
1 July 2008
Granted as
compensation
Exercised
Other
changes*
Held at
30 June
2009
Vested during
the year
Vested and
exercisable at
30 June 2009
1,000,000
250,000
250,000
Directors
Mark Brayan
1,000,000
Executives
Peter Adams
Alex Baburin
350,000
160,000
Andre Cuenin
-
Rick Ferguson
300,000
Kurt Roscow
300,000
-
-
40,000
300,000
-
-
Pierre Semaan
-
200,000
David Stark
350,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
350,000
200,000
300,000
300,000
(300,000)
-
-
-
200,000
350,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
87
Notes to the Financial Statements
Note 26. Key management personnel disclosures (continued)
Prior Year
Directors
Held at
1 July 2007
Granted as
compensation
Exercised
Other
changes*
Held at
30 June
2008
Vested during
the year
Vested and
exercisable at
30 June 2008
Keith Andrews
1,000,000
-
Mark Brayan
Executives
Peter Adams
-
-
1,000,000
350,000
Nathan Brumby
200,000
Steve Douglas
300,000
-
-
Rick Ferguson
-
300,000
Stephen Rorie
300,000
Kurt Roscow
300,000
-
-
David Stark
-
350,000
David Taylor
200,000
-
-
-
-
-
(1,000,000)
-
-
-
(200,000)
1,000,000
350,000
-
-
(11,250)
(288,750)
-
-
-
-
-
-
300,000
(300,000)
-
-
300,000
350,000
(200,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
75,000
-
-
*
Other changes represent options that expired or were forfeited during the year.
Options granted as compensation in the current year were:
Alex Baburin
Andre Cuenin
Options
Granted
40,000
300,000
Pierre Semaan
200,000
Grant Date
Oct 2008
Oct 2008
Jul 2008
Expiration
Date
Exercise Price
per Share $
Market Value
per Share $
Earliest
Exercise Date
Oct 2013
Oct 2013
Jul 2013
$0.31
$0.31
$0.35
$0.31
$0.31
$0.35
Oct 2009
Oct 2009
Jul 2009
25% of options granted vest annually on the anniversary of the grant date, and may also be subject to the consolidated
entity achieving certain performance hurdles. Options expire on the earlier of their expiry date or termination of the
individual’s employment. No options have been granted since the end of the financial year. The options were provided at
no cost to the recipients. No options held by key management personnel are vested but not exercisable.
Exercise of options and shares granted as compensation
During the reporting period no shares were issued granted as compensation.
There are no amounts unpaid on the shares issued as a result of the exercise of the options.
88 INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Movements in shares
The movement during the reporting period in the number of ordinary shares in Integrated Research Limited held, directly,
indirectly or beneficially, by each key management person, including their related parties, is as follows:
Held at
1 July 2008
Purchases
Received on
exercise of options
Received as
compensation
Sales
Held at
30 June 2009
Current Year
Directors
Non-executive
David Boyles*
1,700,000
John Brown
Kate Costello
Steve Killelea
Executive
50,000
200,000
94,834,951
Mark Brayan
25,000
-
-
-
-
-
*
resigned November 2008.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,700,000
50,000
200,000
94,834,951
25,000
Held at
1 July 2007
Purchases
Received on
exercise of options
Received as
compensation
Sales
Held at
30 June 2008
Prior Year
Directors
Non-executive
David Boyles
1,700,000
-
John Brown
-
50,000
Kate Costello
200,000
Alex Kennedy**
350,000
Steve Killelea
94,834,951
-
-
-
Executive
Mark Brayan
-
25,000
resigned September 2007
**
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,700,000
50,000
200,000
350,000
94,834,951
25,000
Shareholdings at the date of the Directors’ Report for existing Key Management Personnel remain unchanged.
Other transactions with the company or its controlled entities
There were no other transactions between the key management personnel, or their personally-related entities, and the
company or its controlled entities.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
89
Notes to the Financial Statements
Note 27. Related parties
The company has a related party relationship with its subsidiaries (see note 24) and its key management personnel (see
note 26).
During the financial year ended 30 June 2009, subsidiaries purchased goods from the Company in the amount of
$19,659,000 (2008: $17,555,000) and at 30 June 2009 subsidiaries owed the consolidated entity $7,533,000 (2008:
$9,345,000) Refer notes 10 and 17. The net amounts owed are non interest bearing and repayable at call. Transactions with
subsidiaries are priced on an arm’s length basis.
At 30 June 2009 Mr Steve Killelea, the Chairman of the Company, owned either directly or indirectly 56.86% of the Company
(2008: 56.88%).
Note 28. Subsequent events
For dividends declared after 30 June 2009 see Note 21 in the financial statements. The financial effect of dividends
declared and paid after 30 June 2009 have not been brought to account in the financial statements for the year ended 30
June 2009 and will be recognised in subsequent financial reports.
