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1 PROSPECTUS For an offer of 45,000,000 shares in Shine Corporate Ltd ACN at $1.00 per share This is an important document and should be read in its entirety. Lead Manager and Underwriter RBS Morgans Corporate Limited Co-Lead Manager Bell Potter Securities Limited Legal Advisers McCullough Robertson Lawyers

2 IMPORTANT NOTICES GENERAL This prospectus is dated 28 March A copy of this prospectus was lodged with ASIC on that date. Neither ASIC or ASX takes any responsibility for the contents of this prospectus or the merits of the investment to which this prospectus relates. No Shares will be allotted or transferred on the basis of this prospectus after the expiry date, which is 13 months after the date of the prospectus. No person is authorised to give any information or make representations about the Offer, which is not contained in this prospectus. Information or representations not contained in this prospectus must not be relied on as authorised by the Company, SaleCo or any other person, in connection with the Offer. This prospectus provides information for investors to decide if they wish to invest in Shine. Read this document in its entirety. Examine the assumptions underlying the Forecast Financial Information and the risk factors that could affect the financial performance of Shine. Consider these factors carefully in light of your personal financial circumstances. Seek professional advice from your accountant, stockbroker, lawyer or other professional adviser before deciding whether to invest. The Offer does not take into account the investment objectives, financial situation or needs of particular investors. AUSTRALIAN RESIDENTS ONLY The Offer is available to Australian residents in each State and Territory of Australia. The distribution of this prospectus in jurisdictions outside Australia may be restricted by law. Seek advice on and observe any restrictions. This prospectus is not an Offer in any place where, or to any person to whom, it would not be lawful to make the Offer. DEFINED TERMS Some terms used in this prospectus are defined in the Glossary. ELECTRONIC PROSPECTUS This prospectus is available electronically at The Application Form attached to the electronic version of this prospectus must be used within Australia. Electronic versions of this prospectus should be downloaded and read in their entirety. Obtain a paper copy of the prospectus (free of charge) by telephoning the Company Secretary on or [email protected]. Applications for Shares may only be made on the Application Form attached to this prospectus or in its paper copy form downloaded in its entirety from EXPOSURE PERIOD Under the Corporations Act Shine must not process Application Forms during the seven day period after the date of lodgement of this prospectus with ASIC. This period may be extended by ASIC for up to a further seven days. This exposure period enables the prospectus to be examined by market participants. Application Forms received during the exposure period will not be processed until after the expiry of that period. No preference will be given to Application Forms received during the exposure period. CURRENCY Monetary amounts shown in this prospectus are expressed in Australian dollars (AUD) unless otherwise stated. PHOTOGRAPHS AND DIAGRAMS Photographs used in this prospectus without descriptions are only for illustration. The people shown are not endorsing this prospectus or its contents. Diagrams used in this prospectus may not be drawn to scale. The assets depicted in photographs in this prospectus are not assets of the Company unless otherwise stated. THIS DOCUMENT IS IMPORTANT AND SHOULD BE READ IN ITS ENTIRETY 2

3 CONTENTS Letter from the Chairman 1 Investment Summary 5 2 Company Overview 8 3 Ownership, Management and Corporate Governance 18 4 Financial Information 28 5 Risk Factors 40 6 Investigating Accountant s Report and Financial Services Guide 44 7 Material Agreements 51 8 Additional Information 56 9 How to Apply Glossary Application Form 63 Corporate Directory Inside back cover Cover Image: Tiddalac, a purpose built residential staff training facility in the Lockyer Valley. 3

4 LETTER FROM THE CHAIRMAN Dear Investor, On behalf of the Board, it gives me great pleasure to present this opportunity to invest in Shine Corporate Ltd. Shine is a national law firm that specialises in plaintiff litigation. Shine s vision is to Shine a light on injustice and make the world a better place one client at a time. As this document highlights, Shine s values are central to its day-to-day operations. Shine protects the rights of every day Australians and empowers them to right wrong, wherever and whenever it occurs. Shine commenced operations in Toowoomba, Queensland, when Kerry Shine first set up his country practice in Since that time Shine has grown to over 600 people located across more than 30 offices throughout Australia. This expansion has resulted from both organic growth and carefully selected acquisitions. Shine s impressive growth will continue to be a focus of the Board and senior management going forward. In particular, Shine has an acute focus on the development of systems and processes to improve client outcomes. While there remains significant opportunity for expansion within Australia, Shine will also explore the viability of replicating its success overseas, in the same prudent and conservative manner that it has approached Australian acquisitions in the last decade. The funds raised by the Offer will provide Shine with the working capital to pursue its growth strategy and the founding shareholders with the opportunity to realise a small part of their investment. On completion of the Offer, the Founders will retain approximately 65% of the Company and will continue their active involvement in the Company s growth. An ASX listing will provide Shine with access to equity capital markets, facilitate corporate transactions by the issue of Shares, give its people an opportunity to participate in the ownership of the Company and provide liquidity for Shareholders. Through this prospectus, Shine is inviting investors to subscribe for 45,000,000 Shares, at an Offer Price of $1.00 per Share. At the Offer Price, Shine will have a market capitalisation of $155 million on completion of the Offer. The Offer is fully underwritten by RBS Morgans Corporate Limited. This prospectus contains detailed information about Shine s culture, operations, financial performance, experienced management team and exciting future plans. It also outlines the potential risks associated with this investment. I encourage you to read this document carefully before making your investment decision. I look forward to welcoming you as a shareholder. Yours faithfully Tony Bellas Chairman Shine Corporate Ltd 4

5 1For personal use only INVESTMENT SUMMARY 1.1 Summary offer details ISSUER SHINE CORPORATE LTD Offer Price per Share $1.00 New Shares Vendor Shares Total number of Shares offered Total number of Shares on issue following the Offer Market capitalisation at the Offer Price 15 million 30 million 45 million 155 million $155 million 1.2 Key dates Prospectus date 28 March 2013 Offer opens 15 April 2013 Offer closes 2 May 2013 Expected date of allotment 8 May 2013 Shareholding statements expected to be dispatched 9 May 2013 Anticipated commencement of ASX trading 15 May 2013 All dates are subject to change and are indicative only. The Company reserves the right to vary these dates without prior notice. 1.3 Summary financial information $ 000s REVIEWED PRO FORMA FY10 REVIEWED PRO FORMA FY11 REVIEWED PRO FORMA FY12 REVIEWED FORECAST FY13 REVIEWED FORECAST FY14 Revenue 59,000 71,192 85, , ,832 EBITDA 19,981 21,046 23,588 27,086 33,008 EBIT 19,758 20,619 22,818 25,698 31,354 NPAT 13,016 13,819 15,460 17,299 21,263 Earnings per Share cents 13.7 cents Dividend per Share 1.5 cents 3.0 cents Price earnings ratio 9.0 times 7.3 times Dividend yield (annualised) 2 3.0% 3.0% 1 Based on 155 million ordinary Shares. 2 Anticipated dividend yield based on the Offer Price. The FY13 dividend yield has been calculated on the basis that 1.5 cents per Share is payable in respect of 2HFY13, even though investors in the IPO will only have held their Shares for approximately two months of this period. Dividends will be franked to the extent possible. Further financial information is contained in section 4. 5

6 1.4 Debt funding The Company s secured debt facility of $31.5 million (see section 7.10) was utilised to the extent of $23.7 million as at 13 March A key bank covenant relating to this facility is for borrowings not to exceed 40% of net WIP plus 50% of net disbursements. As at 31 December 2012 this ratio was 14%. The Company will continue to adopt a prudent debt policy which it will review on an ongoing basis. The Company may seek to extend its debt facility in the event that appropriate acquisition opportunities arise. 1.5 Purpose of the Offer and use of funds A total of $45 million will be raised through the Offer, of which $15 million will be raised for the Company in new equity and $30 million will be realised for the Vendor Shareholders through the sale of the Vendor Shares. 1.6 Capital structure post completion of the Offer NUMBER OF SHARES (ROUNDED) Simon Morrison million 32.5% Stephen Roche million 32.5% Other existing 9.3 million 6.0% shareholders 2 PERCENTAGE HELD (ROUNDED) Subscribers of Shares 45 million 29.0% under the Offer 3 Total Shares on completion of Offer 155 million 100% The proceeds raised by the Company through the issue of New Shares will be applied as follows: primarily to provide working capital to strengthen the balance sheet of the Company and support organic growth; and to provide the flexibility to fund the Company s acquisition strategy when appropriate opportunities arise $13,656,000 Offer costs, including underwriter s fees $1,344,000 The purpose of the Offer is to: raise new funds for those purposes listed above; and provide an opportunity for the Founders to sell down a portion of their shareholding. An ASX listing will also deliver significant benefits for Shine including: ongoing access to equity capital markets; further increase its public profile; where deemed appropriate, undertake further acquisitions by the issue of Shares; and provide employees with an opportunity to participate in the ownership of the Company. Shine has sufficient working capital to carry out its current objectives as set out in this prospectus. 1 Includes Shares held by the Founders and the entities they control. 2 Shares are held by current employees. 3 Includes Vendor Shares which form part of the Offer. 1.7 Business model summary Shine is one of Australia s largest damages based plaintiff litigation firms. It generates revenue in the form of legal fees by representing clients on a speculative fee basis and prosecuting their cases through the litigation process. Legal fees are typically charged on an hourly rate with an uplift fee in some jurisdictions (see section 2.12). The terms of the speculative fee arrangement are set out in a conditional fee agreement, and Shine s ability to charge fees is contingent upon the case resulting in damages paid by a defendant or its insurer. Shine will seek to continue to grow its business profitably by concentrating on: adherence to Shine s core values and principles (see section 2.1); a focused and disciplined approach to practice areas (see section 2.3); an engaged workforce led by an appropriately skilled Board and senior management (see sections 2.4, 3.2 and 3.3); ongoing investment in case selection and case management systems (see sections 2.6 and 2.7); emerging practice areas and new geographies (see sections 2.8 and 2.10); and a balance of organic growth and acquisitions (see section 2.9). 6

7 1.8 Dividend policy In respect of the Forecast Period, the Board intends to pay dividends of 1.5 cents per Share in October 2013 (for FY13) and an annual dividend of 3.0 cents per Share for FY14 (payable as an interim dividend in April 2014 and a final dividend in October 2014). In subsequent financial years, the Board expects to pay dividends of approximately 40% of NPAT excluding net movement in WIP and accounting for disbursements. Net movement in WIP and disbursements could have a significant effect on the Company s ability to pay dividends. No guarantee can be given about the payment of dividends, the level of franking or imputation of such dividends or the size of the payout ratios. These matters will depend on a number of factors, including the future earnings of the Company, its financial, tax and franking credit position, and the Board s view of the appropriate dividend policy at the time. 1.9 Directors and management Shine s board of directors comprises three non-executive directors, who collectively have a depth of non-executive board experience, including of ASX listed companies, and two executive directors, who are Shine s founders (see section 3.2). Shine s chairman, Tony Bellas, has over 26 years experience in senior management roles in the public and private sectors and is currently chairman of ERM Power Limited and Corporate Travel Management Limited. Carolyn Barker AM was appointed as a non-executive Director of the Company in 2009 and holds a number of senior roles in the private sector, including Endeavour Learning Group, as well as being chair of Brisbane Transport and a non-executive director of MIGAS. Greg Moynihan is currently a director of Ausenco Limited, Sunwater Limited and Corporate Travel Management Limited, having previously held senior executive positions in Citibank Australia, Metway and Suncorp Metway. Shine s executive director, Stephen Roche, joined Shine in 1981 and is Shine s longest serving staff member and a former managing partner. Stephen is a past President of the Australian Plaintiff Lawyers Association (Queensland Branch). Shine s managing director, Simon Morrison, joined Shine in 1988 and became partner in Simon has particular expertise in the field of workers compensation and is a former National President of the Australian Lawyers Alliance and current chair of the Alliance s National Workers Compensation Special Interest Group. Shine s senior management team, profiled in section 3.3, supports the Board, combining individuals with experience in areas critical to Shine s performance, including operational, finance, human resources, information technology and marketing Key risks summary Conflict of duties Shine has a paramount duty to the court, first, and then to its clients. Those duties prevail over Shine s duty to Shareholders. There may be instances where Shine and its lawyers, in exercising their duties to the court or to the client (or both), act other than in the best interests of Shareholders. An example is in settlement negotiations where Shine s duty to its client would be favoured over any short term cash flow or funding needs of Shine s business. Regulatory environment Shine operates in a regulated environment. Its business operations could be adversely affected by actions of State, Territory and Commonwealth governments, including changes in legislation, guidelines and regulations that affect the areas of law in which Shine practises. WIP recoverability because Shine operates on a speculative fee basis and in areas of law where the ultimate recovery of fees is regulated (see section 2.12), the recoverability of WIP is a key risk to the achievement of forecast revenue. A description of Shine s accounting policies in respect of revenue recognition is set out in section Growth and integration risk there is a risk that Shine may be unable to manage its future growth successfully. Historically, Shine has grown through a combination of organic growth and acquisitions. That growth strategy will continue, and may include new practice areas and geographies. A variety of factors, including unexpected integration issues, might cause future growth to be implemented less successfully than it has in the past. Case management systems Shine s business is reliant on its case management systems. Over the next few years, Shine is implementing the T2 Project which is designed to improve efficiencies in its case selection and management. Given the importance of Shine s systems in managing its business processes, any delays, cost overruns or integration issues with the T2 Project could have an adverse effect on Shine s operations and profitability. Personnel Shine depends on the talent and experience of its people. In particular, Shine s growth is reliant on attracting and retaining professional fee-earning staff. Should any of its key people or a significant number of other people leave the Company, particularly to work for a competitor, this may have an adverse effect on Shine. It may be difficult to replace them, or to do so in a timely manner or at comparable expense. Brand and reputational risk the success of Shine is reliant on its reputation and brand. Anything that diminishes Shine s reputation or brand could have a significant adverse financial effect on Shine. In particular, the actions of Shine s employees, including breaches of relevant regulations or negligence in the provision of legal advice, could damage Shine s brand and diminish future profitability and growth. As Shine has alliances with high profile individuals, such as Erin Brockovich, any harm to the reputation of those individuals may also negatively impact Shine. A more detailed list of risks relating to an investment in Shine is set out in section 5. Important notice This section is not intended to provide full information for investors intending to apply for Shares. This prospectus should be read in its entirety. The Shares offered pursuant to this prospectus carry no guarantee in respect of return of capital, return on investment, payment of dividends or the future value of the Shares. 7

8 2For personal use only COMPANY OVERVIEW 2.1 Introduction Shine was established in 1976 as a small provincial general practice offering conveyancing, commercial law, family law, litigation and other legal services. In the 1990s, Shine made the strategic decision to focus on personal injuries litigation. Since that time, Shine has enjoyed sustained growth and is now one of Australia s largest damages based plaintiff litigation firms with more than 600 staff in more than 30 offices across Queensland, New South Wales, Victoria and Western Australia. Exceptional client service is central to Shine s operating model and its success. Shine has a strong values based culture that is reflected in high staff engagement and retention of its key people. Shine embraces a local office, national firm philosophy through a decentralised operating model. This enables Shine to extend its reach and to position itself in the heart of local communities. Shine s growth has been underpinned by a commitment to Right Wrong and its three core values: always stand up for the little guy ahead of the pack dare to be different. Consistent with these values, Shine operates on a speculative fee basis, meaning that no fee is payable by a client unless they receive compensation. It has acted for thousands of injured Australians on this basis in the areas of workers compensation, motor vehicle accidents, public liability, medical negligence and catastrophic injury. Shine has been deliberate in its strategy to remain focused on damages based plaintiff litigation and not expand into other areas of law. This inch wide; mile deep strategy has allowed it to invest significantly in developing case management systems and processes. The improvement in the quality and efficiency of Shine s case management as a result of its systems and processes is a key competitive advantage. Shine continues to invest in this area to ensure it retains this competitive advantage. Shine s national brand continues to strengthen, which has resulted in growth in enquiries. Its branding was further enhanced in 2009 when it formed a relationship with internationally acclaimed environmental advocate Erin Brockovich. This relationship significantly enhanced Shine s brand and has been formalised in a 10 year alliance agreement which runs until A NATIONAL FIRM WITH A LOCAL FOCUS QUEENSLAND BRISBANE BUNDABERG CABOOLTURE CAIRNS CARINDALE CHERMSIDE DALBY GYMPIE HERVEY BAY IPSWICH HELENSVALE LOGAN MACKAY MAROOCHYDORE NORTH LAKES ROBINA SOUTHPORT SPRINGWOOD STONES CORNER STRATHPINE TOOWOOMBA TOWNSVILLE BRISBANE NEW SOUTH WALES FAIRFIELD MANLY NEWCASTLE NORTH SYDNEY PARRAMATTA SYDNEY PERTH WESTERN AUSTRALIA PERTH MELBOURNE SYDNEY VICTORIA DANDENONG MELBOURNE RESERVOIR SUNSHINE 8

9 THE GROWTH OF SHINE 2013 Commenced Aviation and Landholder Rights practice areas 2012 Former US Military Lawyer and Human Rights advocate Major Michael D Mori joined to strengthen Shine s Social Justice practice 2009 Strategic alignment with Erin Brockovich Strategic commencement of emerging practice areas 2010 Commenced in New South Wales 2008 Expanded into Western Australia th office opened in Queensland 2006 Rebranded Shine Lawyers 2004 Entered Victorian market via Workforce Legal partnership Strategic focus to specialise in personal injury litigation 1998 The arrival of mass tort litigation 1994 Brisbane office established Stephen Roche joined the partnership, which is re-named Shine Roche Simon Morrison commenced articles of clerkship with Shine Roche Stephen Roche commenced articles of clerkship with KG Shine & Dean 1976 KG Shine & Co was established in Toowoomba, Queensland

10 2.2 The industry The personal legal services industry is estimated to be valued at $3.1 billion 1, and includes personal injuries law, family law, property law, class actions, wills, probate and residential conveyancing. Shine specialises in damages based plaintiff litigation, primarily personal injuries law a subset of the personal legal services industry. Shine is the third largest plaintiff litigation firm in Australia. Shine and its largest competitors have grown significantly in recent years. However, the Directors estimate that the market share of Shine and those competitors in the personal legal services industry is still less than 20%. Shine estimates that it holds less than 4% of the personal legal services industry, which equates to no more than 10% of the personal injuries market. Barriers to entry have increased with regulatory changes and tort reform, including restrictions on advertising (the effect of which is to favour established brands in the market place). Also, the growing popularity of speculative fee work has provided a competitive advantage to those firms with access to capital. Advances in the use of technology have provided a further benefit to those firms with the capital to invest in case management systems, allowing them to operate more efficiently. In Shine s experience, key success factors in this industry include: strong brand awareness; good reputation; high success rate; access to capital; and efficient and fully integrated systems and processes. 1 Source: IBISWorld Pty Ltd Industry Report OD5125, Personal Legal Services Industry in Australia, December Further information on the regulatory framework relating to damages based plaintiff litigation is set out in section RECENT TRENDS IN DAMAGES BASED PLAINTIFF LITIGATION IN AUSTRALIA Regulatory or tort reform Shine s personal injury practice areas continue to be shaped by tort reform initiatives, including those described in section 5. Although such reforms pose risks for Shine s business, particularly to the extent that they seek to impose limits on damages or fees that can be recovered, Shine has considerable experience adapting its business model to regulatory change. Tort reform also presents opportunities, particularly in the acquisition of smaller practices which do not have the systems in place to deal with complex regulatory changes. Shine s emerging practice areas are less affected by tort reform. Increase in advertising restrictions Incorporated legal practices Regulatory push for the earlier resolution of claims Litigation funding Class actions Consolidation of smaller practices Many jurisdictions have imposed restrictions on advertising certain types of legal services, including personal injuries. In those jurisdictions, a strong brand is a competitive advantage for winning new work. The relaxation of rules (which previously required legal practices to be owned by lawyers) has allowed firms to access capital from additional sources, more readily provide ownership opportunities to staff, and assist in the attraction and retention of non-legal staff. Given the cost and time involved in the court process, the regulatory regime that applies to personal injury matters has tended to promote the early resolution of claims. Litigation funding is a worldwide trend that is becoming more prevalent in Australia, particularly with the rise of class action litigation. Litigation funders do not provide legal services. They simply fund the progress of litigation by a client in return for a contingency fee which is typically based on the settlement received by the client. Litigation funders can be complementary to legal providers as they reduce the risk for law firms by funding their WIP. In Australia, litigation funders have tended not to operate in personal injury matters. Shine has not used litigation funders to date. There has been an increase in class actions in Australia in recent years, driven in part by the availability of litigation funding. Shine is currently acting on a number of class actions and will accept further cases having regard to the alignment of such cases with Shine s values and case selection criteria. In addition to normal exit drivers of professional service firms, the increasing regulatory complexity of personal injury law in Australia has contributed to the consolidation of smaller firms. Shine expects that industry consolidation will continue and present attractive growth opportunities into the future. 10

11 2.3 Practice areas Indicative breakdown of current revenue by practice area Shine s strategy is to maintain a highly specialised focus on damages based plaintiff litigation, representing the wronged party, which it describes internally as inch wide; mile deep. Shine intends to maintain this specialisation and not become a full service law firm. 2% 12% 40% Historically Shine has focused on personal injury litigation. In recent years Shine has deepened its services to include other practice areas within damages based plaintiff litigation, such as professional negligence, human rights and environmental cases. These new practice areas are forecast to represent approximately 12% of Shine s revenue in FY13. The Company expects to continue to grow these areas. 22% 24% Employment Motor Vehicle Public Liability Medical Negligence Emerging Practice Areas SHINE S PRACTICE AREAS Personal injury Medical negligence Public liability Catastrophic injuries Workers compensation Motor vehicle accidents EMERGING PRACTICE AREAS Disability insurance and superannuation claims Professional negligence Human rights Environmental claims Class actions Shine s medical law team works exclusively for clients who have been injured by medical and health practitioners. Cases include child birth trauma and failure to properly diagnose and treat patients. For example, the team achieved a multi-million dollar settlement for a family against a hospital whose actions are alleged to have resulted in a young baby suffering brain damage. Public liability law covers a wide range of circumstances in which a person suffers injury or death. This includes accidents that occur in public, commercial or private places. Examples of public liability claims include slips, trips and falls, recreational and boating injuries, and physical or sexual assaults. Shine has run a number of high profile sexual abuse cases and, in one such case, Shine s client was awarded one of the highest exemplary damages in Australia. A catastrophic injury includes brain injury, spinal cord injury, amputations, multiple severe fractures, severe burns or the loss of a dependent. Recently Shine secured a multi-million dollar settlement for a young man who was severely injured in a motor vehicle accident. Shine acts for people injured in the workplace. Shine recently secured a major settlement for a tradesman who fell 15 metres after stepping on a broken rafter. Shine acts for people injured in motor vehicle accidents. Shine recently secured a significant settlement for a young mother who was severely injured after an intoxicated driver collided with her vehicle. Shine s disability insurance and superannuation team handles claims for insurance through a client s personal life insurance policies and superannuation schemes. Shine has obtained benefits for clients as small as $25,000 and as large as $1.2 million. Established in 2010, the Shine professional negligence team represents clients who have suffered loss at the hands of negligent professional advisors. Shine s human rights team aims to protect the rights of citizens in the areas of civil and political rights, asylum seekers, indigenous rights, and equality and discrimination. For example, Shine has recently assisted a mentally ill asylum seeker, who was being held indefinitely in detention, to receive appropriate treatment and housing. In 2012, former US military lawyer Major Michael D. Mori joined the Shine human rights team. The Shine environmental team protects the rights of individuals and communities who have suffered physical injuries or financial detriment as a result of environmental damage or misuse. Cases include loss from crop destruction, negligent farm spraying, water contamination, factory pollution and industrial air pollution. One of Shine s current cases is a group action on behalf of the fishing and local industries in Gladstone. Shine s clients allege loss caused by the dredging and development in Gladstone Harbour. Shine s class action practice represents the interests of groups of people who have been wronged. For example, Shine is currently representing property owners against the Queensland Government for permitting the development of land at Collingwood Park which suffered subsidence. 11

