Litigation Capital Management Limited ACN 608 667 509
ANNUAL REPORT 2017
ANNUAL REPORT 2017 1
LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509 2 LITIGATION CAPITAL MANAGEMENT LIMITED
Contents
Chairman’s Letter
Chief Executive’s Report 2017
Directors’ Report
Annual Financial Report for the year ended 30 June 2017
Shareholder Information
3
5
9
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ANNUAL REPORT 2017 1
LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509 LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509DIRECTORS’ REPORT Chairman’s Letter
To leverage the ongoing increase in international and
domestic activity, following the IPO we made a key
hire in the international arbitration area and opened a
Melbourne office. As we organically generate further
capital we will seek to apply it to other attractive
growth opportunities. I commend to you the report of
our Chief Executive Officer, Patrick Moloney, for further
details on our business and the exciting prospects
ahead. We as a Board are confident of the path ahead
for the Company through FY18 and beyond.
On behalf of the Board, I take this opportunity to
thank my fellow directors and all LCM employees, both
existing and new, for their efforts during FY17.
As a Board we are committed to delivering value to
our long standing and many new shareholders. FY18
is shaping up to be a year of material progress for LCM
and I look forward to welcoming those shareholders
who can attend our AGM in November.
Yours sincerely,
Dr David King
Chairman
Dear Shareholders,
It is my pleasure to present to you the Litigation
Capital Management (LCM) 2017 Annual Report – our
first as an ASX-listed company following our successful
IPO in December 2016 – and to be able to report good
progress in all aspects of our business.
Post our strategic decision to transition through
the IPO process from a largely externally financed
business to an internally financed business, we have
continued to invest in people and systems and to grow
our business. The transition to listed company status,
with prescribed reporting timetables, has presented
some challenges, as we operate in an industry
where the timing and quantum of recoveries from
successful litigation projects is very difficult to predict
with precision. These timing issues prevented the
Company from achieving the annual profit forecast in
the IPO Prospectus, however we remain pleased with
the progress in all of our litigation projects and are
confident on the progress to profitability in the near
term. Encouragingly, we effectively operated at break
even during the second half of the financial year.
Our litigation project performance over the last 6
financial years has been exemplary with a 2.4 times
return on invested capital over an average 26 month
period at an IRR of 81%.
We are very comfortable with the composition and
maturation profile of our litigation project portfolio,
which stands at almost $1 billion, and the scale of our
estimated $2 billion litigation project pipeline which
shows no signs of abating.
As one of the longest standing and one of the few
listed litigation financing entities in the world, LCM
is very well positioned to capitalise on a global
environment which is seeing rapid and dynamic
change in the sector from both a capital and corporate
recognition perspective.
ANNUAL REPORT 2017 3
LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509 LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509DIRECTORS’ REPORT Chief Executive’s Report 2017
2017 Financial Results
As shareholders know, Litigation Capital Management
Limited (LCM) successfully completed its Initial
Public Offering (IPO) and listed on the Australian
Securities Exchange in December 2016. LCM’s financial
performance during the 2017 financial year reflects its
transition from a private company into a publicly listed
and tradeable entity.
Whilst timing issues prevented LCM from achieving the
annual profit forecast in the IPO Prospectus, the Board
however remain pleased with the progress of the
company towards profitability. Overall, the statutory
loss posted by LCM during the 2017 financial year was
incurred in the first half and prior to its listing. During
the second half, as a listed entity, LCM effectively broke
even giving the Board confidence that its transition
into profitability is well under way.
During LCM’s preparation for its IPO, significant
expenses and overheads were incurred to render the
company ready for listing and adequately prepared
to further pursue its objectives in LCM’s target
litigation finance markets. LCM also transitioned from
an external funds management model to funding
litigation projects on its own balance sheet. Those
factors created a temporary mismatch between
LCM’s corporate overheads and its revenue. Whilst
the Board had anticipated that the transition would
be completed during the 2017 financial year, that
milestone was not achieved due to a single litigation
project not resolving within that financial year. The
particular litigation project remains part of LCM’s
portfolio of projects under management and is
expected to complete comfortably within the 2018
financial year. Indeed, management is confident that
the delay in the resolution of that project will result in
better than forecast returns.
The Board deliberately adopted a conservative plan
for the first 12 months of LCM’s operations to ensure
that its transition to a public entity was a success. In
approaching the 12 month mark since listing, the Board
is very happy with the regulatory and other systems
which were implemented to ensure the smooth
transition and ongoing operations as a listed entity. In
achieving its first 12 months of operations as a public
entity, LCM is well placed to take advantage of many
opportunities available to it in an industry which is
growing at a rapid rate both within Asia-Pacific and
world-wide.
Key Achievements Since Listing
LCM completed two litigation projects during the 2017
financial year. As noted above, a third large and multi
case litigation project which was forecast to complete
in 2017 was moved into the 2018 accounting period.
Both of the two projects completed within FY17
exceeded forecast returns. In terms of investments
those two projects displayed exceptional financial
returns. When the two litigation projects completed
in 2017 are considered in aggregate, they generated
an IRR of 480%, 3.8 times ROIC over a period of 18
months.
With the inclusion of the two litigation projects
completed in the 2017 financial year, LCM’s financial
performance for the six financial years to 30 June 2017
shows an IRR of 81% at 2.4 times with an average time
to completion of 26 months. The performance figures
include all projects including projects which yielded a
loss. The Board is confident that LCM will continue to
generate high returns as its business grows.
LCM has increased the size of its litigation projects
under management significantly. At the time of the
IPO LCM managed litigation projects with a gross
claim size of approximately $380 million. LCM’s current
portfolio of litigation projects under management has
an aggregate gross claim size of almost $1 billion. In
increasing the size of its portfolio of litigation projects,
LCM has not only increased the number of projects
under management but also the size of projects
under management. During the same period, LCM has
increased the capital invested in its litigation projects
by 92 percent.
