Download - 032.ASX IAW Sept 25 2008 Full Year Statuary Accounts

8/9/2019 032.ASX IAW Sept 25 2008 Full Year Statuary Accounts

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INTEGRATED LEGAL HOLDINGS LIMITED ACN 120 394 194

(ASX: IAW)

Annual Report For the year ended 30 June 2008

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Corporate Information

ABN 20 120 394 194

Directors The Hon John Dawkins, Chairman Anne Tregonning, Nonexecutive Director Graeme Fowler, Managing Director/CEO

Company Secretary Jean Marie Rudd

Registered office Ground Floor 201 Adelaide Terrace Perth WA 6000

Principal place of business Head Office Level 5, Edgecliff Centre 233 New South Head Road Edgecliff NSW 2027 Tel: (02) 9362 3734

Share Register Computershare Investor Services Pty Limited Level 2 45 St Georges Terrace Perth WA 6000 Tel: (08) 9323 2000

Integrated Legal Holdings Limited shares are listed on the Australian Stock Exchange.

Solicitors Talbot Olivier Level 8, Wesfarmers House 40 The Esplanade Perth WA 6000

Bankers National Australia Bank Limited 50 St Georges Terrace Perth WA 6000

Auditors Ernst & Young 11 Mounts Bay Road

Perth WA 6000

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Contents

Chairman and Managing Directors Report ............................................................................. 1

Directors Report ...................................................................................................................... 8

Auditors Independence Declaration ..................................................................................... 26

Corporate Governance Statement ......................................................................................... 27

Financial Report ..................................................................................................................... 34

ASX Additional Information ................................................................................................... 90

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Chairman and Managing Directors Report (continued)

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The company has achieved a strong Balance Sheet position, with cash holdings at 30 June 2008 of $5.63m ($5.04m 31 December 2007), and a net tangible asset backing of 11.71 cents per share, (compared with 10.02 cents per share at 31 December 2007).

Operating cash flows strengthened during the 2nd half, with $1.12m received for the period since inception.

The company has grown strongly and selectively expanded during the period, with the announcement of 2 tuck in acquisitions. Annualised revenue of these acquisitions was approximately $1.05m.

The Directors are of the view that the company is well placed to continue growth both organically and by acquisition by capitalising on the significant opportunity afforded by prevailing industry issues, including succession planning and availability of capital to fund growth. Longterm competitive advantage can be achieved by the company in supporting member firms in developing scale to underpin future growth and profitability.

The Directors note that they have appointed a new Managing Director for the company effective May 2008. Mr. Graeme Fowler is based in Sydney and was previously Chief Executive Officer of listed accounting and financial services consolidator WHK Group Limited.

Since commencing with the company, Mr Fowler has in conjunction with the Board undertaken a review of the operations of the company with a view to refining the companys strategy and business model in order to appropriately position the company for achieving strong and consistent future growth in earnings and dividends.

The Directors are pleased with the Groups performance and the significant progress that has been made during its initial year as a publicly listed company.

Consistent with this position, the Directors believe the outlook for the Group for 2008/09 is strong and expect growth in operating revenue, net profit after tax and earnings per share.

2. Full Year Profit Summary

Net profit after tax for the period ended 30 June 2008 was $1.54m. The result was achieved on total operating revenue of $10.69m.

Earnings per share were 2.66 cents for the period. o

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2007/08 (10.5 months) $m

Revenue Fee Income Other Income Operating Revenue

10.17 0.51 10.69

EBITDAI* 2.84 As a % of operating revenue

Impairment Losses

26.6%

0.21 Amortisation Expenses 0.03 Depreciation 0.09 Lease, HP and Interest 0.03 Tax 0.94

Net Profit After Tax As a % of operating revenue

1.54 14.4%

Earnings per Share (weighted average)

2.66

*EBITDAI = Earnings before Interest, Tax, Depreciation, Amortisation and Impairment.

3. Final and Full Year Dividend

The Directors are pleased to announce a dividend of 2.2 cents per share fully franked (at a 30% tax rate) for the period to 30 June 2008.

The dividend is in accordance with the companys announcement in October 2007, and is as a result of the companys strong earnings result and cash position. The 2.2 cent dividend represents a pro rata of the announced 2.5 cent dividend policy, on the basis of the shortened initial trading period (10.5 months).

The dividend of 2.2 cents is payable on 7th November 2008, with the record date for determining entitlements to the dividend being 17 th October 2008.

The Directors have revised the dividend policy of the company and in future periods dividends will be declared after consideration of the performance of the company and future investment opportunities. Additionally, the Directors advise their intention to declare an interim dividend following release of the companys half year financial results.

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4. Full Year Profit Analysis and Performance Review

The companys two divisions performed well during the period.

2007/08 (10.5 months) $m

Fee Income - Legal Services

As a % of operating revenue - IT Services

As a % of operating revenue

9.38 92.2% 0.79 7.8%

Total Fee Income 10.17

Total Net Contribution from firms* As a % of operating revenue

3.61 35.5%

*Net Contribution = Net profit from member firms before tax, interest, depreciation, amortisation and impairment

The total net contribution from member firms was $3.61m for the period, with a margin of 35.5% of fee income.

The Directors are particularly pleased with the performance of member firms given that this was the initial period of the member firms as part of the company.

Legal Services Division

The Legal Services Division incorporates the businesses of Talbot Olivier and Brett Davies Lawyers.

Talbot Olivier operates in commercial law, litigation, and insurance, predominantly in the Perth area, and targets commercial clients in the mid market segment.

Brett Davies Lawyers is a specialist superannuation, taxation and estate planning firm, with predominantly accountant and financial planning clients across Australia.

The companys strategy is to develop a national network of leading law firms in the capital cities and other key centres across Australia, with a view to the growth and improvement of these businesses, as well as the development of cross referral processes and scale advantage opportunities.

The company will look to the acquisition of a series of medium sized commercial law firms, as well as a number of specialist law firms in areas such as superannuation, tax and estate planning, and employment law, which will look to leverage member firm relationships in these growth segments.

The Directors are of the view that the legal services industry is currently influenced by a number of issues which provide an opportunity to develop and grow a network of leading medium sized firms in the mid market, SME and high net worth client segments, and that the companys business model and strategy provides the basis for assisting member firms in addressing these industry issues.

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Issues affecting the legal industry include the following:

- It is difficult for medium sized firms to attract and retain good senior lawyers - It is hard for medium sized firms to provide broad services to clients - It is problematic for medium sized firms to achieve growth, due to limitations on available

capital for working capital and general business investment - Some owners are seeking a value for their business

Information Technology Services Division

The IT Services Division incorporates the Law Central business, which is an internet based customised legal document publishing and information service. The service is targeted towards accountants and financial planners and earns revenue based on the selling of documents and subscriptions to the service.

The company strategy for IT Services is to grow and develop the business through the expansion of on line services, and the building of deeper relationships with the existing Law Central client base.