12 EMERGING PRACTICE AREAS First party insurance recovery claims Landowners rights Aviation Product liability Asbestos compensation Shine has joined forces with Risk Worldwide, a global consulting firm that specialises in disaster insurance work. Shine and Risk Worldwide are working together on claims relating to the floods in Queensland and Cyclone Yasi. They are also helping property owners in Christchurch recover their full entitlement under insurance policies after the recent devastating earthquakes. Further details of the Risk Worldwide arrangements are in section 7.9. Recognising the growth in the energy industry in Australia, Shine has recently acquired a team which provides advice in connection with Queensland s coal seam gas industry. The team represents land owners and works to protect their rights and ensure adequate compensation in negotiations with gas companies. Shine s aviation claims team assists the victims of aircraft accidents and their families through the complicated process of claiming compensation. This includes accidents in Australia or overseas. Shine acts for clients harmed through faulty products and devices. Shine is currently representing hundreds of clients whose quality of life has been affected by faulty hip prostheses that were recalled globally in August Shine represents victims of asbestos related diseases throughout Australia and in overseas jurisdictions, including the UK. For example, Shine secured a substantial settlement for a man who was diagnosed with asbestos cancer (mesothelioma) after his exposure to asbestos in the 1970s when working as a boiler maker. 2.4 Shine s people Shine has a strong values based culture that is reflected in high staff engagement and retention of its key people. Shine works hard to attract staff closely aligned to its values. Shine attracts, retains and incentivises talent by promoting its values based culture and by providing an environment where individuals and teams are recognised, rewarded and inspired to deliver outcomes for clients. Celebrating successes and milestones is encouraged. Shine engages an independent consultant, Aon Hewitt, to undertake a nationally benchmarked annual survey of its people. This survey measures their overall engagement as employees of Shine. Topics include, among other things, remuneration, communication, learning and development, recognition, work practices, development opportunities and work place health and safety. This survey assists Shine to shape the future direction of the firm. Shine also undertakes its own bi-monthly survey that focuses on its culture and values and provides a high level snap shot of staff engagement throughout the year that may impact operational objectives. Shine s people all have annual goals for day to day operations management, with metrics based on the following key areas: maximising damages for clients; building strong teams; reducing file time; working smart; and attracting new clients. 12

13 New employees are inducted at a purpose built residential training facility in the Lockyer Valley just outside of Toowoomba. This induction process is critical in providing skills and systems training to new employees as well as instilling Shine s culture and values. The training facility is also used for ongoing training and development purposes, helping further develop the pipeline of talent within the Company. 2.6 Case selection Shine s decision on whether to accept an individual case is critical to its success as Shine acts for clients on a speculative fee basis. Shine s high volume of enquiry is managed through a comprehensive process summarised in the diagram below: Staff numbers FY04 FY YTD The figures above comprise the Company, Shine Partnership and the Service Trust as if they had operated as one entity (see section 2.1 for further details of corporate history). Shine has enjoyed numerous accolades as an employer of choice including: The National Minister s Award for Outstanding Equal Employment Opportunity Initiative / Result for the Advancement of Women (EOWA s Business Achievement Awards 2010); and Award for Gender Equality in the Workplace (Australian Human Resources Institute (AHRI) 2012). 2.5 Clients At Shine, clients are at the heart of decision making. By operating on a speculative fee basis, Shine provides legal representation for those who might not otherwise be able to afford it. In line with one of Shine s core values to always stand up for the little guy, Shine will typically represent individual people or families, or in the case of a class action, groups of people, in those practice areas described in section 2.3. Over time, Shine s client base has evolved to include: communities affected by environmental issues; individuals who have suffered loss due to negligent professional advice; insurance policy holders seeking to recover damages against their policies; and individuals whose human rights have been violated. In essence, Shine s client base includes anyone who has suffered a wrong, the loss for which can be pursued by application of Shine s expertise in damages based plaintiff litigation. Given the nature of the industry, whilst Shine does not tend to have recurrent clients (as injuries tend to be one off), it does benefit from client and other referrals. Case selection process NEW CLIENT TEAM Call centre Capture information, pre-qualify the enquiry and allocate it appropriately INITIAL CLIENT INTERVIEW Conducted by legal teams Obtain detailed instructions from a prospective client for referral to the review panel REVIEW PANEL Chaired by a senior lawyer Accept or reject a case and create a plan on approved cases As a consequence of this assessment process, and enquiries related to cases outside Shine s practice areas (eg family, industrial relations, property and criminal law), Shine proceeded with less than 20% of initial enquiries received into the business in FY12. Number of enquiries and new file openings 30,000 25,000 20,000 15,000 10,000 5, New enquiries New file openings Case management One of Shine s key competitive advantages has been its ability to efficiently manage cases and achieve a successful outcome for its clients. The Company has a number of controls in place, designed to maximise the recovery of damages for clients and manage cycle time and the recovery of WIP. These include: a customised case management system with automated workflows, case assessment process, WIP controls and performance measures; detailed case plans to assist Shine s lawyers to ensure individual cases are adequately prepared, issues identified and evidence gathered; an independent review committee to consider complex case issues; monthly provisioning to revise and provide for WIP recovery; and measurement and setting of key performance indicators to provide visibility and manage performance against critical metrics. 13

14 The day to day conduct of each case is supervised at a branch level. Dedicated departments, separate to the legal departments, are responsible for fielding initial enquiries (new client team) and for collecting settlement funds (settlement services team). Shine is committed to continuous improvement in its case management systems and processes. The T2 Project is tasked with a number of important business improvement goals, including to increase the level of damages recovered for Shine s clients, reduce the cycle time (the speed with which a matter is brought to a conclusion for clients), improve recoverability of Shine s fees, increase the ratio of fee-earning to non-fee-earning staff in the business, and make Shine s systems and processes increasingly scalable and agile across different geographies. 2.8 Growth Since it was established in 1976, Shine has demonstrated a track record of sustained growth. The graphs below illustrate Shine s revenue and EBITDA growth from FY08 to FY14. The graph below illustrates the mix of organic and acquisition growth from FY10 to FY14. Revenue growth ($m): organic and acquisitions FY10 FY FY10 FY11 FY12 FY13(f) FY14(f) Organic Acquisitions Acquisition growth The figures for FY10, FY11 and FY12 shown in the graphs comprise the results of the Company, Shine Partnership and the Service Trust as if they had operated as one entity (see section 4.1.2). Revenue ($m) FY08 FY FY FY FY10 EBITDA ($m) FY08 FY FY FY FY13 (f) 27.1 FY08 FY09 FY10 FY11 FY12 FY13 (f) FY14 (f) 33.0 FY14 (f) The figures above comprise results of the Company, Shine Partnership and the Service Trust as if they had operated as one entity (see section 4.1.2). The figures for FY08 and FY09 are based on management accounts that have not been audited or reviewed. Shine s growth has been driven by: strong brand positioning and innovative marketing strategies (including direct consumer marketing through traditional and digital media, the Erin Brockovich alliance, expanded geographic footprint and growing referral partnerships) leading to growth in client enquiries; an ongoing focus on achieving better damages outcomes for clients, enhancing Shine s reputation and referral base and improving WIP recoverability; case selection and case management systems and processes; establishing new offices and developing new practice areas; successful integration of acquired firms and introduction of business improvement initiatives to enhance the profitability of these acquisitions; attracting, retaining and developing its people; and investing in technology to enhance case management. Shine is determined to maintain its track record of growth while still doing what is right for its clients, its people, the community and the environment. 2.9 Acquisition strategy Since 1976, Shine has successfully acquired and integrated more than 20 legal firms. It has also established a similar number of greenfield sites (see the table below). The business was founded in Queensland and has a strong foothold in that market. It successfully entered Western Australia and Victoria in 2008 and New South Wales in

15 Shine s acquisition criteria include: alignment of values and cultural fit; ease of integration into Shine s business model; value of WIP; profitability and cashflow; geographic location; track record; and synergistic opportunities. Recent acquisitions have been funded through Shine s existing debt facility. In some recent acquisitions, Shine has used earn out arrangements. Shine has also undertaken file acquisitions, where it purchases files from other law firms without acquiring the associated overheads. Shine will continue to assess the acquisition of damages based plaintiff litigation firms within Australia that are consistent with its business strategy and values. SHINE S GROWTH Founded Toowoomba, QLD KG Shine & Co 1978 Acquisition Toowoomba, QLD Beirne & Noel 1983 Acquisition Toowoomba, QLD R P Beirne 1984 Acquisition Chinchilla, QLD Leslie L Ross 1990 Merger Toowoomba, QLD Murdoch Phillips and McVeigh 1994 Greenfield Brisbane, QLD 2000 Greenfield Gold Coast, QLD 2001 Acquisition Cairns, QLD Lindsay Duffy Lawyers 2002 Greenfield Townsville, QLD 2003 Greenfield Sunshine Coast, QLD Acquisition Cairns, QLD Adams and Associates 2004 Acquisition Redcliffe, QLD Cooke & Hutchinson (personal injury only) Greenfield Melbourne, Vic Workforce Legal partnership (50%) 2005 Greenfield Caboolture, QLD Acquisition Mackay, QLD Vince Morrin and Associates 2007 Greenfield Gympie, QLD SHINE S GROWTH Greenfield Perth, WA Acquisition Melbourne, VIC Workforce Legal (50% balance) 2009 Greenfield Bundaberg, QLD Greenfield Greenfield Reservoir, Vic Sunshine, Vic Acquisition Melbourne, Vic VA Law 2009 Acquisition Noosaville, QLD Law Essentials (personal injury only) 2010 Acquisition North Sydney, NSW Somerville and Co (personal injury only) Acquisition Caloundra, QLD AB Law 2011 Greenfield North Lakes, QLD Greenfield Greenfield Greenfield Robina, QLD Helensvale, QLD Gladstone, QLD 2012 Greenfield Hervey Bay, QLD Greenfield Parramatta, NSW Acquisition Newcastle, NSW Palmieri Law Firm Acquisition Sydney, NSW Manly, NSW Walker Legal Acquisition Brisbane, QLD AK Compensation Lawyers Acquisition Toowoomba, QLD Cleary & Lee Acquisition Toowoomba, QLD Dalby, QLD Shannon Donaldson Province Lawyers Acquisition Fairfield, NSW Ron Kramer Associates RKA Lawyers Acquisition Fairfield, NSW Eugene Lepore & Associates Greenfield Strathpine, QLD Westfield Retail Centre 2013 Greenfield Chermside, QLD Westfield Retail Centre Greenfield Carindale, QLD Westfield Retail Centre Greenfield Greenfield Strathpine, QLD Ipswich, QLD Acquisition Logan, QLD Keith Scott & Associates 2008 Greenfield Dandenong, VIC 15

16 Erin Brockovich Shine s relationship with internationally renowned Erin Brockovich began in 2007, culminating in a formal strategic partnership agreement. In Australia, Erin exclusively consults with Shine on class actions, environmental cases and other strategic initiatives. Erin has a long-term contract with Shine, described in section International opportunities UNITED KINGDOM Since 2000 Shine has been exploring the feasibility of entering the United Kingdom legal market. In that time Shine has actively recruited lawyers to Australia from the United Kingdom. Recent and proposed reforms may present opportunities for Shine to enter into that market. With its experience in the Australian market and its established systems and processes, Shine considers itself well placed to capitalise on these potential opportunities. USA Given Shine s relationship with Erin Brockovich, her strong referral base and other opportunities, the Directors have kept a watching brief on the US legal market and will continue to do so in the future. RISK WORLDWIDE Since early 2011, Shine has worked closely with insurance specialist Risk Worldwide, a US based consulting firm which specialises in loss assessment and insurance claims. Shine engaged Risk Worldwide to provide claims consulting in relation to the Queensland floods and Cyclone Yasi during the 2011 summer in Australia. Shine also is a joint venture partner of Risk Worldwide New Zealand Limited (RWWNZ), a New Zealand limited liability company, assisting policy holders who have suffered loss from the Christchurch earthquakes. RWWNZ does not provide legal advice. Further details of the arrangements in respect of RWWNZ are in section Social responsibility and community Shine s business has been founded on social responsibility. Its people are instilled with a strong sense of social responsibility and the company pursues social justice on a daily basis for its clients. It has a dedicated social justice and human rights team led by respected social justice advocate George Newhouse and former US military lawyer Major Michael D. Mori that enables minorities to seek justice and have their voices heard. In pursuit of this objective, the Founders established the Shine a Light Foundation to support injured Australians through injury prevention, education and rehabilitation. Shine s people have the opportunity to support this initiative through fortnightly deductions from their salary. Shine helped establish the Environmental Justice Society (EJS) to help Australians voice their concerns and pursue justice if their life, or the livelihood of their community, is negatively impacted by the actions of others. It is a group of environmentally conscious lawyers, doctors, scientists and campaigners who want to empower individuals and communities with the knowledge and resources to rally support and take action to bring negligent companies to account. Erin Brockovich is the patron of the EJS and Shine provides ongoing administrative support. 16

17 2.12 Regulatory framework INCORPORATED LEGAL PRACTICE Shine is regulated as an incorporated legal practice (ILP), which is a corporation that engages in legal practice. Each State and Territory regulates legal practices. Traditionally, the legislation governing the legal profession only allowed lawyers to receive the benefits of a legal practice. More recently, in all States and Territories, except South Australia, model laws have been adopted (Legal Profession Acts) which allow a corporation to conduct a legal practice. ILPs can have: directors and shareholders who are not lawyers; and business interests outside of the legal practice. The relevant Legal Profession Acts regulate the structure and operation of ILPs to minimise the risk that a lawyer s legal and professional responsibilities are compromised by the ILP structure. The most fundamental of these restrictions is that an ILP must have at least one director who holds an unrestricted practising certificate (Legal Practitioner Director). Each Legal Practitioner Director is responsible for managing the legal services provided by the ILP and ensuring that appropriate management systems are in place to ensure that the legal services provided by the ILP are in accordance with the professional obligations of legal practitioners. To address the potential conflict between a director s duty to act in the best interests of the company and a legal practitioner s duties to the client and court, the Legal Profession Acts include safeguards to ensure that the obligations of the Legal Practitioner Director as a legal practitioner are preserved. Under the Legal Profession Acts, the legislation is given precedence over the company s Constitution, to the extent of any inconsistency, and allows the regulations associated with the Legal Profession Acts to displace the operation of the Corporations Act. REGULATION OF FEES Shine s profitability is affected by its ability to recover legal fees from clients. Accordingly, Shine has taken the following measures to assist in the recoverability of its legal fees: ensuring a proper balance of lawyers and non-legally qualified staff; charging appropriate fees; having a costs agreement which is enforceable (ie satisfies all disclosure obligations under the Legal Profession Acts and is a suitable agreement); and having systems and processes in place to effectively manage WIP. In some States and Territories, statutory provisions may impact on the maximum amount of legal fees being charged, regardless of costs agreements entered into by lawyers and their clients. Accordingly, Shine s profitability will be affected by any such limitations. In each State and Territory, there exist statutory rights for clients to seek review of legal fees. Shine, like all law firms in Australia, is subject to any client exercising those rights. REGULATION OF PERSONAL INJURY ADVERTISING Under the Legal Profession Acts, advertising by legal practitioners must not be false, misleading or deceptive or otherwise in contravention of the Competition and Consumer Act 2010 (Cth). In addition to the restrictions on advertising legal services generally, each of the Relevant Jurisdictions has regulations about personal injury advertising and, in particular, restrictions on the advertising of personal injury claims on a speculative fee basis. NON-COMPLIANCE WITH REGULATIONS The regulator in each Relevant Jurisdiction has the power to investigate and prosecute breaches under the Legal Profession Acts and breaches of the advertising restrictions described above. Where Shine fails to comply with the Legal Profession Acts and other relevant regulations, Shine may be subject to fines and any individual legal practitioner involved in non-compliance (and the Legal Practitioner Director in some circumstances) may be subject to disciplinary action by the regulator of the Relevant Jurisdiction, depending on the severity of the non-compliance. Disciplinary action may include suspension or cancellation of practising certificates of the individual legal practitioner and, in serious cases, disqualification of the ILP. REGULATORY REFORMS A number of regulatory reforms which are relevant to areas within which Shine operates are currently being considered: the establishment of a national injury insurance scheme (NIIS), which would provide fully funded care and support for all cases of catastrophic injury; the establishment of a national disability insurance scheme (NDIS), which would provide all Australians with a significant and ongoing disability with long-term care and support, such as home and vehicle modifications, personal care, respite, community access support, domestic and transport assistance, but not income; the Queensland workers compensation review; and the NSW Compulsory Third Party (CTP) scheme. A more detailed description of these reforms is set out in section 5.2. Shine is engaged by each of its clients on the basis of a conditional costs agreement (also known as a speculative fee arrangement). Where legislation permits, Shine will also normally charge an uplift fee (of up to 25% of Shine s WIP) to compensate for the risk to Shine of undertaking work without a guarantee of payment and the subsequent delay that will occur from commencement until payment. 17

18 3 OWNERSHIP, MANAGEMENT AND CORPORATE GOVERNANCE 3.1 Shine corporate structure The evolution of Shine led to it becoming a limited entity on 19 December 2008 and converting to a public company on 8 January It began providing legal services as an ILP in Queensland, Victoria and Western Australia in 2009 and in New South Wales in Its holding company, Shine Corporate Ltd, was registered in Queensland on 13 March It is the ultimate holding company for the members of the Group as illustrated in the following diagram. SHINE CORPORATE LTD ACN SHINE LAWYERS LIMITED ACN % SHINE NZ PTY LTD ACN % 3.2 Board of directors TONY BELLAS BEcon, DipEd, MBA, FAIM, MAICD, ASA Independent Chairman and Non-Executive Director Tony joined Shine in 2013 as independent chairman and non-executive Director. He has over 26 years experience in senior management roles in the public and private sectors. Currently chairman of ERM Power Limited and Corporate Travel Management Limited and director of a number of other unlisted companies, Tony was previously Chief Executive of a number of major companies including: Seymour Group (November 2007 to June 2010) Queensland s largest private investment and development company; Ergon Energy Corporation Limited (January 2004 to November 2007) a Queensland Government Owned Corporation involved in electricity distribution; and CS Energy Limited (December 2001 to January 2004) a Queensland Government Owned Corporation involved in base load electricity generation. Prior to this, Tony had a long career with Queensland Treasury where he reached the position of Deputy Under Treasurer. In that role, Tony had oversight of a number of related Treasury operations including Fiscal Strategy, Office of Government Owned Corporations and Office of State Revenue. CAROLYN BARKER AM BBus, MBA, FAIM Independent Non-Executive Director Carolyn joined the Board in 2009 as a non-executive Director. Carolyn commenced her professional career as an owner and operator of a nationally accredited advertising agency. For ten years, she led the Australian Institute of Management QLD and NT and the Institute s national commercial businesses in online learning and publishing. In 2010 she was appointed Chief Executive Officer (CEO) of the Endeavour Learning Group, an Australasian private education business, owned by private equity. Carolyn is Chair of Brisbane Transport and a non-executive director of MIGAS. She was previously a director of private companies The Cyber Institute Pty Ltd and In Touch Pty Ltd. In 2000 she was made the inaugural chair of The Queensland Orchestra, a position she held for eight years. In 2005, Carolyn was awarded a Member of the Order of Australia for her service to business through management education. She is an adjunct professor in business at Griffith University. 18

19 GREG MOYNIHAN BCom, Grad Dip SIA, CPA, FFin, MAICD Independent Non-Executive Director Greg joined Shine in 2013 as a non-executive Director. He has spent most of his career within the broad finance sector and is a former CEO of Metway Bank Limited. He has held senior executive positions in Citibank Australia, Metway and Suncorp Metway covering a range of disciplines including financial and capital management, investment management, and corporate strategy. Greg has held past directorships with a range of companies including Cashcard Australia Ltd, LJ Hooker Ltd, RACQ Insurance Ltd, HFA Limited and various subsidiaries of Suncorp Metway Ltd. He is currently a director of Ausenco Limited (since 2008), Sunwater Limited (since 2007) and Corporate Travel Management Limited (since 2010) and several unlisted companies. SIMON MORRISON LLB Managing Director Simon joined Shine in 1988 and became partner in Simon is a former National President of the Australian Lawyers Alliance (ALA) and chairs the Alliance s National Workers Compensation Special Interest Group. He is also a member of the American Association of Justice (formerly the Association of Trial Lawyers of America) and sits on that Association s Board of Governors. Simon has particular expertise in the field of workers compensation and is an acknowledged leader at both a state and national level. He has given evidence at numerous Government inquiries and has assisted in drafting legislation and is a regular speaker at national and state conferences in this field. Simon is currently the Managing Director (MD) of Shine, spearheading the firm s strategic and operational objectives. STEPHEN ROCHE LLB, LLM, FAIM, GAICD Executive Director Stephen joined Shine in 1981 and is Shine s longest serving staff member. He is a former Managing Partner of Shine and was among the first solicitors in Queensland to be awarded Specialist Accreditation in Personal Injuries by the Queensland Law Society. Stephen is a Fellow of the Australian Institute of Management, an active member of The Executive Connection, a past President of the Australian Plaintiff Lawyers Association (Queensland Branch, since renamed ALA) and a past member of the National Executive. He is admitted to practice in various states in Australia. His current role is strategic opportunities. The Solicitors Complaints Tribunal suspended Stephen Roche from practice for 12 months from March 2003 after finding him guilty of professional misconduct on the basis of two charges brought by The Council of Queensland Law Society Incorporated. Following that period, Mr Roche s unrestricted practicing certificate was reinstated. Further details of the proceedings are set out in section 8.1 He holds a Bachelor of Laws, is a Queensland Law Society Accredited Specialist in Personal Injury law and is admitted to practice in several states of Australia. 3.3 Management team JODIE WILLEY LLB (Hons) Chief Executive Officer Jodie joined Shine in 1995 as an articled clerk and has spent 18 years with the firm. She possesses a diverse range of experience, having been a senior legal practitioner specialising in plaintiff litigation prior to taking on senior leadership roles within the business. Jodie is an Accredited Specialist in Personal injury law and a member of a number of professional associations. CRAIG THOMPSON BCom, ICAA Chief Financial Officer Craig joined Shine in 2011 as Chief Financial Officer (CFO). Craig commenced his career at one of the big four accounting firms and is a member of the Institute of Chartered Accountants in Australia. He has extensive financial, risk management and executive experience gained over 20 years working in global corporates, including Gallagher Bassett Services (a specialist claims management subsidiary of a US listed company), Flight Centre, Anglo Coal & Shell Coal and Dresdner Kleinwort Benson. 19