ANNUAL REPORT 2017 5
LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509 practitioner in international arbitration. Jonathan has
worked in private practice in most of the international
centres where arbitration takes place including Europe
and Asia. Jonathan has also worked within the ICC
International Court of Arbitration. Jonathan brings to
LCM vast experience in the international arbitration
industry as well as a considerable network of contacts
both in Asia-Pacific and Europe. LCM is in the process
of considering in excess of 20 applications for funding
of disputes in international arbitration. The Board
believes that many opportunities will become available
as the market in international arbitration matures
through the Asia-Pacific region.
Also during 2017 LCM established an office in
Melbourne to better serve the Victorian litigation
market. Melbourne, being the second largest economic
hub in Australia, provides many opportunities for
the deployment of capital into litigation projects in
insolvency, commercial and corporate litigation as
well as class actions. Melbourne also provides, albeit
a smaller market, opportunities in arbitration. Since
establishing its Melbourne office, LCM has seen an
increase in applications for litigation finance from the
Victorian jurisdiction.
In addition to increasing its portfolio of litigation
projects under management, LCM’s pipeline of
investments it is currently considering and subjecting
to due diligence has increased from approximately
$1.3 billion at the time of the IPO to almost $2 billion
presently. The Board is very pleased with not only
the increase in the size of its portfolio of projects
under management but also the mix of those projects
referable to industry sectors and risk. The Board is also
very pleased with the progress achieved by LCM in
offering litigation funding and finance products into
markets previously outside its capacity.
An example of the opportunities and markets
becoming available to LCM is the international
arbitration space. During 2017, the Parliaments of
both Singapore and Hong Kong passed legislation
to abolish the doctrines of maintenance and
champerty in relation to international arbitrations
conducted within those jurisdictions. The passing of
that legislation permits litigation funding and finance
products to be utilised by parties to international
arbitrations in both Singapore and Hong Kong. Both
of those jurisdictions have exceptionally large markets
for the resolution of international disputes through
arbitration. The provision of litigation funding and
finance into the international arbitration space is
growing internationally as well as in the Asia-Pacific
markets.
During 2017 LCM moved to establish the necessary
skill-sets within its business to provide funding into
the international arbitration space. In mid-2017, after
a thorough international search, LCM employed
Jonathan Barnett, an experienced lawyer and
way as other projects. Litigation funding
is highly relevant, just like funding for any
“We run large claims in the same
other investment or project.”
Cameron Ford, Corporate Counsel at Rio Tinto
6 LITIGATION CAPITAL MANAGEMENT LIMITED
LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509CHIEF EXECUTIVE’S REPORT 2017 Litigation Finance Market and
Opportunities
The market for litigation finance and funding products
has matured and grown at an astonishing rate over the
past few years. The industry has grown well beyond its
humble beginnings in Australia in the late 1990’s.
Litigation finance or litigation funding, as it was then
known, was first established in Australia as a means
by which insolvency practitioners could pursue
meritorious claims in a company subject to external
administration. During the early 2000’s the provision
of litigation funding spread to parties who did not
have the financial capacity to pursue meritorious
claims. The provision of finance associated with
litigation or dispute resolution is now accepted as a
legitimate form of corporate finance and is being used
and considered by sophisticated and well capitalised
corporate entities. The development of litigation
finance as a corporate finance product has developed
most significantly in the past few years. The maturing
of the market place such that litigation finance is
now widely used as a tool to increase a company’s
profitability and manage risk, has exponentially
expanded the overall market and the opportunities
available to LCM. As noted by Cameron Ford,
Corporate Counsel at Rio Tinto:
“We run large claims in the same way as other
projects. Litigation funding is highly relevant, just like
funding for any other investment or project.”
The use of litigation funding or litigation finance by
a large multi-national company such as Rio Tinto
was unthinkable when the industry commenced to
service the needs of insolvency practitioners and
impecunious plaintiffs. Indeed the use of litigation
finance by a corporate entity such as Rio Tinto would
not have been a consideration even five years ago.
The acceptance and use of litigation finance by the
corporate sector increases LCM’s opportunities very
significantly.
Most importantly, LCM has the market advantage
of being one of only a small handful of litigation
financiers worldwide who is listed.
Sophisticated corporations worldwide have been far
more accepting of litigation finance as a corporate
funding product from entities who are regulated and
have the transparency of a public listing. LCM expects
that the market for providing litigation finance and risk
management services to large corporates will continue
to increase in the coming years.
As briefly noted above, LCM has positioned itself to
take advantage of the legislative changes which have
occurred in the jurisdictions of Singapore and Hong
Kong relating to international arbitrations.
Arbitration is simply an alternative method of dispute
resolution to Court based litigation. Arbitration is being
used increasingly by multi-nationals as an alternative
to litigation. LCM is well placed to take advantage of
the increased use of arbitration for dispute resolution
and the expanding markets in the Asia-Pacific region.
LCM continues to see an increase in applications
for litigation finance consequent upon its increased
public profile through public listing. In addition to an
increased number of applications, LCM is seeing a
shift in the quality and size of litigation disputes or
cases in which it is requested to assist. The provision of
litigation finance in respect of larger claims increases
significantly the efficiency and the returns expected in
respect of litigation projects.
ANNUAL REPORT 2017 7
LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509CHIEF EXECUTIVE’S REPORT 2017 8 LITIGATION CAPITAL MANAGEMENT LIMITED
Directors’ Report
The Directors of Litigation Capital Management
Limited (LCM) present their report together with
the annual financial report of the consolidated entity
consisting of LCM and its subsidiaries (collectively LCM
Group) for the period ended 30 June 2017 and the
auditors’ report thereon.
The comparative information presented in the
consolidated financial statements is that of the
consolidated financial statements of LCM Litigation
Fund Pty Ltd which was acquired by LCM on 16
November 2015. LCM Litigation Fund Pty Ltd was
deemed to be the acquirer for accounting purposes.