The IT services business provides an element (15%) of recurring revenue through subscriptions to the service.

5. New Business Acquisitions

The company has grown strongly and selectively expanded by acquisition during the period, with the announcement of 2 tuck in acquisitions. Annualised revenue of these acquisitions was approximately $1.05m.

The Directors are of the view that the company is well placed to continue growth both organically and by acquisition by capitalising on the significant opportunity afforded by prevailing industry issues, including succession planning and availability of capital to fund growth. Longterm competitive advantage can be achieved by the company in supporting member firms in developing scale to underpin future growth and profitability.

Broadly, the companys acquisition strategy is based on the following principles:

Owning a limited number of member firms in capital cities and key regional areas across Australia.

Target firms are both medium sized commercial law firms and specialist law firms in key growth segments.

Acquiring selectively and incrementally only quality firms compatible with existing firms and company aspirations and values.

Supporting the strong growth and development of member firms both organically and by acquisition, to achieve scale businesses with competitive advantage in their markets.

Developing internal cross referral processes and external strategic relationships to leverage client opportunities as part of a network of member firms.

Developing cost advantages for member firms through national procurement arrangements.

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During the period, two new tuck in acquisitions have been added to the company and have been merged into Talbot Olivier as follows:

The law firm of Shayne Leslie, a commercial litigation firm based in Perth. The firm had annualised revenue of $750k at the time of acquisition (28/09/2007).

The law firm of Peter Marks, an estate planning law firm based in the greater Perth area. The firm had annualised revenue of $300k at the time of acquisition (19/09/2007).

More generally, the opportunity for continued growth by acquisition is considered to be significant having regard to the prevailing industry issues, and the appropriateness of the companys strategy and business model in supporting growth and development of member firms.

6. Balance Sheet and Operating Cash Flow

The company has maintained a strong Balance Sheet position with cash holdings at 30 June 2008 of $5.63m ($5.04m 31 December 2007), no debt, and a net tangible asset backing of 11.71 cents per share, compared with 10.02 cents per share at 31 December 2007.

As such the Directors believe the company is well placed for future growth.

Operating cash flows strengthened during the 2nd half, with $1.21m received for the year.

7. Management Structure and Operating Priorities

A new Managing Director was appointed for the company effective May 2008.

Mr. Graeme Fowler is based in Sydney and was previously Chief Executive Officer of listed accounting and financial services consolidator WHK Group Limited.

Since commencing with the company, Mr Fowler has in conjunction with the Board undertaken a review of the operations of the company with a view to refining the companys strategy and business model in order to appropriately position the company for achieving strong and consistent future growth in earnings and dividends.

In respect of all three foundation businesses, Talbot Olivier, Brett Davies Lawyers and Law Central, the 2008/2009 financial year will require an element of business investment to ensure the firms are best placed to take advantage of growth opportunities available to them.

Further, the companys corporate expenses will necessarily grow into 2008/2009. The company has made important investment in senior management of the company, whom the Directors believe will be able to manage the company to achieve strong growth into the future.

The company now has a full time Managing Director based in Sydney (effective May 2008) as well as a Chief Financial Officer/Company Secretary based in Perth (effective September 2007). Whilst we anticipate a very small corporate office for the company going forward, the full year effect of these appointments will increase year on year costs.

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Further, the company is looking to continue to develop processes and procedures to ensure value is extracted from the businesses for shareholders.

8. Outlook

Overall, the Directors are pleased with the progress and performance of the company since public listing in August 2007, and consider the company to have very strong future prospects.

The company has achieved an important base, but requires some refinement in the strategy and business model and some investment in people and processes in 2008/2009 in order to underpin appropriate growth and sustainability of earnings into the future for shareholders.

The Directors believe the company will perform strongly in 2008/09 and expect growth in operating revenue, net profit after tax and earnings per share.

The Directors are confident in the longer term outlook of the company given the strength and underlying quality of the existing member firms, the significant potential to grow organically, and by the opportunities for selective acquisition growth as part of the strategy of developing a national network of legal services businesses.

The Hon John Dawkins AO Chairman

Graeme Fowler Managing Director

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Directors Report

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Your directors submit their report for the year ended 30 June 2008.

DIRECTORS The names and details of the Companys directors in office during the financial year and until the date of this report are as follows. Directors were in office for this entire period unless otherwise stated.

Names, qualifications, experience and special responsibilities

The Hon John Dawkins, AO, B.Ec (Nonexecutive Chairman) Appointed: 6 October 2006

Mr Dawkins was Chairman of LawCentral from its early beginnings in March 2000 until March 2006.

His other board appointments include Chair of the Retail Energy Market Company Ltd, Chair of Fortuna Funds Management Ltd, and Director of Genetic Technologies Ltd. For over 10 years, until 2005, he served on the board of Sealcorp Holdings, now Asgard Wealth Solutions, and he is a former chairman of Elders Rural Bank.

Mr Dawkins has consulted to several large Australian and overseas companies, the World Bank and the OECD. Until his retirement from politics in 1994 he served as a Minister in the Federal Government for 10 years and in the House of Representatives for 18 years.

He is a graduate in Economics from the University of Western Australia, and he has been awarded honorary doctorates from The University of South Australia and the Queensland University of

Technology.

During the past three years, Mr Dawkins served as a director of the following listed companies:

MGM Wireless Ltd appointed 17 August 2007* Genetic Technologies Ltd appointed 24 November 2004*

*denotes current directorship

Anne Tregonning, B.Com, FCA, GAICD (Non executive Director) Appointed: 6 October 2006

Ms Tregonning has extensive experience in finance and risk management in both public practice and commerce. Senior positions previously held include General Manager Finance and Risk, Wealth Management Division, St George Bank, Director Group Finance, Sealcorp Holdings (now ASGARD Wealth Solutions), and Senior Manager Corporate Banking, BankWest.

Ms Tregonning is a non executive director of Retail Energy Market Company Ltd and Musica Viva Australia. She is a past executive director of ASGARD Capital Management Limited, a past State Chairman of the Institute of Chartered Accountants and member of its National Council, and a past director of other public company and not forprofit/professional organisations.

Ms Tregonning is a graduate of The University of Western Australia, a Fellow of The Institute of Chartered Accountants and Graduate of the Australian Institute of Company Directors.

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Directors Report (continued)

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Graeme Fowler, B.Bus, CPA, GAICD (Managing Director/CEO)

Appointed: 28 April 2008

Mr Fowler was previously Chief Executive Officer of listed accounting and financial services consolidator WHK Group Limited. He brings specific experience in the successful consolidation of professional services firms. He spent over 15 years in senior management roles with the BT Financial Group including Group Chief Financial Officer, Chief Executive Officer of BT Funds Management NZ, and Chief Executive Officer of BT Portfolio Services (including BT Wrap).

Mr Fowler is a business studies graduate of The University of Technology, Sydney, a Certified Practicing Accountant and a graduate of the Australian Institute of Company Directors.