20 JOHN GEORGE BBus, CPA, FAIM, ACIS Company Secretary and Head of Investor Relations John was appointed to the role of Company Secretary and head of investor relations in 2013 after a period as a non-executive Director of Shine from Over the past two decades, John has had a wide range of experience, having worked in a big four accounting firm, in corporate regulation and capital markets at ASIC and corporate advisory in public practice. Throughout John s career he has worked for, and advised, both domestic and international clients in strategy, capital raising and mergers and acquisitions. John was most recently principal of Standard Edge, a corporate advisory firm specialising in transaction management, strategy and governance. John is a nonexecutive director of Gladstone Airport Corporation and advisory board member of McNab Constructions. John is also a trustee of the Bravehearts Endowment Fund. SIMON BUTTON EMBA, BEng, FAIM, MAICD Chief Information Officer Simon joined Shine in 2011 as Chief Information Officer. Simon is responsible for the entire Information, Communication and Technology strategy and management at Shine. He is also leading the T2 Project to revolutionise Shine s practice management. Simon s career spans almost 20 years with leadership experience gained within Australian and international technology, telecommunication and professional services sectors. Prior to joining Shine, Simon held leadership roles with Ozmota in the US and Australia, Benefon in the UK, and Voxson in Australia. Simon is also a non-executive Director of Queensland Kids. JACINTA GILES MEd, PG Dip Prof Comms, BCRA, AAICD Chief Human Resources Officer GRAEME MCFADYEN BEcon, MBA, GAICD Chief Operating Officer Graeme joined Shine in 2012 as Chief Operating Officer. A graduate of the Australian Institute of Company Directors, he has over 18 years experience in legal practice management and previously held senior leadership positions in other large plaintiff litigation law firms. He has a deep understanding of the legal industry, helping Shine to deliver on its client service promise by devising and implementing effective operational strategies and processes. Graeme is the Director of AEIOU Foundation for kids with autism. Jacinta joined Shine in 2011 as Chief Human Resources Officer, with responsibility for human resources strategy and management including talent and change, culture, learning and development, leadership development, attraction and selection, internal communications, human resources advisory and safety. Jacinta s human resources career spans over 15 years in both domestic and international roles, across a broad range of industries including: professional services, university sector, mining and telecommunications. Prior to this appointment, she spent 9 years working with Deloitte in senior leadership roles within New Zealand and the United States. LISA FLYNN LLB (Hons), BCom (Politics and Public Policy) National Legal Partner Lisa has worked with Shine for nearly 15 years, initially engaged in an administrative role and soon after as an articled clerk. Prior to her role as National Legal Partner, she held a variety of senior legal roles within the firm. In her current role as National Legal Partner, she is responsible for leading and managing the legal operations of the Company. Lisa possesses a passion for, and an in depth knowledge of, the needs of Shine s clients and people. STEPHEN DEANE DM Psych (Comms), BB Comms, MAICD Chief Marketing Officer Stephen joined Shine in 2012 as Chief Marketing Officer. He is an executive level marketing and communication specialist with nearly 20 years experience working across brand, marketing strategy and customer relationship management, in both domestic and international markets. He has worked with the likes of Brisbane Marketing, a subsidiary of the Brisbane City Council, and Mindshare in Singapore, a global media network with nearly 6,000 people in 67 countries. Stephen is a member of a number of professional associations, including CMO Global, the Institute of Company Directors, the Association for Data-Driven Marketing & Advertising and the Australian Marketing Institute. 20

21 3.4 Responsibility of the Board GRANT DEARLOVE LLB, LLM, MBA, GDip Applied Corporate Governance AICS, FAIM Special Practice Areas Partner Grant joined Shine in 2009 and has been admitted as a solicitor for 20 years practising in the fields of commercial and insurance litigation. Grant currently leads Shine s Special Practice Areas including: professional negligence, commercial, class action, environmental, insurance contracts, medical, energy, major and project litigation divisions. Grant also has the responsibility of working with Shine s executive team, expanding Shine into new areas of litigation. SCOPE OF RESPONSIBILITY OF BOARD The Board is responsible for the corporate governance of the Company and has adopted a board charter (Charter). A guiding principle of the Charter is that the Board act in good faith and in the best interests of the Company. In assessing the Company s best interests the Board may also have regard to the interests of: Shareholders (with a view to building sustainable value for them); employees of the Group; and other people or entities with whom the Group deals, Apart from his legal career Grant has also held management and governance roles. He is a non-executive director on a number of private and public sector boards as well as being the former MD of one of Australia s largest property and real estate companies. He has spent his life in the professional services arena and studied leadership of professional service organisations at Harvard University. STUART MACLEOD LLB Queensland Legal Partner Stuart joined Shine in He has been admitted as a solicitor for 16 years practising exclusively in the area of plaintiff personal injury litigation. Stuart commenced his career in the UK and trained and worked with one of the UK s largest personal injury law firms before being recruited by Shine. Stuart has held a number of roles at Shine. Initially he specialised in WorkCover litigation before taking up senior leadership positions within the firm. Stuart currently holds the position of Queensland Legal Partner responsible for the operational performance of Shine s largest jurisdiction. JAMES CHRARA LLB New South Wales and Western Australia Legal Partner James joined Shine in 2008 with over 10 years prior experience in plaintiff and defendant litigation. In his role as Legal Partner of New South Wales and Western Australia, he is responsible for the operational performance of these jurisdictions. In the last three years James has grown the NSW region from one to seven offices. He has been instrumental in acquiring offices, driving change and the integration and implementation of Shine s processes within the region. James is a member of the Legislative Review sub-committee of the Australian Lawyers Alliance. and the unique obligations of Shine Lawyers as an ILP, including the duties it owes to the court and to its clients. The Board s broad function is to: chart strategy and set financial targets for the Group; monitor the implementation and execution of strategy and performance against financial targets; and appoint and oversee the performance of executive management, and generally to take an effective leadership role in relation to the Group. Power and authority in certain areas is specifically reserved to the Board consistent with its function as outlined above. These areas include: determining the Board s composition (including appointment and retirement or removal of Directors); oversight of the Group (including its control and accountability systems); appointing and removing the CEO or equivalent; where appropriate, ratifying the appointment and the removal of members of the senior management team; reviewing, ratifying and monitoring systems of risk management and internal control, codes of conduct, and legal compliance; approving and formulating company strategy and policy; monitoring the senior management team s implementation of strategy; approving and monitoring the progress of major capital expenditure, capital management, and acquisitions and sales; approving and monitoring financial and other reporting; performance of investment and treasury functions; monitoring industry developments relevant to the Group and its business; developing suitable key indicators of financial performance for the Group and its business; having input in and granting final approval of corporate strategy and performance objectives developed by management; the overall corporate governance of the Group (including its strategic direction and goals for management, and monitoring the achievement of these goals); and oversight of committees (Committees). 21

22 COMPOSITION OF BOARD The composition of the Board will be subject to the following principles: members with a broad range of experience, expertise, skills, diversity and contacts relevant to the Group and its business; no less than five Directors, half of whom should be non-executive Directors; more than five Directors where the Board considers that additional expertise is required in specific areas or when an outstanding candidate is identified; and a majority of independent directors. Independence is determined by having regard to whether the Director is free from any interest and any business or other relationship, which could, or could reasonably be perceived to materially interfere with the Director s ability to exercise independent judgement. The Board members may be deemed to not be independent based upon the length of their membership on the Board and their associated interests as shareholders and associates of clients. A separate functioning board exists for Shine Lawyers, which must always include at least one Legal Practitioner Director. SUMMARY OF CHARTER Shine has adopted the Charter (which will be reviewed and amended from time to time as the Board considers appropriate) to give formal recognition of the Board s role and responsibilities and to specify how Shine is governed so as to promote Shine and protect the interests of Shareholders, employees, clients and the broader community. The Charter is available on Shine s website at To complement the Charter, Shine has adopted an Audit and Risk Management Committee charter, a Remuneration Committee charter, a Nominations Committee charter, a code of conduct, a remuneration policy, a securities trading policy, a continuous disclosure policy, a diversity policy and a shareholder communication policy. BOARD COMMITTEES Audit and Risk Management Committee The Audit and Risk Management Committee oversees the structure and management systems that ensure the integrity of Shine s financial reporting. Committee members have financial expertise and understand the industry in which Shine operates. The committee meets at least two times per year. An agenda is prepared, and papers circulated to committee members before each meeting. Shine s MD, CEO and CFO and external auditors may attend committee meetings. The Audit and Risk Management Committee reviews Shine s annual financial reports and makes recommendations to the Board on adopting financial statements. The committee provides additional assurance to the Board with regard to the quality and reliability of financial information, financial controls and financial risk management. The committee has the authority to seek information from any officer or employee of the Company and to obtain advice from external independent experts. The committee reviews the independence of the external auditor and reports on this issue to the Board. Greg Moynihan, Tony Bellas and Carolyn Barker (Shine s independent non-executive Directors) comprise the Audit and Risk Management Committee and the committee s charter is available on Shine s website at Nominations Committee The Nominations Committee provides advice and makes recommendations to the Board about the appointment of new Directors (both executive and non-executive) and of the MD, CEO and CFO and, to the extent delegated to it by the Board, other members of the senior management team. It does this by: assessing the skills required by the Board and the extent to which the required skills are represented on the Board; establishing processes for: the review of the individual Directors and the Chairman, and the Board as a whole; the identification of suitable candidates for appointment to the Board as additional members or to succeed existing members; making recommendations to the Board on Directors appointments or Board and Committee structure; and ensuring that the Company complies with the Diversity Policy (see below) and implements the strategies developed under it. Tony Bellas, Greg Moynihan and Carolyn Barker (Shine s independent non-executive Directors) comprise the Nominations Committee. The committee s charter is available on Shine s website at Remuneration Committee The Remuneration Committee reviews remuneration for the MD, CEO and CFO and other members of the senior management team and non-executive Directors against Group and individual performance and makes recommendations to the Board, including as necessary to facilitate compliance with the Diversity Policy (see opposite page). 22

23 The committee also oversees supporting governance procedures and Group policy on remuneration, including: general remuneration practices; performance management; equity participation, and other incentive programs; directors and officers and other insurance arrangements; and superannuation. internally identify and report information which may need to be disclosed and sets out practical implementation processes in order to ensure any indentified information is adequately communicated to ASX and Shareholders. The Disclosure Policy also sets out the exceptions to the disclosure requirements. Any non-compliance with the Disclosure Policy will be regarded as an act of serious misconduct. The Disclosure Policy is available on Shine s website at In undertaking its work, the Remuneration Committee may seek the advice of independent external experts. A remuneration policy has also been adopted by the Company setting out the factors which the Remuneration Committee should consider when setting remuneration. Carolyn Barker, Greg Moynihan and Tony Bellas (Shine s independent non-executive Directors) comprise the Remuneration Committee. A copy of the committee s charter and the remuneration policy are available on Shine s website at Code of Conduct The Company has adopted a code of conduct to guide Directors in the performance of their duties. A copy of the Code of Conduct is available on Shine s website at Policies SECURITIES TRADING POLICY A securities trading policy (Trading Policy) has been adopted by the Board to provide guidance to the Board employees and other stakeholders of Shine, where they are contemplating dealing in Shine s securities or the securities of entities with whom Shine may have dealings. The Trading Policy is designed to ensure that any trading in Shine s securities is in accordance with the law and minimises the possibility of misperceptions arising in relation to Directors and employees dealings in Shine s securities or securities of other entities. Any non-compliance with the Trading Policy will be regarded as an act of serious misconduct. The Trading Policy is available on Shine s website at CONTINUOUS DISCLOSURE POLICY The Board has adopted a continuous disclosure policy (Disclosure Policy), which sets out procedures to be adopted by the Board to ensure Shine complies with its continuous disclosure obligations to keep the market fully informed of information which may have a material effect on the price or value of the Company s securities. The Board is responsible for determining whether information is such that it would have a material effect on the price or value of Shine s securities. The Disclosure Policy provides a framework for the Board and officers of Shine to DIVERSITY POLICY Shine is committed to complying with the diversity recommendations published by ASX and promoting diversity among employees, consultants and senior management, and has adopted a policy in relation to diversity (Diversity Policy). Shine defines diversity to include, but not be limited to, gender, age, ethnicity and cultural background. The Diversity Policy adopted by the Board outlines Shine s commitment to fostering a corporate culture that embraces diversity and provides a process for the Board to determine measurable objectives and procedures to implement and report against to achieve its diversity goals. Shine s Nominations Committee is responsible for implementing the Diversity Policy, setting the Company s measurable objectives and benchmarks for achieving diversity and reporting to the Board on compliance with the Diversity Policy. As part of its role, Shine s Remuneration Committee is responsible for formulating and implementing a Company remuneration policy. Under the Diversity Policy, a facet of this role will include reporting to the Board annually on the proportion of men and women in Shine s workforce and their relative levels of remuneration. The Board will assess and report annually to Shareholders on Shine s progress towards achieving its diversity goals. The Diversity Policy is available on Shine s website at Compliance with ASX Corporate Governance Principles and Recommendations The ASX document, Principles of Good Corporate Governance and Best Practice Recommendations (Guidelines) was published by the ASX Corporate Governance Council with the aim of enhancing the credibility and transparency of Australia s capital markets. Shine s corporate governance Charter has been drafted in light of the Guidelines. The Board has assessed Shine s current practice against the Guidelines and outlines its assessment on the following pages. 23

24 PRINCIPLES AND RECOMMENDATIONS COMPLIANCE COMPLY Principle 1 Lay solid foundations for management and oversight 1.1 Establish the functions reserved to the Board and those delegated to manage and disclose those functions. The Board is responsible for overall corporate governance of the Company. The role of the Board and delegation to management have been formalised in the Charter which outlines the main corporate governance practices in place for the Company and to which the Board and each Director are committed. The conduct of the Board is also governed by the Constitution, and where there is inconsistency with that document, the Constitution prevails to the extent of the inconsistency. Complies. 1.2 Disclose the process for evaluating the performance of senior executives. The Charter will be reviewed and amended from time to time as appropriate taking into consideration practical experience gained in operating as a listed company. The Board s broad function is to chart strategy and set financial targets for the Company, monitor the implementation and execution of strategy and performance against financial targets, appoint and oversee the performance of executive management, and generally to take an effective leadership role in relation to the Company. The Chairman, with assistance from the Nominations Committee, annually assesses the performance of Directors and senior executives, and the Chairman s performance is assessed by the other Directors. Complies. 1.3 Provide the information indicated in Guide to reporting on Principle 1. Principle 2 Structure the Board to add value 2.1 A majority of the Board should be independent directors. 2.2 The chair should be an independent director. 2.3 The roles of chair and CEO should not be exercised by the same individual. 2.4 The Board should establish a nomination committee. 2.5 Disclose the process for evaluating the performance of the Board, its committees and individual directors. The Charter is available on the Company s website. Shine s corporate governance practices have only existed in their current form for a short period of time, so no performance evaluations for senior executives have taken place in accordance with the policies. The Company currently has a five member Board, of whom three are independent non-executive Directors. Together, the Directors have a broad range of experience, expertise, skills, qualifications and contacts relevant to the Company and its business. The Chairman, Tony Bellas, is an independent non-executive Director. The Company does have a CEO, Jodie Willey, who is not the same individual as the Chairman. A Nominations Committee has been established with its own Charter and consists of Tony Bellas, Greg Moynihan and Carolyn Barker. The Nominations Committee complies with recommendation 2.4, which recommends that the committee have at least three members, the majority of whom must be independent and should be chaired by an independent Director. The Company has established charter rules for the Nominations Committee as a guide for Board deliberations. The Nominations Committee charter is available on the Company s website. Complies. Complies. Complies. Complies. Complies. Complies. 24

25 PRINCIPLES AND RECOMMENDATIONS COMPLIANCE COMPLY 2.6 Provide the information indicated in the Guide to reporting on Principle 2. A director is considered independent when he substantially satisfies the test for independence as set out in applicable laws, rules and regulations (including the ASX Corporate Governance Recommendations). Complies. The Board has undertaken a review of the mix of skills and experience on the Board in light of the Company s principal activities and direction, and has considered diversity in succession planning. The Board considers the current mix of skills and experience of members of the Board and its senior management is sufficient to meet the requirements of the Company. The Company has disclosed full details of its Directors in this prospectus. Other disclosure material on the structure of the Board is available on the Company s website. Principle 3 Promote ethical and responsible decision making 3.1 Establish a code of conduct and disclose the code or a summary of the code. 3.2 Companies should establish a policy concerning diversity and disclose the policy or a summary of that policy. The policy should include requirements for the Board to establish measurable objectives for achieving gender diversity and for the Board to assess annually both the objectives and progress in achieving them. 3.3 Companies should disclose in each annual report the measurable objectives for achieving gender diversity set by the Board in accordance with the Diversity Policy and progress towards achieving them. 3.4 Companies should disclose in each annual report the proportion of women employees in the whole organisation, women in senior executive positions and women on the board. 3.5 Provide the information indicated in Guide to reporting on Principle 3. The Company has adopted a code of conduct, which sets out a framework to enable Directors to achieve the highest possible standards in the discharge of their duties and to give a clear understanding of best practice in corporate governance. Shine has developed and adopted a Diversity Policy which requires the Directors to establish measurable objectives for achieving gender diversity as well as steps to assess annually both the objectives and progress achieving them. The Diversity Policy is available on the Company s website. The Diversity Policy for Shine has only recently been implemented and, accordingly, Shine has not reported on the measurable objectives in its latest annual report. As stated above, Shine has not yet reported on the diversity initiatives in its annual reports. The departures from Recommendations 3.1 to 3.4 are contained in the relevant sections above. The Diversity Policy is available on the Company s website. Complies. Complies. Does not comply. However, in accordance with the policy, Shine intends to disclose the measurable objectives for achieving gender diversity in each annual report and Shine s progress in achieving the diversity objectives. Does not comply. However, in accordance with Shine s Diversity Policy, Shine intends to disclose the relevant proportions in its future annual reports. Complies. 25

26 PRINCIPLES AND RECOMMENDATIONS COMPLIANCE COMPLY Principle 4 Safeguard integrity in financial reporting 4.1 The Board should establish an audit committee. 4.2 The audit committee should be structured so that it consists of only non executive directors, a majority of independent directors, is chaired by an independent chair who is not chair of the Board and have at least three members. 4.3 The audit committee should have a formal charter. 4.4 Provide the information indicated in Guide to reporting on Principle 4. Principle 5 Make timely and balanced disclosure 5.1 Establish written policies designed to ensure compliance with ASX Listing Rules disclosure requirements and to ensure accountability at a senior executive level for that compliance and disclose those policies or a summary of those policies. 5.2 Provide the information indicated in the Guide to reporting on Principle 5. Principle 6 Respect the rights of shareholders 6.1 Design a communications policy for promoting effective communication with shareholders and encouraging their participation at general meetings and disclose that policy or a summary of that policy. 6.2 Provide the information indicated in the Guide to reporting on Principle 6. Principle 7 Recognise and manage risk 7.1 Establish policies for the oversight and management of material business risks and disclose a summary of these policies. The Company has established an Audit and Risk Management Committee to assist and report to the Board. The Audit and Risk Management Committee consists of Greg Moynihan, Tony Bellas and Carolyn Barker, all independent Directors and will be chaired by an independent Director who is not the Chairman. The Audit and Risk Management Committee has a formal charter. The Audit and Risk Management Committee charter is available on the Company s website. The other required information will be disclosed in the Directors report in the next annual report of the Company. Shine has a continuous disclosure policy which is designed to ensure that all material matters are appropriately disclosed in a balanced and timely manner and in accordance with the requirements of the ASX Listing Rules. The Company s continuous disclosure policy is available on the Company s website. Shine has adopted a shareholder communications policy. The Company aims to ensure that all Shareholders are well informed of all major developments affecting the Company and that the full participation by Shareholders at the Company s AGM is facilitated. The Company s shareholder communications policy is available on the Company s website. The Charter and the Audit and Risk Management Committee charter sets out processes and policies for the management of risk in Shine s business. The Board must evaluate risks regularly and consider corrective action. Complies. Complies. Complies. Complies. Complies. Complies. Complies. Complies. Complies. 7.2 The Board should require management to design and implement the risk management and internal control system to manage the company s material business risks and report to it on whether those risks are being managed effectively. The Board should disclose that management has reported to it as to the effectiveness of the company s management of its material business risks. The Charter and the Audit and Risk Management Committee charter empowers the Audit and Risk Management Committee to support the Company s business risk strategy. The Board is responsible for the oversight and management of risk, including the identification of material business risks on an ongoing basis and will be assisted by the Audit and Risk Management Committee where required. Management will be responsible for establishing procedures to provide assurance to Shine that major business risks are identified, consistently assessed and appropriately addressed. The management team will regularly report risks to the Board. Complies. 26

27 PRINCIPLES AND RECOMMENDATIONS COMPLIANCE COMPLY 7.3 The Board should disclose The Company s code of conduct requires the CEO and CFO Complies. whether it has received assurance from the CEO and CFO that the declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system of risk management and internal control and that the system is operating efficiently and effectively in all material respects in relation to the financial reporting risks. to provide a statement to the Board with any financial report to the effect that the Company s risk management and internal compliance and control systems are operating efficiently and effectively in all material respects. 7.4 Provide the information Refer to the comments above in 7.1, 7.2 and 7.3. Complies. indicated in Guide to reporting on Principle 7. Principle 8 Remunerate fairly and responsibly 8.1 The Board should establish a remuneration committee. The Board has established a Remuneration Committee to assist the Board to discharge its responsibilities in relation to remuneration and issues relevant to remuneration policies and practices, including those for senior management and non-executive Directors. Complies. 8.2 The remuneration committee should be structured so that it: (a) consists of a majority of independent directors; (b) is chaired by an independent director; (c) has at least three members. 8.3 Clearly distinguish the structure of non-executive directors remuneration from that of executive directors and senior executives. 8.4 Companies should provide the information indicated in the Guide to reporting on Principle 8. The composition and role of the Remuneration Committee is set out in the Remuneration Committee charter. The Remuneration Committee consists of Carolyn Barker, Greg Moynihan and Tony Bellas, all independent Directors and will be chaired by an independent non-executive Director who is not chair of the Board. The Company has adopted a remuneration policy which complies with the guidelines for executive remuneration packages and non-executive director remuneration. No senior executive is involved directly in deciding their own remuneration. The Remuneration Committee Charter and remuneration p olicy are available on the Company s website. The other required information will be disclosed in the Directors report in the next annual report of the Company. Complies. Complies. Complies. 3.7 Compliance with Legal Profession Acts As set out in section 2.12 above, Shine Lawyers is required to comply with the requirements of the Legal Profession Acts that apply in the Relevant Jurisdictions. 27

28 4For personal use only FINANCIAL INFORMATION 4.1 Overview and preparation of Financial Information The financial information contained in this section (Financial Information) has been prepared by Shine and includes: HISTORICAL FINANCIAL INFORMATION The historical financial information (Historical Financial Information) as set out in sections 4.2.1, and comprises the historical income statement, statement of cash flows and balance sheet for the half year ended and as at 31 December The Historical Financial Information for the period ended 31 December 2012 was extracted from the financial statements, which were reviewed by Ernst & Young and on which an unqualified review conclusion was issued. The basis of preparation of the Historical Financial Information is discussed in section PRO FORMA FINANCIAL INFORMATION The pro forma financial information (Pro Forma Financial Information) as set out in sections 4.2.1, and comprises: the historical pro forma income statements and historical pro forma statements of cash flows of Shine for the years ended 30 June 2010, 30 June 2011 and 30 June 2012 as if the Company and Murshine Limited ATF Shine Murdoch Service Trust (the Service Trust) and the partnership (Shine Partnership) had operated as one entity; and the pro forma balance sheet as at 31 December 2012 which assumes completion of certain Pro Forma Transactions such as the capital raising and the payment of offer costs as outlined in section FORECAST FINANCIAL INFORMATION The forecast financial information (Forecast Financial Information) as set out in sections and comprises: the forecast income statements of Shine for the years ending 30 June 2013 and 30 June 2014; and the forecast statements of cash flows of Shine for the years ending 30 June 2013 and 30 June The Historical Financial Information, the Pro Forma Financial Information and the Forecast Financial Information has been reviewed by Ernst & Young Transaction Advisory Services Limited, whose Investigating Accountant s Report and Financial Services Guide is contained within section 6. Prospective investors should note the scope and limitations of the Investigating Accountant s Report. The Financial Information set out in this section should be read in conjunction with the assumptions set out in section 4.4, the sensitivity analysis set out in section 4.5, the discussion of key investment risks set out in section 5 and other information set out in this prospectus. The basis of preparation of the Forecast Financial Information is discussed in section 4.9. On 13 March 2013, Shine Corporate Ltd was incorporated as the holding company (see section 3.1). From FY13, Shine Corporate Ltd will be the reporting entity. The FY10, FY11 and FY12 financial statements of the Company have been audited by WHK Audit and Assurance which has issued unqualified audit opinions in respect of all periods. The basis of preparation of the Pro Forma Financial Information is discussed in section