LCM listed on the ASX on 13 December 2016 (ASX:
LCA).
1. Directors
David is a Fellow of the Australian Institute of
Company Directors, a Fellow of the Australasian
institute of Mining and Metallurgy and a Fellow of the
Australian Institute of Geoscientists. David is Non-
executive Chairman of Galilee Energy Ltd and Cellmid
Ltd and a Non-executive director of African Petroleum
Corporation Ltd.
Directorships of listed companies (last 3 years):
Current directorships
Galilee Energy Limited (ASX: GLL) – Non-executive
Director since 24 September 2013 and Chairman since
30 October 2013;
Cellmid Limited (ASX:CDY) – Non-executive Director
and Chairman since 18 January 2008;
African Petroleum Corporation, Oslo Axess-listed –
Chairman (since May 2016).
The Directors of LCM at any time during or since the
end of the financial period are:
Previous directorships
■ Dr David King – Chairman
■ Mr Patrick Moloney
■ Mr Steven McLean
Particulars of the skills, experience, expertise and
responsibilities of the Directors at the date of this
report are set out below:
David King
Non-executive Independent Chairman
PhD, MSc, FAusIMM, FAICD
Appointed Director and Chairman in October 2015
David was a founder and Non-executive Director of
Sapex Ltd, Gas2Grid Ltd and Eastern Star Gas Ltd. He
has substantial natural resource related experience,
having previously served as managing director of
North Flinders Mines Ltd and CEO of Beach Petroleum
and Claremont Petroleum.
Robust Resources Limited, Republic Gold Limited and
Tengri Resources Limited.
Patrick Moloney
Managing Director
LLB
Appointed Director in 2003 and Managing Director in
December 2013
Patrick has been an Executive Director of LCM since 1
December 2013. He was a Non-executive Director from
2003. Patrick was previously the principal of Moloney
Lawyers, which he established in 2003 and specialised
in commercial litigation and had a diverse client
base. Patrick has acted in more than 200 commercial
litigation cases for clients in the District Court of NSW,
the Supreme Court of NSW, the Federal Court of
Australia and the High Court of Australia. Patrick was
admitted to practice law in 1996.
ANNUAL REPORT 2017 9
LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509 Prior to establishing his own firm, Patrick was an
employed solicitor for 3 years and then a partner in
the firm of Eddy Moloney for 4 years. Patrick is also
the Chairman of 101 Capital Pty Ltd, the holder of a
current Australian Financial Services Licence, which
was formerly the Responsible Entity of a registered
Managed Investment Scheme which raised significant
monies from investors and operated an enhanced
equity income strategy.
Steven McLean
Non-executive Director
BEc
Appointed Director in November 2015
Steven has an investment banking background, with
over 20 years’ experience, commencing with Ernst
& Young Corporate Finance before moving to J.P.
Morgan both in Australia and Europe. Steven has
led equity transactions which have raised in excess
of A$50bn for corporates across various countries
including Australia, USA, UK, Switzerland, Finland,
Holland, Austria, France, Russia, Singapore and
Bermuda.
In additional to his role with LCM, Steven is currently
the Head of Corporate Finance at FinEx, Chairman
of ASX listed ReNu Energy Ltd and holds numerous
private company board positions. Steven is a graduate
of the University of Sydney with a Bachelor of
Economics.
Directorships of listed companies (last 3 years):
ReNu Energy Limited (ASX: RNE) – Non-executive
Director since 14 March 2017.
2. Company Secretaries
Steven McLean (whose details appear above) resigned
as Company Secretary on 7 September 2016.
Anna Sandham was appointed Company Secretary
of LCM on 7 September 2016. Anna is an experienced
company secretary and governance professional with
over 20 years’ experience in various large and small,
public and private, listed and unlisted companies. Anna
has previously worked for companies including AMP
Financial Services, Westpac Banking Corporation,
BT Financial Group and NRMA Limited. Anna holds
a Bachelor of Economics (University of Sydney),
Graduate Diploma of Applied Corporate Governance
(Governance Institute of Australia) and is a Chartered
Secretary.
10 LITIGATION CAPITAL MANAGEMENT LIMITED
3. Meetings of Directors
The number of meetings of the Company’s Board of
Directors (“the Board”) and the number of meetings
attended by each Director during the financial period are:
David King
Patrick Maloney
Steven McLean
Board
A
4
4
4
B
4
4
4
A: represents the number of meetings held during
the time the Director held office;
B: represents the number of meetings attended.
No Committee meetings have been held this financial
year. The Directors acknowledge that an Audit &
Risk Committee was established on IPO, however
they determined during the year that the Board was
fulfilling the role of the Audit & Risk Committee and
that therefore convening separate meetings of the
Audit & Risk Committee was not an effective use of
time or resources given the composition of the Board
and the Audit & Risk Committee are identical. This may
be reviewed in the future.
4. Principal Activities
Litigation Capital Management provides financial and
risk management services associated with the legal
industry and most particularly, litigation. The company
provides services including the funding of contentious
commercial litigation and class actions as well as
corporate risk management associated with litigation.
5. Operating and Financial Review
Overview of the Group
Litigation Capital Management is a company limited
by shares and was incorporated on 9 October 2015.
It listed on the Australian Securities Exchange on 13
December 2016 under the code LCA. Its registered
office and principal place of business is Level 25, 88
Phillip Street Sydney NSW 2000.
Operations
Litigation Capital Management operates its business
through a series of wholly owned subsidiaries. The
principal activity of those subsidiaries is the provision
of litigation finance and risk management associated
with individual and portfolios of litigation projects.
Review of Financial Position
The Directors of LCM continue to be pleased with the
progress that the company is making as it transforms
its business model to a direct investment model
LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509DIRECTORS’ REPORT rather than a model in which LCM manages Litigation
Projects on behalf of third parties.