Thomas Henn, FTIA, GAICD, MTax, MESC, LLB (Munich), LLB (UWA) (former Managing Director) Appointed: 27 June 2006 Resigned: 28 April 2008

Mr Henn practiced as a lawyer in Munich, before emigrating from Germany to Australia in 1993. After finishing a law degree in Australia, Mr Henn practiced in a Big Four accounting firm and also various law firms. He is a practicing lawyer and currently works for Brett Davies Lawyers. Mr Henn has also served as a board member of a public unlisted company.

Mr Henn is a graduate of The University of Munich and holds a Master of Taxation and a Bachelor of Laws degree from The University of Western Australia.

He is a Graduate Member of the Australian Institute of Company Directors and a Fellow of the Taxation Institute of Australia.

Beneficial interests in the shares of the company and related bodies corporate As at the date of this report, the beneficial interests of the directors in the shares of Integrated Legal Holdings Limited were:

Number of Ordinary Shares

J Dawkins 1,626,398 A Tregonning 300,000 G Fowler 2,710,200

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COMPANY SECRETARY Thomas Henn, FTIA, GAICD, MTax, MESC, LLB (Munich), LLB (UWA)

Appointed: 27 June 2006 Resigned: 29 August 2007

Brett Davies, FTIA, B Juris, LLB, LLM, BA (Hons), DipEd, MBA Appointed: 29 August 2007 Resigned: 28 August 2008

Mr Davies is a principal of Brett Davies Lawyers, a taxation and superannuation specialist law firm which has operated since 1994.

Mr Davies was National Chair of the Law Council of Australia's Legal Practice Management Group. He

was elected by his peers to the Law Council's Legal Practice Section executive and he sits on the Council's Taxation SubCommittee. He is the Deputy Convenor of the Law Society of WA Legal Management and Development Committee and sits on the State's Taxation Committee. His committee memberships also extend to non legal organisations including Chairman of the Art Gallery of Western Australia Foundation, past president of The Friends of the Art Gallery of Western Australia and past President of his local Rotary Club.

Jean Marie Rudd, B.Com, CA Appointed: 28 August 2008

Mrs Rudd is also the Chief Financial Officer (CFO) of the Integrated Legal Holdings Limited group of

companies.

Mrs Rudd was previously the Finance Director of national law firm, Minter Ellison, bringing industry specific experience to her roles with Integrated Legal Holdings Limited. This is supported by her committee membership on the Law Office Managers Committee of the Law Society of Western Australia (former Convenor), past committee member of the Law Council of Australia and past lecturer for the Legal Assistance Training Course. Mrs Rudd has over 17 years experience in CFO/Company Secretary roles including senior management roles with the Heytesbury Group and ThinkSmart Limited.

Mrs Rudd is a graduate of Curtin University, Perth, and a Chartered Accountant.

DIVIDENDS On 28 August 2008, the directors declared a fully franked final dividend of 2.2 cents per ordinary share with a record date of 17 October 2008.

PRINCIPAL ACTIVITIES The principal activity of the entities of the consolidated Group was the provision of legal services and online legal document services in Australia.

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OPERATING AND FINANCIAL REVIEW

Group Overview A detailed review of the operations of the Group during the financial year, its financial position and business strategies and prospects for future financial years is set out below.

Performance Indicators Management and the Board monitor the Groups overall performance, from the execution of its strategic plan through to the performance of the Group against operating plans and financial budgets.

The Board, together with management have identified key performance indicators (KPIs) that are used to monitor performance. Directors receive the KPIs for review prior to each monthly Board

meeting allowing all directors to actively monitor the Groups performance.

Operating Results for the Year For the year ended 30 June 2008, the consolidated entity generated a net profit after tax of $1,544,303 (2007: $17,368,147 loss).

Against the same period last year, earnings before interest, tax, impairment, depreciation and amortisation increased from a loss of $5,164,255 to a profit of $2,421,039.

Consolidated operating revenues of $10,688,441 were higher than the previous corresponding year which reported $205 operating revenues.

The turnaround in profitability of the Group arises due to the listing of the Company on the Australian Stock Exchange on 17 August 2007, the acquisition of subsidiaries and continued growth.

Shareholder Returns The Companys return to shareholders is as follows:

2008 2007 Basic and diluted profit/(loss) per share (cents) 2.66 (65.50)

Review of Financial Condition

Liquidity and Capital Resources The consolidated Cash Flow Statement illustrates that there was an increase in cash inflow from operating activities. Operating activities generated $1,207,442 (2007: $205) of net cash inflows. This increase in comparison to 2007 is largely due to the acquisition of businesses upon listing in August 2007 and their successful trading performance for the 10 month period to 30 June 2008. This net increase in the cash flows from operating activities has been offset by the amount of cash used for investing activities of $6,866,530 (2007: nil), which was mainly attributable to the acquisition of businesses during the year. There was also a $2,497,119 cash inflow (2007: $8,788,530) from financing activities largely due to the raising of funds from the initial public offering during the year.

The net tangible asset backing of the Group was 11.71 cents per share (2007: 0.00 cents).

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Operating and Financial Review (continued)

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Asset and capital structure CONSOLIDATED

2008 2007 $ $

Debts: Trade and other payables 1,081,009 9,295,402 Interest bearing loans and borrowings 188,472 Less: Cash and cash equivalents (5,626,766) (8,788,735)

Net debt/(cash) (4,357,285) 506,667 Total equity 13,904,646 205 Total capital employed 9,547,361 506,872

The level of gearing in the Company is within acceptable limits set by the directors given the implications of the initial public offering and business acquisitions on listing.

Share issues during the year The Company has issued 28,801,616 shares during the year:

1,258,096 shares to Law Central Co Pty Ltd shareholders in part payment for acquisition of the Company, as offered under the Prospectus dated 16 May 2007;

24,833,320 shares to subscribers to the Prospectus dated 16 May 2007; and 2,710,200 shares to Graeme Fowler, Managing Director/CEO, on his appointment on 28 April

2008.

Risk Management The Group takes a proactive approach to risk management. The Board is responsible for ensuring that risks, and also opportunities, are identified on a timely basis and that the Groups objectives and activities are aligned with the risks and opportunities identified by the Board.

The Group believes that it is crucial for all Board members to be part of this process, and as such the Board has not established a separate risk management committee. Instead sub committees are convened as appropriate in response to issues and risks identified by the Board as a whole and the sub committee further examines the issue and reports back to the Board.

The Board has a number of mechanisms in place to ensure that managements objectives and activities are aligned with the risks identified by the Board. These include the following:

Implementation of Board approved budget and Board monitoring of progress against budget, including the establishment and monitoring of financial KPIs; and

The establishment of committees to report on specific business risks. o

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SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS Significant changes in the state of affairs during the year ended 30 June 2008 are as follows:

On 16 May 2007, the Company issued a Prospectus for the purposes of raising $12m in new equity. The Prospectus was oversubscribed and the Company successfully listed on the Australian Stock Exchange on 17 August 2007.

