Integrated Research
Annual Report 2010
ABN 76 003 588 449
Providing Business InsightTM
Contents
1. 2010 Highlights 01
2. Letter from the Chairman 02
3. Chief Executive Officer’s Report 12
4. Review of operations
and activities 14
5. Directors and Senior
Management 18
6. Directors’ Report 24
7. Remuneration Report 29
8. Corporate Governance
9. Financial Statements
10. Notes to the financial statements
11. Directors’ Declaration
12. Independent Audit Report
13. Lead Auditor’s independence
declaration
14. ASX additional Information
15. Corporate Directory
37
44
49
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2010 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)
In millions of local currency
Year ended 30 June
Americas revenue (USD)
Europe revenue (UK Sterling)
Asia Pacific revenue (AUD)
Total revenue
(Dollars in millons)
$42.7
$37.4
$37.3
2010
17.4
37.3
5.4
24.5
8.4
22.5
5.2
8.0
3.24
19.7
2.9
8.0
2009
21.7
42.7
7.9
27.2
14.5
27.0
7.3
7.3
4.72
19.7
3.3
7.3
% Change
(20%)
(13%)
(31%)
(10%)
(42%)
(17%)
(28%)
10%
(31%)
-
(12%)
10%
Net profit after tax
(Dollars in millons)
Revenue from licence fees
(Dollars in millons)
$7.9
$5.8
$5.4
$21.7
$19.6
$17.4
2008
2009
2010
2008
2009
2010
2008
2009
2010
Integrated Research and its controlled entities I Annual Report 2010
Integrated Research and its controlled entities I Annual Report 2010
1
1
Letter from
the Chairman
The Company’s profit after tax came in at $5.4 million and
represents a fall of 31% on the 2009 financial year results. Total
revenue for the financial year was $37.3 million, compared
to $42.7 million in the prior financial year and represented
a fall of 13%. The result was also affected by a decline in HP
NonStop revenue which is covered in detail later in this report.
There were, however, some pleasing aspects to the Company’s
performance, with strong growth in the IP telephony (IPT)
business and in Consulting Services.
Revenue derived from the Company’s IPT products continued
its strong growth. Even with the stronger Australian dollar,
new licence sales for IPT were up 14% over the prior year
with growth reported in all geographic regions. On currency
adjusted terms, IPT new licence sales increased by 29% over
the prior year. This was also a watershed year for the Company
with IPT now being the largest source of new licence sales.
The Company continues to invest in this product line, both in
new R&D initiatives and in the sales operation, and expects to
maintain its historical growth rates.
The Company has expanded the number of IPT platforms that
it manages, which now includes Alcatel-Lucent in addition to
the existing platforms of Avaya, Cisco and Nortel. The Company
will continue to expand on the number of supported platforms,
as one of our strategic strengths is the breadth and seamless
integration provided for multiple IP telephony platforms.
Additionally, the Company’s strategy is to expand its product
ranges, so I am pleased to announce that Integrated Research
has released a Network Diagnostics product with special
emphasis on IP telephony networks.
Dear fellow shareholders,
The 2010 financial year
was a difficult trading year
for Integrated Research
mainly because of the
record appreciation in the
Australian dollar against all of
the currencies of our major
trading partners.
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Annual Report 2010 I Integrated Research and its controlled entities
The Company’s core strategic
competency is its world class
Research and Development
operation, and the Company will
continue to invest in its success.
For the full financial year Consulting Services grew by
19% over the prior year to $2.0 million. This is the second
consecutive year of strong growth with 23% growth
being recorded in the 2009 financial year. Whilst only
approximately 11% of overall new licence revenue, it does
reflect our clients’ interest in having Integrated Research
extend our solutions. The company will continue to expand
this business segment and we would expect to see similar
levels of growth in the coming years.
The HP NonStop result was disappointing. There were a
number of circumstances that affected this result: adverse
currency conditions, more strategic focus on our IPT business
unit as it becomes our major source of new licence revenue,
and changes in the HP NonStop marketplace. Stock trading
has increasingly been moving towards new and evolving
technological platforms that are not as reliant on fault
tolerant high end systems such as NonStop, particularly in
Europe and North America.
However, payments systems remain buoyant for HP NonStop
and the number of transactions that will be processed by
our customers is expected to increase this year and in future
years. To take further advantage of this situation, Integrated
Research has signed a strategic reseller relationship with ACI,
the world’s largest supplier of POS and ATM switches. This
is expected to provide a good source of revenue in ensuing
years.
The Distributed Systems business segment (Windows, UNIX
and Linux based servers) recorded growth in Europe and Asia
Pacific, mainly due to customers seeking real time monitoring
solutions for their mission-critical applications. The Company
will maintain its attention on this business unit with special
emphasis on the payments systems that run on these
platforms. The Company will also continue to expand the
Distributed Systems product range with the release of new
products over the coming financial year.
The Company’s core strategic competency is its world class
Research and Development operation, and the Company
will continue to invest in its success. R&D expenditure
for the 2010 financial year was $8.3 million, representing
22% of total revenue and in line with historical averages.
It is also pleasing to note that there has been a significant
improvement in R&D processes, resulting in better product
quality and improved customer satisfaction.
Although the global economic situation has improved, the
growth rates in the developed world are still below historical
trend lines. Although the future global outlook does not point
to a recessionary environment, the Company has developed
its plans around subdued economic conditions. The Company
expects that the Australian dollar will remain strong, but the
steep appreciation in the currency experienced during the
2010 financial year is not expected to be repeated.
The future outlook for the Company remains solid. The
Company has no debt, the core technologies that the
Company’s business units are based upon, including HP
NonStop, remain healthy, with expansion expected in both
the IP telephony and payments markets. The company has a
strong cash position with $8.4 million at 30 June 2010.
The Board is pleased to announce a final dividend of 1.0
cents per share, 45% franked, bringing the total dividend
for the year to 3.0 cents per share and includes a special
dividend of 0.5 cents. This is comparable to total dividends of
4.0 cents for the prior financial year.
Thank you for your continued support.
Steve Killelea
Chairman
Integrated Research and its controlled entities I Annual Report 2010
Integrated Research and its controlled entities I Annual Report 2010
3
3
In just
twelve
months
at Integrated
Research
We acquired 148 new customers.
We reached four million total phones under
management.
We signed up and enabled more than 70 new
Prognosis VoIP Monitor Resellers.
We had a presence at 27 trade shows and events.
We released 6 new products, across 4 product lines.
We signed two new major alliance agreements
with ACI Worldwide and Stratus Technologies.
We grew and cemented existing alliances with
Avaya, EMC and GE.
4
Annual Report 2010 I Integrated Research and its controlled entities
Integrated Research
solutions are
reaching more
people, every day
We are living in a world in which data
demands are becoming increasingly more
real time. Data is instantaneous, it is high-
volume, it is delivered and accessed via
diverse technology platforms, and it requires
constant vigilance to manage and maintain.
Integrated Research is well-positioned to take
advantage of this shift.
2010 was both a demanding and rewarding
year for Integrated Research. Through the
efforts of IR staff across the globe in our
offices in Australia, USA and United Kingdom,
we achieved significant milestones, of which
we are justifiably proud.
More customers and prospects are hearing
about the solutions Integrated Research
provide and engaging with us than ever
before. The message has reached them
online via websites and social networks,
through our alliance partners, via advertising
and publicity, at events, from analysts and
industry experts, and from existing Prognosis
users sharing their experiences.
They are learning how Prognosis touches
the day to day lives of millions of people and
hundreds of enterprises, providing critical
business insight to our customers.
Through our new alliances we now have
the opportunity to reach new markets with
our monitoring solutions for Payments,
Communications and IT Infrastructure. We
are continuing to extend our solution range to
meet customer needs through Consulting, and
reaffirming our commitment to innovation in
Research and Development.
Most of all, we are listening to and responding
to the needs of our customers, which is
reflected in our products, both old and new.
Integrated Research and its controlled entities I Annual Report 2010
5
Prognosis
solutions for
Communications
With global communications vendors offering
more technologies and solutions daily, and
buzzwords such as Unified Communications,
SIP and TelePresence permeating the market,
Integrated Research is responding by offering
an ever-growing list of supported technologies,
depth of functionality, and multi-platform and
multi-vendor support.
Our best-in-class Prognosis IP Telephony
Manager forms the basis of our Communications
monitoring solution, providing a real-time,
telephony-centric view across the entire VoIP
ecosystem, supporting major vendors including
Cisco, Avaya, Nortel and Alcatel-Lucent.
Our strong, long-term relationships and alliances
with major vendors are providing the basis for
widening our product range to include voip
monitoring for small to medium business, as well
as expanding and updating Prognosis solutions
for service providers and enterprise contact
centres.
Now, Prognosis solutions for Communications
have been supplemented with Prognosis
Network Diagnostics, extending the power of
Prognosis from the telephony application into the
network, providing deeper business insight and
diagnostic capability than ever before.
6
Annual Report 2010 I Integrated Research and its controlled entities
Solutions for mid-to-large enterprises
Solutions for small and medium business
Solutions for Managed Service Providers
Solutions for contact centres
Solutions for Unified Communications
Solutions for telephony networks
Integrated Research and its controlled entities I Annual Report 2010
7
Prognosis
solutions for
Payments
From Australia’s population of just 22.15 million
people, there were 118.8 million credit card
transactions processed per month in 2009. The
total number of non-cash payments grew by
7% over the previous year, and leading analysts
believe this number will continue to grow. This
is a staggering electronic transaction rate, and
financial institutions are reaping the benefits.
However, with higher transaction volumes comes
higher management complexity.
Offering a centralised, real-time view of all
transactions and devices in the payments
environment forms the core of Prognosis
monitoring solutions for Payments. Prognosis
supports established platforms, including ACI
BASE24 and BASE24-eps, EFD Connex and S1
Postilion, as well as offering extended
solutions to monitor transactions from any
transaction processing application, including
custom and in-house developed platforms.
Prognosis is also particularly well positioned to
support financial services organisations through
mergers and acquisitions, as well as migration to
different processing platforms, with the capability
to integrate new, legacy, and diverse platforms
seamlessly into a single management view.
Alliances with ACI Worldwide and Stratus
Technologies have opened up new opportunities
for Integrated Research, not only for enhanced
sales and marketing, but for partnering with
these industry leaders to innovate and develop
monitoring solutions to address new challenges
in the payments market.
8
Annual Report 2010 I Integrated Research and its controlled entities
Solutions for ATM and POS payment service management
Solutions for ATM and POS device management
Solutions for transaction surveillance
Solutions for custom and in-house developed financial
transaction platforms
Solutions for phone, internet and mobile banking
Integrated Research and its controlled entities I Annual Report 2010
9
Prognosis
solutions for
IT Infrastructure
Monitoring the performance and availability
of critical IT Infrastructure has formed the
core of the Prognosis monitoring solution
for over twenty years. The HP NonStop
platform continues to represent the pinnacle
of high availability for critical customer-facing
interactions.
Integrated Research have maintained a
commitment to developing and innovating
around the HP NonStop platform. Prognosis
monitoring solutions ensure businesses are able
to maximise the return on their infrastructure
investments, and continue to make HP NonStop
the centrepiece of their business operations.
Prognosis solutions for IT Infrastructure have
now also been expanded dramatically to meet
customer demand, supporting industry moves
towards virtualisation and cloud applications,
and expanding our monitoring capabilities to
include high-demand storage arrays. We also
continue to support new releases in applications
and middleware for distributed systems.
With an unparalleled depth of metrics and
a customisable, flexible interface, Prognosis
provides the real time business insight required
to unlock the hidden value in enterprise IT
infrastructure.