29 4.2 Financial Information SUMMARY INCOME STATEMENTS $ 000s PRO FORMA FY10 PRO FORMA FY11 PRO FORMA FY12 HISTORICAL 1H13 FORECAST FY13 FORECAST FY14 Revenue 59,000 71,192 85,476 48, , ,832 Expenses 1 39,019 50,146 61,888 36,296 74,593 81,824 EBITDA 19,981 21,046 23,588 12,499 27,086 33,008 EBITDA margin 33.9% 29.6% 27.6% 25.6% 26.6% 28.7% Depreciation and amortisation (223) (427) (770) (565) (1,388) (1,654) EBIT 19,758 20,619 22,818 11,934 25,698 31,354 Interest (732) (875) (675) (438) (914) (891) NPBT 19,026 19,744 22,143 11,496 24,784 30,463 Income tax expense (6,010) (5,925) (6,683) (3,503) (7,485) (9,200) NPAT 13,016 13,819 15,460 7,993 17,299 21,263 Notes The pro forma summary income statements comprise the results of the Company, Shine Partnership and the Service Trust as if they had operated as one entity. This reconciliation is included in section As the business has historically operated as the Company, Shine Partnership and the Service Trust (see section 4.1.2), different financing and tax arrangements existed. Income tax expense reflects the income tax expense as if those entities operated as the Company. Revenue and expenses from historical acquisitions have been recorded from acquisition date and no retrospective adjustments have been applied. 1 A breakdown of historical expense items is contained in section SUMMARY STATEMENTS OF CASH FLOWS $ 000s PRO FORMA FY10 PRO FORMA FY11 PRO FORMA FY12 HISTORICAL 1H13 FORECAST FY13 FORECAST FY14 Gross operating cash flow 4,873 7,956 11, ,066 12,349 Income tax paid (1,794) (1,734) (2,770) (703) Other working capital movements (2,052) (778) (2,049) (58) (534) (891) Acquisitions and investments (4,818) (4,854) (5,063) (7,025) (9,775) (3,650) Capital expenditure (725) (1,453) (3,633) (2,622) (4,342) (5,040) Cash dividends (327) (793) (2,293) (4,650) Proceeds from borrowings and leases 3,293 (2,187) 5,426 3,005 8,083 3,267 Proceeds from issue of Shares and New Shares ,162 Net increase in cash and cash equivalents 991 (1,166) 4,351 (8,717) 10, Notes The pro forma summary statements of cash flows comprise the results of the Company, Shine Partnership and the Service Trust as if they had operated as one entity. This reconciliation is included in section As the business has historically operated as the Company, the Service Trust and Shine Partnership (see section 4.1.2), different financing and tax arrangements existed. No dividends were paid during this transition period. Income tax expense reflects income tax paid by the Company. Cash flows from historical acquisitions have been recorded from acquisition date and no retrospective adjustments have been applied. Acquisitions and investments include instalments and earn outs from past acquisitions. 29

30 4.2.3 HISTORICAL AND PRO FORMA BALANCE SHEETS $ 000s HISTORICAL PRO FORMA DEC12 ADJUSTMENTS 1 DEC12 Current Assets Cash and cash equivalents ,656 14,247 Trade and other receivables 6,344 6,344 Work in progress 94,782 94,782 Unbilled disbursements 23,997 23,997 Other current assets Total Current Assets 126,510 13, ,166 Non-Current Assets Property, plant and equipment 5,279 5,279 Intangible assets 9,257 9,257 Work in progress 11,829 11,829 Unbilled disbursements 2,200 2,200 Other non-current assets Total Non-Current Assets 28,718 28,718 Total Assets 155,228 13, ,884 Current Liabilities Trade and other payables 13,099 13,099 Borrowings 16,099 16,099 Deferred revenue 3,642 3,642 Provisions 3,489 3,489 Total Current Liabilities 36,329 36,329 Non-Current Liabilities Trade and other payables 1,771 1,771 Borrowings 1,704 1,704 Deferred tax liabilities 32,454 32,454 Provisions 1,592 1,592 Non-Current Liabilities 37,521 37,521 Total Liabilities 73,850 73,850 Net Assets 81,378 13,656 95,034 Equity & Reserves Issued capital 5,096 13,656 18,752 Retained earnings 76,282 76,282 Total Equity 81,378 13,656 95,034 1 Pro Forma Transactions The Pro Forma Financial Information also reflects the transaction costs of the offer being approximately $1,344,000 which have been netted off against the expected capital raising of $15,000,000 to reflect a net injection of approximately $13,656,000. As discussed in section 3.1, Shine Corporate Ltd was incorporated on 13 March This will be the reporting entity going forward and Shine Corporate Ltd will report the results of its subsidiaries as a consolidated group in respect of FY13 and thereafter. There is no impact on the pro forma balance sheet as a result of this incorporation. 30

31 4.3 Management discussion and analysis of Financial Information REVENUE YEAR ENDED 30 JUNE 2010 THROUGH TO YEAR ENDING 30 JUNE 2014 Shine has a long history of revenue growth. From 2010 to 2012, Shine averaged in excess of 20% compound annual growth rate (CAGR), with revenue growing from $59.0 million to $85.5 million. This revenue growth can be attributed to: strong organic growth, with base revenue of $57.8 million in FY10 growing to $77.0 million by FY12 at 15.5% CAGR; and revenue from acquisitions contributing $1.2 million in FY10 to a cumulative contribution of $8.5 million in FY12, including $1.4 million of revenue growth post acquisition. Revenue is forecast to continue to grow by approximately 19% in FY13 to $101.7 million including 9% of organic growth, with the balance of growth coming from full year contributions of recently acquired firms and subsequent growth of acquired firms from FY10. Revenue is forecast to grow by a further 13% in FY14 to $114.8 million. The majority of Shine s revenue is derived from hourly rates that fee-earning staff record on client files, known as WIP. As a result, the underlying key drivers of revenue are the number of fee-earning staff, their time recorded at hourly rates (Productivity) and the recoverability of this Productivity. Revenue is brought to account in accordance with the Company s revenue recognition policy, described in section In the balance sheet, cumulative Productivity not yet billed (Gross WIP) is carried at cost plus profit recognised on client cases that are in progress but have not been invoiced at the end of the reporting period. Gross WIP may not be fully recoverable for a variety of reasons. As a result, recoverability of Gross WIP is assessed by management and any amounts in excess of the net recoverable value are provided for when identified, to form Net WIP. Historical experience and knowledge of the individual client cases has been used to determine Net WIP at balance date. Historically, the recoverability rate of WIP has ranged from 85-90% with a similar level of provision carried in the balance sheet against Gross WIP to arrive at Net WIP. Leading up to the preparation of the 31 December 2012 financial statements, a review was undertaken of the historical Net WIP to Gross WIP ratio against recoverability. Following this review it was determined to take an additional provision of $2.5 million at 31 December 2012, resulting in a Net WIP to Gross WIP ratio of 84.5% carried at 31 December 2012, representing a higher level of provisioning than historically carried. The additional provision of $2.5 million reduced revenue for the six month period to 31 December Included in the forecasts is the Directors best-estimate assumption of an 84.5% recoverability rate. REVENUE RECOGNITION Productivity in a year (time spent on a cases in financial year) - Net WIP write-offs +/- (a) WIP provision movement in financial year on outstanding cases +/- (b) WIP write-off/write-up for cases settled, less reversal of cumulative WIP provision + Out of pocket recoveries on cases settled = Total Revenue BALANCE SHEET WIP Gross WIP (Cumulative Productivity on outstanding cases) - WIP provisioning (Cumulative on outstanding cases) = Net WIP CASH FLOW Fees billed to client on settled cases + Out of pocket recoveries on settled cases + Disbursements recovered on settled cases - Disbursements incurred during life of cases - Operating costs (wages/rent/etc) +/- Working capital movements = Gross Operating Cash Flow RECOVERABILITY % (Productivity Net WIP write-offs)/ Productivity 31

32 4.3.2 EXPENSES YEAR ENDED 30 JUNE 2010 THROUGH TO YEAR ENDING 30 JUNE 2014 The Company s major expenses are fee-earning staff salaries and support and administrative staff wages. Other major expenses include premises and marketing costs. A breakdown of historical expense items is contained in the table below: $ 000s FY10 FY11 FY12 1H13 Salaries & wages 24,545 31,038 38,223 23,632 Premises 3,503 4,298 5,289 3,192 Marketing 2,496 2,872 4,189 2,294 Other overheads 8,475 11,938 14,187 7,178 Total expenses 39,019 50,146 61,888 36,296 EBITDA ($m) and EBITDA margin FY10 FY % % % 28.4% 28.7% % FY10 FY11 FY12 FY13 (f) FY14 (f) EBITDA EBITDA margin EBITDA margin excl $2.5m (LHS) (RHS) (RHS) In recent years expenses have grown at a faster rate (26% CAGR from FY10 to FY12) than revenue (20% over the same period). This is largely due to: additional provisioning of WIP which reduces revenue, as discussed in section 4.3.1; the Company s expansion into other jurisdictions and emerging practice areas; the structural transition from a private partnership to an ILP; and investment in other strategic initiatives. The expenses are forecast to increase by 21% in FY13 (broadly in line with revenue growth) including incremental expenses related to a publicly listed company structure. Expenses are forecast to increase 10% in FY14, as the ongoing cost base of the Company stabilises, compared to a forecast growth in revenue of 13% EBITDA MARGIN YEAR ENDED 30 JUNE 2010 THROUGH TO YEAR ENDING 30 JUNE 2014 The EBITDA margin from FY10 to FY12 moved from 33.9% to 27.6% as a result of a decrease in WIP recoverability and the Company s investment in future growth described in the above sections. In the six month period to 31 December 2012, the margin was 25.6% after the impact of the additional WIP provision of $2.5 million described in section Prior to this write-down, the underlying margin was 29.2%, which was an increase over the FY12 margin of 27.6% attributable to improvements in Productivity and WIP recoverability. For FY13 the EBITDA margin is forecast to be 26.6% which includes the first half impact of the $2.5 million write-down. Excluding this write-down, EBITDA margin is forecast for FY13 at 28.4%, as illustrated in the chart below. The Company s EBITDA margin for FY14 is forecast to increase to 28.7%, reflecting the ongoing improvement in Productivity and the stabilising of the Company s cost base CASH FLOW YEAR ENDED 30 JUNE 2010 THROUGH TO YEAR ENDING 30 JUNE 2014 Unlike the income statement, where revenue is recognised during the life of a matter, cash flow relating to fees is only generated at the successful completion of a matter. The average lifecycle of a matter (file opening through to cash receipt on settlement) for Shine is currently approximately 18 months. As a result there is a timing difference between revenue recognition, which is on an accruals basis (see section 4.3.1), and fee collection, which is on a cash basis. At the same time the Company pays expenses at the time they are incurred. The faster the rate of organic growth, the greater the costs being incurred to facilitate this growth, which results in a greater difference between gross operating cash flow and EBITDA. By reducing the matter lifecycle from its current 18 month average this difference will reduce, improving gross operating cash flow. A number of business improvement initiatives are underway to reduce the average lifecycle of a matter (see section 2.7). As shown in the summary statements of cash flows, the gross operating cash flow to 31 December 2012 was $4,000. This reflects the seasonal skew to settlements in the second half of the financial year to 30 June. This means that the Company receives a greater proportion of its fees billed in the second half of the financial year, as illustrated in the chart below. The $4,000 gross operating cash flow is expected to improve to $8.1 million by 30 June Dependent on the nature of the cases being concluded at financial year end there could be timing differences between date of resolution and receipt of cash. The income tax shown relates to the income tax paid by the Company only. There is a timing difference between accounting revenue on an accruals basis (see section 4.3.1) and taxable income which is assessable on raising client invoices at the end of a matter (effectively on a cash basis). As a result, a deferred tax liability is recognised in the balance sheet to reflect this timing difference. At 31 December 2012 the total income tax timing differences were $32.5 million, the largest component relating to the timing difference associated with revenue recognition. 32

33 Operating cash flow and fees ($m) FY11 FY HFY11 2HFY11 1HFY12 2HFY12 1HFY13 2HFY13 Gross operating cash flow (LHS) Fees (RHS) As described in section 2.9, Shine has a history of acquisitions. Some acquisitions have included instalments with performance based adjustments (earn outs), and the majority of FY14 acquisition and investment cash flows relate to earn outs from prior acquisitions. Included in the FY13 and FY14 statements of cash flows, is a capital allowance for the T2 Project of $5.5 million (see section 7.5). Historically the Company s provider of finance facilities, the Commonwealth Bank of Australia, has provided funding for working capital needs, acquisitions and other investments. The Company s secured debt facility of $31.5 million (see section 7.10) was utilised to the extent of $23.7 million as at 13 March A key bank covenant relating to this facility is for borrowings not to exceed 40% of net WIP plus 50% of net disbursements. As at 31 December 2012 this ratio was 14%. 4.4 Assumptions used to prepare the Forecast Financial Information OVERVIEW OF ASSUMPTIONS The Forecast Financial Information has been based on the best-estimate assumptions of the Directors set out in sections and The Directors believe that they have prepared the Forecast Financial Information with due care and attention, and consider all best-estimate assumptions when taken as a whole to be reasonable at the time of preparing this prospectus. This information is intended to assist prospective investors in assessing the reasonableness and likelihood of the assumptions occurring, and is not intended to be a representation that the assumptions will occur. Investors should be aware that the actual events and outcomes may differ in quantum and timing from those assumed, with potentially material consequential positive or negative impact on the Company s actual earnings and cash flows. Accordingly, investors should be aware of the risks of placing undue reliance on the information in this section. Prospective investors are advised to review the bestestimate assumptions set out in sections and 4.4.3, in conjunction with the sensitivity analysis set out in section 4.5, the risk factors set out in section 5 and other information set out in this prospectus GENERAL BEST-ESTIMATE ASSUMPTIONS The material general assumptions made when preparing the Forecast Financial Information are as follows: the operating and financial performance of the Company is influenced by a variety of general economic and business conditions worldwide, including the levels of inflation, interest rates, exchange rates, and government, fiscal, monetary and regulatory policies. The Forecast Financial Information assumes that there will be no material changes in these conditions. there is no material amendment to any material agreement relating to the Company s business. there are no material acquisitions or disposals during the Forecast Period outside the transactions disclosed in this prospectus. there are no changes to the Company s capital structure other than those set out in, or contemplated by this prospectus. there are no material changes to the statutory, legal or regulatory environment, including taxation that would have a material adverse impact on the Company s operations. there are no material changes in industrial, political or economic conditions with respect to the legal industry generally or tort law particularly. there is no change in key management personnel. there are no material beneficial or adverse effects arising from the actions of competitors. there are no material changes in Australian Accounting Standards or other mandatory professional reporting requirements that would have a material effect on the Forecast Financial Information SPECIFIC BEST-ESTIMATE ASSUMPTIONS The following specific best-estimate assumptions have been applied in preparing the Forecast Financial Information. Revenue KEY ASSUMPTION Productivity Recoverability New fee-earners DESCRIPTION Consistent with levels at December 2012, which includes an allowance for periods of absence for training and non-productive time for public holidays and leave A charge out rate increase assumed to cover anticipated salary and overhead increases over the forecast period Recoverability rate of 84.5% in 2HFY13 and FY14 New fee-earner increase of 1 per month for 2HFY13 and 1.5 per month for FY14 33

34 Expenses An allowance has been made over the Forecast Period for: salaries and overheads consistent with levels at December 2012 with an anticipated increase for salaries at 1 July 2013 and other overhead increases throughout the Forecast Period; salaries for new fee-earners; and incremental public company costs and operational expenses. In accordance with Shine s accounting policies set out in section 4.12, certain costs are capitalised and amortised over their expected useful lives. Depreciation is recorded in accordance with the policy in section Cash Flow The fees billed over the Forecast Period follow a similar seasonal trend to historical fee levels and are consistent with revenue growth. Costs of $5.5 million associated with the T2 Project assumed to be funded by debt facilities (see section 7.10). Income Tax In estimating the forecast income tax expense an effective corporate tax rate of 30.2% has been applied to reflect an allowance for non-deductible expenses. 4.5 Sensitivity analysis The major drivers of the Company s profitability are the number of fee-earners, their Productivity, and the recoverability of this Productivity. Accordingly, the sensitivity of the Company s Forecast Financial Information has been presented based on these key drivers. There are many other factors that could impact profitability and the Directors in no way imply that this is a comprehensive analysis. The Forecast Financial Information detailed in sections and has been prepared with reference to a number of estimates and assumptions, including the General and Specific Assumptions set out in sections and Both the Forecast Financial Information and the specific best-estimate assumptions are by their very nature subject to inherent business, economic and political uncertainties and risks. Many of these are outside the control of the Directors and are not predictable. Therefore, actual financial results may vary from those forecast and variations may be materially positive or negative. The following table demonstrates the potential impact on profitability that may arise from variations to the specific best-estimate assumptions of the key drivers (either positive or negative). Care should be taken when interpreting the information as it deals with each type of variation in isolation from potential variations in any of the other key categories. Circumstances that may give rise to any particular variation may or may not result in variations elsewhere. It is possible that multiple sets of circumstances could give rise to movements in more than one category and those movements may have cumulative or off-setting effects on profitability. 4.6 Dividend policy and forecast distribution In respect of the Forecast Period, the Board intends to pay dividends of 1.5 cents per Share in October 2013 (for FY13) and an annual dividend of 3.0 cents per Share for FY14 (payable as an interim dividend in April 2014 and a final dividend in October 2014). In subsequent financial years, the Board expects to pay dividends of approximately 40% of NPAT excluding net movement in WIP and accounting for disbursements. Net movement in WIP and disbursements could have a significant effect on the Company s ability to pay dividends. No guarantee can be given about the payment of dividends, the level of franking or imputation of such dividends or the size of the payout ratios. These matters will depend on a number of factors, including the future earnings of the Company, its financial, tax and franking credit position, and the Board s view of the appropriate dividend policy at the time. 4.7 Basis of preparation of Historical Financial Information The Historical Financial Information for the period ended 31 December 2012 was extracted from the financial statements, which were reviewed by Ernst & Young and on which an unqualified review conclusion was issued. The Historical Financial Information has been prepared using the recognition and measurement requirements of Australian Accounting Standards and presented in an abbreviated form. The Historical Financial Information does not contain all of the disclosures and notes applicable to annual reports as required by Australian Accounting Standards and the Corporations Act. A summary of the significant accounting policies is set out in section POTENTIAL IMPACT ON FY13 NPAT $ 000s POTENTIAL IMPACT ON FY14 NPAT $ 000s KEY ASSUMPTION ASSUMPTION TYPE OF VARIATION Productivity 1 Similar levels as 1% chargeable time experienced in 1HFY13 WIP recoverability % 1% New fee-earners 2HFY13 New fee-earners FY14 1 per month (6 in total) 1.5 per month (18 in total) 1 fee-earner for the full period 1 fee-earner for the full period Sensitivities are calculated based on fee-earner numbers as at 31 December 2012 and with no increase in fee-earners. 34

35 4.8 Basis of preparation of Pro Forma Historical Information The FY10, FY11 and FY12 financial statements of the Company have been audited by WHK Audit and Assurance, which has issued unqualified opinions in respect of all periods. The Pro Forma Financial Information of Shine has been derived from the audited financial statements of Shine Lawyers Ltd for FY10, FY11 and FY12, and the balance sheet of the Company for the six month period as at 31 December 2012, after adjusting for Pro Forma Transactions and other adjustments to reflect Shine s operations and accounting policies following completion of the Offer. Refer to section 4.10 for a reconciliation between the statutory NPAT and pro forma historical NPAT and section 4.11 for a reconciliation between statutory cash flows and pro forma cash flows. The Pro Forma Financial Information has been prepared using the recognition and measurement requirements of Australian Accounting Standards and presented in an abbreviated form. The Pro Forma Financial Information does not contain all of the disclosures and notes applicable to annual reports as required by Australian Accounting Standards and the Corporations Act. A summary of the significant accounting policies is set out in section Pro Forma Adjustments to Statutory Consolidated Historical $ 000s FY10 FY11 FY12 Statutory NPAT of the Company 24,686 17,935 18,297 Increase in provision for annual leave (35) (35) Increase in accrual for deferred lease incentives (94) (169) Increase in amortisation of make good (87) (67) Increase in discount on net present value of make good liability (32) (31) Reclassification from prepayments to marketing costs (264) Trust distribution 1 (7,566) NPAT contribution of the Service Trust NPAT contribution of Shine Partnership 2 (4,069) (3,868) (2,306) Pro forma NPAT 13,016 13,819 15,460 Investors should note that past results are not a guarantee of future performance. 4.9 Basis of preparation of Forecast Financial Information The Forecast Financial Information has been prepared by Shine based on an assessment by Shine as to its likely future operating conditions and a number of best estimate assumptions regarding future actions and events as set out in sections 4.4.1, and The Forecast Financial Information is subject to the risks set out in section 5. This information is intended to assist investors in assessing the reasonableness and likelihood of the assumptions occurring, and is not intended to be a representation that the assumptions will occur. The Forecast Financial Information assumes the successful implementation of investment and business decisions and strategies, which are subject to change. No assurance can be given that the investment and business decisions and strategies will be effective or that the anticipated benefits from them will be realised in the periods for which the Forecast Financial Information has been prepared. Events and circumstances often do not occur as anticipated and therefore actual results will differ from the Forecast Financial Information. These differences may be material. Neither the Company, the Directors, nor any other person guarantees or provides any assurance as to the achievement of the Forecast Financial Information. The Forecast Financial Information should not be regarded as a representation or warranty that the Company will achieve, or is likely to achieve, any particular results. Actual events and outcomes may differ in quantum and timing from those assumed, with material consequential positive or negative impact on Shine s actual earnings and cash flows. 1 This represents a distribution of profits to the Company from trusts associated with the Founders. 2 As the business has historically operated as the Company, Shine Partnership and the Service Trust (see section 4.1.2), different financing and tax arrangements existed. Income tax expense reflects the income tax expense as if those entities operated as the Company. No further contributions were made by the Partnership following FY Pro Forma Adjustments to Statutory Consolidated Historical Statement of Cash Flows $ 000s FY10 FY11 FY12 Statutory net cash flow of the Company 2,113 (1,042) 4,600 Cash flow contribution of the Partnership (992) (41) (196) Cash flow contribution of the Service Trust (130) (83) (53) Pro Forma net cash flow 991 (1,166) 4,351 35