Under the terms of the Prospectus, the Company also acquired Law Central Co Pty Ltd, an internet portal designed to provide easy access by the legal profession and public to a range of legal and other documents. Settlement took place on 10 August 2007 refer note 29.

On 10 August 2007, the Company acquired, through its wholly owned subsidiaries, Talbot Olivier Pty Ltd and Tax Lawyers Australia Pty Ltd, the legal practices of Talbot Olivier and

Brett Davies Lawyers, respectively refer note 29.

On 19 September 2007, the Company, through its wholly owned subsidiary, Talbot Olivier Pty Ltd, acquired the legal practice of the late Peter Marks trading as Peter Marks Succession Lawyers refer note 29.

On 28 September 2007, the Company, through its wholly owned subsidiary, Talbot Olivier Pty Ltd, acquired the legal practice of Shayne Leslie refer note 29.

SIGNIFICANT EVENTS AFTER THE BALANCE DATE

A fully franked final dividend of 2.2 cents per share was declared on 28 August 2008 with a record date of 17 October 2008 and a payment date of 7 November 2008.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS Integrated Legal Holdings Limited will continue to seek growth in revenue and earnings through the acquisition of additional law firms in New South Wales, Victoria, the Australian Capital Territory, Queensland and Western Australia. If and when other States allow non lawyers to own law firms and share in the profits of law firms, then the Company will pursue acquisitions in those jurisdictions as opportunities arise.

ENVIRONMENTAL REGULATION The Groups operations are not subject to any significant environmental, Commonwealth or State, regulations or laws.

SHARE OPTIONS Unissued shares Since the inception of the Company, the Company has not issued any options.

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INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS Each of the directors and secretary of the Company has entered into a deed with the Company

whereby the Company has provided certain contractual rights of access to books and records of the Company to those directors and secretary and to effect and maintain insurance in respect of the directors and officers liability and provide certain indemnities to each of the directors, to the extent permitted by section 199B of the Corporations Act 2001 .

The Company has put in place Prospectus Insurance and Directors and Officers Liability Insurance. The contract prohibits the disclosure of the nature of the liability and/or the amount of the premium.

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REMUNERATION REPORT (audited)

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This remuneration report outlines the director and executive remuneration arrangements of the Company and the Group in accordance with the requirements of the Corporations Act 2001 and its Regulations. For the purposes of this report Key Management Personnel (KMP) of the Group are defined as those persons having authority and responsibility for planning, directing and controlling the major activities of the Company and the Group, directly or indirectly, including any director (whether executive or otherwise) of the parent company, and includes three executives in the Parent and the Group receiving the highest remuneration.

For the purposes of this report, the term executive encompasses the Chief Executive, senior executives and the secretary of the Parent and the Group.

Details of key management personnel (including the three highest paid executives of the Company and the Group):

i) Directors J Dawkins Chairman (non executive) appointed 6 October 2006 A Tregonning Non executive director appointed 6 October 2006 T Henn Managing director appointed 27 June 2006/resigned 28 April 2008 G Fowler Managing director/CEO appointed 28 April 2008

ii) Executives B Taylor Chief executive, Talbot Olivier appointed 10 August 2007 B Davies Company secretary appointed 29 August 2007/resigned 28 August 2008

Chief executive, Brett Davies Lawyers appointed 10 August 2007 JM Rudd Financial controller appointed 4 September 2007

Company secretary appointed 28 August 2008

Other than the appointment of Mrs Rudd as Company Secretary, there were no other changes to KMP after reporting date and before the date the financial report was authorised for issue.

The Board of Directors of the Company is responsible for determining and reviewing remuneration arrangements for the Board and executives.

The Board will assess the appropriateness of the nature and amount of remuneration of executives on a periodic basis by reference to relevant employment market conditions with the overall

objective of ensuring maximum stakeholder benefit from the retention of a high quality, high performing Board and executive team.

Remuneration philosophy The performance of the Company depends upon the quality of its directors and executives. To prosper, the Company must attract, motivate and retain highly skilled directors and executives.

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REMUNERATION REPORT (audited) (continued)

Remuneration philosophy (continued)

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To this end, the Company embodies the following principals in its remuneration framework:

Provide competitive rewards to attract high calibre executives; Link executive reward to shareholder value; Have a portion of executive remuneration at risk; and Establish appropriate, demanding performance hurdles for variable executive remuneration.

Remuneration structure In accordance with best practice corporate governance, the structure of non executive director and executive remuneration is separate and distinct.

Non executive director remuneration

Objective The Board seeks to set aggregate remuneration at a level that provides the Company with the ability to attract and retain directors of the highest calibre, whilst incurring a cost that is acceptable to shareholders.

Structure The Constitution and the ASX Listing Rules specify that the aggregate remuneration of non executive

directors shall be determined from time to time by a general meeting. The current aggregate remuneration level for non executive directors, as approved by shareholders, is $250,000 per annum. The next determination will be at the AGM to be held on 27 November 2008 when shareholders will be asked to approve the aggregate remuneration for non executive directors for the year.

The amount of aggregate remuneration sought to be approved by shareholders and the fee structure is reviewed annually. The Board considers advice from external consultants as well as the fees paid to non executive directors of comparable companies when undertaking the annual review process.

Each non executive director receives an agreed/contracted fee for being a director.

Non executive directors do not receive retirement benefits, nor do they participate in any incentive programs.

The remuneration of non executive directors for the financial year is detailed in Table 1 of this report.

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Executive remuneration

Objective The Group aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities within the Group so as to:

Reward executives for Group, subsidiary and individual performance against targets set by reference to appropriate benchmarks;

Align the interests of executives with those of shareholders; and Ensure total remuneration is competitive by market standards.

Structure

In determining the level and make up of executive remuneration, the Board engages external consultants as needed to provide independent advice.

The Board has entered into a detailed contract of employment with the Managing Director/CEO and other executives. Details of these contracts are provided below.

Remuneration consists of the following key elements:

Fixed remuneration (base salary and superannuation) Variable remuneration:

o Short term incentives (STI) o Long term incentives (LTI) in the form of share based payments (equity settled)

Fixed remuneration

Objective Fixed remuneration is reviewed annually by the Board. The process consists of a review of Company, subsidiary and individual performance, relevant comparative remuneration externally and internally and, where appropriate, external advice on policies and practices. As noted above, the Board has access to external advice independent of management.

Structure

Executives are given the opportunity to receive their fixed (primary) remuneration in a variety of forms including cash and fringe benefits such as motor vehicles. It is intended that the manner of payment chosen will be optimal for the recipient without creating undue cost for the Group.

The fixed remuneration component of executives is detailed in table 1.