6. Dividends
The loss for LCM after providing for income tax
amounted to $2.34m for the full financial year ended
30 June 2017 (30 June 2016: loss of $2.21m).
During the first half of the period, 1 July 2016 to 31
December 2016, LCM reported a loss of $2.42m
which when compared against the loss for the full
financial year of $2.34m supports the view held by the
Directors of LCM that the transition to profitability is
well under way.
During the period LCM completed two Litigation
Projects with recognised ‘Other income’ of $3.4m.
The financial performance of these Litigation Projects
was very strong – demonstrating 3.8 times Return on
Invested Capital (ROIC) at an average time to maturity
of 18 months at an IRR of 480%.
The financial performance of the two Litigation Projects
Completed in FY17 positively contributes to LCM’s
historical financial performance. LCM is proud to have
managed Litigation Projects over the last six financial
years that have produced a ROIC of 2.4 times at an
average time to maturity of 26 months at an IRR of 81%.
As at 30 June 2017 LCM had recognised $12.5m of
Litigation Projects as assets as compared with $6.5m
as at 30 June 2016.
LCM is currently managing 14 Litigation Projects, 11 of
which LCM is financing directly.
Significant Changes in the State of Affairs
Litigation Capital Management was incorporated on 9
October 2015 and undertook an initial public offering
and listed on the Australian Securities Exchange on 13
December 2016.
No matters or circumstances have arisen during the
financial year which have significantly affected or
could significantly affect the operations of LCM or
the LCM group, the results of those operations, or the
state of affairs of the consolidated group in future
financial years.
Future Developments, Prospects and Business
Strategies
LCM is pleased with the composition and maturation
of its Litigation Project portfolio and continues
to see significant levels of attractive investment
opportunities. The Directors of LCM continue to be
encouraged by the scale and pace of the growth
of the litigation financing industry globally. LCM will
continue to monitor these developments closely with a
view to broadening out its service offering should any
of these opportunities present themselves in a suitable
manner.
The Board of LCM regard the future prospects of LCM
as bright.
No dividends were paid during the financial year.
7. Matters subsequent to the end of the
financial period
On 31 August 2017 LCM entered into a credit facility
with a private investor, Ambro Nominees Pty Ltd. The
credit facility provides LCM with a line of credit up
to $4m over a term of 18 months. The credit facility
has been provided on normal commercial terms and
is secured by charges granted by LCM and two of
its operating subsidiaries. The entry into the credit
facility enables LCM to enter into a number of litigation
funding opportunities, which will be announced to the
market in due course, and continue with the growth of
its portfolio of Litigation Projects.
In addition, LCM is engaged in advanced negotiations
with a number of parties in respect of both a larger
commercial credit facility as well as a commercial co-
funding arrangement. A larger and more permanent
source of debt capital will enable LCM to continue
with the growth of its portfolio of Litigation Projects
and meet the increasing demand for its services. A
commercial co-funding arrangement may enable LCM
to enter into larger scale Litigation Projects which
might otherwise represent concentration risk in its
portfolio. LCM will announce to the market the entry
into either of those anticipated facilities in due course.
8. Likely Developments
The maturation of LCM’s current book of Litigation
Projects is progressing very well and in respect of
some Litigation Projects better than anticipated. The
individual Litigation Projects which together comprise
the portfolio of Litigation Projects presently being
managed and funded by LCM are generally tracking
as, or better than expected. The Litigation Projects
which were expected to complete within FY17 are
progressing towards a resolution well within FY18.
In addition, the Portfolio of Litigation Projects which
LCM had originally forecast for resolution in FY18
are maturing towards a resolution well within that
timeframe.
9. Environmental Regulation
The Group’s operations are not regulated by any
significant environmental regulation under a law of the
Commonwealth or of a State or Territory.
ANNUAL REPORT 2017 11
LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509DIRECTORS’ REPORT 10. Directors’ interests
The relevant interests of each director in the shares
and rights or options over shares issued by LCM, as
notified by ASX in accordance with s205G(1) of the
Corporations Act 2001 (Cth) (Act), at the date of this
report are as follows:
Director
Ordinary shares
(held directly and
indirectly)
Unlisted options
over ordinary shares
exercisable at $0.47*
Unlisted options
over ordinary shares
exercisable at $1.00**
Unlisted partly paid
shares
David King
Steven McLean
Patrick Moloney
1,601,484
577,499
3,212,557
-
-
1,595,058
600,000
-
900,000
-
-
1,433,022
* to acquire fully paid ordinary shares, exercisable on or before 1 December 2018 at an exercise price of $0.47 per
option.
**to acquire fully paid ordinary shares, exercisable between 1 November 2018 and 1 November 2021 at an exercise
price of $1.00 per option.
11. Share Options and Rights
12. Indemnity and insurance of officers
outstanding
As at the date of this report there are 3,190,116 options
outstanding at an exercise price of $0.47 per option
and an expiry date of 1 December 2018 and 1,500,000
options outstanding at an exercise price of $1.00
exercisable between 1 November 2018 and 1 November
2021.
Option holders do not have the right to participate in
any share issue or interest issue of the Company.
The terms and condition of each grant of options
granted during the financial year are summarised
below:
Grant
date
Vesting
date
Expiry
date
Exercise
price
20 Sept
2016
20 Sept
2016
1 Nov
2018
1 Nov
2018
1 Nov
2021
1 Nov
2021
$1.00 per
share
$1.00 per
share
Number
of
Options
600,000
900,000
No shares have been issued during or since the year
end as a result of the exercise of options.
and auditors
Indemnification
Under the LCM Constitution, to the maximum extent
permitted by the Act, LCM must indemnify each
person who is or has been an Officer against any
liability incurred as an Officer and may pay a premium
for a contract insuring an Officer against that liability.
During the financial period, LCM has paid premiums in
respect of contracts insuring the directors and officers
of LCM against any liability of this nature.
LCM has not, during or since the end of the financial
period, indemnified or agreed to indemnify an officer
or auditor of LCM or any related entity against a
liability as such by an officer or auditor except to the
extent permitted by law.