36 4.12 Summary of significant accounting policies Significant accounting policies This Financial Information has been prepared in accordance with the recognition and measurement principles prescribed under the Australian Accounting Standards and the Corporations Act. The Financial Information has been prepared on an accruals basis and is based on a historical costs basis except for, where applicable the revaluation of available for sale financial assets and liabilities at fair value through profit or loss, investment properties, certain classes of property plant and equipment and derivative financial instruments. A summary of significant accounting policies is set out below. (a) Business combinations Business combinations occur where an acquirer obtains control over one or more businesses. A business combination is accounted for by applying the acquisition method, unless it is a combination involving entities or businesses under common control. The business combination will be accounted for from the date that control is attained, whereby the fair value of the identifiable assets acquired and liabilities (including contingent liabilities) assumed is recognised (subject to certain limited exceptions). Current income tax expense charged to the profit or loss is the tax payable on taxable income. Current tax liabilities (assets) are measured at the amounts expected to be paid to (recovered from) the relevant taxation authority. Deferred income tax expense reflects movements in deferred tax asset and deferred tax liability balances during the year as well as unused tax losses. Current and deferred income tax expense (income) is charged or credited outside profit or loss when the tax relates to items that are recognised outside profit or loss. Except for business combinations, no deferred income tax is recognised from the initial recognition of an asset or liability, where there is no effect on accounting or taxable profit or loss. Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled and their measurement also reflects the manner in which management expects to recover or settle the carrying amount of the related asset or liability. Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised. When measuring the consideration transferred in the business combination, any asset or liability resulting from a contingent consideration arrangement is also included. Subsequent to initial recognition, contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or liability is remeasured in each reporting period to fair value, recognising any change to fair value in profit or loss, unless the change in value can be identified as existing at acquisition date. All transaction costs incurred in relation to business combinations are expensed to the statement of comprehensive income. The acquisition of a business may result in the recognition of goodwill or a gain from a bargain purchase. Goodwill Goodwill is carried at cost less any accumulated impairment losses. Goodwill represents the excess of the cost of an acquisition over the fair value of the Company s share of the net identifiable assets at the date of acquisition. Goodwill is not amortised, but is tested annually for impairment or more frequently if events or changes in circumstances indicate that it might be impaired. Goodwill is tested for impairment annually and is allocated to the company s cash-generating units or groups of cash-generating units, which represent the lowest level at which goodwill is monitored but where such level is not larger than an operating segment. (b) Income tax The income tax expense (income) for the year comprises current income tax expense (income) and deferred tax expense (income). Where temporary differences exist in relation to investments in subsidiaries, branches, associates, and joint ventures, deferred tax assets and liabilities are not recognised where the timing of the reversal of the temporary difference can be controlled and it is not probable that the reversal will occur in the foreseeable future. Current tax assets and liabilities are offset where a legally enforceable right of set-off exists and it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur. Deferred tax assets and liabilities are offset where: (a) a legally enforceable right of set-off exists; and (b) the deferred tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities, where it is intended that net settlement or simultaneous realisation and settlement of the respective asset and liability will occur in future periods in which significant amounts of deferred tax assets or liabilities are expected to be recovered or settled. (c) Revenue Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent that it is probable that economic benefits will flow to the Company and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: (i) Rendering of services Revenue from the provision of legal services is recognised on an accrual basis in the year in which the legal service is provided and is calculated with reference to the professional staff hours incurred on each matter. 36

37 (ii) Interest revenue Revenue is recognised as interest accrues using the effective interest rate method. This is a method of calculating the amortised cost of a financial asset and allocating the interest revenue over the relevant year using the effective interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the financial asset. All revenue is stated net of the amount of goods and services tax (GST). (d) Disbursements Disbursements represent costs incurred during the course of a matter that are recovered from clients. A provision for non recoverable disbursements is recognised to the extent that recovery of the outstanding receivable balance is considered less than likely. The provision is established based on the Company s history of amounts not recovered over previous years. (e) Work in progress Work in progress represents costs incurred and profit recognised on client cases that are in progress and have not yet been invoiced at the end of the reporting date. The recoverability of these amounts is assessed by management and any amounts in excess of the net recoverable value are provided for when identified. Historical experience and knowledge of the client cases has been used to determine the net realisable value of work in progress at balance date and also the classification between current and non-current. (f) Property, plant and equipment Each class of property, plant and equipment is carried at cost or fair value less, where applicable, any accumulated depreciation and impairment losses. Plant and equipment Plant and equipment are measured on the cost basis and are therefore carried at cost less accumulated depreciation and any accumulated impairment losses. In the event the carrying amount of plant and equipment is greater than the estimated recoverable amount, the carrying amount is written down immediately to the estimated recoverable amount and impairment losses are recognised either in profit or loss or as a revaluation decrease if the impairment losses relate to a revalued asset. A formal assessment of recoverable amount is made when impairment indicators are present (refer to Note (i) for details of impairment). Subsequent costs are included in the asset s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the company and the cost of the item can be measured reliably. All other repairs and maintenance are recognised as expenses in the statement of comprehensive income during the financial period in which they are incurred. Depreciation The depreciable amount of all fixed assets including capitalised lease assets, is depreciated on a straight-line basis and diminishing value over the asset s useful life to the company commencing from the time the asset is held ready for use. Leasehold improvements are depreciated over the shorter of either the unexpired period of the lease or the estimated useful lives of the improvements. The depreciation rates used for each class of depreciable assets are: Class of fixed asset Depreciation rate Plant and equipment 5% - 50% Leased plant and equipment 10% - 25% The assets residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset s carrying amount is written down immediately to its recoverable amount if the asset s carrying amount is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount. These gains or losses are included in the statement of comprehensive income. (g) Leases Leases of fixed assets, where substantially all the risks and benefits incidental to the ownership of the asset but not the legal ownership are transferred to entities in the company, are classified as finance leases. Finance leases are capitalised by recognising an asset and a liability at the lower of the amounts equal to the fair value of the leased property or the present value of the minimum lease payments, including any guaranteed residual values. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period. Leased assets are depreciated on a straight-line basis over the shorter of their estimated useful lives or the lease term. Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are recognised as expenses on a straight-line basis over the lease term. (h) Financial instruments Financial instruments are initially measured at fair value plus transaction costs except where the instrument is classified at fair value through profit or loss, in which case transaction costs are expensed to profit or loss immediately. Classification and subsequent measurement Financial instruments are subsequently measured at fair value, amortised cost or cost. Where available, quoted prices in an active market are used to determine fair value. In other circumstances, valuation techniques are adopted. Amortised cost is calculated as the amount at which the financial asset or financial liability is measured at initial recognition less principal repayments and any reduction for impairment. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial asset is derecognised. Held-to-maturity investments Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments, and it is the company s intention to hold these investments to maturity. They are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial asset is derecognised. 37

38 Financial liabilities Non-derivative financial liabilities other than financial guarantees are subsequently measured at amortised cost. Gains or losses are recognised in profit or loss through the amortisation process and when the financial liability is derecognised. Impairment At the end of each reporting period, the company assesses whether there is objective evidence that a financial asset has been impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events (a loss event ) having occurred, which has an impact on the estimated future cash flows of the financial asset(s). In the case of financial assets carried at amortised cost, loss events may include: indications that the debtors or a group of debtors are experiencing significant financial difficulty, default or delinquency in interest or principal payments; indications that they will enter bankruptcy or other financial reorganisation; and changes in arrears or economic conditions that correlate with defaults. For financial assets carried at amortised cost (including loans and receivables), a separate allowance account is used to reduce the carrying amount of financial assets impaired by credit losses. After having taken all possible measures of recovery, if management establishes that the carrying amount cannot be recovered by any means, at that point the written-off amounts are charged to the allowance account or the carrying amount of impaired financial assets is reduced directly if no impairment amount was previously recognised in the allowance account. When the terms of financial assets that would otherwise have been past due or impaired have been renegotiated, the company recognises the impairment for such financial assets by taking into account the original terms as if the terms have not been renegotiated so that the loss events that have occurred are duly considered. Derecognition Financial assets are derecognised when the contractual rights to receipt of cash flows expire or the asset is transferred to another party whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised when the related obligations are discharged, cancelled or have expired. The difference between the carrying amount of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets or liabilities assumed, is recognised in profit or loss. (i) Impairment of assets At the end of each reporting period, the Company assesses whether there is any indication that an asset may be impaired. The assessment will include considering external sources of information and internal sources of information. If such an indication exists, an impairment test is carried out on the asset by comparing the recoverable amount of the asset, being the higher of the asset s fair value less costs to sell and value in use to the asset s carrying amount. Any excess of the asset s carrying amount over its recoverable amount is recognised immediately in profit or loss, unless the asset is carried at a revalued amount in accordance with another Standard (eg in accordance with the revaluation model in AASB 116). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Impairment testing is performed annually for goodwill and intangible assets with indefinite lives. (j) Investments in associates Associates are companies over which the company has significant influence through holding, directly or indirectly, 20% or more of the voting power of the company. Investments in associates are accounted for in the financial statements by applying the equity method of accounting, whereby the investment is initially recognised at cost and adjusted thereafter for the post-acquisition change in the company s share of net assets of the associate company. In addition, the company s share of the profit or loss of the associate company is included in the company s profit or loss. The carrying amount of the investment includes goodwill relating to the associate. Any discount on acquisition, whereby the Company s share of the net fair value of the associate exceeds the cost of investment, is recognised in profit or loss in the period in which the investment is acquired. Profits and losses resulting from transactions between the Company and the associate are eliminated to the extent of the Company s interest in the associate. When the Company s share of losses in an associate equals or exceeds its interest in the associate, the Company discontinues recognising its share of further losses unless it has incurred legal or constructive obligations or made payments on behalf of the associate. Upon the associate subsequently making profits, the Company will resume recognising its share of those profits once its share of the profits equals the share of the losses not recognised. (k) Intangibles other than goodwill Projects T2 Project costs and Erin Brockovich costs are capitalised only to the extent that the project is identifiable (ie is separable or arises from contractual or legal rights), will deliver future economic benefits, and these benefits can be measured reliably. Capitalised project costs are amortised on a systematic basis matched to the future economic benefits, over the useful life of the project. (l) Foreign currency transactions and balances Functional and presentation currency The functional currency is measured using the currency of the primary economic environment in which the entity operates. The financial statements are presented in Australian dollars which is the entity s functional and presentation currency. 38

39 Transaction and balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the date of the transaction. Foreign currency monetary items are translated at the year-end exchange rate. Non-monetary items measured at historical cost continue to be carried at the exchange rate at the date of the transaction. Nonmonetary items measured at fair value are reported at the exchange rate at the date when fair values were determined. Exchange differences arising on the translation of monetary items are recognised in the statement of comprehensive income, except where deferred in equity as a qualifying cash flow or net investment hedge. Exchange differences arising on the translation of nonmonetary items are recognised directly in equity to the extent that the gain or loss is directly recognised in equity, otherwise the exchange difference is recognised in the statement of comprehensive income. (m) Employee benefits Provision is made for the company s liability for employee benefits arising from services rendered by employees to the end of the reporting period. Employee benefits that are expected to be settled within one year have been measured at the amounts expected to be paid when the liability is settled. Employee benefits payable later than one year have been measured at the present value of the estimated future cash outflows to be made for those benefits. In determining the liability, consideration is given to employee wage increases and the probability that the employee may not satisfy any vesting requirements. Those cash flows are discounted using market yields on national Government bonds with terms to maturity that match the expected timing of cash flows. (n) Provisions Provisions are recognised when the company has a legal or constructive obligation, as a result of past events, for which it is probable that an outflow of economic benefits will result and that outflow can be reliably measured. Provisions are measured using the best estimate of the amounts required to settle the obligation at the end of the reporting period. (o) Cash and cash equivalents Cash and cash equivalents include cash on hand, deposits held at call with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within short-term borrowings in current liabilities on the statement of financial position. (p) Trade and other receivables Trade and other receivables include amounts due from customers for goods sold and services performed in the ordinary course of business. Receivables expected to be collected within 12 months of the end of the reporting period are classified as current assets. All other receivables are classified as non-current assets. Trade and other receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment. Refer to Note (h) for further discussion on the determination of impairment losses. (q) Trade and other payables Trade and other payables represent the liabilities for goods and services received by the company that remain unpaid at the end of the reporting period. The balance is recognised as a current liability with the amounts normally paid within 30 days of recognition of the liability. (r) Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of assets that necessarily take a substantial period of time to prepare for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. (s) Goods and Services Tax (GST) Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office (ATO). Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the ATO is included with other receivables or payables in the statement of financial position. Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities, which are recoverable from or payable to the ATO, are presented as operating cash flows included in receipts from customers or payments to suppliers. (t) Critical accounting estimates The Directors evaluate estimates and judgments incorporated into the financial statements based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Company. Key estimates Provision for work in progress The Company has provided for potential non-recovery of work in progress by evaluating the prospects of each case and its likelihood of recovery. Provision for doubtful debtors The Company has fully provided for all debtors where there is an inherent uncertainty in relation to the collection of the debt. Cash generating units The Company has used a 15% discount rate when determining future cash flow to test the impairment for its single cash generating unit. The discount rate was derived by looking at the external information on the likely return on businesses of similar operation and size. 39

40 5 RISK FACTORS 5.1 Factors influencing success and risk INTRODUCTION This section identifies the risks that the Board considers the major risks associated with an investment in Shine. The Shine business is subject to risk factors, both specific to its business activities, and risks of a general nature. Individually, or in combination, these might affect the future operating performance of Shine and the value of an investment in the Company. There can be no guarantee that Shine will achieve its stated objectives or that any forward looking statements or forecasts will eventuate. An investment in the Company should be considered in light of relevant risks, both general and specific. Each of the risks set out below could, if it eventuates, have a material adverse impact on Shine s operating performance and profits, and the market price of the Shares. Before deciding to invest in the Company, potential investors should: read the entire prospectus; consider the assumptions underlying the Forecast Financial Information, the sensitivity analysis and the risk factors that could affect the financial performance of Shine; review these factors in light of their personal circumstances; and seek professional advice from their accountant, stockbroker, lawyer or other professional adviser before deciding whether to invest. 5.2 Specific investment risks CONFLICT OF DUTIES Shine has a paramount duty to the court, first, and then to its clients. Those duties prevail over Shine s duty to Shareholders. There may be instances where Shine and its lawyers, in exercising their duties to the court or to the client (or both), act other than in the best interests of Shareholders. An example is in settlement negotiations where Shine s duty to its client would be favoured over any short term cash flow or funding needs of Shine s business. REGULATORY ENVIRONMENT AND REFORM Shine is subject to significant regulatory and legal oversight. The Company s business operations could be adversely affected by actions of State, Territory and Commonwealth governments. If a legal practitioner employed by Shine commits unsatisfactory professional conduct or professional misconduct, there is the potential for the relevant regulator to take disciplinary action against the individual, Shine s Legal Practitioner Directors and Shine itself. Disciplinary action may include suspension or cancellation of practising certificates of the individual legal practitioner and, in extremely serious circumstances, disqualification of the Incorporated Legal Practice, which may prevent Shine from operating in one of more of the Relevant Jurisdictions. Changes in Government legislation, guidelines and regulations in the areas of law in which the Company practises, such as decreases in the maximum amount of legal fees which can be recovered or the amount of damages its clients can claim, could also adversely affect the Company. The regulatory reviews set out below, each of which is relevant to areas in which Shine practises, are currently in progress. The final outcomes of the reviews are not yet known. REVIEW OVERVIEW POTENTIAL RISK TO THE COMPANY Queensland workers compensation review The Finance and Administration Committee is due to report to the Queensland Parliament in May 2013 on Queensland s workers compensation scheme (as part of a five-year review legislated under the Workers Compensation and Rehabilitation Act 2003). In overview, the committee is considering: (a) how the Queensland workers compensation scheme compares to the scheme arrangements in other Australian jurisdictions; (b) whether structural changes can be made to improve the efficiency, responsiveness, and cost-effectiveness of the scheme; and (c) proposed amendments raised at various public hearings. If the Queensland workers compensation scheme is amended (eg to introduce elements of legislation from other States which are less favourable for workers or which otherwise restrict damages or fees), then there could be an adverse effect on the Company s revenue as a result of receiving fewer cases in the future or lower fees as a result of the lower level of damages potentially available. 40

41 REVIEW OVERVIEW POTENTIAL RISK TO THE COMPANY Establishment of the national injury insurance scheme (NIIS) In August 2011, the Productivity Commission recommended that State and Territory governments create insurance schemes that provide fully-funded lifetime care and support (such as medical treatment, rehabilitation, home and vehicle modifications and care costs) for all catastrophic injuries on a no-fault basis. The scheme is tailored to new catastrophic injuries from motor vehicle accident claims (which are the initial priority of the scheme). Other forms of catastrophic injury including medical (excluding cases of cerebral palsy associated with pregnancy or birth covered by the NDIS), criminal and general accidents are intended to be covered by If the Commission s recommendations for no-fault insurance for catastrophic injury are implemented, it will mean that a common law action for damage associated with lifetime care and support is extinguished. This may result in reduced incentives for individuals to litigate under heads of damage such as income loss, and pain and suffering, especially in response to medical negligence claims where the evidentiary burden to establish liability can be significant. These changes could result in lower revenue for Shine in this area, as a result of receiving fewer cases in the future or lower fees as a result of the lower level of damages potentially available. Establishment of the national disability insurance scheme (NDIS) NSW Compulsory Third Party (CTP) scheme The Commission has suggested that, as part of the NIIS, common law rights to sue for lifetime care and support should be removed. However, access to damages for pecuniary and economic loss, and general damages could still be sought under the common law. It is proposed that a further review of the NIIS will take place in On 29 November 2012, the Commonwealth Disabilities Minister introduced draft legislation for the NDIS to Parliament, which the Government proposes is enacted before July The NDIS is intended to provide people who have a significant and ongoing disability with long-term care and support such as home and vehicle modifications, personal care, respite, community access support, domestic and transport assistance, but not income. On 21 January 2013, the New South Wales Government announced that the Motor Accidents Authority (MAA) would review the NSW CTP scheme with the aim of developing a CTP pricing strategy. As part of the pricing strategy, the MAA is examining existing claims management and dispute resolution processes, including legal and other overhead costs, and is considering economic loss caps which will mirror New South Wales workers compensation caps. If NDIS is introduced, it could result in lower revenue for the Company, as a result of receiving fewer cases in the future or lower fees as a result of the lower level of damages potentially available. If the review recommends limits on legal fees, which are subsequently implemented by legislation, there may be an adverse impact on Shine s CTP claims practice in NSW as the level of fees charged may be restricted. In addition, if the economic loss caps are introduced, fees may be lower as a result of the lower level of damages potentially available. WIP RECOVERABILITY The majority of Shine s revenue is derived from hourly rates that fee-earning staff members record on client files. That recorded time, known as WIP, may not be fully recoverable for a variety of reasons, including if a case is ultimately unsuccessful because no damages are paid by a defendant or its insurer (on the basis that Shine has entered into a speculative fee arrangement) or if legislation limits what Shine may recover on a successful case. In some States and Territories, statutory provisions may limit the legal fees that a lawyer can recover or the damages a client may recover. In either case, Shine may be unable to recover the full value of its WIP. Statutory amendments which reduce the amount of legal fees recoverable or the damages which a client may claim, may further reduce Shine s ability to recover its WIP. Any delay in the recovery of WIP may adversely affect Shine s cash flow and profitability. For example, the actions of Shine s clients or the defendants or their insurers during the course of a claim 41

42 may cause a delay in the settlement of the claim. The longer it takes to resolve a claim, the longer Shine is required to fund its clients disbursement costs before it is able to recover its WIP and such costs. Although Shine has taken actions to assist in the recoverability of its WIP, and periodically makes provisions for unrecoverable WIP, it is a difficult measure to predict with certainty. Investors should carefully consider the assumptions on WIP recoverability and Shine s current provision for WIP in the Forecast Financial Information discussed in section 4.5 and the effect of WIP recoverability on the Forecast Financial Information in light of the sensitivity analysis in section ORGANIC GROWTH, ACQUISITIONS AND INTEGRATION RISK There is a risk that the Company may be unable to manage its future growth successfully. In particular: Organic growth The ability to hire and retain skilled personnel may be an obstacle to organic growth. Similarly, the expansion of the Company s practice beyond the areas of law in which it has traditionally practised is subject to greater risk than simply growing its traditional practice, including greater than expected operational costs and inability to attract new clients. Historic acquisitions The success of acquisitions is heavily dependent on the integration of the acquired law firm. Shine has acquired a number of legal practices in the past, some of which have been based in geographies with which Shine has less familiarity. The integration process could be more expensive or time consuming than anticipated by Shine, for example in the event of issues with staff retention, increased management time required in integrating the acquired practice or unidentified liabilities arising post-acquisition. In addition, the acquired practices may not perform in line with Shine s pre-acquisition forecasts. Future acquisitions Shine s growth strategy may be hindered if it is unable to find and successfully integrate suitable acquisitions. For example, Shine s due diligence processes may not be successful and an acquired firm may not perform to the level expected. Due diligence in new practice areas and new geographies, particularly international acquisitions, is inherently more difficult, given that Shine has less familiarity with those areas or geographies than its core practice. There can be no certainty that any practices acquired in the future will be integrated in a cost effective manner. Capital and funding requirements Additional capital or liquidity may be required in the future to meet capital requirements, fund organic growth or pay for acquisitions. Additional funding may not be available on suitable terms or conditions when required and such lack of funding may be related to matters beyond Shine s control, such as general market conditions for debt and equity raising. CASE MANAGEMENT SYSTEMS Shine s internally customised case management systems represent an important part of Shine s operations. Any interruption, loss of or delay of the Company s internet or communication facilities or transaction processing facilities, loss or corruption of data, failure of backup and restoration procedures or failure of disaster recovery plans, may impact the Company s short term financial position and may have a longer term impact on client satisfaction. Over the next few years, Shine is implementing a substantial redevelopment of its case management systems. The T2 Project is designed to achieve a number of important business improvement goals, including to increase damages recovered for Shine s clients, reduce the cycle time (the speed with which a matter is brought to a conclusion for clients), improve recoverability of Shine s fees, increase the ratio of fee-earning to non-fee-earning staff in the business, and make Shine s systems and processes increasingly scalable and agile across different geographies. Implementation of the T2 Project will involve material internal and external costs. If the T2 Project is not managed and implemented carefully, it may result in cost overruns, diversion of management time and the inability to achieve, in the timeframe contemplated, the benefits of the T2 Project, each of which would likely have an adverse effect on Shine s operations and profitability. Further details on the T2 Project are set out in section 7.5. PERSONNEL Shine depends on the talent and experience of its personnel. The departure of any key personnel, or a significant number of personnel generally, would likely have an adverse effect on Shine. It may be difficult to replace those personnel, or to do so in a timely manner or at comparable expense. Additionally, the loss of any key personnel, particularly those who leave to work for a competitor, would likely be adverse to Shine. Employee costs represent a significant component of Shine s total cost base and increases in staff numbers or salary levels and unless carefully managed may have an adverse effect on Shine s cash flows and profitability. PROFESSIONAL LIABILITY AND UNINSURED RISKS The provision of legal advice by Shine gives rise to the risk of potential liability for negligence or other similar client claims. Any such claims may cause financial and reputational damage to Shine. Although Shine maintains professional liability insurance to mitigate the financial risk, Shine s profitability may be adversely affected in the event that the insurance does not cover a potential claim (eg due to some disqualifying act of the lawyer involved), the claim exceeds the coverage available or the deductible on numerous claims in a period is material. 42