Variable remuneration short term incentives (STI)

Objective The objective of the STI program is to link the achievement of the Groups operational targets with the remuneration received by the executives charged with meeting those targets. The total

potential STI available is set at a level so as to provide sufficient incentive to the executive to achieve the operational targets and such that the cost to the Group is reasonable in the circumstances.

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Structure

Managing Director/CEO The Managing Director/CEO is entitled to a maximum performance bonus of $160,000, subject to the achievement of specific performance targets for the period from 28 April 2008 to 30 June 2010 (26 months). If achievement of performance targets is not successful by that date, a lesser amount may be payable at the discretion of the Board, taking into account the individual circumstances contributing to non achievement of those targets.

Performance targets are achieved when: Accumulated revenue for the Group is $40m or greater; and

Earnings per share is 3.335 cents or more (representing a 15% or greater growth above the forecast earnings per share for the 2008 financial year).

The terms and conditions pertaining to the bonus are as follows: 1. Both performance targets must be achieved at the same time for satisfaction of

performance criteria. 2. The bonus is payable upon achievement of targets or 30 June 2010 (providing targets

achieved), whichever is the earlier. 3. A new bonus structure (between the CEO and Board) will be negotiated from time of

payment of this bonus. 4. Bonus to be paid in cash and/or shares, at the discretion of the Board.

5. Bonus payable within 30 days of satisfaction of performance criteria, as confirmed by the Board.

Chief Executives Actual STI payments are granted to each of the subsidiary Chief Executives. The Group has predetermined that the bonus pool will be calculated for each 12 month period from commencement of employment at 20% of the amount by which net profit after tax of the foundation partners law firm exceeds the unaudited net profit after tax of the law firm for the 2006 financial year. This structure is reviewed and approved by the Board. On the annual anniversary date (10 August), the Group determines the amount, if any, of the bonus pool to be paid to the respective law firms for subsequent allocation to individual Chief Executives of each law firm. Payments made

are delivered as a cash bonus within two months after the anniversary date.

STI bonus for 2008

Managing Director/CEO The Board will consider the quantum of the performance bonus payable at the end of the 26 month performance period or when management are satisfied that all targets are met.

The maximum performance bonus achievable at the end of the 26 months is $160,000 and the minimum is nil. At reporting date, no bonus is payable to the Managing Director/CEO under his performance bonus plan.

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Chief Executives The Managing Director will approve the STI bonus payments for the 12 month period ended 10 August 2008, in September 2008. The maximum STI cash bonus is calculated at 20% of the amount by which net profit after tax of the Chief Executives law firm exceeds the unaudited net profit after tax of the law firm for the 2006 financial year. The minimum STI cash bonus payable is nil. The amount of the bonus achieved for the 2008 financial year has been calculated at $176,255. At reporting date, the allocation of the achieved bonus amount to each Chief Executive has not yet been determined.

There have been no alterations to the STI bonus plan since the inception of the bonus plan.

Variable remuneration long term incentives (LTI)

The LTI benefits are delivered on a discretionary basis by the Board in the form of ordinary shares in the Company.

2,710,200 shares were issued to the Managing Director/CEO in the current financial year. There are no performance conditions attached.

While the shares are not specifically linked to performance criteria, the shares are issued at the market price of an ordinary Integrated Legal Holdings Limited share at the time of grant, ensuring that the Managing Director/CEO receives a benefit only when shareholder wealth has increased.

Executive share trading policy The Company has in place a share trading policy which imposes trading restrictions on officers and employees of the Company and its related entities that are considered to be in possession of inside information.

The Company does not have a policy preventing executives and directors from hedging against shares issued.

Employment contracts

Managing Director/CEO There is an employment contract in place between Mr Fowler and Integrated Legal Holdings Limited for Mr Fowlers appointment as Managing Director/CEO of the Company. The contract commenced on 28 April 2008 and continues indefinitely unless terminated according to the provisions of the contract. The appointment as Managing Director/CEO is subject to a probationary period of 180 days during which time either Integrated Legal Holdings Limited or Mr Fowler may terminate the employment without reason on two days notice.

Mr Fowler receives fixed remuneration of $272,500 per annum (inclusive of superannuation).

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Under the terms of the contract, Mr Fowlers duties include, but are not limited to:

Implementing the business plan as determined by the Company; Carrying out such lawful directions as given by the Company; and Expanding and developing the business.

The agreement may be terminated without notice by Integrated Legal Holdings Limited if:

Mr Fowler commits a serious breach of the agreement; Mr Fowler commits any act that amounts to a repudiation of the agreement; Mr Fowler engages in serious or wilful misconduct; or It is permitted for any reason under relevant legislation.

Mr T Henn former Managing Director (resigned 28/04/08) There is an employment contract in place between Mr Henn and Integrated Legal Holdings Limited for Mr Henns appointment as Managing Director of the Company. The contract commenced on 1 July 2007 and continued for a period of 12 months. The appointment as Managing Director was subject to a probationary period of three months during which time either Integrated Legal Holdings Limited or Mr Henn could terminate the employment without reason on two days notice.

Under the terms of the contract, Mr Henns duties included, but were not limited to:

Implementing the business plan as determined by the Company; Carrying out such lawful directions as given by the Company; and Expanding and developing the business.

The agreement was terminated upon the resignation of Mr Henn as Managing Director on 28 April 2008. Mr Henn continues to remain employed as a senior lawyer with subsidiary business, Brett Davies Lawyers.

Chief executives member firms Member firm chief executives, Mr Taylor and Mr Davies, are employed under two year fixed term contracts, expiring on 12 August 2009. Each chief executive is paid an annual salary of $100,000 and potentially a bonus paid as an additional salary (the bonus payment is calculated at 20% of the amount by which the net profit after tax of the chief executives law firm exceeds the unaudited net profit after tax of the law firm for the 2006 financial year).

Each employment contract can be terminated without notice if the employee commits a serious breach of any provision of their contract, is unable to or is prohibited from holding a license to practice law, commits any act that amounts to repudiation of the contract or engages in serious and wilful misconduct. After the conclusion of the two year employment period, either party may also terminate the employment contract by giving 28 days notice.

Each chief executive is also subject to strict confidentiality obligations regarding clients of the legal practice. They are also subject to solicitation restraints for a period of up to two years after termination.

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Chief Financial Officer/Company Secretary The Chief Financial Officer (CFO)/Company Secretary has a standard contract. The Company may terminate the employment agreement by providing one month written notice or providing payment in lieu of the notice period (based on the fixed component of remuneration). The Company may terminate the contract at any time without notice if serious misconduct has occurred. Where termination with cause occurs, the executive is only entitled to that portion of remuneration that is fixed, and only up to the date of termination.

The CFO/Company Secretary contract contains standard obligations to perform the duties of an employee which one would expect to find in a standard employment contract.

Group Performance Integrated Legal Holdings Limiteds remuneration policy aims to connect the remuneration received by executives with earnings and the creation of shareholder wealth.