10 Annual Report 2010 I Integrated Research and its controlled entities
Solutions for HP NonStop systems
Solutions for distributed systems hardware, applications and
middleware
Solutions for ensuring customer satisfaction with web
applications
Solutions for XP Storage Arrays
Solutions for virtualised environments
Integrated Research and its controlled entities I Annual Report 2010
11
Chief Executive
Officer’s report
Licence sales were down 20% on the prior year to $17.4 million
due to the combined effects of a stronger Australian dollar and
lower HP NonStop sales. This in turn reduced total revenue by
13% from last year to $37.3 million. Our annual net profit after
tax was down 31% on the prior year to $5.4 million.
However, we estimate that our licence sales were down just
7% on a constant currency basis and profit after tax similarly
down by 16%. We made a foreign currency hedging gain of $1.6
million in FY2010 and will continue to hedge profits and control
costs in order manage currency fluctuations in FY2011.
Our IPT business grew in all regions. We added 148 new IPT
customers in the year, mostly through the successful execution
of strategies to support our alliance with Avaya, including
investment in enabling the Avaya channel. IPT licence and
maintenance billings were up 6% on the prior year, or about
23% on a constant currency basis.
This IPT growth was encouraging considering that according
to Gartner the number of IP phones shipped in calendar 2009
was 10% less than 2008. Gartner forecast a return to growth in
2010, fuelled by the ongoing trend to replace digital telephony
with IP telephony as older systems are retired, and to take
advantage of the lower costs and functionality improvements
that IP telephony provides.
We are building on our IPT product range in order to expand
our addressable market. We recently added support for
Alcatel-Lucent, and already have our first major customer using
this product. Alcatel-Lucent support opens markets for us in
Europe and Northern Africa, and expands upon our existing
solutions for Cisco, Avaya and Nortel. We have also launched
a Network Diagnostics product that can be sold to new and
existing customers, providing visibility of the entire telephony
ecosystem for more effective troubleshooting and problem
resolution.
We grew our Consulting business in FY2010, with Consulting
revenue up 19% to $2.0 million. Our consulting services
include customisation, implementation, training and
integration to help our customers derive more value from
Prognosis. We added people and built a scalable foundation
of systems and processes in order to support future
Consulting revenue growth.
Dear Shareholders,
The 2010 financial year
presented some challenges
to Integrated Research, but
I’m pleased to report that we
have withstood these and
that the business is healthy,
profitable and debt free. We
are also seeing some benefits
from our growth strategies
and are well prepared for the
future.
12 Annual Report 2010 I Integrated Research and its controlled entities
Consulting makes
Prognosis more valuable
to our customers, expands
our footprint and increases
customer retention.
It’s important to note that our HP NonStop customer
retention remains high at 92%. This underpins the
importance of our products and the systems that they
manage. We continue to invest in our HP NonStop suite, and
released new products and functionality during the financial
year. Our development plan is aligned with HP’s server
strategy, of which HP NonStop is an important component.
Our Distributed Systems products recorded growth in
Europe and Asia Pacific. We are committed to the continued
development and support of these products, particularly to
enable monitoring of multi-platform applications such as
payments.
The new strategic alliance between Integrated Research and
Stratus Technologies, a leading provider of high-availability,
fault-tolerant Windows servers, increases the market for our
Distributed Systems products and provides a new channel
to customers in the financial services, manufacturing,
transportation, healthcare and telecommunications sectors
that rely on Stratus servers.
FY2010 also saw the implementation of a number of new
systems and processes within Integrated Research to ensure
our agility and scalability, and to build a strong foundation
for future growth. These included new CRM and financial
systems that give us greater visibility into our business and
improve our decision making.
These internal changes are having a strategic impact on
our business. We’ve re-engineered our R&D processes by
implementing the Agile development methodology and this
has resulted in measurable improvements in product quality,
shorter development cycles and a 53% improvement in R&D
output per person.
Despite the challenges of FY2010, our business is strong and
poised for growth. I would like to thank our customers for
their ongoing business and our staff for their hard work and
perseverance this year.
Thank you for your support.
Consulting Services is an important part of our strategy. In
addition to contributing services revenue, our consultants
look for ways to extend our customers’ use of Prognosis to
provide real time business insight. This makes Prognosis
more valuable to our customers, expands our footprint and
increases customer retention.
We also increased our focus on the payments market in
FY2010, which offers a significant opportunity for us. It is a
high growth market in developing countries, as well as being
a rapidly evolving market in western economies, with new
payments channels such as mobiles and the internet. Our
ability to monitor high volumes of transactions in continuity-
critical environments makes Prognosis a strong fit for this
market.
Our strategy in payments is similar to our IPT strategy,
supporting multiple platforms to increase our addressable
market, as well as providing solutions for heterogeneous
payments environments. We currently support ACI BASE24
and BASE24-eps, EFD Connex and S1 Postilion. We also
have a powerful toolkit that enables us to fully integrate any
custom-built or bespoke switch into Prognosis. With a large
number of payments switches being developed in-house,
the level of visibility Prognosis offers to these financial
institutions is invaluable.
Our new alliance with ACI Worldwide enhances this go to
market strategy. ACI’s market share of the top 500 retail
payment switches using commercial software is over 50%,
and they have selected Prognosis as their payment service
management solution for the full range of ACI products.
Given that the vast majority of ACI’s customers run their
payment switches on HP NonStop servers, the ACI alliance is
also expected to have a positive impact on our HP NonStop
products and revenue.
Our HP NonStop business was down this year due to lower
customer spending on HP NonStop servers throughout
the year, largely because of changes in the market and
customers having sufficient processing capacity for their
current business. Also, analysts estimate that IT capital
spending declined by more than 10% in 2009. We expect
this to be temporary, as our customers will need to invest in
additional capacity to cope with increased processing when
the economy recovers.
Mark Brayan
Chief Executive Officer
Integrated Research and its controlled entities I Annual Report 2010
Integrated Research and its controlled entities I Annual Report 2010
13
13
Review of
operations
and activities
Integrated Research
has a twenty-two year
heritage of providing
performance monitoring
and diagnostics software
solutions for business-
critical computing
environments.
Principal activities
The Company’s principal activities during the year
were the design, development and sale of systems
and applications management computer software for
business-critical computing and IP telephony networks.
The Company increased its investment in and revenue
from Prognosis-based consulting services during the year
and expects to increase this further in future years.
Group overview
Integrated Research has a twenty-two 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.
14 Annual Report 2010 I Integrated Research and its controlled entities
14 Annual Report 2010 I Integrated Research and its controlled entities
Typical business environments where Prognosis is
Currency exchange rates were volatile over the course
used include automated teller machine (ATM) and
of the 2010 financial year resulting. The average US
EFTPOS transaction systems, web applications such as
exchange rate for the 2010 financial year was 17%
online banking or online shopping, hospital systems,
higher than the equivalent prior year. Consolidated
emergency services, stock trading applications, and
revenues were lower due to the impact of currency
telecommunications systems including IP telephony
translation of our overseas operations.
systems.
The Company has developed its Prognosis products
flat revenue, Europe reported a decline of 14% and Asia
around a fault-tolerant, highly distributed software
Pacific increased by 10% over the equivalent prior year.
In underlying natural currency the Americas reported
architecture, designed to achieve high levels of
functionality, scalability and reliability with a low total
cost of ownership.
Revenue derived from the Company’s IP Telephony (IPT)
products continued its strong growth. Even with the
stronger Australian dollar, new licence sales for IPT were
Integrated Research services customers in more than 50
up 14% over the prior year with growth reported in all
countries through direct sales offices in the USA, UK and
Australia, and via a global, channel-driven distribution
geographic regions. This was a watershed year for the
Company with IPT now being the largest source of new
network. The Company’s customer base consists of
licence sales.
many of the world’s largest organisations and includes
major stock exchanges, banks, credit card companies,
telecommunications companies, computer companies
and hospitals.
Total revenue was impacted by lower than anticipated
HP NonStop sales. However, the product line showed
improvement in the second half with 10% increase
in new licence sales in the US over the same period
The Company generates most of its revenue from upfront
last year, in line with improved economic conditions
licence fees, recurring maintenance and recurring licence
globally.
fees.
Review and results of operations
The Company achieved an annual net profit after tax of
$5.4 million compared to the equivalent prior period of
$7.9 million, which is within the guidance provided to
the ASX on 2 July 2010. Revenue for the full year was
$37.3 million representing a 13% decline over the prior
year, mainly attributable to a stronger Australian dollar.
In constant currency, revenue was down 3% compared to
the prior year.
Revenue
Revenue for the year was $37.3 million, a decrease of
13% over 2009. Licence fees decreased by 20%, and
maintenance fees decreased by 12%. The customer
retention rate remains high at 93%.
Revenue from consulting services increased by 19%
over the prior year to $2.0 million which validates the
Company’s strategy to invest in this business segment.
Revenue derived from
the Company’s IP
Telephony products
continued its strong
growth. New licence
sales for IPT were up 14%
over the prior year with
growth reported in all
geographic regions.
Integrated Research and its controlled entities I Annual Report 2010
Integrated Research and its controlled entities I Annual Report 2010
15
15
4
Expenses
The Company continued to focus on expanding its capabilities and productivity. The number of staff increased by 13%
from 142 to 161. Total expenses were $31.6 million, down 5% against the prior year, which was attributable to the strong
Australian dollar.
Research and development expenditure of $8.3 million was 22% of total revenue and in line with historical averages. This
has been underscored by significant improvement in research and development processes, better product quality and
improved customer satisfaction. The company is committed to maintaining and improving its core strategic strength and
we expect a comparable level of investment in research and development in the future.
Net research and development expenses are represented as follows:
In thousands of AUD
Gross research and development spending
Capitalisation of development expenses
Amortisation of capitalised expenses
Net research and development expenses
2010
8,290
(5,932)
5,989
8,347
2009
9,001
(5,790)
5,033
8,244
Shareholder returns
Returns to shareholders increased through the payment of partly franked dividends:
Net profit ($’000)
Basic EPS
Dividends per share
Return on equity
Financial position
2010
$5,401
3.24¢
3.0¢
22.0%
2009
$7,863
4.72¢
4.0¢
28.9%
2008
$5,776
3.47¢
3.0¢
24.3%
The consolidated entity continues to hold a strong financial position being free of debt and with cash at 30 June 2010
of $8.4 million, compared to $14.5 million at the same time last year. Net cash flow provided by operating activities was
$8.3 million, compared to $13.4 million for the same period last year.
Net cash flow provided by operating activities ($’000)
Current ratio (current assets to current liabilities)
Net tangible asset backing per ordinary share
2010
$8,339
1.57
6.32¢
2009
$13,434
1.98
8.35¢
2008
$13,201
1.85
6.69¢
16 Annual Report 2010 I Integrated Research and its controlled entities
16 Annual Report 2010 I Integrated Research and its controlled entities
Outlook and strategy for 2011
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.
The Company invested in 2010 in recommendations from
its review of its strategy in 2009. This review validated
our strategy of maximising the unique core features of
Prognosis. We will continue to improve and extend our
products to deliver real-time insight to critical business
processes and transactions.
The HP NonStop platform is an important part of HP’s
server strategy and remains at the operational core of
many of the world’s largest companies. The payments
segment is a growing opportunity for Integrated Research
and we have invested in our payments products to add
platform support and functionality to exploit this trend.
We have signed a strategic alliance with ACI Worldwide,
the world’s largest payments software vendor, to be
their exclusive partner for payments monitoring. As
well as driving payments sales this opens up more HP
NonStop opportunities for us given most ACI switches
run on HP NonStop. The payments market also includes
many customised switches and we have developed a
repeatable solution that monitors customised switches,
which greatly increases our addressable market.
Prognosis for Distributed Systems (Windows, Unix and
Linux) continues to be sold alongside our HP NonStop
products as customers seek a common monitoring
interface for all platforms or convert applications
from one platform to another. We expect this trend to
continue in 2010 and will invest to extend our platform
coverage. We signed a strategic alliance with Stratus, a
leading vendor of ultra-high availability Windows servers,
to provide real-time monitoring for their customers and
application partners.