Insurance premiums
In accordance with normal commercial practices,
under the terms of the insurance contracts, the nature
of liabilities insured against and the amount of the
premiums paid are confidential.
12 LITIGATION CAPITAL MANAGEMENT LIMITED
LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509DIRECTORS’ REPORT 13. Non-audit services
15. Lead Auditor’s independence
declaration
The Auditor’s independence declaration as required
under section 307C of the Act is included on page 21
of the Annual Report.
16. Auditor
BDO continues in office in accordance with section
327 of the Act.
17. Officers of the Company who are
former partners of BDO
There are no officers of LCM who are former partners
of BDO.
18. Rounding of amounts
LCM is of a kind referred to in the Australian Securities
and Investments Commission Corporations (Rounding
in Financial/Directors’ Reports) Instrument 2016/191,
relating to ‘rounding-off’. Amounts in this report have
been rounded off in accordance with that Instrument
to the nearest thousand dollars, or in certain cases, the
nearest dollar.
Details of the amounts paid or payable to the auditor
for non-audit services provided during the financial
year by the auditor are outlined in note 20 to the
financial statements.
The Directors are satisfied that the provision of non-
audit services during the financial period, by the
auditor (or by another person or firm on the auditor’s
behalf), is compatible with the general standard of
independence for auditors imposed by the Act.
The Directors are of the opinion that the services
disclosed in note 20 to the financial statements do
not compromise the external auditor’s independence
requirements of the Act for the following reasons:
■ All non-audit services have been reviewed and
approved to ensure that they do not impact the
integrity and objectivity of the auditor; and
■ None of the services undermines the general
principles relating to auditor independence as set
out in the APES 110 Code of Ethics for Professional
Accountants issued by the Accounting
Professional and Ethical Standards Board,
including reviewing or auditing the auditor’s own
work, acting in a management or decision-making
capacity for the Company, acting as an advocate
for the company or jointly sharing economic risks
and rewards.
14. Proceedings on behalf of LCM Group
No person has applied for leave of court to bring
proceedings on behalf of the company or intervene in
any proceedings to which the company is a party for
the purpose of taking responsibility on behalf of the
company for all or any part of those proceedings.
The company was not a party to any such proceedings
during the year.
ANNUAL REPORT 2017 13
LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509DIRECTORS’ REPORT 19. Remuneration Report (Audited)
The Directors present this Remuneration Report
(Report) for Litigation Capital Management Limited
(LCM and together with its controlled entities, the LCM
Group) for the 12 months ended 30 June 2017 which
has been audited in accordance with the Corporations
Act 2001 (Cth) (Act) and its regulations, and outlines
key aspects of our remuneration framework. It
contains the following sections:
1. Remuneration Framework
2. Remuneration details
3. Service Agreements
4. Remuneration table
5. Other statutory disclosures
1. Remuneration framework
1.1 Overview of remuneration framework
Relationship between remuneration policy, the
company’s performance and shareholder wealth
As LCM only listed on the Australian Securities
Exchange (ASX) in December 2016, this Remuneration
Report specifically focusses on the remuneration
arrangements for Non-executive Directors and
Executives for the period since listing and the
philosophy the Board has set going forward. The
remuneration disclosed for this period is consistent
with disclosures made in the Prospectus.
The Board recognises that the performance of
LCM depends on the quality and motivation of its
people. The objective of LCM’s remuneration policy
is to attract, motivate and retain the best available
management and employees to operate and manage
LCM. Non-executive Director remuneration is
designed in a way that supports the retention of their
independence. Executive remuneration and incentive
policies and practice are performance-based and
aligned with LCM Group’s vision, values and overall
business objectives.
LCM’s remuneration framework is designed to support
and reinforce its vision, value and overall business
objectives, with four guiding principles in mind:
■ Alignment of executive pay with shareholder
interests and wealth outcomes;
■ Motivation of executive behaviour to execute
LCM’s strategy through an appropriate mix of fixed
and variable pay elements;
■ Delivery of a competitive remuneration framework
that assists with attracting and retaining high
calibre non-executive and executive talent to
ensure business success; and
14 LITIGATION CAPITAL MANAGEMENT LIMITED
■ Provision of a simple and transparent framework
that is clear to participants and external
stakeholders.
LCM is committed to developing and communicating
an effective remuneration framework that assists with
attracting, retaining and motivating non-executives
and executives and that supports the execution of our
strategy to the benefit of long term value creation. The
Board welcomes feedback from external stakeholders
around its remuneration practices and disclosures.
We look forward to providing further detail on
the remuneration and reward framework in future
reports and the linkages this provides with business
performance.
1.2 Role of the Board
In lieu of a Remuneration Committee the Board
ensures that the remuneration of Directors and senior
executives is consistent with market practice and
sufficient to ensure that the LCM Group can attract,
develop and retain the best individuals.
The Board ensures that the Company’s remuneration
philosophy and strategy (as set out above) continues
to be designed to:
■ Attract, develop and retain Board and executive
talent;
■ Create a high performance culture by driving
and rewarding executives for achievement of the
Group’s strategy and business objectives; and
■
Link incentives to the creation of shareholder
value.
1.3 Key Management Personnel
Key Management Personnel (KMP) are those persons
having authority and responsibility for planning,
directing and controlling the activities of the entity,
either directly or indirectly, including any director of
LCM or the Group. The following persons were KMP’s
during the past financial year:
1.3.1 Non-executive directors
Dr David King
Steven McLean
Non-executive Chairman
Non-executive Director
1.3.2 Executives (also a member of the Board)
Patrick Moloney
Managing Director
1.4 Remuneration Consultants
When and where it is considered necessary, the
Board will seek advice from independent experts
and advisers including remuneration consultants. No
remuneration consultants were used this financial year.
LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509DIRECTORS’ REPORT
1.5 Long term incentive scheme
There has been no long term incentive scheme in place
for any KMPs or executives of LCM in the past financial
year.