Group performance is reflected in the movement of the Groups earnings per share (EPS) over time. The graph below shows Integrated Legal Holdings Limiteds basic EPS history since incorporation in June 2006:

(70.00)(60.00)(50.00)(40.00)(30.00)(20.00)(10.00)

0.00

10.00

EPS (cents)

EPS (cents) (65.50) 1.57 2.66

Jun 2007 (1) Dec 2007 (2) Jun 2008 (3)

(1) For the period from incorporation on 26 June 2006 to 30 June 2007 (2) For the six months ended 31 December 2007 (3) For the year ended 30 June 2008

The 2007 EPS result of (65.50) was affected by the valuation of shares issued to foundation partners and supporters at a deemed value of 50 cents per share prior to listing of the Company and acquisition of legal practices.

Since listing in August 2007 and the subsequent acquisition of four legal practices and an information technology business, the EPS has steadily improved. The announcement of a dividend in respect of the 2008 financial year further highlights the solid performance of the Group.

The directors believe that the business model remains strong and the company is on target to achieve its objectives.

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Remuneration of key management personnel (KMP) and the three highest paid executives of the Company and the GroupTable 1: Remuneration for the year ended 30 June 2008

Short term Post

Employment Long term Share

Paym

Salary & Fees Cash Bonus

Non monetary benefits Other

Super annuation

Long Service benefits Shar

$ $ $ $ $ $ $

Non executive directors J Dawkins Chairman 43,333 30,000 A Tregonning 45,833 Sub total non executive directors 43,333 75,833

Executive directors T Henn Managing Director (1) 2,293 22,540 G Fowler Managing Director/CEO (2) 22,917 2,062 65 406Sub total executive directors 25,210 24,602 65 406

Other key management personnel B Taylor Chief Executive, Talbot Olivier Pty Ltd (3)

81,157 7,304 87

B Davies Chief Executive, Tax Lawyers Australia Pty Ltd (3)

73,793 6,641 277

JM Rudd Chief Financial Officer/Company Secretary (4)

81,138 23,862 158

Sub total other KMP 236,088 37,807 522 Total 304,631 138,242 587 406(1) Mr Henn resigned as Managing Director on 28 April 2008 (2) Mr Fowler was appointed Managing Director/CEO 28 April 2008 (3) Mr Taylor and Mr Davies were appointed as Chief Executives on 10 August 2007 (4) Mrs Rudd was appointed Financial Controller on 4 September 2007 and CFO and Company Secretary on 28 August 2008 (5) All executives of the Group and Company have been disclosed

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Remuneration of key management personnel (KMP) and the three highest paid executives of the Company and the GroupTable 2: Remuneration for the period ended 30 June 2007

Short term Post

employment Long term Share

Paym

Salary & Fees Cash Bonus

Non monetary benefits Other

Super annuation

Long Service benefits Shar

$ $ $ $ $ $ $

Non executive directors J Dawkins Chairman (3) 81A Tregonning (3) 15Sub total non executive directors 96

Executive directors W Black(1) H Modi (2) 2T Henn Managing Director (4) 7Sub total executive directors 9Total 1,05(1) Mr Black resigned as Director on 6 October2006 (2) Mr Modi resigned as Director on 6 October2006 (3) Mr Dawkins and Ms Tregonning were appointed Directors on 6 October2006 (4) Mr Henn was appointed Managing Director on 26 June 2006 (5) All executives of the Group and Company have been disclosed

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24

DIRECTORS MEETINGS

The number of meetings of directors (including meetings of committees of directors) held during the year and the number of meetings attended by each director were as follows:

Directors Meetings Audit Acquisition* Eligible to

attend Attended Eligible to

attend Attended Eligible to

attend Attended

J Dawkins 11 11 4 2 11 11 A Tregonning 11 11 4 4 11 11 T Henn 8 8 3 3 8 8 G Fowler 3 3 1 1 3 3

*The members

of

the

acquisition

committee

meet,

as

required,

with

formal

matters

being

raised

during Board meetings.

Committee membership As at the date of this report, the Company had an Audit Committee and an Acquisition Committee of the Board of Directors.

Members acting on the committees of the Board during the year were:

Audit Committee Acquisition Committee A Tregonning Chairman B Davies Chairman

J Dawkins

A

Tregonning

T Henn (1) J Dawkins G Fowler (2) T Henn (1)

G Fowler (2) (1) Mr Henn resigned as Managing Director on 28 April 2008 (2) Mr Fowler was appointed Managing Director/CEO on 28 April 2008

AUDITOR INDEPENDENCE AND NON AUDIT SERVICES A copy of the auditors independence declaration received by the Directors in relation to the audit for the year is provided with this report on page 26.

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NON AUDIT SERVICES Non audit services were provided by the entitys auditor, Ernst & Young. The directors are satisfied

that the provision of non audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001 . The nature and scope of each type of non audit service provided means that auditor independence was not compromised.

Ernst & Young received or are due to receive the following amounts for the provision of non audit services:

CONSOLIDATED PARENT 2008 2007 2008 2007

$ $ $ $ Tax compliance 9,470 9,470 Taxation services 32,853 32,853

Due diligence services 145,067 145,067 42,323 145,067 42,323 145,067

Signed in accordance with a resolution of the directors.

G Fowler Managing Director

Sydney, 25 September 2008

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GHM:NR:ILH:023 Liability limited by a scheme approvedunder Professional Standards Legislation

Auditor's Independence Declaration to the Directors of Integrated Legal Holdings Limited

In relation to our audit of the financial report of Integrated Legal Holdings Limited for the year ended 30June 2008, to the best of my knowledge and belief, there have been no contraventions of the auditorindependence requirements of the Corporations Act 2001 or any applicable code of professional conduct.

Ernst & Young

G H MeyerowitzPartnerPerth

25 September 2008

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Corporate Governance Statement

27

The Board of Directors of Integrated Legal Holdings Limited is responsible for the corporate governance of the Group. The Board guides and monitors the business and affairs of Integrated

Legal Holdings Limited on behalf of the shareholders by whom they are elected and to who they are accountable.