Our IP Telephony products are central to our growth
in 2011 and beyond. Sales grew in FY10 and we made
important investments in the product line. We added
support for Alcatel-Lucent’s IP phones and launched
a network diagnostics product that extends the
functionality of Prognosis for IP Telephony. Over four
million phones are now licensed with Prognosis. We will
continue our investments in our IPT products to add
functionality that improves our strong market position.
Consulting Services is an important element in our
strategy. Consultants provide services to implement
Prognosis for our customers and train them in its
effective use. They also help us develop unique and
repeatable solutions that extend the use and value of
Prognosis. We will continue to invest in people and
processes for our consulting business to grow revenue
and margin.
In addition to investments in new products and alliances,
we have improved our R&D capabilities by implementing
the Agile development methodology. This has decreased
cycle times, increased product quality and enabled more
focus on innovation and new product development.
Consulting Services is
an important element
in our strategy.
Consultants provide
services to implement
Prognosis for our
customers and train
them in its effective use.
Integrated Research and its controlled entities I Annual Report 2010
Integrated Research and its controlled entities I Annual Report 2010
17
17
Directors
The directors of the Company at any time during or since the end of the financial year are listed below:
Steve Killelea, AM
Non-Executive Director and Chairman
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 is also Chairman of the
Institute for Peace and Economics and The
Charitable Foundation and for activities
involved with these he has received a
number of international awards. He is also
active in the financial community with
investments in many high tech companies.
Steve’s current term will expire no later
than the close of the 2012 Annual General
Meeting. Listed companies directorships
held in the past three years: None.
Age 61 years.
Mark Brayan, MBA
Managing Director and Chief
Executive Officer
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. Listed companies directorships
held in the past three years: None.
Age 46 years.
Alan Baxter, BSc, Dip Ed
Independent 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 2012 Annual General Meeting. Listed
company directorships held in the past
three years other than listed above: None.
Age 65 years.
John Brown, B Com, FCA,
MAICD
Independent Non-Executive Director
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. Listed companies directorships
held in the past three years: None.
Age 62 years.
18 Annual Report 2010 I Integrated Research and its controlled entities
Kate Costello, LLB, FAICD
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, LBT
Innovations 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. Listed
companies directorships held in the past
three years other than listed above: None.
Age 57 years.
Clyde McConaghy, B.Bus.,
MBA, MAICD, MIOD - UK
Non-Executive Director
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 was a board director of WMRC Plc,
an economic analysis publisher, on the
London Stock Exchange and a director of
the Economist Intelligence Unit GmbH
in London. 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. Listed companies directorships
held in the past three years: None.
Age 48 years.
Peter Lloyd
Non-Executive Director
Peter was appointed a Director in July
2010. He has 37 years experience in
computing technology, having worked for
both computer hardware and software
solution providers. For the past 26 years
Peter has been specifically involved in
the provision of payments solutions for
the financial services industry. Peter is
currently the global sales and marketing
Director for Distra Pty Ltd a provider of
payments systems. He is also a Director
of The Grayrock Group Pty Ltd and
Limehouse Creative Pty Ltd. Peter’s
current term will expire no later than
the close of the 2010 Annual General
meeting.Listed companies directorships
held in the past three years: None.
Age 56 years.
David Leighton, MBA, FCPA, ACIS
Company Secretary
David is a member of Chartered Secretaries Australia. He has been Company Secretary since
October 2000.
Integrated Research and its controlled entities I Annual Report 2010
Integrated Research and its controlled entities I Annual Report 2010
19
19
Senior
Leadership Team
Peter Adams, B.Com, CA
Chief Financial Officer
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, B.App. Sc
General Manager, Research and
Development
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.
20 Annual Report 2010 I Integrated Research and its controlled entities
Andre Cuenin, BSc, MBA
Global Head of Sales
Andre joined Integrated Research in
October 2008 and is responsible for all
global business operations. 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.
Pierre Semaan, BEng,
MBA
General Manager, Product
Management & Marketing
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 organisations. Prior to Sage,
Pierre worked at Citrix as the Chief of
Operations & Director of the CTO Office
and Advanced Products Group.
Geoff Bryant, M.Mgt,
MAICD
Vice President Consulting
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.
Integrated Research and its controlled entities I Annual Report 2010
Integrated Research and its controlled entities I Annual Report 2010
21
21
Integrated
Research
customers
include*
8 of the worlds 10 largest companies
5 of the top 10 US banks
4 of the 5 biggest aerospace and defense
companies
6 of the 10 biggest telecommunications
companies
6 of the 10 biggest stock exchanges
The 3 biggest oil and gas companies
The 2 biggest aircraft manufacturers
*Source: Forbes 2000 (2010) and World Federation of Exchanges
22 Annual Report 2010 I Integrated Research and its controlled entities
Financials
Directors’ Report
Remuneration Report
Corporate Governance
Financial Statements
Notes to the financial statements
Directors’ Declaration
Independent Audit Report
Lead Auditor’s independence declaration
ASX additional Information
Corporate Directory
24
29
37
44
49
82
83
85
86
89
Integrated Research and its controlled entities I Annual Report 2010
23
Directors’ Report
The directors present their report together
with the Financial Statements of Integrated
Research Limited (“the consolidated entity”),
being the Company and its controlled entities,
for the year ended 30 June 2010 and the
Auditor’s Report thereon.
Results
The net profit of the consolidated entity for the 12 months ended 30 June 2010 after income tax expense was
$5.4 million.
Dividends
Dividends paid or declared by the Company since the end of the previous financial year were:
Cents Per Share
Total Amount
$’000
Date of Payment
Final 2009 – Ordinary shares
Interim 2010 – Ordinary shares
5% franked
8% franked
Special 2010 – Ordinary shares
unfranked
Final 2010 – Ordinary shares
45% franked
2.5
1.5
0.5
1.0
4,170
2,502
834
1,668
18 Sep 2009
12 Mar 2010
12 Mar 2010
17 Sep 2010
Principal activities and review of operations
Detail of the principal activities and review of operations of the consolidated entity are set out on pages 14 to 17.
24 Annual Report 2010 I Integrated Research and its controlled entities
Events subsequent to reporting date
For dividends declared after 30 June 2010 see Note 19 in the financial statements. The financial effect of dividends
declared and paid after 30 June 2010 has not been brought to account in the financial statements for the year ended 30
June 2010 and will be recognised in subsequent financial statements.
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.
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 pages 18 to 19.
Details of the company secretary and his qualifications are set out on page 19.
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 2010, 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
John Brown
Mark Brayan
Kate Costello
Steve Killelea
Clyde McConaghy
A
11
12
12
12
11
12
B
12
12
12
12
12
12
A
3
3
-
-
-
3
B
3
3
-
-
-
3
A
3
-
-
2
3
-
B
3
-
-
3
3
-
A
-
-
3
3
3
3
B
-
-
3
3
3
3
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 I Annual Report 2010
25
Directors’ Report page 24-28
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 Securities Exchange
in accordance with S205G(1) of the Corporations Act 2001, at the date of this report is as follows:
Ordinary shares in Integrated Research
Options
Directly held
Beneficially held
Total
Number of Options
-
25,000
101,000
-
94,497,339
-
-
-
-
-
200,000
337,612
-
-
-
25,000
101,000
200,000
94,834,951
-
-
-
1,000,000
-
-
-
-
-
Alan Baxter
Mark Brayan
John Brown
Kate Costello
Steve Killelea
Clyde McConaghy
Peter Lloyd
Share options
Options granted to directors and senior executives
The Company granted no options to either executives or non-executive directors of the consolidated entity during or
since the end of the financial year.
26 Annual Report 2010 I Integrated Research and its controlled entities
Unissued shares under option
Unissued ordinary shares of Integrated Research Limited under option at the date of this report are as follows:
Expiry date
Sep 2010
May 2011
Jan 2012
Jun 2012
Sep 2012
Feb 2013
Apr 2013
July 2013
Oct 2013
Exercise price
Number of shares
$0.54
$0.41
$0.50
$0.48
$0.42
$0.38
$0.38
$0.35
$0.31
400,000
482,000
160,000
648,000
1,000,000
350,000
300,000
200,000
340,000
May 2014
Options do not entitle the holder to participate in any share issue of the Company or any other body corporate.
Total unissued ordinary shares of Integrated Research Limited under option 5,420,000
1,540,000
$0.28
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
15,000
10,000
10,000
Amount paid on each share
$0.41
$0.48
$0.28
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.
Integrated Research and its controlled entities I Annual Report 2010
27
Directors’ Report page 24-28
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 29 to 36.
Corporate governance
A statement describing the Company’s main corporate governance practices in place throughout the financial year is on
pages 37 to 43 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 and 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 and 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 on page 85
and forms part of the 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 Statements 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 16th day of August 2010
28 Annual Report 2010 I Integrated Research and its controlled entities
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
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.
designed to attract suitably qualified candidates, reward
Performance-linked remuneration
the achievement of strategic objectives, and achieve the
broader outcome of creation of value for shareholders.
The remuneration structure takes into account:
Performance linked remuneration includes both short-
term and long-term incentives and is designed to reward
executive directors and senior executives for exceeding
The capability and experience of the directors and
their financial and personal objectives. The short-term
senior executives
The directors and senior executives ability to
control the relevant segment’s performance
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
The consolidated entity’s performance including:
Plan (ESOP).
- The consolidated entity’s earnings
- The growth in share price and returns on
shareholder wealth
Integrated Research and its controlled entities I Annual Report 2010
29
Remuneration Report page 29-36
Short-term incentive bonus
At the end of the financial year the Nomination
The Nomination and Remuneration Committee is
and Remuneration Committee assesses the actual
responsible for setting the key performance indicators
performance of the CEO against the KPIs set at the
(KPIs) for the Chief Executive Officer, and for approving
beginning of the financial year. A percentage of the
the KPIs for the senior executives who report to him.
predetermined maximum amounts for each KPI
The KPIs generally include measures relating to the
is awarded depending on results. The committee
consolidated entity, the relevant segment, and the
recommends the cash incentive to be paid to the CEO
individual, and include financial, people, customer,
for approval by the board.
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.
Long-term incentive
Options are issued to executive directors and other
senior executives under the Employee Share Option
Plan. The ability of executive directors and other senior
The financial performance objectives vary with position
executives to exercise options is conditional on the
and responsibility and are aligned with each respective
consolidated entity achieving certain profit after tax (PAT)
year’s budget. The non-financial objectives vary with
performance hurdles over the vesting period. PAT was
position and responsibility and include measures such as
considered the most appropriate performance hurdle
achieving strategic outcomes and staff development.
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:
2010
2009
2008
2007
2006
New licences
Net profit
Dividends paid
$17,386,000
$21,723,000
$19,623,000
$19,517,000
$18,633,000
$5,401,000
$7,863,000
$7,506,000
$5,003,000
$5,776,000
$5,826,000
$5,433,000
$4,152,000
$6,975,000
$4,146,000
Change in share price
$0.125
($0.06)
($0.23)
$0.185
($0.005)
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.
30 Annual Report 2010 I Integrated Research and its controlled entities
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
Other key management personnel
Steve Killelea – Chairman
Peter Adams – Chief Financial Officer
Mark Brayan – Chief Executive Officer
Alex Baburin – General Manager, Research & Development
Alan Baxter
John Brown
Kate Costello
Geoff Bryant – Vice President Consulting
Andre Cuenin – Global Head Of Sales
Rick Ferguson – Vice President Asia Pacific
Clyde McConaghy
David Leighton – Company Secretary
Pierre Semaan – General Manager, Product Management & Marketing
David Stark – Vice President Europe (resigned Nov 2009)
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
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.
a severance payment or an amount for redundancy
Mr Alex Baburin, General Manager Research and
equal to the scale of payments prescribed in the NSW
Development, has a contract of employment with
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.