2 Remuneration details
2.1 Remuneration payable to Non-executive
Directors
Annual Directors’ fees
Non-executive Directors enter into service agreements
through a letter of appointment which are not subject
to a fixed term. Non-executive Directors receive a fee
for their contribution as Directors.
The following persons acted as Non-executive
Directors of the Company during and since listing on
ASX in December 2016 and are considered members
of Key Management Personnel:
Non-executive Directors
Dr David King Non-executive Chairman
Steven McLean Non-executive Director
Fees payable to Non-executive Directors reflect the
demands which are made on, and the responsibilities
of, Directors. Directors’ fees are reviewed regularly by
the Board.
LCM’s provides that LCM may remunerate each
Director as the Board decides, provided that the total
amount paid to Non-executive Directors’ may not
exceed:
(i) The amount fixed by LCM in general meeting for
that purpose; or
(ii) If no amount has been fixed by LCM in general
meeting for that purpose, $200,000 per annum.
As no amount has been fixed by LCM in general
meeting, the aggregate fee pool limit is $200,000 per
annum. There is no intention to seek to increase the
Non-executive Director fee pool at the 2017 AGM.
The Non-executive Director annual fee structure
(including superannuation) is as follows:
Non-executive Chairman
Non-executive Director
Fee ($ per annum)
75,000*
50,000
*comprising a base fee of $50,000 and a fee of
$25,000 for the role of Chairman
Section 4.1 provides details of fees paid during the
financial year to each non-executive director. The Non-
executive Directors were both appointed in October
2015 and did not receive any fees for these services until
payment of Dr David King for his services as Chairman
commenced from October 2016, and Mr Steven McLean
for his services as a Non-executive Director from
January 2017, after LCM listed on the ASX.
The objective of LCM’s remuneration policies with
regard to Non-executive Directors is to ensure
the Company is able to attract and retain Non-
executive Directors with the skills and experience to
ensure the Board is able to discharge its oversight
and governance responsibilities in an effective
and diligent manner and supports the retention of
their independence. The Board also believes that
remuneration for Non-executive Directors should
reflect the time commitment and responsibilities of the
role as well as taking into account market levels.
It is the policy of LCM not to pay lump sum retirement
benefits to Non-executive Directors. Non-executive
Directors do not receive any bonus payments whilst
holding office as a Non-executive Director.
145 Fleet
LCM entered into an agreement with 145 Fleet Pty
Limited in October 2015 to act as LCM’s Financial
Adviser in relation to the Offer to acquire new shares
as detailed in the IPO Prospectus dated 17 November
2016 (Offer). Mr Steven McLean is the sole Director of
145 Fleet Pty Limited.
As LCM’s Financial Adviser in relation to the Offer,
including assisting with the structure of the Offer,
145 Fleet and its affiliates received consideration of
$512,430,49 (including GST and expenses).
The agreement with 145 Fleet Pty Limited was entered
into prior to Mr McLean’s appointment to the Board of
LCM, and it was a result of this assistance provided by
Mr McLean that the Directors (other than Mr McLean)
considered that he would be a suitable candidate as
a Director of LCM. Accordingly, the Directors of LCM
(other than Mr McLean who makes no statement of
opinion), consider that the agreement with 145 Fleet
Pty Limited was entered into on an arms’ length basis.
Dr David King
In recognition of his assistance with the Offer and in
recognition of him acting as Chairman of the Company
in return for nil Director fees for a considerable period
of time in the lead up to the IPO, Dr David King was
awarded the following unquoted Incentive Options to
acquire shares:
Grant date Vesting date Expiry date
Exercise
price
Number of
Options
20 Sept
2016
1 Nov 2018 1 Nov 2021 $1.00 per
600,000*
share
*all are subject to a 2 year escrow period following
LCM’s shares becoming quoted.
Further details on the valuation of these Options are
contained in sections 2.3 and 4.1 below.
ANNUAL REPORT 2017 15
LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509DIRECTORS’ REPORT 2.2 Remuneration payable to Managing Director
2.3 Share based payment arrangements
LCM, via its wholly owned subsidiary, LCM Litigation
Fund Pty Ltd, entered into an employment agreement
in February 2014 with Patrick Moloney for the
performance of his role as Managing Director. As
part of that employment agreement, the Managing
Director is entitled to a fixed salary per annum plus
superannuation and is entitled to six weeks paid
annual leave per year, details of which are set out in
section 4.1.
Forming part of the Managing Director’s remuneration
package include the following:
Grant date
20 Sept
2016
1 Dec 2013
Vesting
date
1 Nov
2018
1 Dec
2013
Expiry date
Exercise
price
Number of
Options
1 Nov 2021 $1.00 per
900,000*
share
1 Dec 2018 $0.47 per
1,595,058
share
*all are subject to a 2 year escrow period following
LCM’s shares becoming quoted.
The tranche of 900,000 options were issued to the
Managing Director in recognition of his assistance with
the Offer and in recognition of his ongoing services to
LCM.
Further details on the valuation of these Options are
contained in sections 2.3 and 4.1 below.
Appropriate benchmarking analysis was undertaken
prior to finalising the Managing Director’s base
remuneration package and benefits.
The terms and condition of each grant of options in
existence during the financial year are summarised
below:
Grant
date
Vesting
date
20 Sept
2016
1 Nov
2018
Expiry
date
1 Nov
2021
20 Sept
2016
1 Nov
2018
1 Nov
2021
1 Dec
2013
1 Dec
2013
1 Dec
2018
Exercise
price
Value at
Grant date
Number of
Options
$75,750 600,000
$113,625 900,000
$201,377 1,595,058
$1.00
per
share
$1.00
per
share
$0.47
per
share
The fair value at grant date of options issued during
the year was determined by using a Black-Scholes
option pricing model that takes into account the
share price at grant date, exercise price, expected
volatility, option life, expected dividends, the risk free
rate, vesting and performance criteria, the impact of
dilution, the fact that the options are not tradeable.