43 BRAND AND REPUTATIONAL RISK The reputation and branding of Shine is an important factor in its success. Anything that diminishes Shine s reputation or brand would likely be adverse to Shine. If such an event was widely publicised, the level of enquiries that Shine receives may suffer, which in turn would adversely affect Shine s revenue, profitability and growth. The actions of Shine s employees, including breaches of the regulations to which Shine is subject or negligence in the provision of legal advice, may damage the Shine brand. As Shine has alliances with high profile individuals, such as Erin Brockovich, any harm to the reputation of such individuals may also negatively impact Shine. CONCENTRATION OF SHAREHOLDING Following completion of the Offer, the Founders will hold approximately 65% of the Shares. Accordingly, the Founders will continue to be in a position to exert significant influence over the outcome of matters relating to Shine, including the election of Directors and the consideration of material Board decisions. Although the interests of Shine, the Founders and other Shareholders are likely to be consistent in most cases, there may be instances where their respective interests diverge. The sale of Shares in the future by the Founders (following expiry of the escrow period described in section 7.6), or the perception that such sales might occur, could adversely affect the market price of the Shares. Also, the concentration of ownership may affect the liquidity of the market for Shares on ASX, limiting the likelihood of Shine s entry into relevant indices in due course (such as the S&P ASX 200) and contributing to a perception that the ownership structure is not conducive to a corporate control transaction involving Shine in the short to medium term. COMPETITION If the actions of competitors or potential competitors become more effective, Shine s financial performance or operating margins could be adversely affected or Shine may be unable to compete successfully. For example, competitors of Shine might adopt more aggressive strategies to capture market share. Such occurrences may negatively affect Shine s future profitability, planned growth and market share. 5.3 General investment risks SHARE MARKET INVESTMENTS Prior to the Offer there has been no public market for the Shares. It is important to recognise that, once the Shares are quoted on ASX, their price might rise or fall and they might trade at prices below or above the Offer Price. There can also be no assurance that an active trading market will develop for the Shares. GENERAL ECONOMIC CONDITIONS Shine s operating and financial performance is influenced by a variety of general economic and business conditions including the level of inflation, interest rates and Government fiscal, monetary and regulatory policies. Prolonged deterioration in general economic conditions, might have a corresponding adverse impact on the Company s operating and financial performance. ACCOUNTING STANDARDS Australian accounting standards are set by the Australian Accounting Standards Board (AASB) and are outside the Board s control. Changes to accounting standards issued by AASB could materially adversely affect the financial performance and position reported in Shine s financial statements. TAXATION RISKS Changes to the rate of taxes imposed on Shine (including in overseas jurisdictions in which Shine operates now or in the future) or tax legislation generally may affect Shine and its Shareholders. In addition, an interpretation of Australian taxation laws by the Australian Taxation Office that differs to Shine s interpretation may lead to an increase in Shine s taxation liabilities and reduction in Shareholder returns. Personal tax liabilities are the responsibility of each individual investor. Shine is not responsible either for taxation or penalties incurred by investors. 5.4 Cautionary statement Statements contained in this prospectus may be forwardlooking statements. Forward-looking statements can be identified by the use of forward-looking terminology such as, but not limited to, may, will, expect, anticipate, estimate, would be, believe, or continue or the negative or other variations of comparable terminology. Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. The Directors expectations, beliefs and projections are expressed in good faith and are believed to have a reasonable basis, including without limitation, examination of historical operating trends, data contained in their records and other data available from third parties. There can be no assurance, however, that their expectations, beliefs or projections will result. Investors should not place undue reliance on these forward-looking statements. Additional factors that could cause actual results to differ materially from those indicated in the forward-looking statements are discussed earlier in this section. Factors affecting the price at which the Shares are traded on ASX could include domestic and international economic conditions. In addition, the prices of many listed entities securities are affected by factors unrelated to the operating performance of the relevant company. Such fluctuations might adversely affect the price of the Shares. 43

44 6 INVESTIGATING ACCOUNTANT S REPORT AND FINANCIAL SERVICES GUIDE 28 March 2013 The Board of Directors Shine Corporate Ltd Level 6, 30 Makerston Street Brisbane QLD 4000 Dear Directors PART 1 INVESTIGATING ACCOUNTANT S REPORT ON HISTORICAL FINANCIAL INFORMATION, PRO FORMA FINANCIAL INFORMATION AND FORECAST FINANCIAL INFORMATION 1. Introduction We have prepared this Investigating Accountant s Report (the Report ) on the historical, pro forma and forecast financial information of Shine Corporate Ltd ( Shine ) for inclusion in the prospectus to be dated on or about 28 March 2013, and to be issued by Shine, in respect of the listing of Shine Corporate Ltd on the Australian Securities Exchange ( ASX ) (the Proposed Offer or Offer ). During the year ended 30 June 2012, Shine Lawyers Limited undertook a corporate restructure meaning that operations going forward were to be conducted by Shine Lawyers Limited. The financial information includes the results of Shine Lawyers Limited, the Service Trust (Murshine Ltd ATF Shine Murdoch Service Trust) and the Shine Partnership as if they had operated as one entity for the years ended 30 June 2010, 2011 and On 13 March 2013, Shine Corporate Ltd was incorporated as the ultimate holding company. Expressions defined in the prospectus have the same meaning in this Report. Ernst & Young Transaction Advisory Services Limited ( Ernst & Young Transaction Advisory Services ) holds an Australian Financial Services Licence (AFS Licence Number ). Anne- Maree Keane is a Director and Representative of Ernst & Young Transaction Advisory Services. We have included our Financial Services Guide as Part 2 of this Report. 2. Scope Ernst & Young Transaction Advisory Services has been requested to prepare this Report to cover the following financial information: Historical Financial Information The historical financial information, as set out in sections 4.2.1, and of the prospectus comprises the historical income statement, statement of cash flows and balance sheet for the half year ended and as at 31 December (Hereafter the Historical Financial Information ). The Historical Financial Information for the period ended 31 December 2012 was extracted from the reviewed financial statements, which were reviewed by Ernst & Young and on which an unqualified review conclusion was issued. Ernst & Young Transaction Advisory Services Limited, ABN Australian Financial Services Licence No

45 2 Pro Forma Financial Information The pro forma financial information as set out in sections and of the prospectus comprises: (a) (b) the historical pro forma income statements and historical pro forma statements of cash flows of Shine for the years ended 30 June 2010, 30 June 2011 and 30 June 2012 as if the Company (Shine Lawyers Limited), the Service Trust (Murshine Ltd ATF Shine Murdoch Service Trust) and the Partnership (Shine Partnership) had operated as one entity; and the pro forma balance sheet as at 31 December 2012 which assumes completion of certain Pro Forma Transactions such as the capital raising and the payment of offer costs. (Hereafter the Pro forma Financial Information ). The Pro Forma Financial Information has been prepared on the basis of the pro forma assumptions and the Pro Forma Transactions outlined in sections 4.2.1, and of the prospectus. The Pro Forma Financial Information in respect of the years ended 30 June 2010, 30 June 2011 and 30 June 2012 has been extracted from the financial statements of the Company which have been audited by WHK Audit and Assurance which has issued unqualified opinions in respect of all periods. Forecast Financial Information The forecast financial information as set out in sections and of the prospectus comprises: (a) the forecast income statements of Shine for the years ending 30 June 2013 and 30 June 2014; and (b) the forecast statements of cash flows of Shine for the years ending 30 June 2013 and 30 June (Hereafter the Forecast Financial Information ). (Collectively, the Financial Information ). The Forecast Financial Information is based on the assumptions outlined in section 4.4 of the prospectus. The Financial Information is presented in an abbreviated form insofar as it does not include all of the presentation and disclosures required by Australian Accounting Standards applicable to general purpose financial reports. 3. Directors Responsibility for the Financial Information The Directors of Shine have prepared and are responsible for the preparation and presentation of the Financial Information. The Directors are also responsible for the determination of the pro forma assumptions and best- estimate assumptions as set out in sections 4.2.1, 4.2.2, and 4.4 of the prospectus. 45

46 3 4. Our Responsibility Historical and Pro Forma Financial Information Our responsibility is to express a conclusion on the Historical and Pro Forma Financial Information based on our review. We have conducted an independent review of the Historical and Pro Forma Financial Information in order to state whether on the basis of the procedures described, anything has come to our attention that would cause us to believe that: (a) The Historical Financial Information does not present fairly: o the historical income statement, statement of cash flows and balance sheet for the half year ended and as at 31 December 2012; in accordance with the measurement and recognition requirements (but not all of the presentation and disclosure requirements) of Australian Accounting Standards; (b) The pro forma assumptions do not provide a reasonable basis for the Pro Forma Financial Information; (c) The Pro Forma Financial Information has not been prepared on the basis of the assumptions set out in sections 4.2.1, and of the prospectus; and (d) The Pro Forma Financial Information does not present fairly: o o the historical pro forma income statements and historical pro forma statements of cash flows of Shine for the years ended 30 June 2010, 30 June 2011 and 30 June 2012 as if the Company, the Service Trust and the Partnership had operated as one entity; and the pro forma balance sheet as at 31 December 2012 which assumes completion of certain Pro Forma Transactions such as the capital raising and the payment of offer costs; in accordance with the measurement and recognition requirements (but not all of the presentation and disclosure requirements) of Australian Accounting Standards as if the Pro Forma Transactions set out in section of the prospectus had occurred at 31 December Our independent review of the Historical and Pro Forma Financial Information has been conducted in accordance with Australian Auditing and Assurance Standards applicable to review engagements. Our procedures consist of reading of relevant board minutes, reading of relevant contracts and other legal documents, inquiries of management personnel and the Directors of Shine, and analytical and other procedures applied to Shine s accounting records. These procedures do not provide all the evidence that would be required in an audit, thus the level of assurance provided is less than that given in an audit. We have not performed an audit and, accordingly, we do not express an audit opinion on the Financial Information. Forecast Financial Information Our responsibility is to express a conclusion on the Forecast Financial Information based on our review. We have conducted an independent review of the Forecast Financial Information in order to state whether on the basis of the procedures described, anything has come to our attention that would cause us to believe that: (a) (b) The Directors best- estimate assumptions do not provide a reasonable basis for the preparation of the Forecast Financial Information; The Forecast Financial Information was not prepared on the basis of the best- estimate assumptions; and 46

47 4 (c) The Forecast Financial Information does not present fairly: o The forecast income statements of Shine for the years ending 30 June 2013 and 30 June 2014; and o The forecast statements of cash flows of Shine for the years ending 30 June 2013 and 30 June 2014; in accordance with the recognition and measurement requirements (but not all of the presentation and disclosure requirements) of Australian Accounting Standards as if the best- estimate assumptions set out in section 4.4 of the prospectus, had occurred at 30 June 2013 or 30 June 2014 (as applicable). The Forecast Financial Information has been prepared by the Directors to provide investors with a guide to Shine s potential future financial performance based upon the achievement of certain economic, operating, developmental and trading assumptions about future events and actions that have not yet occurred and may not necessarily occur. There is a considerable degree of subjective judgement involved in the preparation of the Forecast Financial Information. Actual results may vary materially from this Forecast Financial Information and the variation may be materially positive or negative. Accordingly, investors should have regard to the Risk Factors set out in section 5 of the prospectus and Sensitivity analysis set out in section 4.5 of the prospectus. Our independent review of the Forecast Financial Information has been conducted in accordance with Australian Auditing and Assurance Standards applicable to review engagements. Our procedures consist of reading of relevant board minutes, reading of relevant contracts and other legal documents, inquiries of management personnel and the Directors of Shine, and analytical and other procedures applied to Shine s accounting records. These procedures do not provide all the evidence that would be required in an audit, thus the level of assurance provided is less than that given in an audit. We have not performed an audit and, accordingly, we do not express an audit opinion on the Forecast Financial Information. 5. Conclusion Review conclusion on Historical and Pro Forma Financial Information Based on our independent review, which is not an audit, nothing has come to our attention which causes us to believe that: (a) The Historical Financial Information does not present fairly: o the historical income statement, statement of cash flows and balance sheet for the half year ended and as at 31 December 2012; in accordance with the measurement and recognition requirements (but not all of the presentation and disclosure requirements) of Australian Accounting Standards; (b) The pro forma assumptions do not provide a reasonable basis for the Pro Forma Financial Information; (c) The Pro Forma Financial Information has not been prepared on the basis of the assumptions set out in sections 4.2.1, and of the prospectus; and (d) The Pro Forma Financial Information does not present fairly: o the historical pro forma income statements and historical pro forma statements of cash flows of Shine for the years ended 30 June 2010, 30 June 2011 and 30 June 2012 as if the Company, the Service Trust and the Partnership had operated as one entity; and 47

48 5 o the pro forma balance sheet as at 31 December 2012 which assumes completion of certain Pro Forma Transactions such as the capital raising and the payment of offer costs; in accordance with the measurement and recognition requirements (but not all of the presentation and disclosure requirements) of Australian Accounting Standards as if the Pro Forma Transactions set out in section of the prospectus had occurred at 31 December Review conclusion on Forecast Financial Information Based on our review of the Forecast Financial Information, which is not an audit, and based on an investigation of the reasonableness of the Directors best- estimate assumptions giving rise to the prospective financial information, nothing has come to our attention which causes us to believe that: (a) the Directors best- estimate assumptions do not provide a reasonable basis for the preparation of the Forecast Financial Information; (b) the Forecast Financial Information was not prepared on the basis of the best- estimate assumptions; and (c) the Forecast Financial Information does not present fairly: o o the forecast income statements of Shine for the years ending 30 June 2013 and 30 June 2014; and the forecast statements of cash flows of Shine for the years ending 30 June 2013 and 30 June 2014; in accordance with the recognition and measurement requirements (but not all of the presentation and disclosure requirements) of Australian Accounting Standards as if the best- estimate assumptions set out in section 4.4 of the prospectus, had occurred at 30 June 2013 or 30 June 2014 (as applicable). The best- estimate assumptions, set out in section 4.4 of the prospectus, are subject to significant uncertainties and contingencies often outside the control of Shine and the Directors. If events do not occur as assumed, actual results achieved and distributions provided by Shine may vary significantly from the Forecast Financial Information. Accordingly, we do not confirm or guarantee the achievement of the Forecast Financial Information, as future events, by their very nature, are not capable of independent substantiation. We disclaim any assumption of responsibility for any reliance on this Report or on the Financial Information to which this Report relates for any purposes other than the purpose for which it was prepared. This Report should be read in conjunction with the prospectus. 6. Independence or Disclosure of Interest Ernst & Young Transaction Advisory Services does not have any pecuniary interests that could reasonably be regarded as being capable of affecting its ability to give an unbiased conclusion in this matter. Ernst & Young provides audit and other advisory services to Shine, and Ernst & Young Transaction Advisory Services will receive a professional fee for the preparation of this Report. Yours faithfully Ernst & Young Transaction Advisory Services Limited Anne- Maree Keane Director and Representative 48

49 28 March 2013 THIS FINANCIAL SERVICES GUIDE FORMS PART OF THE INVESTIGATING ACCOUNTANT S REPORT PART 2 FINANCIAL SERVICES GUIDE 1. Ernst & Young Transaction Advisory Services Ernst & Young Transaction Advisory Services Limited ( Ernst & Young Transaction Advisory Services or we, or us or our ) has been engaged to provide general financial product advice in the form of an Independent Accountant s Report ( Report ) in connection with a financial product of another person. The Report is to be included in documentation being sent to you by that person. 2. Financial Services Guide This Financial Services Guide ( FSG ) provides important information to help retail clients make a decision as to their use of the general financial product advice in a Report, information about us, the financial services we offer, our dispute resolution process and how we are remunerated. 3. Financial services we offer We hold an Australian Financial Services Licence which authorises us to provide the following services: financial product advice in relation to securities, derivatives, general insurance, life insurance, managed investments, superannuation, and government debentures, stocks and bonds; and arranging to deal in securities. 4. General financial product advice In our Report we provide general financial product advice. The advice in a Report does not take into account your personal objectives, financial situation or needs. You should consider the appropriateness of a Report having regard to your own objectives, financial situation and needs before you act on the advice in a Report. Where the advice relates to the acquisition or possible acquisition of a financial product, you should also obtain an offer document relating to the financial product and consider that document before making any decision about whether to acquire the financial product. We have been engaged to issue a Report in connection with a financial product of another person. Our Report will include a description of the circumstances of our engagement and identify the person who has engaged us. Although you have not engaged us directly, a copy of the Report will be provided to you as a retail client because of your connection to the matters on which we have been engaged to report. Ernst & Young Transaction Advisory Services Limited, ABN Australian Financial Services Licence No

50 2 5. Remuneration for our services We charge fees for providing Reports. These fees have been agreed with, and will be paid by, the person who engaged us to provide a Report. Our fees for Reports are based on a time cost or fixed fee basis. Our directors and employees providing financial services receive an annual salary, a performance bonus or profit share depending on their level of seniority. The estimated fee for this Report is $15,000 (exclusive of GST). Ernst & Young Transaction Advisory Services is ultimately owned by Ernst & Young, which is a professional advisory and accounting practice. Ernst & Young may provide professional services, including audit, tax and financial advisory services, to the person who engaged us and receive fees for those services. Except for the fees and benefits referred to above, Ernst & Young Transaction Advisory Services, including any of its directors, employees or associated entities should not receive any fees or other benefits, directly or indirectly, for or in connection with the provision of a Report. 6. Associations with product issuers Ernst & Young Transaction Advisory Services and any of its associated entities may at any time provide professional services to financial product issuers in the ordinary course of business. 7. Responsibility The liability of Ernst & Young Transaction Advisory Services is limited to the contents of this Financial Services Guide and the Report. 8. Complaints process As the holder of an Australian Financial Services Licence, we are required to have a system for handling complaints from persons to whom we provide financial services. All complaints must be in writing and addressed to the AFS Compliance Manager or the Chief Complaints Officer and sent to the address below. We will make every effort to resolve a complaint within 30 days of receiving the complaint. If the complaint has not been satisfactorily dealt with, the complaint can be referred to the Financial Ombudsman Service Limited. 9. Compensation Arrangements The Company and its related entities hold Professional Indemnity insurance for the purpose of compensation should this become relevant. Representatives who have left the Company s employment are covered by our insurances in respect of events occurring during their employment. These arrangements and the level of cover held by the Company satisfy the requirements of section 912B of the Corporations Act Contacting Ernst & Young Transaction Advisory Services AFS Compliance Manager Ernst & Young 680 George Street Sydney NSW 2000 Telephone: (02) Contacting the Independent Dispute Resolution Scheme: Financial Ombudsman Service Limited PO Box 3 Melbourne VIC 3001 Telephone: This Financial Services Guide has been issued in accordance with ASIC Class Order CO 04/

51 7For personal use only MATERIAL AGREEMENTS 7.1 Constitution Below is a summary of the key provisions of Shine s Constitution (Constitution). This summary is not exhaustive, nor does it constitute a definitive statement of Shareholder s rights and obligations. SHARES The Board is entitled to issue and cancel Shares in the capital of Shine, grant options over unissued Shares and settle the manner in which fractions of a Share are to be dealt with. The Board may decide the persons to whom and the terms on which Shares are issued or options are granted as well as the rights and restrictions that attach to those Shares or options. The Constitution permits the issue of preference Shares on terms determined by the Board. Shine may also sell a Share that is part of an unmarketable parcel of Shares in accordance with the procedure set out in the Constitution. VARIATION OF CLASS RIGHTS The rights attached to any class of Shares may, unless their terms of issue state otherwise, only be varied with the consent in writing of members holding at least three-quarters of the Shares of that class, or with the sanction of a special resolution passed at a separate meeting of the holders of Shares of that class. RESTRICTED SECURITIES If the ASX classifies any of Shine s share capital as restricted securities then the restricted securities must not be disposed of during the escrow period and Shine must refuse to acknowledge a disposal of the restricted securities during the escrow period except as permitted under the Listing Rules or by the ASX. SHARE CERTIFICATES Subject to the requirements of the Corporations Act, the Listing Rules or the ASX Settlement Rules, Shine need not issue share certificates if the Directors so decide. CALLS The Board may, from time to time, call upon Shareholders for unpaid monies on their Shares. The Board must give Shareholders notice of a call at least 30 business days before the amount called is due, specifying the time and place of payment. If such a call is made, Shareholders are liable to pay the amount of each call by the time and at the place specified. FORFEITURE AND LIEN Shine is empowered to forfeit Shares in relation to any call or other amount payable in respect of Shares which remains unpaid following any notice to that effect sent to a Shareholder. Forfeited Shares become the property of Shine and the Directors may sell, reissue or otherwise dispose of the Shares as they think fit. A person whose Shares have been forfeited may still be required to pay Shine all calls and other amounts owing in respect of the forfeited Shares (including interest) if the Directors so determine. Shine has a first and paramount lien for unpaid calls, instalments and related interest and any amount it is legally required to pay in relation to a Shareholder s Shares. The lien extends to all distributions relating to the Shares, including dividends. Shine s lien over Shares will be released if it registers a transfer of the Shares without giving the transferee notice of its claim. Shine Lawyers, a subsidiary of Shine, is an ILP. Under the Legal Profession Acts, a person who is a disqualified person (as defined in the Legal Profession Acts) may not share the receipts, revenue or other income arising from the provision of legal services by the ILP. The Constitution permits the Directors to compel the sale or buyback of Shares from persons restricted from holding them under any legislation regulating the provision of legal services. SHARE TRANSFERS Shares may be transferred by any method permitted by the Corporations Act, the Listing Rules or the ASX Settlement Rules or by a written transfer in any usual form or in any other form approved by the Directors. The Board may refuse to register a transfer of securities of Shine where the transfer is not in registrable form, Shine has a lien over any of the Shares to be transferred or where it is permitted to do so by the Listing Rules or the ASX Settlement Rules. GENERAL MEETINGS Each Shareholder and Director is entitled to receive notice of and attend any general meeting of Shine. Two Shareholders must be present to constitute a quorum for a general meeting and no business may be transacted at any meeting except the election of a chair and the adjournment of the meeting, unless a quorum is present when the meeting proceeds to business. A call is deemed to have been made when a Directors resolution passing the call is made or on such later date fixed by the Board. A call may be revoked or postponed at the discretion of the Board. 51

52 VOTING RIGHTS Subject to any rights or restrictions attached to any Shares or class of Shares, on a show of hands each member present has one vote and, on a poll, one vote for each fully paid Share held, and for each partly paid Share, a fraction of a vote equivalent to the proportion to which the Share has been paid up. Voting may be in person or by proxy, attorney or representative. REMUNERATION OF DIRECTORS Directors are to be paid remuneration for their services up to such sum as accrues on a daily basis as Shine determines in general meeting to be divided among them as agreed. The remuneration of a Director (other than the MD or an Executive Director) must not include a commission on, or a percentage of, profits or operating revenue. Remuneration may be provided in such manner that the Directors decide, including by way of non cash benefits. There is also provision for Directors who devote special attention to the business of Shine or who otherwise perform services which are regarded as being outside of their ordinary duties as Directors, or who at the request of the Board engage in any journey on Shine s business, to be paid extra remuneration as determined by the Board. Directors are also entitled to be paid all travelling and other expenses they incur in attending to Shine s affairs, including attending and returning from general meetings or Board meetings, or meetings of any committee engaged in Shine s business. INTERESTS OF DIRECTORS A Director who has a material personal interest in a matter that is being considered by the Board must not be present at a meeting while the matter is being considered nor vote on the matter, unless the Corporations Act allows otherwise. ELECTION OF DIRECTORS There must be a minimum of three Directors and a maximum of eight Directors, which the Board may determine from time to time. At every annual general meeting, subject to the Constitution, one third of the Directors (to the nearest whole number and excluding the MD) must retire from office and may offer themselves for re-election. No Director, other than the MD, may hold office without re-election beyond the third annual general meeting following the meeting at which the Director was last elected or re-elected. With respect to the retirement of Directors, the Director(s) longest in office since last being elected must retire. If a number of Directors were elected on the same day, the Directors to retire shall (in default of agreement between them), be determined by ballot. DIVIDENDS If the Board determines that a final or interim dividend is payable, it will (subject to the terms of issue on any Shares or class of Shares) be paid on all Shares proportionate to the amount for the time being paid on each Share. Dividends may be paid by cheque, electronic transfer or any other method as the Board determines. The Board has the power to capitalise and distribute the whole or part of the amount from time to time standing to the credit of any reserve account or otherwise available for distribution to Shareholders. Such capitalisation and distribution must be in the same proportions which the Shareholders would be entitled to receive if distributed by way of a dividend. Subject to the Listing Rules, the Board may pay a dividend out of any fund or reserve or out of profits derived from any particular source. PROPORTIONAL TAKEOVER BIDS Shine may prohibit registration of transfers purporting to accept an offer made under a proportionate takeover bid unless a resolution of Shine has been passed approving the proportional takeover bid in accordance with the provisions of the Constitution. The rules in the Constitution relating to proportional takeover bids will cease on the third anniversary of the adoption of the Constitution or the renewal of the rules unless renewed by a special resolution of shareholders. INDEMNITIES AND INSURANCE Shine must indemnify current and past Directors and other executive officers (Officers) of Shine on a full indemnity basis and to the fullest extent permitted by law against all liabilities incurred by the Officer as a result of their holding office in Shine or a related body corporate. Shine may also, to the extent permitted by law, purchase and maintain insurance, or pay or agree to pay a premium for insurance, for each Officer against any liability incurred by the Officer as a result of their holding office in Shine or a related body corporate. 7.2 Underwriting agreement Shine and SaleCo appoint the Underwriter to underwrite the subscription of Shares under the Offer. FEES AND COSTS Shine and SaleCo must pay the Underwriter a fee of 4% (comprising an underwriting fee of 3% and management fee of 1%) of the Offer proceeds. The payment is proportionate, based on the number of Shares issued or sold (as the case may be) by each. In addition to these fees, Shine has agreed to pay the Underwriter for out of pocket expenses (including legal fees) in relation to the Offer. 52