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 I Annual Report 2010
31
Remuneration Report page 29-36
Mr Geoff Bryant, Vice President Consulting, has a
Director’s base fees in FY2010 were $50,000 per annum
contract of employment with Integrated Research
plus compulsory superannuation. The chairman receives
Limited dated 19 June 2009, which provides for specific
the base fee by a multiple of two. Director’s fees cover
notice and severance undertakings of up to one
all main board activities and committee membership.
month’s compensation depending on the particular
Directors can elect to salary sacrifice their directors fees
circumstances. Mr Bryant can terminate his employment
into superannuation.
by giving one month’s prior notice in writing.
Mr Andre Cuenin, Global Head of Sales, has a contract of
related compensation or retirement benefits.
Non-executive directors do not receive performance
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’s
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’s
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’ 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.
32 Annual Report 2010 I Integrated Research and its controlled entities
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
Perfor-
mance
related
Total
$
Value of
options
In AUD
Directors: Non-executive
Alan Baxter
(appointed
June 2009)
David Boyles
(resigned
November 2008)
John Brown
Kate Costello
2010
2009
2010
2009
2010
2009
2010
2009
50,000
1,603
-
-
50,000
45,000
37,500
-
Steve Killelea
(Chairman)
Clyde
McConaghy
2010
100,000
2009
2010
2009
90,000
50,000
33,750
Directors: Executive
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,500
144
-
26,773
4,500
4,050
17,000
49,050
9,000
8,100
4,500
15,300
-
-
-
-
-
-
-
-
-
-
-
-
Mark Brayan
2010
395,468
45,260
2009
395,468
149,870
4,532
4,532
14,461
(22,455)
13,334
85,956
* Superannuation contribution contain salary sacrifice.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
54,500
1,747
-
26,773
54,500
49,050
54,500
49,050
109,000
98,100
54,500
49,050
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
437,266
649,160
10%
23%
(5%)
13%
Integrated Research and its controlled entities I Annual Report 2010
33
Remuneration Report page 29-36
Short Term
Salary
& fees
$
Non-cash
benefits
$
Bonus
$
Post-
employment
Super-
annuation
contribution
$
Share-
based
payments
Value of
options
$
Other
compen-
sation
Termina-
tion
benefit
$
Proportion of
remuneration
Perfor-
mance
related
Total
$
Value of
options
In AUD
Executive officers (excluding directors)
Consolidated
Peter Adams
Alex Baburin
Geoff Bryant
(appointed June
2009)
Rick Ferguson
David Leighton
Pierre Semaan
Andre Cuenin
(appointed
October 2008)
Kurt Roscow
(resigned
July 2008)
David Stark
(resigned
Nov 2009)
Total
compensation:
key
management
(including directors)
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
241,008
37,412
229,950
49,330
207,891
35,536
188,503
41,870
185,154
69,109
-
-
209,144
106,642
206,851
115,725
43,759
45,000
-
-
221,007
61,519
207,436
41,889
233,069
164,972
162,847
143,965
-
11,691
-
-
135,794
45,482
265,217
118,559
4,532
1,133
3,399
4,532
8,988
-
4,532
4,532
1,241
-
4,532
4,532
-
-
-
-
-
-
14,461
(5,695)
18,918
20,306
18,710
(8,952)
16,965
13,068
16,731
-
-
-
18,823
(4,555)
18,617
17,178
4,050
4,050
-
-
14,461
(12,189)
16,932
-
-
-
-
-
-
8,831
2,574
8,689
-
-
(23,416)
22,463
2010
2,159,794
565,932
31,756
141,197
(74,688)
2009
1,883,316
661,208
19,261
192,233
176,491
13%
15%
14%
16%
25%
-
32%
32%
-
-
21%
15%
41%
46%
-
-
(2%)
6%
(3%)
5%
-
-
(1%)
5%
-
-
(4%)
3%
1%
3%
-
-
29%
29%
(15%)
6%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
291,718
319,637
256,584
264,938
279,982
-
334,586
362,903
49,050
49,050
289,330
279,620
400,615
315,501
-
11,691
157,860
406,239
2,823,991
2,932,509
34 Annual Report 2010 I Integrated Research and its controlled entities
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
% vested in year
% forfeited in year
Short-term incentive bonuses
Directors
Mark Brayan
Executives
Peter Adams
Alex Baburin
Geoff Bryant
Andre Cuenin
Rick Ferguson
Pierre Semaan
David Stark
$ (A)
45,260
37,412
35,536
69,109
164,972
106,642
61,519
45,482
23%
75%
89%
69%
83%
76%
87%
23%
(B)
77%
25%
11%
31%
17%
24%
13%
77%
(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 2010 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 Employee Share Option Plan (ESOP).
Options and rights over equity instruments granted as compensation
No options have been granted to named executives either during or since the end of the financial year.
There were no options vesting during the year that were granted to named executives in prior reporting periods.
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 16 to the financial statements.
Integrated Research and its controlled entities I Annual Report 2010
35
Remuneration Report page 29-36
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 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
Value yet to vest ($)
Min (B)
Max (C)
% vested
in year
% Forfeited
in year (A)
Financial
year in
which grant
expires
Directors
Mark Brayan
1,000,000
Sep 2007
Executives
Peter Adams
Alex Baburin
Andre Cuenin
Rick Ferguson
Pierre
Semaan
350,000
160,000
40,000
300,000
300,000
200,000
Mar 2008
Aug 2006
Oct 2008
Oct 2008
Apr 2008
Jul 2008
David Stark
350,000
Mar 2008
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100%
2012
nil
$108,075
2013
2012
2013
2013
2013
2013
2013
nil
nil
nil
nil
nil
nil
nil
$58,861
$25,748
$5,191
$38,933
$50,453
$29,305
n/a
(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.
36 Annual Report 2010 I Integrated Research and its controlled entities
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 evaluating and approving 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 assessing 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).
Integrated Research and its controlled entities I Annual Report 2010
37
Corporate Governance Statement page 37-43
Board process
Independent advice and access to company information
To assist in the execution of its responsibilities, the
Each director has the right of access to all relevant
Board has established a number of board committees
company information and to the company’s executives
including a Nomination and Remuneration Committee,
and, subject to prior consultation with the chairman, may
an Audit and Risk Committee and a Strategy Committee.
seek independent professional advice from a suitably
These committees have written mandates and operating
qualified adviser at the consolidated entity’s expense.
procedures, which are reviewed on a regular basis.
A copy of the advice received by the director is made
The board has also established a framework for the
available to all other members of the board.
management of the consolidated entity including board-
endorsed policies, a system of internal control, a business
Composition of the board
risk management process and the establishment of
The names of the directors of the company in office at
appropriate ethical standards.
the date of this report are set out on pages 18 to 19 of
The full board currently holds twelve scheduled meetings
this report.
each year and any extraordinary meetings at such
The company’s constitution provides for the board
other times as may be necessary to address any specific
to consist of between three and twelve members. At
matters that may arise.
30 June 2010 the board members were comprised as
follows:
The agenda for its meetings is prepared in conjunction
with the chairman, chief executive officer and company
secretary. Standing items include strategic matters
Mr Steve Killelea – non executive director
(Chairman).
for discussion, the CEO’s report, financial reports, key
Mr Alan Baxter – independent non executive
performance indicator reports and presentations by
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 Peter Lloyd was appointed as an independent non
executive director in July 2010.
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.
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.
38 Annual Report 2010 I Integrated Research and its controlled entities
The election of Mr Killelea, who holds a majority of the
the board and implement actions for the retirement and
company’s issued shares, as non-executive chairman,
re-election of directors.
does not comply with the ASX Corporate Governance
Council recommendation that the chairman be an
Responsibilities regarding remuneration
independent director. However, the board is satisfied that
The Committee reviews and makes recommendations to
the company benefits from Mr Killelea’s experience and
the board on:
knowledge gained through his long involvement with
Integrated Research and his associations throughout the
information technology industry. Mr Killelea founded
Integrated Research in 1988 and was the CEO and
managing director of the company until his retirement in
November 2004.
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
At each Annual General Meeting one-third of directors,
senior executives.
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.
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
Nomination and Remuneration Committee
The Committee develops and makes recommendations
The Nomination and Remuneration Committee is a
to the board on:
committee of the board of directors and is empowered
The CEO and senior executive succession planning.
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 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.
Integrated Research and its controlled entities I Annual Report 2010
39
Corporate Governance Statement page 37-43
Board succession plans to maintain a balance of
During the year, the Audit and Risk Committee
skills, experience and expertise on the board.
provided the Board with updates to the Company’s risk
Evaluation of the board’s performance.
Appointment and removal of directors.
Appropriate composition of committees.
management register (with the Board approving this
document).
The external auditor, Chief Executive Officer and
Chief Financial Officer are invited to Audit and Risk
The terms and conditions of the appointment of non-
Committee meetings at the discretion of the committee.
executive directors are set out in a letter of appointment,
The committee met three times during the year and
including expectations for attendance and preparation
committee members’ attendance record is disclosed in
for all board meetings, expected time commitments,
the table of directors’ meetings on page 25.
procedures when dealing with conflicts of interest, and
the availability of independent professional advice.
The external auditor met with the audit committee/
board three times during the year, two of which included
The members of the Nomination and Remuneration
time without the presence of executive management.
Committee during the year were:
Ms Kate Costello (Chairperson) – Independent
Non-Executive
Mr Alan Baxter – Independent Non-Executive
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 2010 comply
with accounting standards and present a true and fair
view, in all material respects, of the company’s financial
Mr Steve Killelea – Non-Executive
condition and operational results. This statement is
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
required annually.
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
The Audit and Risk Committee has a documented
partners.
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,
The main responsibilities of the Audit and Risk
Committee include:
Serve as an independent party to monitor the
financial reporting process and internal control
internal control and appropriate ethical standards for the
systems.
management of the consolidated entity.
The members of the Audit and Risk Committee during
the year were:
Mr John Brown (Chairman) – Independent Non-
Executive
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
Mr Alan Baxter – Independent Non-Executive
annual audit to the board.
Mr Clyde McConaghy – Non-Executive
40 Annual Report 2010 I Integrated Research and its controlled entities
Review the external auditor’s management letter
- Review the draft financial report and
and responses by management.
recommend board approval of the financial
Provide an avenue of communication between the
report.
auditors, management and the board.
As required, to organise, review and report on any
Monitor compliance with all financial statutory
special reviews or investigations deemed necessary
requirements and regulations.
by the board.
Review financial reports and other financial
Strategy Committee
information distributed to shareholders so that
they provide an accurate reflection of the financial
health of the company.
The Strategy Committee has a documented charter,
approved by the board and is responsible for reviewing
strategy and recommending strategies to the board to
Monitor corporate risk management and
enhance the company’s long-term performance. The
assessment processes, and the identification and
committee is comprised of at least three members,
management of strategic and operational risks.
including the chairman of the board and the Chief
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
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
meets with them during the year as follows:
Mr Clyde McConnaghy – Non-Executive
To discuss the external audit plans, identifying any
Ms Kate Costello – Independent Non-Executive
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:
The Strategy Committee is responsible for:
Review and assist in defining current strategy.
Assess new strategic opportunities, including
M&A proposals and intellectual property
- To review the half-year and preliminary final
developments or acquisitions.
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.
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 three times during the year under
review.
Integrated Research and its controlled entities I Annual Report 2010
41
Corporate Governance Statement page 37-43
Risk management
Under the 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
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.
by competitors, government policy changes and the
Investment appraisals – Guidelines for capital
impact of exchange rate movements.
expenditure include annual budgets, detailed
Comprehensive policies and procedures are established
such that:
appraisal and review procedures and levels of
authority.
Capital expenditure above a certain size requires
Internal audit
Board approval.