No other transaction or event of a material or unusual nature has arisen in the interval between the end of the financial
year and the date of this report any item, likely, in the opinion of the directors of the company, to affect significantly the
operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated entity, in
future financial years.
90 INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Directors’
declaration
In the opinion of the directors of Integrated Research Limited (“the Company”):
a)
the financial statements and notes, set out in pages 50 to 90, are in accordance with the Corporations Act 2001,
including:
(i) giving a true and fair view of the financial position of the Company and consolidated entity as at 30 June 2009
and of their performance, as represented by the results of their operations and their cash flows, for the year
ended on that date; and
(ii)
complying with Accounting Standards in Australia and the Corporations Regulations 2001; and
b)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable.
c)
The directors have been given the declarations required under Section 295(5) of the Corporations Act 2001 from the
chief executive officer and the chief financial officer for the financial year ended 30 June 2009.
Dated at North Sydney this 7th day of September 2009.
Signed in accordance with a resolution of the directors:
Steve Killelea
Chairman
Mark Brayan
Chief Executive Officer
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
91
Independent
Auditor’s Report
Independent Auditor’s Report to the Members of Integrated Research Limited
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250 Grosvenor Place
Sydney NSW 1219 Australia
DX 10307SSE
Tel: +61 (0) 2 9322 7000
Fax: +61 (0) 2 9322 7001
www.deloitte.com.au
Report on the financial report
We have audited the accompanying financial report of Integrated Research Limited, which comprises the balance sheet as at 30
June 2009, and the income statement, cash flow statement and statement of recognised income and expense for the year ended on
that date, a summary of significant accounting policies, other explanatory notes and the directors’ declaration of the consolidated
entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year as set
out on pages 50 to 91.
Auditor’s Opinion
In our opinion the Remuneration Report of Integrated Research Limited for the year ended 30 June 2009, complies with section
300A of the Corporations Act 2001.
Directors’ Responsibility for the Financial 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) and the 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, whether due to fraud or error; selecting and applying appropriate
accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1, the directors also state,
in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that compliance with the Australian
equivalents to International Financial Reporting Standards ensures that the financial report, comprising the financial statements
and notes complies with International Financial Reporting Standards.
Auditor’s Responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with
Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating
to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from
material misstatement.
Liability limited by a scheme approved under Professional Standards Legislation
92 INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The
procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the
financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to
the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also
includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the
directors, as well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Auditor’s Independence Declaration
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
Auditor’s Opinion
In our opinion:
(a)
the financial report of Integrated Research 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 June 2009 and of their
performance for the year ended on that date; and
(ii)
complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the
Corporations Regulations 2001; and
(b)
the financial report also complies with International Financial Reporting Standards as disclosed in Note 1.
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 31 to 39 of the directors’ report for the year ended 30 June 2009.
The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with
section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our
audit conducted in accordance with Australian Auditing Standards.
Auditor’s Opinion
In our opinion the Remuneration Report of Integrated Research Limited for the year ended 30 June 2009, complies with section
300A of the Corporations Act 2001.
DELOITTE TOUCHE TOHMATSU
Michael Kaplan
Partner
Chartered Accountants
Sydney, 7 September 2009
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
93
Lead Auditor’s
Independence Declaration
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Grosvenor Place
225 George Street
Sydney NSW 2000
PO Box N250 Grosvenor Place
Sydney NSW 1219 Australia
DX 10307SSE
Tel: +61 (0) 2 9322 7000
Fax: +61 (0) 2 9322 7001
www.deloitte.com.au
The Board of Directors
Integrated Research Limited
Level 9, 100 Pacific Highway,
NORTH SYDNEY, NSW, 2000
7 September 2009
Dear Board Members
Auditor’s Independence Declaration to Integrated Research Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of
independence to the directors of Integrated Research Limited.