53 TERMINATION As is normal for agreements of this nature, the Underwriter may terminate its obligations under the Underwriting Agreement if certain events occur before the Shares are issued (Unqualified Termination Events). In respect of the occurrence of certain other events, the Underwriter s ability to terminate is limited to circumstances in which the Underwriter is of the opinion that the event has had or could be expected to have a material adverse effect on certain factors including (but not limited to) the success of the offer, the ability of the Underwriter to market or promote the Offer or the price or likely price at which the Shares are likely to trade on ASX (Qualified Termination Events). The Unqualified Termination Events include (but are not limited to): (index fall) the S&P/ASX200 Index published by ASX closes at 10% below its level as at 5pm on the date of the Underwriting Agreement for at least two consecutive business days; (supplementary prospectus) the Underwriter forms the view (acting reasonably) that a supplementary prospectus must be lodged with ASIC under the Corporations Act; (material adverse change) there is a material adverse change, or any fact, matter or circumstance that is likely to cause a material adverse change, in the condition, financial or otherwise, or in the financial position (assets and liabilities) and performance (profits and losses) or financial forecasts of the Group from that described in the prospectus; (offer documents) the Underwriter forms the view (acting reasonably) that: there is an omission from the prospectus or any supplementary prospectus of material required by the Corporations Act to be included; an Offer Document (defined in the Underwriting Agreement to mean any document issued or published by or on behalf of Shine or SaleCo in respect of the Offer, including the prospectus, application forms, supplementary prospectus, any written materials that are presented or provided to prospective investors (including roadshow presentations) and any advertising or publicity documents, notices or reports) contains a statement which is untrue, inaccurate, misleading or deceptive or likely to mislead or deceive (whether by inclusion or omission); or an Offer Document does not contain all information required to comply with all applicable laws; (This termination right does not apply to research reports and other material or communications published or made by or on behalf of the Underwriter or its affiliates) (timetable) any event specified in the Offer timetable is delayed for more than two business days without the prior written approval of the Underwriter (such approval not be unreasonably withheld or delayed); (debt facilities) Shine breaches, or defaults under, any provision, undertaking, covenant or ratio of a material debt or financing arrangement or any related documentation to which that entity is a party which has, or may have, a material adverse effect on the Group; or there occurs: an event of default; a review event which gives a lender or financier the right to accelerate or require repayment of the debt or financing; or any other similar event. under or with respect to any such debt or financing arrangement or related documentation; and (Directors and Senior Management) (i) a Director or any member of Senior Management (defined in the Underwriting Agreement to mean those persons named in sections 3.2 and 3.3 of the prospectus) is charged with a criminal offence relating to any financial or corporate matter; any Government Agency commences any public action against Shine, SaleCo, any of the Directors or any member of Senior Management, or announces that it intends to take any such action; or any Director is disqualified under the Corporations Act from managing a corporation. The Qualified Termination Events include (but are not limited to): (hostilities) in respect of any one or more of Australia, the United States of America, any member state of the European Union, Indonesia, Japan, Russia, the People s Republic of China, North Korea or South Korea: hostilities not presently existing commence (whether or not war has been declared); a major escalation in existing hostilities occurs (whether or not war has been declared); a declaration is made of a national emergency or war; or a terrorist act is perpetrated in any of those countries or a diplomatic, military, commercial or political establishment of any of those countries elsewhere in the world; (material adverse change in financial markets) any of the following occurs: any material adverse change or disruption to the political conditions or financial markets of Australia, Japan, the United Kingdom, the United States of America or the international financial markets or any change or development involving a prospective change in national or international political, financial or economic conditions, 53

54 a general moratorium on commercial banking activities in Australia, the United States of America, Japan or the United Kingdom is declared by the relevant central banking authority in any of those countries, or there is a material disruption in commercial banking or security settlement or clearance services in any of those countries; or trading in all securities quoted or listed on ASX, the London Stock Exchange or the New York Stock Exchange is suspended or limited in a material respect for one day on which that exchange is open for trading; (change in law) except as disclosed in the prospectus, there is introduced, or there is a public announcement of a proposal to introduce, into the Parliament of the Commonwealth of Australia or any State or Territory of Australia a new law, or the Government of Australia, or any State or Territory of Australia, the Reserve Bank of Australia, or any Minister or other Government Agency of Australia or any State or Territory of Australia, adopts or announces a proposal to adopt a new policy (other than a law or policy which has been announced before the date of the Underwriting Agreement); and (material contracts) except as disclosed in the prospectus, any contract, deed or other agreement which is material to the making of an informed investment decision in relation to the Shares is: terminated, rescinded, altered or amended without the prior written consent of the Underwriter (such consent not to be unreasonably withheld); or found to be void or voidable. REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS The Underwriting Agreement contains various representations and warranties made by Shine, SaleCo and the Underwriter, which are customary in such an agreement. Shine also provides certain undertakings under the Underwriting Agreement regarding the conduct of Shine prior to, and for limited periods of time following the Offer. SaleCo has provided similar representations and warranties to the Underwriter. INDEMNITY Shine and SaleCo jointly and severally indemnify the Underwriter, each of its related bodies corporate and affiliates and each of their respective officers, employees, agents and advisers against all losses, liabilities, claims, damages, costs, charges and expenses whatsoever (including reasonable legal costs on a full indemnity basis) incurred or suffered directly or indirectly in connection with the Offer or the Underwriting Agreement. 7.3 Sell-down deed In addition to the Underwriting Agreement, SaleCo, the Company and the Underwriter have entered into a sell down deed to facilitate the sell down of Shares held by SaleCo, being 30 million in total, which will be offered at the Offer Price under this prospectus and form part of the Offer. Under the terms of the sell down deed, the Company is appointed SaleCo s exclusive agent to facilitate and manage the sale of the Vendor Shares under the Offer. SaleCo has an obligation under the deed to ensure the accuracy of statements in and compliance with the Corporations Act, including in relation to information that has arisen after the lodgement of the prospectus. SaleCo provides an indemnity in favour of the Company and the Underwriter for any losses suffered as a result of a breach of the warranties made by SaleCo under the sell down deed. SaleCo is responsible for the payment of any withholding taxes, stamp duty or similar in relation to the transfer of the Vendor Shares. SaleCo is responsible for any income tax or capital gains tax, including any interest, fines, penalties and charges for late or non-payment of income tax or capital gains tax, arising from the sell down of the Vendor Shares under the Offer. The deed is subject to a number of conditions including execution of the Underwriting Agreement and the prospectus being lodged with ASIC. A party may terminate the deed by notice in writing, if these conditions are not satisfied or if the Underwriting Agreement is terminated for any reason. 7.4 Erin Brockovich consultancy agreement Shine has engaged Erin Brockovich to take part in various activities for Shine, including attending functions, delivering lectures and appearing in advertisements. The agreement commenced on 1 June 2010 for a fixed term of ten years, although Shine is permitted to continue running advertising with Ms Brockovich s image for a period of 12 months after the expiry of the term. 7.5 Material technology agreements Shine maintains supplier contracts with its systems and information technology providers. Shine s existing case management system has been in place for a number of years. Shine licenses it from a local technology provider on a per seat licence fee arrangement. Shine is considering partnering with Avanade Australia Pty Ltd (Avanade) to develop a new case management system, part of the T2 Project, to replace Shine s existing system. At the date of this prospectus, Shine is in the process of negotiating an agreement with Avanade. Although the final specification for the project has not been settled, Shine and Avanade have done significant planning work. Based on that work, Shine anticipates expenditure of about $5.2 million in connection with the design and development of the new case management system over the Forecast Period. Avanade would provide ongoing hosting and support. 7.6 Restriction agreements The Founders and certain entities they control have entered into voluntary restriction agreements, which restrict the Founders from selling, creating a security interest in or otherwise dealing in their Shares until the date that is three business days after the release of Shine s full year results for FY14 (in about early September 2014). The escrow arrangements do not restrict the Founders from accepting a successful takeover bid (being a takeover bid that is accepted by at least half of non-escrowed Shareholders), transferring Shares under a scheme of arrangement or entering into a pre-bid acceptance agreement with a potential bidder for all the Shares. ASIC has provided relief from Chapter 6 of the Corporations Act to enable the Company to enter into the voluntary restriction agreements. 54

55 7.7 Executive service contracts The Company has entered into employment agreements and confidentiality agreements with key executives, which contain standard terms and conditions for agreements of this nature, including confidentiality, restraint on competition and retention of intellectual property. In the case of Shine s MD, Simon Morrison, the employment agreement is terminable on six months notice by either the Company or Mr Morrison. Under this agreement, Mr Morrison currently receives a salary of $429,288 per annum (plus statutory superannuation) and other non-cash benefits. In the case of Shine s Executive Director, Stephen Roche, the employment agreement is terminable on six months notice by either the Company or Mr Roche. Under this agreement, Mr Roche currently receives a salary of $379,288 per annum (plus statutory superannuation) and other non-cash benefits. Details of Directors fees payable to the other Directors are set out in section Deeds of indemnity and access The Company has entered into standard deeds of indemnity and access with the Directors. The Company has undertaken, consistent with the Corporations Act, to indemnify each Director in certain circumstances and to maintain Directors and Officers insurance cover in favour of the Director for seven years after the Director has ceased to be a Director. The Company has further undertaken with each Director to maintain a complete set of the Company s board papers and to make them available to the Director for seven years after the Director has ceased to be a Director. 7.9 Risk Worldwide At the date of this prospectus, Shine has entered into an arrangement under which it holds a one third interest in RWWNZ, with two other shareholders experienced in disaster insurance recovery. Shine provided a loan of approximately $400,000 to fund the commencement of operations and the other shareholders contribute similar amounts Finance facilities Shine has several corporate facilities with the Commonwealth Bank of Australia (CBA) that have a combined limit of $31.5 million. The facilities are secured by a security interest over all of Shine s assets and the assets of the Shine Murdoch Service Trust. The purpose of these facilities is to fund acquisitions, provide working capital requirements, provide short term acquisition funding, equipment financing, bank guarantees for leased premises and the working capital contribution for the Risk Worldwide NZ joint venture (see section 7.9). The facility is subject to certain ongoing conditions typical of a facility of this nature, including quarterly reporting to the lender, Shine s financial indebtedness not exceeding 40% of the net dollar value of WIP and 50% of net disbursements (with a quarterly review of this covenant), the maintenance of a combined shareholding of no less than 51% by the Founders, periodic WIP due diligence reports and the provision of detailed forecast of cash flow, profit and loss, and balance sheet for the group and the RWWNZ business, for each current financial year Leases Shine leases all of its office premises in Australia. The leases contain standard terms and conditions under which Shine is generally required to pay outgoings in addition to monthly rental fees, which are subject to rental review on a predetermined basis. The leases also contain standard termination clauses for events of default. Shine occupies a number of premises pursuant to arrangements with related parties. Those arrangements are described in more detail in section Documents available for inspection Copies of the following documents are available for inspection during normal office hours at the registered office of the Company for 13 months after the date of this prospectus: the Constitution; and the consents to the issue of this prospectus. RWWNZ will run a consultancy business to assist New Zealand victims of natural disasters or related events to recover the fair value of losses under their insurance policies, particularly those arising from the Christchurch earthquakes of 2010 and Shine NZ Pty Ltd will own a 33% interest in the venture. Under the terms of the arrangement, Shine agrees to make available to RWWNZ up to $3,000,000 under a revolving line of credit facility. The facility is unsecured and guaranteed, severally, by each shareholder (including Shine). Interest is to be accrued on the facility at the rate charged to Shine by its working capital lender. As at 31 December 2012, an amount of $1,835,891 had been advanced by Shine to RWWNZ under these arrangements. 55

56 8For personal use only ADDITIONAL INFORMATION 8.1 Past proceedings against Mr Stephen Roche In March 2003, the Solicitors Complaints Tribunal (Tribunal) held Stephen Roche guilty of professional misconduct on the basis of two charges brought against Mr Roche by The Council of Queensland Law Society Incorporated (QLS). The charges related to a retainer agreement dated 12 October 2000 between Shine Roche McGowan and a client. The charges were (1) that Mr Roche had failed to discharge his fiduciary obligation to his client, in relation to making a retainer agreement; and (2) that Mr Roche had been guilty of gross overcharging. The Tribunal found that each charge had been established, although not in all the particularised allegations in relation to the second charge, and ordered that Mr Roche be suspended from practice for 12 months. Both Mr Roche and QLS appealed against the Tribunal s decision to the Supreme Court of Queensland. The Supreme Court dismissed both appeals, upholding the Tribunal s decision and the penalty imposed. 8.2 Consents and disclaimers of responsibility None of the parties referred to below has made any statement that is included in this prospectus or any statement on which a statement made in this prospectus is based, except as specified below. Each of the parties referred to below, to the maximum extent permitted by law, expressly disclaims, and takes no responsibility for, any part of this prospectus, other than the reference to its name and a statement included in this prospectus with the consent of that party, as specified below. RBS Morgans Corporate Limited has given, and has not withdrawn, its written consent to be named as Lead Manager and Underwriter to the Offer in the form and context in which it is named. Bell Potter Securities Limited has given, and has not withdrawn, its written consent to be named as Co-Lead Manager to the Offer in the form and context in which it is named. McCullough Robertson has given, and has not withdrawn, its written consent to be named as lawyers to the Offer in the form and context in which it is named. Ernst & Young Transaction Advisory Services Limited (EYTAS) has given, and has not withdrawn, its written consent to be named as Investigating Accountant, in the form and context in which it is named and for the inclusion of its Investigating Accountant s Report and Financial Services Guide in section 6 of this prospectus in the form and context in which it is included. Ernst & Young has given, and not withdrawn, its consent to be named as Auditor in the form and context in which it is named. WHK Audit and Assurance has given, and not withdrawn, its consent to be named as Auditor in the form and context in which it is named. Link Market Services has given, and not withdrawn, its written consent to be named as share registrar in the form and context in which it is named. 8.3 Interests of experts and advisers Except as set out in this prospectus, no person named in this prospectus as performing a function in a professional, advisory or other capacity in connection with the preparation or distribution of this prospectus: has any interest or has had any interest during the last two years, in the formation or promotion of Shine, or in property acquired or proposed to be acquired by Shine in connection with its formation or promotion, or the Offer of the Shares; and no amount has been paid or agreed to be paid, and no benefit has been given, or agreed to be given, to any such person in connection with the services provided by the person in connection with the formation or promotion of Shine, or the Offer of the Shares. RBS Morgans Corporate Limited has acted as Lead Manager and Underwriter to the Offer. RBS Morgans Corporation Limited will be paid a management and underwriting fee, details of which are disclosed in section 7.2 of this prospectus. Bell Potter Securities Limited has acted as Co-Lead Manager to the Offer. Bell Potter Securities Limited will be paid a management and selling fee out of the fees payable to the Lead Manager and Underwriter. McCullough Robertson has acted as legal adviser to the Company in relation to the Offer and has been involved in undertaking due diligence enquiries and providing legal advice in relation to the Offer. McCullough Robertson will be paid an amount of $335,000 in respect of these services. EYTAS has acted as Investigating Accountant to the Offer and has prepared the Investigating Accountant s Report and Financial Services Guide in section 6 and performed work in relation to due diligence enquiries. EYTAS will be paid an estimated fee of $15,000 in respect to these services. Ernst & Young is the Company s auditor and has conducted a review of certain financial information relevant to this prospectus. Ernst & Young will be paid an estimated fee of $135,000 (GST exclusive) in respect of those services. Further amounts may be paid to Ernst & Young in accordance with their normal time-based charges and in connection with the audit services to be provided. WHK Audit and Assurance was the Company s auditor and has conducted a review of certain tax information relevant to this prospectus. WHK Audit and Assurance will be paid an estimated fee of $30,000 (GST exclusive) in respect of those services. 8.4 Interests of Directors Other than set out above or elsewhere in this prospectus: no Director or proposed Director of Shine has, or has had in the two years before lodgement of this prospectus, any interest in the formation or promotion of Shine, or the Offer of Shares, or in any property proposed to be acquired by Shine in connection with information or promotion of the Offer of the Shares; and 56

57 no amounts have been paid or agreed to be paid and no benefit has been given or agreed to be given, to any Director or proposed Director of Shine either to induce him or her to become, or to qualify him or her as a Director, or otherwise for services rendered by him or her in connection with the promotion or formation of Shine or the Offer of Shares. 8.5 Shareholdings Directors are not required to hold any Shares. The Directors or their associates have a beneficial interest in the following Shares in the Company at the date of this prospectus: DIRECTOR SHAREHOLDER SHARES 2 Stephen Roche 1 Stephen Roche ATF 65,339,902 Stephen Roche Trust Simon Morrison 1 Simon Morrison ATF Simon Morrison Trust 65,339,902 1 The Founders, together with their respective discretionary trusts, the Roche Trust and the Morrison Trust, have entered into a pre-emption deed to regulate the transfer of their Shares. Under the terms of the deed, if either Founder, or either of their respective discretionary trusts, wants to transfer their Shares they must first offer such Shares to the other Founder. 2 Before selldown by the Vendor Shareholders under the Offer. One or more of the three non-executive Directors of Shine, Tony Bellas, Carolyn Barker and Greg Moynihan may apply for Shares under the Offer. 8.6 Options There are no options on issue by the Company. 8.7 Transactions with related parties Shine has entered into a number of property leases with lessors who are related parties of Shine, being the Founders and entities they control (Founder Related Parties), as shown in the table below. Each of the property leases has been entered into on arm s length terms. Murshine Limited as trustee for the Shine Murdoch Services Trust (Service Trust), which is controlled by the Founders, is the lessee of various premises occupied by Shine, including premises owned by the Founder Related Parties. The Service Trust was established when Shine operated as a partnership. It charges Shine at cost for lease payments and various other costs. The aggregate amount paid to the Service Trust for the six months to 31 December 2012 was $654,790, of which $148,276 related to leases in respect of premises owned by Founder Related Parties (identified in the table below where the tenant is listed as the Service Trust). In addition, Shine has entered into leases directly with the Founder Related Parties, the lease costs for which totalled $183,061 for the six months to 31 December 2012 (identified in the table below where the tenant is listed as Shine). The aggregate payments to the Founder Related Parties, including those to the Service Trust which relate to premises owned by the Founder Related Parties, is $331,337 for the six months to 31 December OFFICE Bundaberg Gympie Toowoomba, Kitchener Street ADDRESS Shop 1, 6 Barolin Street Bundaberg QLD River Road Gympie QLD 4570 Ground and First Floor 5 Kitchener Street Toowoomba QLD 4350 CURRENT LANDLORD TENANT RELATIONSHIP Tojohage Investments Pty Ltd as trustee & Binya Park Pty Ltd as trustee Tojohage Investments Pty Ltd & Binya Park Pty Ltd as trustee Kerredan No 21 Pty Ltd & Binya Park Pty Ltd as trustee Shine Lawyers Ltd Service Trust Service Trust Stephen Roche is the sole director and shareholder of Tojohage Investments Pty Ltd. Simon Morrison is the sole director and shareholder of Binya Park Pty Ltd. Stephen Roche is the sole director shareholder of Tojohage Investments Pty Ltd. Simon Morrison is the sole director and shareholder of Binya Park Pty Ltd. Stephen Roche is a director of Kerredan No 21 Pty Ltd. Stephen Roche and Wendy Roche hold 100% of the share capital in Kerredan No 21 Pty Ltd. Simon Morrison is the sole director and shareholder of Binya Park Pty Ltd. Townsville Ross River Road Mundingburra QLD 4812 Tojohage Investments Pty Ltd as trustee & Binya Park Pty Ltd as trustee Service Trust Stephen Roche is the sole director and shareholder of Tojohage Investments Pty Ltd. Simon Morrison is the sole director and shareholder of Binya Park Pty Ltd. Shine Learning Centre 68 Thomas Road Upper Lockyer Tojohage Investments Pty Ltd as trustee & Binya Park Pty Ltd as trustee Shine Lawyers Ltd Stephen Roche is the sole director and shareholder of Tojohage Investments Pty Ltd. Simon Morrison is the sole director and shareholder of Binya Park Pty Ltd. Park Regis Hotel Units 36 & North Quay Brisbane QLD Tojohage Investments Pty Ltd as trustee & Binya Park Pty Ltd as trustee Shine Lawyers Ltd Stephen Roche is the sole director and shareholder of Tojohage Investments Pty Ltd. Simon Morrison is the sole director and shareholder of Binya Park Pty Ltd. Toowoomba storage unit 4 Clopton Street Toowoomba Stephen & Wendy Roche as trustee & Simon & Nicole Morrison as trustee Shine Lawyers Ltd Stephen Roche and Simon Morrison are trustees and beneficiaries of the landlord. 57

58 The Service Trust has given guarantees and security in favour of CBA for the purpose of securing its and Shine s bank facilities. As leases entered into by the Service Trust lapse, it is the Board s intention, subject to an ongoing business need for those leases, to negotiate new leases to be entered into directly by Shine on arm s length terms. 8.8 Payments to Directors The Constitution of Shine provides that the Directors may be paid, as remuneration for their services, a sum set from time to time by Shine s Shareholders in general meeting, with that sum to be divided amongst the Directors as they agree. The maximum aggregate amount which has been approved by Shine s Shareholders for payment to the Directors is $500,000 per annum. The current non-executive Directors fees are $120,000 per annum for the Chairman and $80,000 per annum for each of the non-executive Directors. 8.9 Expenses of the Offer The total estimated expenses of the Offer payable by the Company including ASX and ASIC fees, underwriting fees, accounting fees, legal fees, share registry fees, printing costs, public relations costs and other miscellaneous expenses are estimated to be approximately $1,344, Privacy When applying for Shares in the Company, Applicants will be asked to provide personal information to Shine directly, and through the share registry, such as name, address, telephone and fax numbers, tax file number and account details. The Company and the share registry collect, hold and use that personal information to assess Applications, provide facilities and services to Applicants and undertake administration. Access to information may be disclosed by the Company to its agents and service providers on the basis that they deal with such information under the Privacy Act 1988 (Cth). Incomplete applications may not be processed. Under the Privacy Act 1988 (Cth), Applicants may request access to their personal information held by or on behalf of the Company by contacting the share registry Authorisation This prospectus is issued by the Company and SaleCo. Each Director has consented to the lodgement of this prospectus with ASIC. Dated 28 March 2013 Tony Bellas Chairman Shine Corporate Ltd Simon Morrison Director Shine Vendor Sale Co Pty Ltd 58