The Company does not have an internal audit function
Financial exposures are controlled, including the use
but utilises its financial resources as needed to assist the
of forward exchange contracts.
board in ensuring compliance with internal controls.
Risks are identified and managed, including internal
audit, privacy, insurances, business continuity and
Ethical standards
compliance.
Business transactions are properly authorised and
executed.
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
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.
management and internal compliance and control which
Conflict of interest
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:
Each Director 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.
Financial reporting – Monthly actual results are
Details of director related entity transactions with the
reported against budgets approved by the
consolidated entity are set out in Note 25.
directors and revised forecasts for the year are
prepared monthly.
42 Annual Report 2010 I Integrated Research and its controlled entities
Code of conduct
The consolidated entity has advised each director,
they buy or sell shares in the company, subject to board
veto. The company advises the ASX of any transactions
manager and employee that they must comply with
conducted by directors in shares in the company.
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
The consolidated entity’s trading policy may be reviewed
on the company’s website.
Communication with shareholders
employees to act with honesty and integrity,
The board provides shareholders with information using
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.
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
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 I Annual Report 2010
43
Financial
Statements
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the financial statements
1. Significant accounting policies
2. Segment reporting
3. Finance income
4. Expenses
5. Auditors’ remuneration
6. Income tax expense
7. Earnings per share
8. Cash and cash equivalents
9. Trade and other receivables
10. Other current assets
11. Other financial assets
12. Property, plant and equipment
13. Deferred tax assets and liabilities
14. Intangible assets
15. Trade and other payables
16. Employee benefits
17. Provisions
18. Other liabilities
19. Capital and reserves
20. Financial instruments
21. Operating leases
22. Consolidated entities
23. Reconciliation of cash flows from operating activities
24. Key management personnel disclosures
25. Related parties
26. Parent entity disclosures
27. Contingent liabilities
28. Subsequent events
44 Annual Report 2010 I Integrated Research and its controlled entities
Consolidated statement of comprehensive income
For the year ended 30 June 2010
In thousands of AUD
Revenue
Revenue from licence fees
Revenue from maintenance fees
Revenue from consulting and other activites
Total revenue
Research and development expenses
Sales, consulting and marketing expenses
General and administration expenses
Total expenses
Profit before finance income and tax
Finance income
Profit before tax
Income tax expense
Profit for the year
Other comprehensive income
Gain/(loss) on cash flow hedge taken to equity
Foreign exchange translation differences
4
3
6
Income tax relating to components of other comprehensive income
13
Other comprehensive income (net of tax)
Consolidated
Notes
2010
2009
17,386
16,846
3,071
37,303
8,347
19,197
4,054
31,598
5,705
341
6,046
645
5,401
(797)
(153)
239
(711)
21,723
19,217
1,744
42,684
8,244
18,932
6,142
33,318
9,366
454
9,820
1,957
7,863
657
(162)
(197)
298
Total Comprehensive income for the year
4,690
8,161
Profit attributable to:
Owners of the parent
Total comprehensive income attributable to:
Owners of the parent
5,401
7,863
4,690
8,161
Basic earnings per share (AUD cents)
Diluted earnings per share (AUD cents)
7
7
3.24¢
3.23¢
4.72¢
4.71¢
The consolidated statement of comprehensive income is to be read in conjunction with the notes to the financial
statements set out on pages 49 to 81.
Integrated Research and its controlled entities I Annual Report 2010
45
Financial Statements page 44-48
Consolidated statement of financial position
As at 30 June 2010
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
Trade and other receivables
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
Income tax liabilities
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
Notes
2010
2009
8
9
10
9
11
12
13
14
15
17
18
13
17
18
19
19
8,396
14,548
336
879
24,159
1,514
1,818
2,064
742
13,957
20,095
44,254
3,088
1,445
211
10,615
15,359
3,473
555
365
4,393
19,752
24,502
835
(860)
24,527
24,502
14,459
11,012
1,683
2,142
29,296
-
1,823
2,355
394
13,323
17,895
47,191
2,913
1,132
-
10,740
14,785
3,802
635
723
5,160
19,945
27,246
816
(44)
26,474
27,246
The consolidated statement of financial position is to be read in conjunction with the notes to the financial statements
set out on pages 49 to 81.
46 Annual Report 2010 I Integrated Research and its controlled entities
Consolidated statement of changes in equity
For the year ended 30 June 2010
In thousands of AUD
Balance at 1 July 2008
Profit for the year
Other comprehensive income for
the year
Total comprehensive income for
the year
Lapsed employee options
Expensed employee options
Shares issued
Dividends to shareholders
Balance at 30 June 2009
Balance at 1 July 2009
Profit for the year
Other comprehensive income for
the year
Total comprehensive income for
the year
Lapsed employee options
Expensed employee options
Shares issued
Dividends to shareholders
Balance at 30 June 2010
Consolidated
Share
capital
Hedging
reserve
Translation
reserve
Employee
benefit
reserve
509
-
-
-
(135)
284
(9)
-
Retained
earnings
Total
23,479
7,863
23,791
7,863
-
298
7,863
8,161
135
-
-
-
284
13
(5,003)
(5,003)
-
-
460
460
-
-
-
-
(991)
-
(162)
(162)
-
-
-
-
460
(1,153)
649
26,474
27,246
460
-
(1,153)
649
-
26,474
5,401
27,246
5,401
-
(711)
5,401
158
-
-
4,690
-
60
12
(7,506)
(7,506)
-
-
-
(158)
60
(7)
-
(558)
(153)
(558)
(153)
-
-
-
-
-
-
-
-
(98)
(1,306)
544
24,527
24,502
794
-
-
-
-
-
22
-
816
816
-
-
-
-
-
19
-
835
The consolidated statement of changes in equity is to be read in conjunction with the notes to the financial statements
set out on pages 49 to 81.
Integrated Research and its controlled entities I Annual Report 2010
47
Financial Statements page 44-48
Consolidated statements of cash flows
For the year ended 30 June 2010
In thousands of AUD
Cash flows from operating activities
Cash receipts from customers
Cash paid to suppliers and employees
Cash generated from operations
Income taxes paid/(refunded)
Net cash provided by operating activities
Cash flows from investing activities
Payments for capitalised development
Payments for property, plant and equipment
Payments for intangible assets
Interest 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/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1 July
Effects of exchange rate changes on cash
Cash and cash equivalents at 30 June
Consolidated
Notes
2010
2009
33,059
(25,588)
7,471
868
8,339
41,513
(26,494)
15,019
(1,585)
13,434
(5,932)
(5,790)
(334)
(624)
341
(501)
(24)
454
(6,549)
(5,861)
12
(7,506)
(7,494)
(5,704)
14,459
(359)
8,396
13
(5,003)
(4,990)
2,583
11,148
728
14,459
23
19
8
The consolidated statement of cash flows is to be read in conjunction with the notes to the financial statements set out on
pages 49 to 81.
48 Annual Report 2010 I Integrated Research and its controlled entities
Notes to the
Financial
Statements
For the year ended 30 June 2010
Note 1: Significant accounting policies
b) Basis of Preparation
Integrated Research Limited (the “Company”) is a
company domiciled in Australia. The financial report of
the Company for the year ended 30 June 2010 comprises
the Company and its subsidiaries (together referred to as
the “consolidated entity”).
The financial report was authorised for issue by the
directors on 16 August 2010.
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 statements of the consolidated
entity also comply with the measurement requirements
of International Financial Reporting Standards and
interpretations adopted by the International Accounting
Standards Board.
The financial statements are presented in Australian
dollars and are 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 financial statements 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.
Integrated Research and its controlled entities I Annual Report 2010
49
Notes to the Financial Statements page 49-81
Significant accounting policies
(continued)
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.
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
statements, but will change the disclosures presently
made in relation to the consolidated entity’s financial
statements:
Standard/Interpretation
Effective for annual
reporting periods
beginning on or after
Expected to be
initially applied in the
financial year ending
AASB 2009-8 ‘Amendments to Australian Accounting Standards –
Group Cash-settled Share-based Payment Transactions’
1 January 2010
30 June 2011
AASB 124 ‘Related Party Disclosures (2009)’, AASB 2009-12
‘Amendments to Australian Accounting Standards’
1 January 2011
30 June 2012
AASB 9 ‘Financial Instruments’, AASB 2009-11 ‘Amendments to
Australian Accounting Standards arising from AASB 9’
1 January 2013
30 June 2014
AASB 2009-10 ‘Amendments to Australian Accounting Standards –
Classification of Rights Issues’
1 February 2010
30 June 2011
AASB 2009-14 ‘Amendments to Australian Interpretation –
Prepayments of a Minimum Funding Requirement’
1 January 2011
30 June 2012
AASB 2010-3 Amendments to Australian Accounting Standards
arising from the Annual Improvements Project
1 July 2010
30 June 2011
AASB 2010-4 Further Amendments to Australian Accounting
Standards arising from the Annual Improvements Project
1 January 2011
30 June 2012
AASB Interpretation 19 ‘Extinguishing Liabilities with Equity
Instruments’
1 July 2010
30 June 2011
50 Annual Report 2010 I Integrated Research and its controlled entities
Significant accounting policies
(continued)
arising on consolidation are translated to Australian
dollars at foreign exchange rates ruling at the year
end date. The revenues and expenses of foreign
The accounting policies set out below have been applied
operations, are translated to Australian dollars at rates
consistently to all periods presented in the consolidated
approximating the foreign exchange rates ruling at the
financial statements.
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
dates of the transactions. Foreign exchange differences
arising on retranslation are recognised directly in other
comprehensive income.
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
are included in the consolidated financial report from the
trading purposes. However, derivatives that do not
date that control commences until the date that control
qualify for hedge accounting are accounted for as trading
ceases.
instruments.
Intragroup balances and any gains and losses or income
Derivative financial instruments are recognised initially at
and expenses arising from intragroup transactions,
are eliminated in preparing the consolidated financial
statements.
d) Foreign currency
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
In preparing the financial statements of the individual
loss depends on the nature of the item being hedged.
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 year end date are translated
to Australian dollars at the foreign exchange rate ruling
at that date. Foreign exchange differences arising on
The fair value of forward exchange contracts is their
quoted market price at the year end date, being the
present value of the quoted forward price.
f) Hedging
translation are recognised in profit or loss. Non-monetary
On entering into a hedging relationship, the consolidated
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.
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
On consolidation, the assets and liabilities of foreign
risk. Such hedges are expected to be highly effective
operations, including goodwill and fair value adjustments
Integrated Research and its controlled entities I Annual Report 2010
51
Notes to the Financial Statements page 49-81
Significant accounting policies
(continued)
offsetting changes in fair value or cash flows and are
assessed on an ongoing basis to determine that they
The following useful lives are used in the calculation of
depreciation:
Leasehold improvements
Plant and equipment 4 to 8 years
6 to 10 years
actually have been highly effective throughout the
h) Intangible Assets
financial reporting periods for which they are designated.
Research and development
For cash flow hedges, the associated cumulative gain
Expenditure on research activities, undertaken with the
or loss is removed from equity and recognised in profit
prospect of gaining new scientific or technical knowledge
or loss in the same period or periods during which
and understanding, is recognised in profit or loss as
the hedged forecast transaction affects profit or loss.
incurred.
The ineffective part of any gain or loss is recognised
immediately in the profit or loss.
Expenditure on development activities, whereby research
findings are applied to a plan or design for the production
g) Property, plant and equipment
of new or substantially improved products and processes,
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.
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 profit or loss 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 profit or loss on a straight-line
basis over the estimated useful life, but no more than
three years.
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 a 2½ to 3 year period.