The inputs used for the Black-Scholes option pricing
model for options granted were as follows:
■
options are granted for no consideration, have a 3
year life and are exercisable after the vesting date
of 1 November 2018
■ grant date: 20/09/2016
■
■
■
■
exercise price: $1.00
expected volatility rate: 25%
expected dividend yield rate: 0%
risk free rate: 5%
Expected volatility was determined based on the
historic volatility (based on the remaining life of the
option), adjusted for any expected changes to future
volatility based on publicly available information.
16 LITIGATION CAPITAL MANAGEMENT LIMITED
LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509DIRECTORS’ REPORT Holders of the options granted are as follows:
Name
Balance at start
of year
Granted as
compensation
Exercised
Balance at end
of year
Fair value at
grant date
Vested and
Exercisable
Unvested
Dr David King
Patrick Moloney
-
-
600,000
900,000
Patrick Moloney
1,595,058
-
-
-
-
600,000
900,000
$75,750
$113,625
-
-
600,000
900,000
1,595,058
$201,377
1,595,058
-
3 Service agreement
On appointment, all non-executive directors enter into
an agreement which outlines obligations and minimum
terms and conditions.
Remuneration and other terms of employment for the
Managing Director are formalised in an employment
agreement. This agreement specifies the components
of remuneration to which he is entitled and outlines
base salary, eligibility for incentives and other benefits
including superannuation.
Key terms for the Managing Director is as follows:
Name
Patrick Moloney
Term of Agreement
Termination arrangements
Term of 5 years (commencing 1 December 2013)
with an automatic extension for a further 5 years
unless notice is given at least 1 year before the
expiry of the initial term that the agreement will
not be extended.
LCM can terminate the agreement at any time
without cause by making payment of the total
remuneration and benefits for the unexpired
period of the term, unless the remaining
term is less than 12 months, in which case the
agreement may be terminated by 12 months’
notice in writing or payment in lieu of notice.
4 Remuneration table
4.1 Remuneration table for year ended 30 June 2017
The table below provides remuneration for KMPs for the 12 months ended 30 June 2017. Due to the Company
listing in December 2016, no comparatives for the prior year have been provided.
KMP Remuneration expenses for the twelve months ended 30 June 2017 ($)
Short Term
Post employment
Long Term
TOTAL
Annual
leave
accrual
for 12
months
Salary &
Fees1
IPO
Bonus2
Total
Short
Term
Superan-
nuation
STI
Total
Post
employ-
ment
Long
Service
Leave Options
Total
Long
Term
TOTAL
in AUD
DIRECTORS
Non-executive
Directors
Dr David King
51,370
51,370
4,880
4,880
28,080
28,080
84,330
Steven
McLean
Executive
Directors
Patrick
Moloney
Total
Directors’
remuneration
22,831
512,430
535,261
2,169
2,169
537,430
450,000
29,423
479,423
25,000 25,000
7,475
42,120
49,595 554,018
524,201 512,430
29,423
1,066,054
32,049
32,049
7,475
70,200
77,675 1,175,778
1 shown gross of tax
2 Includes GST and expenses and was paid to 145 Fleet Pty Limited of which Steven McLean is the sole Director
ANNUAL REPORT 2017 17
LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509DIRECTORS’ REPORT
4.2 Relative proportion of Remuneration
Non-executive
directors
Dr David King
Steven McLean
Executive Director
Patrick Moloney
Fixed remuneration
At Risk – Cash Bonus / Other
At Risk - Securities
2017
%
100
100
100
2017
%
-
-
N/A
2017
%
N/A
N/A
N/A
4.3 Performance holdings of key management personnel
No Performance Rights have been issued to any Key Management Personnel during the current year.
4.4 Shareholdings of key management personnel
Fully Paid Ordinary Shares
The table below provides the number of fully paid ordinary shares in the company held by each Non-executive
Director and Executive KMP during the period:
2017
Balance as at start of year
Shares received during
the period on exercise of
Performance Options /
Rights
Net other change
Balance as at 30 June 2017
No.
No.
No.
No.
Dr David King
Steven McLean
Patrick Moloney
1,601,484
0
3,212,557
-
-
-
-
577,499
-
1,601,484
577,499
3,212,557
Unlisted Options to acquire Shares (exercisable between 1 November 2018 and 1 November 2021 at an exercise
price of $1.00 per option)
The table below provides the number of unlisted Options to acquire shares in the company held by each Non-
executive Director and Executive KMP during the period (exercisable between 1 November 2018 and 1 November
2021 at an exercise price of $1.00 per option):
2017
Balance as at
start of year
Granted as
compensation
Exercised
Net other
change
Balance as at
30 June 2017
Balance vested
as at 30 June
2017
Options vested
during the year
No.
No.
No.
No.
No.
No.
No.
Dr David King
Steven McLean
Patrick Moloney
0
0
0
600,000
0
900,000
-
-
-
-
-
-
600,000
0
900,000
-
-
-
-
-
-
18 LITIGATION CAPITAL MANAGEMENT LIMITED
LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509DIRECTORS’ REPORT Unlisted Options to acquire Shares (exercisable on or before 1 December 2018 at an exercise price of $0.47 per
option)
The table below provides the number of unlisted Options to acquire shares in the company held by each Non-
executive Director and Executive KMP during the period (exercisable on or before 1 December 2018 at an exercise
price of $0.47 per option):
2017
Balance as at
start of year
Granted as
compen-
sation
Exercised
Net other
change
Balance as at
30 June 2017
Balance
vested as at
30 June 2017
Options
vested during
the year
No.
No.
No.
No.
No.
No.
No.