59 9For personal use only HOW TO APPLY 9.1 Description of the Offer The Offer comprises: (a) a capital raising of $15 million, by way of an issue of 15,000,000 Shares at $1.00 per Share and (b) a $30 million sell down of 30,000,000 Shares at $1.00 per Share by the Vendor Shareholders. The total number of Shares being offered under this prospectus is therefore 45,000,000, for a total Offer size of $45 million. The Shares will rank equally in all respects with the Shares held by the Existing Shareholders. The rights and liabilities attaching to all Shares are detailed in the Company s Constitution. A summary of the Constitution is set out in section How to apply Applications may only be made on the Application Form attached to or accompanying this prospectus or in its paper copy form as downloaded in its entirety from Detailed instructions on how to complete the Application Form are set out on the reverse of the Application Form. The Offer Price is $1.00 per Share. Applications must be for a minimum of 2,000 Shares ($2,000). Complete a paper copy of the Application Form (the Company will not accept Application Forms electronically) and send it, with payment in Australian currency, by the Closing Date to: Post Lead Manager and Underwriter RBS Morgans Corporate Limited GPO Box 202 Brisbane QLD 4001 Delivery Lead Manager and Underwriter RBS Morgans Corporate Limited Level 29, Riverside Centre 123 Eagle Street Brisbane QLD 4000 Co-Lead Manager Co-Lead Manager Bell Potter Securities Limited Bell Potter Securities Limited PO Box R234 Level 38, Aurora Place Royal Exchange 88 Phillip Street NSW 1225 Sydney NSW 2000 Cheques or bank drafts must be made payable to Shine Share Offer and should be crossed and marked Not Negotiable. If you have received a firm allocation of Shares from your broker, please follow the instructions in section 9.5. Applicants with questions on how to complete the Application Form, or who require additional copies of the prospectus, can contact RBS Morgans Corporate Limited on , the Company Secretary on or [email protected] or visit the website to download a copy of the prospectus. 9.3 Broker firm applicants If you have received a firm allocation of Shares from your broker, your application and payment procedures will differ in two important respects from those described above: your application cheque must be made payable to the broker (not to Shine Share Offer ); and your completed Application Form and cheque must be delivered to the broker directly (not to the Share Registry). Applicants who receive a firm allocation of Shares must lodge their Application Form and Application Monies with the relevant broker in accordance with the relevant broker s directions in order to receive their firm allocation. Your broker will act as your agent in submitting your application. The Company, the Share Registry and the Lead Manager and Underwriter take no responsibility for any acts or omissions by your broker in connection with your Application, Application Form or Application Monies. The procedure should be explained to you in further detail by your broker. If you have a firm allocation of Shares and are in any doubt about what action to take, you should immediately contact the broker who has made you the firm offer. 9.4 Allocation of Shares The Lead Manager and Underwriter, after consultation with the Company will allocate Shares to Applicants under the Offer at its discretion. It is intended that all Shares will be allocated via a broker firm offer. Where no allocation is made to a particular Applicant or the number of Shares allocated is less than the number applied for by an Applicant, surplus Application Monies will be returned to that Applicant. No interest will be paid on refunded Application Monies. Any interest earned on Application Monies is the property of the Company. Successful Applicants will be notified in writing of the number of Shares allocated to them as soon as possible after the Closing Date. It is the responsibility of Applicants to confirm the number of Shares allocated to them prior to trading in Shares. Applicants who sell Shares before they receive notice of the Shares allocated to them do so at their own risk. If the Company s application for admission to ASX is denied, or for any reason this Offer does not proceed, all Application Monies will be refunded in full without interest. 59

60 9.5 Validity of Application Forms An Application Form may only be distributed with, attached to or accompany a complete and unaltered copy of this prospectus. By completing and lodging an Application Form received with this prospectus, the Applicant represents and warrants that the Applicant has personally received a complete and unaltered copy of this prospectus prior to completing the Application Form. The Company will not accept a completed Application Form if it has reason to believe the Applicant has not received a complete copy of the prospectus or it has reason to believe that the Application Form has been altered or tampered with in any way. An Application Form is an irrevocable acceptance of the Offer. 9.6 ASX listing An application will be made to ASX not later than seven days after the date of this prospectus for the Company to be admitted to ASX, and for official quotation of the Shares. Acceptance of the application by ASX is not a representation by ASX about the merits of the Company or the Shares. Official quotation of Shares, if granted, will commence as soon as practicable after the issue of initial shareholding statements to successful Applicants. It is expected that trading of the Shares on ASX will commence on or about 15 May If permission is not granted for official quotation of the Shares on ASX within three months of the date of this prospectus, all Application Monies received will be refunded without interest as soon as practicable in accordance with requirements of the Corporations Act. 9.7 CHESS The Company will apply for the Shares to participate in CHESS. Applicants who are issued Shares under this Offer will receive shareholding statements in lieu of share certificates. The shareholding statements set out the number of Shares issued to each successful Applicant. The shareholding statement will also provide details of the Shareholder s HIN (in the case of a holding on the CHESS sub-register) or SRN (in the case of a holding on the issuer sponsored sub-register). Shareholders need to quote their HIN or SRN, as applicable, in all dealings with a stockbroker or the Share Registry. Further statements will be provided to Shareholders showing changes in their shareholding during a particular month. Additional statements may be requested at any time, although the Company reserves the right to charge a fee. 9.8 Withdrawal The Company reserves the right to withdraw the Offer, at any time before the allotment of Shares. If the Offer does not proceed, Application Monies will be refunded. No interest will be paid on any Application Monies refunded as a result of the withdrawal of the Offer. 9.9 Taxation considerations The taxation consequences of an investment in the Company will depend upon the investor s particular circumstances. Investors should make their own enquiries about the taxation consequences of an investment in the Company. If you are in doubt as to the course you should follow, you should consult your accountant, stockbroker, lawyer or other professional adviser Foreign selling restrictions No action has been taken to register or qualify the Shares or the Offer in any jurisdiction outside Australia, or otherwise to permit a public offering of the Shares outside Australia. This prospectus does not constitute an offer or invitation in any jurisdiction where, or to any person to whom, such an offer or invitation would be unlawful. The distribution of this prospectus in jurisdictions outside Australia may be restricted by law and persons who come into possession of this prospectus should seek advice on and observe any such restrictions. Any failure to comply with such restrictions may constitute a violation of applicable securities laws. Each Applicant warrants and represents that: (a) the Applicant is an Australian citizen or resident in Australia, is located in Australia at the time of the application and is not acting for the account or benefit of any person in the United States or any other foreign person; and (b) the Applicant will not offer or sell the Shares in the United States or in any other jurisdiction outside Australia or to a United States person, except in transactions exempt from registration under the US Securities Act 1933 as amended, and in compliance with all applicable laws in the jurisdiction. 60

61 10For personal use only GLOSSARY Applicant Application Form A person or entity who submits an Application Form. An application form attached to this prospectus. Application Money The money the subject of applications under this prospectus, being the Offer Price multiplied by the number of Shares applied for. ASIC Australian Securities and Investments Commission. ASX ASX Limited ACN or the securities exchange operated by it (as the case requires). ASX Settlement ASX Settlement Pty Ltd ACN ASX Settlement Operating Rules The ASX Settlement Operating Rules, being the operating rules of the Settlement Facility for the purposes of the Corporations Act. Board The board of directors of the Company. CHESS Clearing House Electronic Subregister System, operated by ASX Settlement. Closing Date The date on which the Offer closes, being 2 May 2013, or another date nominated by the Company. Company or Shine (a) Shine Corporate Ltd ACN and, where a reference is made to the Company or Shine in the context of events or matters occurring before 2009, those references shall be to the partnership through which the legal practice was carried on at the relevant time; and (b) its Subsidiaries as the context requires. Constitution The Constitution of Shine. Corporations Act Corporations Act 2001 (Cth). Directors The directors of the Company. EBIT Earnings before interest and income tax. EBITDA Earnings before interest, income tax, depreciation and amortisation. Existing Shareholders The holders of Shares prior to the date of this prospectus. EYTAS Ernst & Young Transaction Advisory Services Limited. Financial Information Forecast Financial Information, Historical Financial Information and Pro Forma Financial Information. Forecast Financial Information Has the meaning set out in section Forecast Period The financial years ending 30 June 2013 and 30 June Founders Simon Morrison and Stephen Roche. FY The financial year ended or ending 30 June. Group Shine and its subsidiaries (each a Group Member). Historical Financial Information Has the meaning set out in section ILP or Incorporated Legal Practice A corporation that is permitted to provide legal services under the Legal Profession Acts. Legal Practitioner Director A director who holds an unrestricted practising certificate. Legal Profession Acts The Legal Profession Act 2007 (QLD), New South Wales Legal Profession Act 2004 (NSW), Victoria Legal Profession Act 2004 (VIC) and Western Australia Legal Profession Act 2008 (WA). Listing Rules Listing rules of ASX. New Shares 15,000,000 Shares to be issued by Shine under the Offer. NPAT Net profit after tax. NPBT Net profit before tax. Offer The offer of Shares under this prospectus. Offer Price $1.00 per Share. Pro Forma Financial Information Has the meaning set out in section

62 Pro Forma Transactions Has the meaning set out in section Quotation Date The first date Shares are quoted on ASX. Relevant Jurisdictions Each State and Territory in Australia in which Shine operates as an ILP, being Queensland, New South Wales, Victoria and Western Australia at the date of this prospectus. SaleCo Shine Vendor Sale Co Pty Ltd ACN Settlement Facility Has the meaning specified in the ASX Settlement Operating Rules. Shareholders Holders of Shares. Shares Fully paid ordinary shares in Shine. Shine Lawyers Shine Lawyers Limited ACN Subsidiaries The wholly owned subsidiaries of the Company, Shine Lawyers and Shine NZ Pty Ltd ACN T2 Project The project to redevelop Shine s operational systems and processes with a focus on case management. Described in sections 2.7 and 7.5. Underwriter or Lead Manager RBS Morgans Corporate Limited ACN and Underwriter Vendor Shareholders The Existing Shareholders who are selling Shares under this prospectus, being the Founders and entities associated with the Founders. Vendor Shares 30,000,000 Shares to be transferred by SaleCo under the Offer. WIP Work-in-progress. 62

63 Broker Code Adviser Code ACN Broker Firm Offer Application Form This is an Application Form for Shares in Shine under the Broker Offer on the terms set out in the Prospectus dated 28 March You may apply for a minimum of 2,000 Shares and multiples of 500 thereafter. This Application Form and your cheque or bank draft must be received by your Broker by the deadline set out in their offer to you. If you are in doubt as to how to deal with this Application Form, please contact your accountant, lawyer, stockbroker or other professional adviser. The Prospectus contains information relevant to a decision to invest in Shares and you should read the entire Prospectus carefully before applying for Shares. A C Shares applied for Price per Share Application Monies,, at A$1.00 B A$,,. (minimum 2,000, thereafter in multiples of 500) PLEASE COMPLETE YOUR DETAILS BELOW (refer overleaf for correct forms of registrable names) Applicant #1 Surname/Company Name Title First Name Middle Name Joint Applicant #2 Surname Title First Name Middle Name Designated account e.g. <Super Fund> (or Joint Applicant #3) D TFN/ABN/Exemption Code First Applicant Joint Applicant #2 Joint Applicant #3 TFN/ABN type if NOT an individual, please mark the appropriate box Company Partnership Trust Super Fund E PLEASE COMPLETE ADDRESS DETAILS PO Box/RMB/Locked Bag/Care of (c/-)/property name/building name (if applicable) Unit Number/Level Street Number Street Name Suburb/City or Town State Postcode address (only for purpose of electronic communication of shareholder information) F CHESS HIN (if you want to add this holding to a specific CHESS holder, write the number here) X Please note: that if you supply a CHESS HIN but the name and address details on your Application Form do not correspond exactly with the registration details held at CHESS, your Application will be deemed to be made without the CHESS HIN and any Shares issued as a result of the Offer will be held on the issuer sponsored sub-register. Telephone Number where you can be contacted during Business Hours G ( ) Contact Name (PRINT) Cheques or bank drafts should be drawn up according to the instructions given by your Broker. H Cheque or Bank Draft Number BSB Account Number - Total Amount A$,,. LODGEMENT INSTRUCTIONS You must return your application so it is received by your Broker by the deadline set out in their offer to you. XXX BRO001

64 Your Guide to the Application Form Please complete all relevant white sections of the Application Form in BLOCK LETTERS, using black or blue ink. These instructions are cross-referenced to each section of the form. The Shares to which this Application Form relates are Shine ( Shine ) Shares. Further details about the Shares are contained in the Prospectus dated 28 March 2013 issued by Shine. The Offer Document will expire 13 months after the date of the Offer Document. While the Prospectus is current, Shine will send paper copies of the Prospectus, any supplementary document and the Application Form, free of charge on request. The Australian Securities and Investment Commission requires that a person who provides access to an electronic application form must provide access, by the same means and at the same time, to the relevant Prospectus. This Application Form is included in the Prospectus. The Prospectus contains important information about investing in the Shares. You should read the Prospectus before applying for Shares. a b C Insert the number of Shares you wish to apply for. The Application must be for a minimum of 2,000 Shares and thereafter in multiples of 500. You may be issued all of the Shares applied for or a lesser number. Insert the relevant amount of Application Monies. To calculate your Application Monies, multiply the number of Shares applied for by the issue price. Amounts should be in Australian dollars. Please make sure the amount of your cheque or bank draft equals this amount. Write the full name you wish to appear on the register of Shares. This must be either your own name or the name of a company. Up to three joint Applicants may register. You should refer to the table below for the correct registrable title. Enter your Tax File Number (TFN) or exemption category. Business enterprises may alternatively quote their Australian Business Number (ABN). Where applicable, please enter the TFN or ABN for each joint Applicant. Collection of TFN(s) and ABN(s) is authorised by taxation laws. Quotation of TFN(s) and ABN(s) is not compulsory and will not affect your Application. However, if these are not provided, Shine will be required to deduct tax at the highest marginal rate of tax (including the Medicare Levy) from payments. e F g Please enter your postal address for all correspondence. All communications to you from Shine and the Share Registry will be mailed to the person(s) and address as shown. For joint Applicants, only one address can be entered. If you are already a CHESS participant or sponsored by a CHESS participant, write your Holder Identification Number (HIN) here. If the name or address recorded on CHESS for this HIN is different to the details given on this form, your Shares will be issued to Shine s issuer sponsored subregister. Please enter your telephone number(s), area code and contact name in case we need to contact you in relation to your Application. Please complete the details of your cheque or bank draft in this section. The total amount of your cheque or bank draft should agree with the amount shown in section B. If you receive a firm allocation of Shares from your Broker make your cheque payable to your Broker in accordance with their instructions. D H CorreCt Forms of registrable Names Note that ONLY legal entities are allowed to hold Shares. Applications must be in the name(s) of natural persons or companies. At least one full given name and the surname is required for each natural person. The name of the beneficiary or any other non-registrable name may be included by way of an account designation if completed exactly as described in the examples of correct forms below. type of investor Correct Form of registration incorrect Form of registration individual Use given names in full, not initials Mrs Katherine Clare Edwards K C Edwards Company Use Company s full title, not abbreviations Liz Biz Pty Ltd Liz Biz P/L or Liz Biz Co. Joint Holdings Use full and complete names trusts Use the trustee(s) personal name(s) Deceased estates Use the executor(s) personal name(s) minor (a person under the age of 18 years) Use the name of a responsible adult with an appropriate designation Partnerships Use the partners personal names Mr Peter Paul Tranche & Ms Mary Orlando Tranche Mrs Alessandra Herbert Smith <Alessandra Smith A/C> Ms Sophia Garnet Post & Mr Alexander Traverse Post <Est Harold Post A/C> Mrs Sally Hamilton <Henry Hamilton> Mr Frederick Samuel Smith & Mr Samuel Lawrence Smith <Fred Smith & Son A/C> Peter Paul & Mary Tranche Alessandra Smith Family Trust Estate of late Harold Post or Harold Post Deceased Master Henry Hamilton Fred Smith & Son long Names Mr Hugh Adrian John Smith-Jones Mr Hugh A J Smith Jones Clubs/Unincorporated bodies/business Names Mr Alistair Edward Lilley Vintage Wine Club Use office bearer(s) personal name(s) <Vintage Wine Club A/C> superannuation Funds Use the name of the trustee of the fund XYZ Pty Ltd <Super Fund A/C> XYZ Pty Ltd Superannuation Fund Put the name(s) of any joint Applicant(s) and/or account description using < > as indicated above in designated spaces at section C on the Application Form.

65 Broker Code Adviser Code ACN Broker Firm Offer Application Form This is an Application Form for Shares in Shine under the Broker Offer on the terms set out in the Prospectus dated 28 March You may apply for a minimum of 2,000 Shares and multiples of 500 thereafter. This Application Form and your cheque or bank draft must be received by your Broker by the deadline set out in their offer to you. If you are in doubt as to how to deal with this Application Form, please contact your accountant, lawyer, stockbroker or other professional adviser. The Prospectus contains information relevant to a decision to invest in Shares and you should read the entire Prospectus carefully before applying for Shares. A C Shares applied for Price per Share Application Monies,, at A$1.00 B A$,,. (minimum 2,000, thereafter in multiples of 500) PLEASE COMPLETE YOUR DETAILS BELOW (refer overleaf for correct forms of registrable names) Applicant #1 Surname/Company Name Title First Name Middle Name Joint Applicant #2 Surname Title First Name Middle Name Designated account e.g. <Super Fund> (or Joint Applicant #3) D TFN/ABN/Exemption Code First Applicant Joint Applicant #2 Joint Applicant #3 TFN/ABN type if NOT an individual, please mark the appropriate box Company Partnership Trust Super Fund E PLEASE COMPLETE ADDRESS DETAILS PO Box/RMB/Locked Bag/Care of (c/-)/property name/building name (if applicable) Unit Number/Level Street Number Street Name Suburb/City or Town State Postcode address (only for purpose of electronic communication of shareholder information) F CHESS HIN (if you want to add this holding to a specific CHESS holder, write the number here) X Please note: that if you supply a CHESS HIN but the name and address details on your Application Form do not correspond exactly with the registration details held at CHESS, your Application will be deemed to be made without the CHESS HIN and any Shares issued as a result of the Offer will be held on the issuer sponsored sub-register. Telephone Number where you can be contacted during Business Hours G ( ) Contact Name (PRINT) Cheques or bank drafts should be drawn up according to the instructions given by your Broker. H Cheque or Bank Draft Number BSB Account Number - Total Amount A$,,. LODGEMENT INSTRUCTIONS You must return your application so it is received by your Broker by the deadline set out in their offer to you. XXX BRO001

66 Your Guide to the Application Form Please complete all relevant white sections of the Application Form in BLOCK LETTERS, using black or blue ink. These instructions are cross-referenced to each section of the form. The Shares to which this Application Form relates are Shine ( Shine ) Shares. Further details about the Shares are contained in the Prospectus dated 28 March 2013 issued by Shine. The Offer Document will expire 13 months after the date of the Offer Document. While the Prospectus is current, Shine will send paper copies of the Prospectus, any supplementary document and the Application Form, free of charge on request. The Australian Securities and Investment Commission requires that a person who provides access to an electronic application form must provide access, by the same means and at the same time, to the relevant Prospectus. This Application Form is included in the Prospectus. The Prospectus contains important information about investing in the Shares. You should read the Prospectus before applying for Shares. a b C Insert the number of Shares you wish to apply for. The Application must be for a minimum of 2,000 Shares and thereafter in multiples of 500. You may be issued all of the Shares applied for or a lesser number. Insert the relevant amount of Application Monies. To calculate your Application Monies, multiply the number of Shares applied for by the issue price. Amounts should be in Australian dollars. Please make sure the amount of your cheque or bank draft equals this amount. Write the full name you wish to appear on the register of Shares. This must be either your own name or the name of a company. Up to three joint Applicants may register. You should refer to the table below for the correct registrable title. Enter your Tax File Number (TFN) or exemption category. Business enterprises may alternatively quote their Australian Business Number (ABN). Where applicable, please enter the TFN or ABN for each joint Applicant. Collection of TFN(s) and ABN(s) is authorised by taxation laws. Quotation of TFN(s) and ABN(s) is not compulsory and will not affect your Application. However, if these are not provided, Shine will be required to deduct tax at the highest marginal rate of tax (including the Medicare Levy) from payments. e F g Please enter your postal address for all correspondence. All communications to you from Shine and the Share Registry will be mailed to the person(s) and address as shown. For joint Applicants, only one address can be entered. If you are already a CHESS participant or sponsored by a CHESS participant, write your Holder Identification Number (HIN) here. If the name or address recorded on CHESS for this HIN is different to the details given on this form, your Shares will be issued to Shine s issuer sponsored subregister. Please enter your telephone number(s), area code and contact name in case we need to contact you in relation to your Application. Please complete the details of your cheque or bank draft in this section. The total amount of your cheque or bank draft should agree with the amount shown in section B. If you receive a firm allocation of Shares from your Broker make your cheque payable to your Broker in accordance with their instructions. D H CorreCt Forms of registrable Names Note that ONLY legal entities are allowed to hold Shares. Applications must be in the name(s) of natural persons or companies. At least one full given name and the surname is required for each natural person. The name of the beneficiary or any other non-registrable name may be included by way of an account designation if completed exactly as described in the examples of correct forms below. type of investor Correct Form of registration incorrect Form of registration individual Use given names in full, not initials Mrs Katherine Clare Edwards K C Edwards Company Use Company s full title, not abbreviations Liz Biz Pty Ltd Liz Biz P/L or Liz Biz Co. Joint Holdings Use full and complete names trusts Use the trustee(s) personal name(s) Deceased estates Use the executor(s) personal name(s) minor (a person under the age of 18 years) Use the name of a responsible adult with an appropriate designation Partnerships Use the partners personal names Mr Peter Paul Tranche & Ms Mary Orlando Tranche Mrs Alessandra Herbert Smith <Alessandra Smith A/C> Ms Sophia Garnet Post & Mr Alexander Traverse Post <Est Harold Post A/C> Mrs Sally Hamilton <Henry Hamilton> Mr Frederick Samuel Smith & Mr Samuel Lawrence Smith <Fred Smith & Son A/C> Peter Paul & Mary Tranche Alessandra Smith Family Trust Estate of late Harold Post or Harold Post Deceased Master Henry Hamilton Fred Smith & Son long Names Mr Hugh Adrian John Smith-Jones Mr Hugh A J Smith Jones Clubs/Unincorporated bodies/business Names Mr Alistair Edward Lilley Vintage Wine Club Use office bearer(s) personal name(s) <Vintage Wine Club A/C> superannuation Funds Use the name of the trustee of the fund XYZ Pty Ltd <Super Fund A/C> XYZ Pty Ltd Superannuation Fund Put the name(s) of any joint Applicant(s) and/or account description using < > as indicated above in designated spaces at section C on the Application Form.

67 CORPORATE DIRECTORY Company Shine Corporate Ltd ACN Level 6, 30 Makerston Street Brisbane QLD Directors Tony Bellas Carolyn Barker AM Greg Moynihan Stephen Roche Simon Morrison Company Secretaries John George Craig Thompson Share Registry Link Market Services Limited Level 15, 324 Queen Street Brisbane QLD 4000 Phone: Fax: Lead Manager and Underwriter to the Offer RBS Morgans Corporate Limited Level 29, Riverside Centre 123 Eagle Street Brisbane QLD Co-Lead Manager Bell Potter Securities Limited Level 38, Aurora Place 88 Phillip Street Sydney NSW Auditor Ernst & Young Level 51, 111 Eagle Street Brisbane QLD Investigating Accountant Ernst & Young Transaction Advisory Services Limited Level 51, 111 Eagle Street Brisbane QLD Lawyers to the Offer McCullough Robertson Level 11, Central Plaza Two 66 Eagle Street Brisbane QLD

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