52 Annual Report 2010 I Integrated Research and its controlled entities
Significant accounting policies
(continued)
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
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
by an impairment loss through the use of an allowance
asset belongs.
account.
l) Employee benefits
Allowance for returns is offset against trade receivables
Superannuation
for estimated warranty claims based upon historical
experience.
j) Cash and cash equivalents
Obligations for contributions to defined contribution
pension plans are recognised as an expense in profit or
loss as incurred. There are no defined benefit plans in
Cash and cash equivalents comprises cash balances and
operation.
call deposits with an original maturity of three months or
Long-term service benefits
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 year end date.
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 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 year end 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
An impairment loss is recognised whenever the carrying
of the Company. The fair value of options granted is
amount of an asset or its cash generating unit exceeds its
recognised as an employee expense with a corresponding
recoverable amount. Impairment losses are recognised
increase in equity. The fair value is measured at
in profit or loss unless the asset has previously been
grant date and spread over the period during which
revalued, in which case the impairment loss is recognised
the employees become unconditionally entitled to
as a reversal to the extent of that previous revaluation
the options. The fair value of the options granted is
with any excess recognised through profit or loss.
measured using a binomial option pricing model, taking
into account the terms and conditions upon which the
The recoverable amount of other assets is the greater
of their fair value less costs to sell and value in use. In
options were granted.
Integrated Research and its controlled entities I Annual Report 2010
53
Notes to the Financial Statements page 49-81
Significant accounting policies
(continued)
Revenue from the sale of licences, where the
consolidated entity has no post delivery obligations to
perform is recognised in profit or loss at the date of
The amount recognised as an expense is adjusted to
delivery of the licence key.
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 the
year end date, calculated at undiscounted amounts
based on remuneration wage and salary rates that the
consolidated entity expects to pay as at the year end
date.
m) Provisions
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.
A provision is recognised in the statement of financial
position when the consolidated entity has a present legal
No revenue is recognised if there are significant
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
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.
p) Expenses
Operating lease payments
Payments made under operating leases are recognised in
profit or loss on a straight-line basis over the term of the
lease. Lease incentives received are recognised in profit
or loss as an integral part of the total lease expense and
spread over the lease term.
The consolidated entity allocates revenue to each
element in software arrangements involving multiple
Financing income
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
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 profit or loss (see accounting policy
price charged when the same element is sold separately.
1(f)).
54 Annual Report 2010 I Integrated Research and its controlled entities
Significant accounting policies
(continued)
q) Income tax
payable is included as a current asset or liability in the
statement of financial position.
Cash flows are included in the statement of cash flows
Income tax on the profit or loss for the periods presented
on a gross basis. The GST components of cash flows
comprises current and deferred tax. Income tax is
recognised in profit or loss except to the extent that it
arising from investing and financing activities, which are
recoverable or payable are classified as operating cash
relates to items recognised directly in equity, in which
flows.
case it is recognised in equity.
s) Significant accounting judgements, estimates and
Current tax is the expected tax payable on the taxable
assumptions
income for the year, using tax rates enacted or
substantively enacted at the year end date, and any
adjustment to tax payable in respect of previous years.
Deferred tax is recognised on 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 year end 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 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
the distribution of dividends are recognised at the same
cost model is applied requiring the asset to be carried at
time as the liability to pay the related dividend.
cost less any accumulated amortisation and accumulated
r) Goods and Services Tax
impairment losses. Any expenditure so capitalised is
amortised over the period of expected benefits from
Revenue, expenses and assets are recognised net of
the related project commencing from the commercial
the amount of goods and services tax (GST), or similar
release of the project. The carrying value of an intangible
taxes, except where the amount of GST incurred is
asset arising from development expenditure is tested for
not recoverable from the taxation authority. In these
impairment annually when the asset is not yet available
circumstances, the GST is recognised as part of the cost
for use or more frequently when an indication of
of acquisition of the asset or as part of the expense.
impairment arises during the reporting period.
Receivables and payables are stated with the amount
of GST included. The net amount of GST recoverable or
Integrated Research and its controlled entities I Annual Report 2010
55
Notes to the Financial Statements page 49-81
Significant accounting policies
(continued)
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.
Receivables
The consolidated entity assesses impairment of
receivables based upon assessment of objective evidence
for significant receivables and by placing non significant
The information reported to the CODM (being the
Chief Executive Officer) for the purposes of resource
allocation and assessment of performance is focused on
geographical performance. The principal geographical
regions are 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
and Corporate Australia - includes revenue and expenses
for research and development and corporate head office
functions of the company.
Inter-segment pricing is determined on an arm’s length
basis.
receivables in portfolios of similar risk profiles, based on
Segment profit represents the profit earned by each
objective evidence from historical experience adjusted
for any effects of conditions existing at each reporting
segment without allocation of investment revenue and
income tax expense. This is the measure reported to
date. This assessment includes judgements and estimates
the CODM for the purposes of resource allocation and
of future outcomes the actual results of which may differ
assessment of segment performance.
from the estimates at the reporting date.
Note 2: Segment Reporting
The Group has adopted AASB 8 Operating Segments
and AASB 2008-3 Amendments to Australian Accounting
Standards arising from AASB 8 with effect from 1
Information regarding these segments is presented
below. Amounts reported for the prior period have been
restated to conform to the requirements of AASB 8. The
accounting policies of the reportable segments are the
same as the Group’s accounting policies.
July 2008. AASB 8 requires operating segments to
The directors have elected under Section 334(5) of the
be identified on the basis of internal reports about
Corporations Act 2001 to apply “AASB2009-5 Further
components of the Group that are regularly reviewed
Amendments to Australian Accounting Standards arising
by the chief operating decision maker (CODM) in
from the Annual Improvements Project” in advance of
order to allocate resources to the segment and to
its effective date. The effect of this amendment is that
assess its performance. In contrast, the predecessor
entities are not required to disclose information regarding
Standard (AASB 114 Segment Reporting) required an
segment assets and liabilities where that information is
entity to identify two sets of segments (business and
not reported to the CODM.
geographical), using a risks and rewards approach, with
the entity’s system of internal financial reporting to key
management personnel serving only as the starting point
for the identification of such segments.
56 Annual Report 2010 I Integrated Research and its controlled entities
Segment Reporting (continued)
Americas
Europe
Asia Pacific
Corporate
Australia*
Eliminations
Consolidated
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
2010
2009
22,482
26,988
5,198
7,276
7,955
7,317
1,668
1,103
-
-
37,303
42,684
-
-
-
-
-
-
18,503
19,659 (18,503)
(19,659)
-
-
22,482
26,988
5,198
7,276
7,955
7,317
20,171
20,762 (18,503)
(19,659)
37,303
42,684
806
829
116
201
1,179
687
3,604
7,649
-
-
5,705
9,366
37,303
42,684
5,705
9,366
341
454
(645)
(1,957)
5,401
7,863
958
525
6,770
5,683
870
435
6,672
5,589
-
-
-
-
17,627
17,272
(54)
(54)
20,095
17,895
73
52
15
38
61
56
37
38
2,417
540
105
137
-
-
-
-
-
-
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
Capital
additions**
Depreciation
and
amortisation
expenditure
Non-current
assets
In thousands of local currency***
Sales to customers outside the consolidated entity
Inter-segment sales
Total segment revenue
Segment results
Americas (USD)
Europe (UK Sterling)
2010
19,719
-
19,719
493
2009
19,710
-
19,710
494
2010
2,871
-
2,871
75
2009
3,321
-
3,321
83
* Corporate Australia includes both the research and development and corporate head office functions of the Company.
** Excludes internal development costs capitalised but includes third party assets acquired.
*** Segment results represented in local currencies as reviewed by the Chief Operating Decision Maker
Integrated Research and its controlled entities I Annual Report 2010
57
Notes to the Financial Statements page 49-81
Note 3. Finance income
In thousands of AUD
Interest income
Note 4. Expenses
Total expenses include:
In thousands of AUD
Depreciation and amortisation
Bad and doubtful debt expense
Operating lease rental expenses
Note 5. Auditors’ remuneration
Consolidated
2010
341
2009
454
Consolidated
2010
6,770
129
1,343
2009
5,683
78
1,266
2010 and 2009 – Deloitte Touche Tohmatsu
In AUD
Consolidated
2010
2009
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
139,913
20,804
126,796
23,333
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:
Auditors of the company (sundry accounting advice)
17,405
2,857
3,600
44,604
3,229
10,900
58 Annual Report 2010 I Integrated Research and its controlled entities
Note 6. Income tax expense
Recognised in profit for the year
Consolidated
Note
2010
2009
In thousands of AUD
Current tax expense:
Current year
Prior year adjustments
Deferred tax expense:
1,356
(273)
1,083
(438)
645
1,743
(140)
1,603
354
1,957
2009
9,820
2,946
177
102
(1,065)
(63)
(140)
1,957
Origination and reversal of temporary differences
13
Total income tax expense in income statement
Numerical reconciliation between income tax expense and profit
Consolidated
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
Other
Prior year adjustments
Income tax expense
Note 7. Earnings per share
2010
6,046
1,814
30
58
(979)
(5)
(273)
645
The calculation of basic and diluted earnings per share at 30 June 2010 was based on the profit attributable to
ordinary shareholders of $5,401,000 (2009: $7,863,000); a weighted number of ordinary shares outstanding during
the year ended 30 June 2010 of 166,809,097 (2009: 166,778,141); and a weighted number of ordinary shares (diluted)
outstanding during the year ended 30 June 2010 of 167,450,698 (2009: 166,938,786), calculated as follows:
In thousands of AUD
Profit for the year
Consolidated
2010
5,401
2009
7,863
Integrated Research and its controlled entities I Annual Report 2010
59
Notes to the Financial Statements page 49-81
Earnings per share (continued)
Weighted average number of shares used as the denominator
Consolidated
(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)
Note 8. Cash and cash equivalents
In thousands of AUD
Cash at bank and on hand
Note 9. Trade and other receivables
Current
In thousands of AUD
Trade debtors
Less: Allowance for doubtful debts
Less: Allowance for returns
GST receivable
2010
2009
166,809,097
166,778,141
641,601
160,645
167,450,698
166,938,786
3.24¢
3.23¢
4.72¢
4.71¢
Consolidated
2010
8,396
2009
14,459
Consolidated
2010
15,993
(470)
(1,073)
14,450
98
14,548
2009
11,749
(521)
(320)
10,908
104
11,012
60 Annual Report 2010 I Integrated Research and its controlled entities
Trade and other receivables (continued)
Non-current
In thousands of AUD
Trade debtors
Consolidated
2010
1,514
2009
-
The credit period on sales ranges from 30 to 90 days although in limited circumstances extended payment terms have
been offered. No interest is charged on trade debtors.
Ageing of past due but not impaired:
In thousands of AUD
Past due 90 days
Consolidated
2010
3,884
2009
1,523
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 in provision
Balance end of year
Consolidated
2010
521
(180)
129
470
2009
187
(810)
1,144
521
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 $2,341,000 (2009:
$682,000) 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.