As lead audit partner for the audit of the financial statements of Integrated Research Limited for the financial year ended 30 June
2009, I declare that to the best of my knowledge and belief, there have been no contraventions of:
(i)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii)
any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
Michael Kaplan
Partner
Chartered Accountants
Liability limited by a scheme under Professional Standards Legislation
94 INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
ASX Additional Information
Shareholder information
Analysis of numbers of equity security holders by size of holding at 31 August 2009:
Class of equity security
Ordinary shares
Shares
Options
1
1,001
5,001
10,001
-
-
-
-
1,000
5,000
10,000
100,000
100,001 and over
87
848
527
832
82
2,376
-
-
15
72
15
102
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest holders of quoted equity securities as at 31 August 2009 are listed below:
Ordinary Shares
Number held
Percentage of issued shares
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
Stephen John Killelea
Andrew Rhys Rutherford
JP Morgan Nominees Australia Limited
UBS Nominees Pty Ltd
B&R James Investments Pty Limited
National Australia Trustees Limited
David Leroy Boyles
ANZ Nominees Limited
Ralph Chiarella
Citicorp Nominees Pty Ltd
Five Talents Limited
Forbar Custodians Limited
Howard Securities Pty Ltd
HSBC Custody Nominees
Mr. Philip Julian Eriksen and Mr. Julian Hans Eriksen
Bell Potter Nominees Ltd
Mr. Richard Ewan Bromley Mews and Mrs. Wee Khoon Mews
Carlos Gil
Sporran Lean Pty Ltd
20
Caratel Pty Ltd
94,497,339
5,426,589
5,034,138
3,141,357
2,500,000
2,409,398
2,000,000
889,843
761,000
679,939
655,000
642,620
600,000
577,412
563,155
500,000
463,460
373,012
364,261
350,000
56.66
3.25
3.02
1.88
1.50
1.44
1.20
0.53
0.46
0.41
0.39
0.39
0.36
0.35
0.34
0.30
0.28
0.22
0.22
0.21
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
95
Unquoted equity securities
Options issued under the Integrated
Research Limited Employee Share Option
Plan to take up ordinary shares
Number on issue *
Number of holders
6,996,000
102
*
Number of unissued ordinary shares under the options.
No person holds 20% or more of these securities.
On-market buy-back
There is no current on-market buy-back.
Substantial holders
Substantial holders in the Company are set out below:
Stephen John Killelea
94,497,339
56.66
Number held
Percentage
Voting rights
The voting rights attaching to each class of equity securities are set out below:
1.
Ordinary shares.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll
each share shall have one vote.
2. Options.
No voting rights.
Other information
Integrated Research Limited, incorporated and domiciled in Australia, is a publicly listed company limited by shares.
96 INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
Corporate Directory
IT infrastructure
IP telephony
VoIP
Directors
Steve Killelea
Chairman and Non-Executive Director
Mark Brayan
Managing Director and CEO
Alan Baxter
Independent Non-Executive Director
John Brown
Independent Non-Executive Director
Kate Costello
Independent Non-Executive Director
Clyde McConaghy
Non-Executive Director
ATM
POS
Web applications
Virtualisation
Payments
Healthcare
Communications
Consulting
Reporting
Secretary
David Leighton
Registered Office
Level 9, 100 Pacific Highway
North Sydney, NSW, 2060
Phone: (+61 2) 9966 1066
Share Registry
Computershare Investor Services Pty Limited
Auditors
Solicitors
Deloitte Touche Tohmatsu
225 George Street
Sydney, NSW, 2000
Blake Dawson
Level 36, Grosvenor Place
225 George Street
Sydney, NSW, 2000
Bankers
Westpac Banking Corporation
Stock Exchange Listing
Country of Incorporation
Australian Stock Exchange
Code IRI
Integrated Research Limited, incorporated and domiciled in
Australia, is a publicly listed company limited by shares.
Notice of Annual General Meeting
The Annual General Meeting of Integrated Research Limited will be
held at 3:00pm on Thursday, 12th November 2009, at the Museum
of Sydney, Corner of Phillip and Bridge Streets, Sydney.
INTEGRATED RESEARCH AND ITS CONTROLLED ENTITIES ANNUAL REPORT 2009
97
Integrated Research
Annual Report 2009
For more information visit our website at www.prognosis.com or email info@prognosis.com
Germany
Integrated Research Ltd
Bockenheimer Landstr.
17-19
D-60325, Frankfurt
t: +49 (69) 710 455 255
f: +49 (69) 710 455 450
e: info.germany@prognosis.com
Asia Pacific/M.East/Africa
Integrated Research Ltd
Level 9, 100 Pacific Hwy
North Sydney NSW 2060
Australia
t: +61 (2) 9966 1066
f: +61 (2) 9966 1042
e: info.ap@prognosis.com
Americas - West Coast
Integrated Research Inc.
8055 East Tufts Avenue,
Suite 950
Denver, CO 80237
t: +1 (303) 390 8700
f: +1 (303) 390 8777
e: info.usa@prognosis.com
Americas - East Coast
Integrated Research Inc.
1818 Library Street,
Suite 500
Reston, VA 20190
t: +1 (703) 956 3025
f: +1 (303) 390 8777
e: info.usa@prognosis.com
United Kingdom
Integrated Research UK Ltd
Orchard Lea, Winkfield Lane
Windsor Berkshire
SL4 4RU
t: +44 (0) 1344 894 200
f: +44 (0) 1344 890 851
e: info.europe@prognosis.com
www.prognosis.com
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