The table below summarises the Companys compliance with the Corporate Governance Councils Recommendations:

Recommendation Comply Yes/No

Reference/ Explanation

1.1 Formalise and disclose the functions reserved to the Board and those delegated to management. Yes

2.1 A majority of the Board should be independent directors. Yes 2.2 The chairperson should be an independent director. Yes

2.3 The roles of chairperson and chief executive officer should not be exercised by the same individual. Yes 2.4 The Board should establish a nomination committee. No (a) 3.1 Establish a code of conduct to guide the directors, the chief executive officer

(or equivalent), the chief financial officer (or equivalent) and any other key executives as to:

the practices necessary to maintain confidence in the Companys integrity; and

the responsibility and accountability of individuals for reporting and investigating reports of unethical practices. Yes

3.2 Disclose the policy concerning trading in Company securities by directors, officers and employees. Yes

4.1 Require the chief executive officer (or equivalent) and the chief financial officer (or equivalent) to state in writing to the Board that the Companys financial reports present a true and fair view, in all material respects, of the Companys financial condition and operational results and are in accordance with relevant accounting standards. Yes

4.2 The Board should establish an audit committee. Yes 4.3 Structure the audit committee so that it consists of:

only non executive directors; a majority of independent directors; an independent chairperson, who is not chairperson of the Board; at least three members. No (b)

4.4 The audit committee should have a formal charter. Yes 5.1 Establish written policies and procedures designed to ensure compliance with

ASX Listing Rule disclosure requirements and to ensure accountability at a senior management level for that compliance. Yes

6.1 Design and disclose a communications strategy to promote effective communication with shareholders and encourage effective participation at general meetings. Yes

6.2 Request the external auditor to attend the annual general meeting and be available to answer shareholder questions about the conduct of the audit and the preparation and content of the auditors report. Yes

7.1 The Board or appropriate Board committee should establish policies on risk oversight with management. Yes

7.2 The chief executive officer (or equivalent) and the chief financial officer (or equivalent) should state to the Board in writing that:

the statement given in accordance with best practice recommendation 4.1 (the integrity of financial statements) is founded on a sound system of risk management and internal compliance and control which implements the policies adopted by the Board; and

The Companys risk management and internal compliance and control system is operating efficiently and effectively in all material respects. Yes

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Corporate Governance Statement (continued)

28

Recommendation Comply Yes/No

Reference/ Explanation

8.1 Disclose the process for performance evaluation of the Board, its committees and individual directors, and key executives Yes

9.1 Provide disclosure in relation to the Companys remuneration policies to enable investors to understand

(i) the costs and benefits of those policies; and (ii) the link between remuneration paid to directors and key executives

and corporate performance. Yes 9.2 The Board should establish a remuneration committee. No (c) 9.3 Clearly distinguish the structure of non executive directors remuneration

from that of executives. Yes 9.4 Ensure that payment of equity based executive remuneration is made in

accordance with thresholds set in plans approved by shareholders. Yes 10.1 Establish and disclose a code of conduct to guide compliance with legal and

other obligations to legitimate stakeholders. Yes

Integrated Legal Holdings Limiteds corporate governance practices were in place throughout the year ended 30 June 2008. The following are reference notes to the Principal Recommendation table:

a) No formal nomination committee or procedures have been adopted for the identification, appointment and review of the Board membership, but the Board is committed to an informal assessment process, facilitated by the Chairman in consultation with the Companys professional advisors.

b) The audit committee membership includes an executive director, being the Managing Director/CEO. Inclusion of the Managing Director/CEO is required to satisfy the

recommendation that the committee must consist of at least three members.

c) No formal remuneration committee has been appointed. The remuneration of an executive director will be decided by the Board, without the affected executive director participating in that decision making process. The determination of an executive directors remuneration will be made by the Board having regard to the inputs and value to the Group of the contributions by the executive director in consultant with the Companys professional advisors.

The total maximum remuneration of non executive directors is the subject of a shareholder resolution in accordance with the Companys constitution, the Corporations Act and the ASX Listing Rules, as applicable. The determination of non executive directors remuneration within

that maximum will be made by the Board having regard to the inputs and value to the Group of the respective contributions by each non executive director.

Various corporate governance practices are discussed within this statement. For further information on corporate governance policies adopted by Integrated Legal Holdings Limited, refer to our website:

www.ilh.com.au

Board Function The Board seeks to identify the expectations of the shareholders, as well as other regulatory and

ethical expectations and obligations. In addition, the Board is responsible for identifying areas of significant business risk and ensuring arrangements are in place to adequately manage those risks.

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To ensure that the Board is well equipped to discharge its responsibilities it has established guidelines for the nomination and selection of directors and for the operation of the Board.

The responsibility for the operation and administration of the Company is delegated by the Board to the Managing Director/Chief Executive Officer (CEO) and the executive management team. The Board ensures that this team is appropriately qualified and experience to discharge their responsibilities and has in place procedures to assess the performance of the CEO and the executive management team.

Whilst at all times the Board retains full responsibility for guiding and monitoring the Company, in discharging its stewardship it makes use of sub committees. Specialist committees are able to focus on a particular responsibility and provide informed feedback to the Board.

To this end the Board has established the following committees: Audit; and Acquisition.

The roles and responsibilities of these committees are discussed throughout this Corporate Governance Statement.

The Board is responsible for ensuring that managements objectives and activities are aligned with the expectations and risk identified by the Board. The Board has a number of mechanisms in place to ensure this is achieved including:

Board approval of corporate objectives, strategy and operations plans to meet stakeholders

needs and manage business risk; ongoing development of business plans and approving initiatives and strategies designed to

ensure the continued growth and success of the entity; and implementation of budgets by management and monitoring progress against budget via

the establishment and reporting of both financial and non financial key performance indicators.

Other functions reserved to the Board include: approval of the annual and half yearly financial reports; approving and monitoring the progress of major capital expenditure, capital management,

and acquisitions and divestitures; ensuring that any significant risks that arise are identified, assessed, appropriately managed

and monitored; and reporting to shareholders.

Structure of the Board The skills, experience and expertise relevant to the position of director held by each director in office at the date of the annual report is included in the Directors Report. Directors of Integrated Legal Holdings Limited are considered to be independent when they are independent of management and free from any business or other relationship that could materially interfere with or could reasonably be perceived to materially interfere with the exercise of their unfettered and independent judgement.

In the context of director independence, 'materiality' is considered from both the Group and individual director perspective. The determination of materiality requires consideration of both quantitative and qualitative elements. An item is presumed to be quantitatively immaterial if it is

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equal to or less than 5% of the appropriate base amount. It is presumed to be material (unless there is qualitative evidence to the contrary) if it is equal to or greater than 10% of the appropriate base

amount. Qualitative factors considered include whether a relationship is strategically important, the competitive landscape, the nature of the relationship and the contractual or other arrangements governing it and other factors that point to the actual ability of the director in question to shape the direction of the Groups loyalty.

In accordance with the definition of independence above, and the materiality thresholds set, the following directors of Integrated Legal Holdings Limited are considered to be independent:

Name Position J Dawkins Chairman, Non executive Director A Tregonning Non executive Director

There are procedures in place, agreed by the Board, to enable directors in furtherance of their duties to seek independent professional advice at the Companys expense.

The term in office held by each director in office at the date of this report is as follows:

Name Term in Office J Dawkins 1 year, 11 months A Tregonning 1 year, 11 months G Fowler 4 months

For additional details regarding Board appointments, please refer to our website:

www.ilh.com.au

Trading Policy Under the Companys Securities Trading Policy an executive or Director must not trade in any securities of the Company at any time when they are in possession of unpublished, price sensitive information in relation to those securities.