Integrated Research and its controlled entities I Annual Report 2010
61
Notes to the Financial Statements page 49-81
Note 10. Other current assets
In thousands of AUD
Other prepayments
Fair value of hedge asset
Note 11. Other financial assets
In thousands of AUD
Deposits
Consolidated
2010
608
271
879
2009
887
1,255
2,142
Consolidated
2010
1,818
2009
1,823
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 12. Property, plant and equipment
In thousands of AUD
Plant and Equipment
At cost
Accumulated depreciation
Leasehold Improvements
At cost
Accumulated depreciation
Total property, plant and equipment
At cost
Accumulated depreciation
Total written down amount
Consolidated
2010
4,690
(3,902)
788
2,012
(736)
1,276
6,702
(4,638)
2,064
2009
4,303
(3,448)
855
2,026
(526)
1,500
6,329
(3,974)
2,355
62 Annual Report 2010 I Integrated Research and its controlled entities
Property, plant and equipment (continued)
In thousands of AUD
Plant and Equipment
Carrying amount at start of year
Additions
Effects of foreign currency exchange
Depreciation expense
Carrying amount at end of year
Leasehold Improvements
Carrying amount at start of year
Additions
Effects of foreign currency exchange
Depreciation expense
Carrying amount at end of year
Note 13. Deferred tax assets and liabilities
Deferred tax assets and liabilities are attributable to the following:
Consolidated
2010
855
338
(1)
(404)
788
1,500
1
(5)
(220)
1,276
2009
687
501
-
(333)
855
1,718
-
-
(218)
1,500
Net
2010
28
2009
34
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
Assets
Liabilities
2010
2009
2010
2009
28
-
339
510
670
-
-
69
1,616
(874)
742
34
-
148
381
351
40
-
29
983
(589)
394
-
-
4,185
3,993
(4,185)
(3,993)
-
-
-
-
162
-
4,347
(874)
3,473
-
-
-
-
398
-
4,391
(589)
3,802
339
510
670
-
(162)
69
148
381
351
40
(398)
29
(2,731)
(3,408)
-
-
(2,731)
(3,408)
Integrated Research and its controlled entities I Annual Report 2010
63
Notes to the Financial Statements page 49-81
Deferred tax assets and liabilities (continued)
Movement in temporary differences during the year:
For year ended 30 June 2010
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
For year ended 30 June 2009
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
Consolidated
Balance
1 July 09
Recognised in
income
Recognised in
equity
Balance
30 June 10
34
(3,993)
148
381
351
40
(398)
29
(3,408)
(6)
(192)
191
129
319
(40)
(3)
40
438
-
-
-
-
-
-
239
-
239
28
(4,185)
339
510
670
-
(162)
69
(2,731)
Consolidated
Balance
1 July 08
Recognised in
income
Recognised in
equity
Balance
30 June 09
50
(3,754)
67
372
281
27
-
100
(2,857)
(16)
(239)
81
9
70
13
(201)
(71)
(354)
-
-
-
-
-
-
(197)
-
(197)
34
(3,993)
148
381
351
40
(398)
29
(3,408)
Note 14. Intangible assets
The amortisation is recognised in the following line item in the statement of comprehensive income:
In thousands of AUD
Research and development expenses
Consolidated
2010
6,146
2009
5,132
64 Annual Report 2010 I Integrated Research and its controlled entities
Intangible assets (continued)
Cost
In thousands of AUD
Balance at 1 July 2008
Internally developed
Acquired
Balance at 30 June 2009
Balance at 1 July 2009
Fully amortised & offset
Effects of foreign currency exchange
Internally developed
Acquired
Balance at 30 June 2010
Amortisation
In thousands of AUD
Balance at 1 July 2008
Amortisation for year
Balance at 30 June 2009
Balance at 1 July 2009
Fully amortised & offset
Effects of foreign currency exchange
Amortisation for year
Balance at 30 June 2010
Consolidated
Software
development
Patents &
trade-marks
Third party
software
26,618
5,790
-
32,408
32,408
(10,539)
-
5,932
392
28,193
33
-
-
33
33
(33)
-
-
-
-
1,101
-
24
1,125
1,125
-
(21)
-
447
1,551
Consolidated
Software
development
Patents &
trade-marks
Third party
software
14,201
5,033
19,234
19,234
(10,539)
-
5,989
14,684
33
-
33
33
(33)
-
-
-
877
99
976
976
-
(30)
157
1,103
Total
27,752
5,790
24
33,566
33,566
(10,572)
(21)
5,932
839
29,744
Total
15,111
5,132
20,243
20,243
(10,572)
(30)
6,146
15,787
Carrying amounts
In thousands of AUD
Balance at 30 June 2009
Balance at 30 June 2010
Consolidated
Software
development
Patents &
trade-marks
Third party
software
13,174
13,509
-
-
149
448
Total
13,323
13,957
Integrated Research and its controlled entities I Annual Report 2010
65
Notes to the Financial Statements page 49-81
Note 15. Trade and other payables
In thousands of AUD
Trade and other creditors
The average credit period on trade and other payables is 30 days.
Note 16. Employee benefits
Current
In thousands of AUD
Liability for annual leave
Liability for long service leave
Non-current
In thousands of AUD
Liability for long service leave
Pension plans
Consolidated
2010
3,088
2009
2,913
Consolidated
2010
1,168
277
1,445
Consolidated
2010
171
2009
1,002
130
1,132
2009
255
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.
66 Annual Report 2010 I Integrated Research and its controlled entities
Employee benefits (continued)
The terms and conditions of the grants made and number outstanding at 30 June 2010 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
Sep 2005
May 2006
Jan 2007 (*)
Jun 2007
Sep 2007 (*)
$0.54
$0.41
$0.50
$0.48
$0.42
Number of
Instruments
Outstanding
400,000
482,000
160,000
648,000
1,000,000
Grant date
Exercise Price
Mar 2008 (*)
Apr 2008 (*)
Jul 2008 (*)
Oct 2008 (*)
May 2009
$0.38
$0.38
$0.35
$0.31
$0.28
Number of
Instruments
Outstanding
350,000
300,000
200,000
340,000
1,540,000
The number and weighted average exercise prices of share options is as follows:
In thousands of options
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)
Weighted
Average
exercise price
2010
Number of
options 2010
Weighted
Average
exercise price
2009
Number of
options 2009
$0.40
$0.47
$0.39
$-
$0.38
$0.45
6,996
(1,541)
(35)
-
5,420
1,986
$0.44
$0.41
$0.23
$0.29
$0.40
$0.47
6,376
(1,523)
(57)
2,200
6,996
2,082
The options outstanding at 30 June 2010 have a weighted average exercise price of $0.38 and a weighted average of
contractual life of five years.
During the year ended 30 June 2010, 35,000 options were exercised (2009: 57,250).
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.
Integrated Research and its controlled entities I Annual Report 2010
67
Notes to the Financial Statements page 49-81
Employee benefits (continued)
There were no options granted during the 2010 financial year. The fair value of options granted and assumptions for the
2009 financial year are disclosed as follows:
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%
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 2010, the consolidated entity recognised expense of $60,000 related to the fair value of
options granted (2009: $284,000).
Note 17. Provisions
Current
In thousands of AUD
Employee benefits
Consolidated
Note
16
2010
1,445
2009
1,132
68 Annual Report 2010 I Integrated Research and its controlled entities
Provisions (continued)
Non-current
In thousands of AUD
Employee benefits
Lease make good
Other
Note 18. Other liabilities
Current
In thousands of AUD
Fair value of hedge liabilities
Deferred revenue
Non-current
In thousands of AUD
Deferred revenue
Note 19. Capital and reserves
Share capital
In thousands of shares
On issue 1 July
Issued against employee options exercised under ESOP
On issue 30 June
Consolidated
Note
16
2010
171
384
-
555
2009
255
360
20
635
Consolidated
2010
232
10,383
10,615
2009
-
10,740
10,740
Consolidated
2010
365
2009
723
Consolidated
2010
166,792
35
166,827
2009
166,735
57
166,792
Integrated Research and its controlled entities I Annual Report 2010
69
Notes to the Financial Statements page 49-81
Capital and reserves (continued)
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 Consolidated Entity’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 16 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
2010
Final 2009
Interim 2010
Special 2010
Total amount
2009
Final 2008
Interim 2009
Total amount
2.5
1.5
0.5
1.5
1.5
4,170
2,502
834
7,506
2,501
2,502
5,003
5% franked
8% franked
Unfranked
18 Sep 09
12 Mar 10
12 Mar 10
Unfranked
Unfranked
12 Sep 08
9 Mar 09
70 Annual Report 2010 I Integrated Research and its controlled entities
Capital and reserves (continued)
After the end of the financial year, 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 2010 and will be recognised in subsequent
financial statements:
In thousands of AUD
Final 2010
Cents per
share
1.0
Total
amount
Franked/
unfranked
1,668
45% franked
Date of
payment
17 Sep 10
The final dividend declared of 1.0 cent together with the interim and special dividends paid in March 2010 of 1.5 cents
and 0.5 cents respectively takes total dividends for the 2010 financial year to 3.0 cents.
Franking account disclosure:
In thousands of AUD
Adjusted franking account balance
Impact on franking account balance of dividends not recognised
Income tax consequence of unrecognised dividends
Company
2010
375
(322)
-
2009
184
(89)
-
Note 20. Financial instruments
Capital risk management
The 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 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 8 and 19
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 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.
Integrated Research and its controlled entities I Annual Report 2010
71
Notes to the Financial Statements page 49-81
Financial instruments (continued)
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 risks arising from the consolidated entity’s financial instruments are currency risk, credit risk, liquidity risk and
cash flow interest rate risk.
The 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 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 consolidated entity does not enter into or trade financial
instruments, including derivative financial instruments, for speculative purposes.
Market risk
The 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 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 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 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:
Consolidated
Liabilities
Assets
In thousands of AUD
2010
2009
US Dollar
Euro
UK Sterling
-
-
-
-
-
-
2010
3,119
1,200
10
2009
1,388
720
61
72 Annual Report 2010 I Integrated Research and its controlled entities
Financial instruments (continued)
(i) Foreign currency sensitivity
At 30 June 2010, 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
Net profit
Retained earnings
Change in currency (i) – 10% decrease
Consolidated
US Impact
Euro Impact
Sterling Impact
2010
346
346
2009
154
154
2010
133
133
2009
2010
2009
80
80
1
1
7
7
(i) This has been based on the change in the exchange rate against the Australian dollar in the financial years ended 30
June 2010 and 30 June 2009.
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 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 year end 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 consolidated entity’s future reported profits could
therefore be impacted by changes in rates of exchange between either the Australian Dollar and the United States Dollar,
or the Australian Dollar and the UK Sterling.
Forward foreign exchange contracts
The 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, UK Sterling and Euros.
The 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 year end date.
The 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 I Annual Report 2010
73
Notes to the Financial Statements page 49-81
Financial instruments (continued)
Outstanding
contracts
Consolidated
Sell US Dollar
Less than 3 months
3 to 6 months
6 to 9 months
9 to 12 months
12 to 15 months
Sell UK Sterling
Average
exchange rate
2010
2009
Foreign Currency
Contract Value
Fair Value
2010
FC’000
2009
FC’000
2010
A$’000
2009
A$’000
2010
A$’000
2009
A$’000
0.82
0.88
0.86
0.85
0.80
0.64
0.72
0.72
0.71
0.71
3,700
1,625
1,000
1,500
1,000
1,675
1,600
2,050
750
250
4,455
1,856
1,166
1,758
1,244
2,622
2,230
2,830
1,058
354
Less than 3 months
0.54
0.40
35
100
64
254
Sell Euros
Less than 3 months
3 to 6 months
6 to 9 months
9 to 12 months
0.60
0.59
0.60
-
0.56
0.55
0.55
0.55
430
80
100
-
50
100
100
100
716
135
168
-
90
181
182
182
84
(83)
(39)
(64)
8
2
95
17
19
-
39
549
238
260
110
36
47
2
5
4
4
1,255
These hedge assets are classified as a level 2 fair value measurement, being derived from inputs rather than quoted
prices that are observable for the asset either directly (ie as prices) or indirectly (ie derived from prices).
Interest rate risk management
The consolidated entity is exposed to interest rate risk on the cash held in bank deposits. Cash in bank and term deposits
of $7.1 million were held by the consolidated entity at the reporting date, attracting an average interest rate of 4.6%
(2009: 3%). 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 $35,000 (2009: $57,000).
Credit risk management
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the
consolidated entity. The 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.
74 Annual Report 2010 I Integrated Research and its controlled entities
Financial instruments (continued)
The 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 consolidated entity’s short, medium and long-term
funding and liquidity management requirements.
The 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 15 for both 2010 and 2009 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 consolidated entity is a reasonable approximation of
their fair value.