Before commencing to trade, an executive must first obtain the approval of the Company Secretary to do so and a Director must first obtain the approval of the Chairman.

Additional restrictions on trading in the Companys securities apply to directors of the Company, all executives reporting directly to the Managing Director and any other employees of the Company considered appropriate by the Managing Director and Company Secretary from time to time (Restricted Persons).

Restricted Persons are prohibited from trading in the Companys securities during the following designated closed periods:

in the two months immediately preceding the release of the Companys half year financial results; or

in the two months immediately preceding the release of the Companys full year financial

results.

In exceptional circumstances clearance may be given for a Restricted Person to sell (but not to purchase) securities when they would otherwise be prohibited from doing so but not while there

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Ms Tregonning has extensive experience in finance and risk management in both public practice and commerce holding directorships and senior positions in several listed corporations. She was

chairman of the Institute of Chartered Accountants and member of its National Council. Ms Tregonning is a graduate of The University of Western Australia, a Fellow of The Institute of Chartered Accountants and Graduate of the Australian Institute of Company Directors.

Mr Henn is a practicing lawyer and has practiced in a Big Four accounting firm. He has served as a board member of a public unlisted company. Mr Henn is a graduate of The University of Munich, holds a Master of Taxation and a Bachelor of Laws degree from The University of Western Australia, a Graduate Member of the Australian Institute of Company Directors and a Fellow of the Taxation Institute of Australia.

Mr Fowler was previously Chief Executive Officer of listed accounting and financial services

consolidator WHK Group Limited. He spent over 15 years in senior management roles with the BT Financial Group including Group Chief Financial Officer, Chief Executive Officer of BT Funds Management NZ, and Chief Executive Officer of BT Portfolio Services (including BT Wrap). Mr Fowler is a business studies graduate of The University of Technology, Sydney, a Certified Practicing Accountant and a graduate of the Australian Institute of Company Directors.

Risk The Board determines the Companys risk profile and is responsible for overseeing and approving risk management strategy and policies, internal compliance and internal control. The Companys process of risk management and internal compliance and control includes:

establishing the Companys goals and objectives, and implementing and monitoring

strategies and policies to achieve these goals and objectives; continuously identifying and measuring risks that might impact upon the achievement of the

Companys goals and objectives, and monitoring the environment for emerging factors and trends that affect these risks;

formulating risk management strategies to manage identified risks, and designing and implementing appropriate risk management policies and internal controls; and

monitoring the performance of, and continuously improving the effectiveness of, risk management systems and internal compliance and controls, including an annual assessment of the effectiveness of risk management and internal compliance and control.

To this end, comprehensive practices are in place that are directed towards achieving the following

objectives: effectiveness and efficiency in the use of the Companys resources; compliance with applicable laws and regulations; and preparation of reliable published financial information.

CEO and CFO Certification The Chief Executive Officer and Chief Financial Officer have provided a written statement to the Board that:

in their view the Companys financial report is founded on a sound system of risk management and internal compliance and control which implements the financial policies adopted by the Board; and

that the Companys risk management and internal compliance and control system is operating effectively in all material respects.

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Performance The performance of the Board and key executives is reviewed regularly against both measurable and

qualitative indicators. The performance criteria against which directors and executives are assessed are aligned with the financial and non financial objectives of Integrated Legal Holdings Limited.

Directors whose performance is consistently unsatisfactory may be asked to retire.

Remuneration It is the Companys objective to provide maximum stakeholder benefit from the retention of a high quality Board and executive team by remunerating directors and key executives fairly and appropriately with reference to relevant employment market conditions. To assist in achieving this objective, the Board links the nature and amount of executive directors and officers remuneration to the Companys financial and operational performance. The expected outcomes of the

remuneration structure are:

retention and motivation of key executives; attraction of high quality management to the Company; and performance incentives that allow executives to share in the success of Integrated Legal

Holdings Limited.

For a full discussion of the Companys remuneration philosophy and framework and the remuneration received by directors and executives in the current period please refer to the Remuneration Report, which is contained within the Directors Report.

There is no scheme to provide retirement benefits to non executive directors.

The Board is responsible for determining and reviewing compensation arrangements for the directors themselves and the executive team.

Acquisition Committee The Board has established an Acquisition Committee to consider potential law firm targets for acquisition by the company. The Acquisition Committee comprises all directors and Mr Brett Davies, Chief Executive of Brett Davies Lawyers.

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Financial Report

34

Balance Sheet

.........................................................................................................................

35

Income Statement ................................................................................................................. 36

Cash Flow Statement ............................................................................................................. 37

Statement of Changes in Equity ............................................................................................. 38

Notes to the Financial Statements ......................................................................................... 40

Directors Declaration ............................................................................................................ 87

Independent Audit Report ..................................................................................................... 88

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Balance Sheet

AS AT 30 JUNE 2008

The above Balance Sheet should be read in conjunction with the accompanying notes. 35

Note CONSOLIDATED PARENT

2008 2007 2008 2007 $ $ $ $

ASSETS

Current Assets

Cash and cash equivalents 10 5,626,766 8,788,735 3,544,723 8,788,735 Trade and other receivables 11 2,651,518 22,847 Work in progress 12 1,084,352 Capitalised expenditure 19 506,872 506,872

Total Current Assets 9,362,636 9,295,607 3,567,570 9,295,607

Non Current Assets Receivables 13 5,572,639 Plant and equipment 14 192,836 3,184 Goodwill 15 6,330,233 2,520,000 Intangible assets 16 136,620 Investments in subsidiaries 17 712,886 Deferred tax assets 7 410,647 357,817 Other assets 18 2,524 2,524

Total Non Current Assets 7,072,860 9,169,050

TOTAL ASSETS 16,435,496 9,295,607 12,736,620 9,295,607

LIABILITIES

Current Liabilities

Trade and other payables 19 1,081,009 9,295,402 146,611 9,295,402 Interest bearing loans and borrowings 20 169,764 Income tax payable 7 968,272 968,272 Provisions 21 173,111 10,501

Total Current Liabilities 2,392,156 9,295,402 1,125,384 9,295,402

Non Current Liabilities

Interest bearing loans and borrowings 20 18,708 Provisions 21 119,986 223

Total Non Current Liabilities 138,694 223

TOTAL LIABILITIES 2,530,850 9,295,402 1,125,607 9,295,402 NET ASSETS 13,904,646 205 11,611,013 205

EQUITY

Issued Capital 22 29,729,975 17,368,352 29,729,975 17,368,352 Accumulated Losses 23 (15,823,844) (17,368,147) (18,117,477) (17,368,147) Reserves 24 (1,485) (1,485)

TOTAL EQUITY 13,904,646 205 11,611,013 205

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Statement of Changes in Equity

FOR THE YEAR ENDED 30 JUNE 2008

The above Statement of Changes in Equity should be read in conjunction with

Download - 032.ASX IAW Sept 25 2008 Full Year Statuary Accounts

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