Note 21. 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 22. Consolidated entities
Parent entity:
Integrated Research Limited
Subsidiaries:
Integrated Research, Inc
Integrated Research UK Limited
Consolidated
2010
1,040
2,213
-
3,253
2009
1,136
2,406
-
3,542
Country of
incorporation
Ownership interest
2010
2009
Australia
USA
UK
100%
100%
100%
100%
Integrated Research and its controlled entities I Annual Report 2010
75
Notes to the Financial Statements page 49-81
Note 23. 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
(Increase)/decrease in other operating assets
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
Consolidated
2010
5,401
6,770
(51)
753
(341)
-
359
(5,752)
(348)
2,615
(48)
(482)
211
(329)
233
(652)
8,339
2009
7,863
5,683
334
(13)
(454)
-
(729)
(1,172)
(110)
(1,959)
465
2,170
-
661
114
581
13,434
Note 24. 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
Other key management personnel
Steve Killelea – Chairman
Peter Adams – Chief Financial Officer
Mark Brayan – Chief Executive Officer
Alex Baburin – General Manager, Research & Development
Alan Baxter
John Brown
Kate Costello
Geoff Bryant – Vice President Consulting
Andre Cuenin – Global Head Of Sales
Rick Ferguson – Vice President Asia Pacific
Clyde McConaghy
David Leighton – Company Secretary
Pierre Semaan – General Manager, Product Management & Marketing
David Stark – Vice President Europe (resigned Nov 2009)
76 Annual Report 2010 I Integrated Research and its controlled entities
Key management personnel disclosures (continued)
Key management personnel compensation
The key management personnel compensation are as follows:
In AUD
Short-term benefits
Post-employment benefits
Equity compensation benefits
Consolidated
2010
2009
2,757,482
2,563,785
141,197
(74,688)
192,233
176,491
2,823,991
2,932,509
Individual directors and executives compensation disclosures
Information regarding individual directors and executives compensation is provided in the remuneration report on pages
29 to 36.
Apart from the details disclosed in this note, no director has entered into a material contract with the consolidated entity
since the end of the previous financial year and there were no material contracts involving directors’ interests existing at
year-end.
Key management personnel transactions with the consolidated entity
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 between one to three 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 or 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 29 to 36.
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).
Integrated Research and its controlled entities I Annual Report 2010
77
Notes to the Financial Statements page 49-81
Key management personnel disclosures (continued)
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
Granted as
compensation
Exer-
cised
Other
changes*
Held at
1 July
2009
Held at
30 June
2010
Vested
during the
year
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(350,000)
1,000,000
350,000
200,000
300,000
300,000
200,000
-
-
-
-
-
-
-
-
Vested and
exercisable
at 30 June
2010
250,000
-
-
-
-
-
-
Directors
Mark Brayan
1,000,000
Executives
Peter Adams
Alex Baburin
Andre Cuenin
Rick Ferguson
Pierre Semaan
David Stark
Prior Year
350,000
200,000
300,000
300,000
200,000
350,000
Held at
1 July
2008
Granted as
compensation
Exer-
cised
Other
changes*
Directors
Mark Brayan
1,000,000
Executives
Peter Adams
Alex Baburin
Andre Cuenin
350,000
160,000
-
Rick Ferguson
300,000
Kurt Roscow
300,000
-
-
40,000
300,000
-
-
Pierre Semaan
-
200,000
David Stark
350,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(300,000)
-
-
Held at
30 June
2009
Vested
during the
year
Vested and
exercisable
at 30 June
2009
1,000,000
250,000
250,000
350,000
200,000
300,000
300,000
-
200,000
350,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
* Other changes represent options that expired or were forfeited during the year
There were no options granted as compensation during the current year.
78 Annual Report 2010 I Integrated Research and its controlled entities
Key management personnel disclosures (continued)
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 or granted as compensation.
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:
Current Year
Held at
1 July 2009
Purchases
Received on
exercise of
options
Received as
compensa-
tion
Sales
Held at
30 June 2010
Directors
Non-executive
John Brown
50,000
51,000
Kate Costello
200,000
Steve Killelea
94,834,951
Executive
Mark Brayan
25,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
101,000
200,000
94,834,951
25,000
Prior Year
Held at
1 July 2008
Purchases
Received on
exercise of
options
Received as
compensa-
tion
Sales
Held at
30 June 2009
Directors
Non-executive
David Boyles**
1,700,000
John Brown
Kate Costello
Steve Killelea
Executive
Mark Brayan
50,000
200,000
94,834,951
25,000
** - resigned November 2008
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,700,000
50,000
200,000
94,834,951
25,000
Shareholdings at the date of the Directors’ Report for existing Key Management Personnel remain unchanged.
Integrated Research and its controlled entities I Annual Report 2010
79
Notes to the Financial Statements page 49-81
Key management personnel disclosures (continued)
Other transactions with the consolidated entity
There were no other transactions between the key management personnel, or their personally-related entities, and the
consolidated entity.
Note 25. Related parties
The consolidated entity has a related party relationship with its key management personnel (see note 24).
At 30 June 2010 Mr Steve Killelea, the Chairman of the Company, owned either directly or indirectly 56.85% of the
Company (2009: 56.86%).
Note 26. Parent entity disclosures
Financial Position
In thousands of AUD
Assets
Current assets
Non-current assets
Total Assets
Liabilities
Current Liabilities
Non-current liabilities
Total Liabilities
Net Assets
Equity
Issued Capital
Employee benefits Reserve
Hedging reserve
Retained Earnings
Total Equity
Parent Entity
2010
2009
18,463
17,626
36,089
10,058
4,073
14,131
21,958
835
544
(98)
20,677
21,958
22,091
17,272
39,363
9,705
4,505
14,210
25,153
816
649
460
23,228
25,153
80 Annual Report 2010 I Integrated Research and its controlled entities
Note 26. Parent entity disclosures (continued)
Financial Performance
In thousands of AUD
Profit for the year
Other comprehensive income
Total comprehensive income
Parent Entity
2010
4,798
(558)
4,240
2009
7,377
460
7,837
Note 27. Contingent liabilities
Integrated Research Inc (the group’s USA based subsidiary) is subject to a tax audit by the United States Internal Revenue
Service (IRS). The audit covers the financial years ending 30 June 2007, 30 June 2008 and 30 June 2009. The company
is in the process of responding to issues raised by the IRS relating to its US withholding tax obligations. The Board of
Directors has received advice from its US subsidiary tax advisors confirming their position that Integrated Research Inc
has complied with its US withholding tax obligations.
Note 28. Subsequent events
For dividends declared after 30 June 2010 see Note 19 in the financial statements. The financial effect of dividends
declared and paid after 30 June 2010 have not been brought to account in the financial statements for the year ended 30
June 2010 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, 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 I Annual Report 2010
81
Directors’
declaration
The directors declare that:
(a)
in the directors’ opinion, there are reasonable grounds to believe that the company will be able to pay its debts as
and when they become due and payable;
(b)
the financial statements are in compliance with International Financial Reporting Standards, as stated in note 1 to
the financial statements;
(c)
in the directors’ opinion, the financial statements and notes thereto are in accordance with the Corporations Act
2001, including compliance with accounting standards and giving a true and fair view of the financial position and
performance of the consolidated entity; and
(d)
the directors have been given the declarations required by Section 295A of the Corporations Act 2001.
Signed in accordance with a resolution of the directors made pursuant to Section 295(5) of the Corporations Act 2001.
Dated at North Sydney this 16th day of August 2010.
Steve Killelea
Chairman
Mark Brayan
Chief Executive Officer
82 Annual Report 2010 I Integrated Research and its controlled entities
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
Independent Auditor’s
Report to the Members
of Integrated Research
Limited
Report on the Financial Report
We have audited the accompanying financial report of Integrated Research Limited, which comprises the consolidated
statement of financial position as at 30 June 2010, and the consolidated statement of comprehensive income, the
consolidated statement of cash flows and the consolidated statement of changes in equity for the year ended on
that date, notes comprising a summary of significant accounting policies and other explanatory information, 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 45 to 82.
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.
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
Liability limited by a scheme under Professional Standards Legislation
Integrated Research and its controlled entities I Annual Report 2010
83
Independent Audit Report page 83-84
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 consolidated entity’s financial position as at 30 June 2010 and of its
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 29 to 36 of the directors’ report for the year ended 30
June 2010. 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 2010, complies with
section 300A of the Corporations Act 2001.
DELOITTE TOUCHE TOHMATSU
Michael Kaplan
Partner
Chartered Accountants
Sydney, 16 August 2010
84 Annual Report 2010 I Integrated Research and its controlled entities
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
16 August 2010
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 2010, 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
Integrated Research and its controlled entities I Annual Report 2010
85
ASX Additional
Information
Shareholder information
Analysis of numbers of equity security holders by size of holding at 31 August 2010:
1
1,001
5,001
10,001
-
-
-
-
1,000
5,000
10,000
100,000
100,001 and over
Class of equity security
Ordinary shares
Shares
102
888
522
921
79
2,512
Options
-
1
14
67
7
89
86 Annual Report 2010 I Integrated Research and its controlled entities
Equity security holders
Twenty largest quoted equity security holders
The names of the twenty largest holders of quoted equity securities as at 31 August 2010 are listed below:
Ordinary Shares
Number held
Percentage of issued shares
1
2
3
4
5
6
7
8
9
10
11
12
13
Stephen John Killelea
Andrew Rhys Rutherford
B&R James Investments Pty Limited
JP Morgan Nominees Australia Limited
National Australia Trustees Limited
David Leroy Boyles
Spectrok Pty Ltd
Ralph Chiarella
Forbar Custodians Limited
Custodial Services Limited
Citicorp Nominees Pty Ltd
Five Talents Limited
Howard Securities Pty Ltd
14 Mr Philip Julian Eriksen + Mr Julian Hans Eriksen
15
Bell Potter Nominees Ltd
16 Mr Kevin John Cairns
17 Mr Rodney Walter Ross
18
Fergfam Nominees Pty Ltd
19 Mr Richard Ewan Bromley Mews + Mrs Wee
Khoon Mews
94,497,339
5,426,589
3,000,000
2,778,268
2,517,735
2,000,000
1,270,472
932,000
893,368
822,550
770,800
655,000
600,000
563,155
532,000
400,000
385,000
375,263
363,460
20 Mr Brenton Alan Scott + Ms Eleanor Joy Nurton
350,000
56.64
3.25
1.80
1.67
1.51
1.20
0.76
0.56
0.54
0.49
0.46
0.39
0.36
0.34
0.32
0.24
0.23
0.22
0.22
0.21
Integrated Research and its controlled entities I Annual Report 2010
87
ASX Additional Information page 86-88
Unquoted equity securities
Number on issue *
Number of holders
Options issued under the Integrated Research Limited
Employee Option Plan to take up ordinary shares
5,415,000
89
*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
56.64
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.
88 Annual Report 2010 I Integrated Research and its controlled entities
Corporate Directory
Directors
Secretary
Registered Office
Share Registry
Auditors
Solicitors
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
Peter Lloyd
Independent Non-Executive Director
Clyde McConaghy
Non-Executive Director
David Leighton
Level 9, 100 Pacific Highway
North Sydney, NSW, 2060
Phone: (+61 2) 9966 1066
Computershare
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
Securites Exchange Listing
Australian Securities Exchange
Code IRI
Country of Incorporation
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 Friday, 26th November 2010, at the Museum of
Sydney, Corner of Phillip and Bridge Streets, Sydney.
Corporate Headquarters
Asia Pacific/Middle 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@ir.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@ir.com
Americas - East Coast
Integrated Research Inc.
1818 Library Street
Suite 500
Reston, VA 20190
t: +1 (703) 956 3025
f: +1 (703) 390 8777
e: info.usa@ir.com
Europe
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@ir.com
For more information visit our website at www.ir.com