Dr David King
Steven McLean
0
0
Patrick Moloney
1,595,058
-
-
-
-
-
-
-
-
-
0
0
1,595,058
-
-
-
-
-
-
Unlisted Partly Paid Shares
The table below provides the number of unlisted partly paid shares in the company held by each Non-executive
Director and Executive KMP during the period (issued at an issue price of $0.17 per share, wholly unpaid and will
convert to a share upon payment to LCM of $0.17 per share):
2017
Balance as at
start of year
Granted as
compensation
Exercised
Net other
change
Balance as at
30 June 2017
No.
No.
No.
No.
No.
Balance vested
as at 30 June
2017
Options vested
during the year
No.
No.
Dr David King
Steven McLean
0
0
Patrick Moloney
1,433,022
-
-
-
-
-
-
-
-
-
0
0
1,433,022
-
-
-
-
-
-
ANNUAL REPORT 2017 19
LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509DIRECTORS’ REPORT 5 Other statutory disclosures
Loans to Non-executive Directors and Executive
KMPs
Other transactions with Non-Executive Directors and
Executive KMPs
No loans were made to Non-executive Directors or
Executive KMPs at the end of the financial year.
No interest was paid to or received since the IPO from
Non-executive Directors or Executive KMPs.
This concludes the remuneration report, which has
been audited.
This report is made in accordance with a resolution of Directors, pursuant to section 298(2)(a) of the Act.
On behalf of the Directors
_____________________________________
Dr David King
Chairman
31 August 2017
Sydney
20 LITIGATION CAPITAL MANAGEMENT LIMITED
LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509DIRECTORS’ REPORT
LITIGATION CAPITAL MANAGEMENT LIMITED
ABN 13 608 667 509
Annual Financial Report
for the year ended 30 June 2017
22 LITIGATION CAPITAL MANAGEMENT LIMITED
LITIGATION CAPITAL MANAGEMENT LIMITED
ABN 13 608 667 509
Annual Financial Report
for the year ended 30 June 2017
Contents
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF CASH FLOWS
NOTES TO THE FINANCIAL STATEMENTS
24
25
26
27
28
ANNUAL REPORT 2017 23
LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509 CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2017
Revenue
Other income
Total Income
Expenses
Finance Costs
Depreciation
Employment expenses
Corporate and office expenses
Litigation fees - Coope Litigation
Legal and Professional fees
IPO Listing Expense
Foreign exchange loss
Profit/(Loss) Before Income Tax
Income tax expense/(benefit)
Net Profit/(Loss) For the Year
NOTE
5
6
7(a)
7(b)
7(c)
CONSOLIDATED
June
2016
$
June
2017
$
13,312
564,825
2,182,426
108,049
2,195,738
672,874
1,665,149
101,859
6,258
4,898
1,402,493
1,230,051
1,272,033
924,143
143,360
1,152,059
56,973
461,867
202,229
310,323
-
-
5,058,818
3,874,877
(2,863,080) (3,202,003)
8
(522,572)
(988,588)
(2,340,508)
(2,213,415)
Other comprehensive income
-
-
Total comprehensive income for the year
(2,340,508)
(2,213,415)
Loss for the year and total comprehensive income attributable to:
Owners of the parent
Non-controlling interest
Earnings per share
From continuing operations:
(2,285,183) (2,245,846)
19
(55,325)
32,430
(2,340,508)
(2,213,415)
- basic / diluted weighted average earnings per share (cents)
From continuing and discontinued operations:
- basic / diluted weighted average earnings per share (cents)
9
9
(5.01)
(6.33)
(5.01)
(6.33)
The above Consolidated Statement of Profit or Loss and Other Comprehensive Income should be read in conjunction with accompanying Notes to the
Financial Statements.
24 LITIGATION CAPITAL MANAGEMENT LIMITED
LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2017
CURRENT ASSETS
Cash and cash equivalents
Other receivables
Intangible assets - litigation contracts
TOTAL CURRENT ASSETS
NON-CURRENT ASSETS
Property, plant and equipment
Intangible assets - litigation contracts
Deferred tax asset
TOTAL NON-CURRENT ASSETS
CONSOLIDATED
June
2016
$
June
2017
$
NOTE
10
11
12
1,862,645
5,918,861
43,666
672,645
11,683,991
3,573,866
13,590,302
10,165,372
7,779
13,083
12
13
786,558
2,920,377
7,766,837
5,125,323
8,561,174
8,058,783
TOTAL ASSETS
22,151,476
18,224,155
CURRENT LIABILITIES
Trade and other payables
Employee Benefits
Borrowings
TOTAL CURRENT LIABILITIES
NON-CURRENT LIABILITIES
Deferred tax liability
Employee Benefits
TOTAL NON-CURRENT LIABILITIES
TOTAL LIABILITIES
NET ASSETS
EQUITY
Issued Capital
Share Based Payments Reserve
Retained Earnings
Parent interest
Non-controlling interest
TOTAL EQUITY
14
15
16
13
16
1,926,074
3,075,866
111,040
85,188
-
7,504,916
2,037,114 10,665,970
3,429,401
1,948,273
26,862
-
3,456,263
1,948,273
5,493,377
12,614,243
16,658,099
5,609,912
17
18
24,865,111
11,546,617
165,903
95,703
(8,357,591) (6,072,408)
16,673,424
5,569,912
(15,325)
40,000
16,658,099
5,609,912
The above Consolidated Statement of Financial Position should be read in conjunction with accompanying Notes to the Financial Statements.
ANNUAL REPORT 2017 25
LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2017
2016
Balance at 1 July 2015
Profit / (Loss) for the year
Issued
capital
Retained
earnings
Share based
payments
reserve
Total
Non-
controlling
interests
Total
equity
11,005,621 (3,826,562)
95,703 7,274,762
108,281 7,383,043
- (2,245,846)
- (2,245,846)
32,430
(2,213,416)
Other comprehensive income
-
-
-
-
-
-
Total comprehensive income for the year
- (2,245,846)
- (2,245,846)
32,430
(2,213,416)
Equity Transactions:
Contributions of equity (note 18)
540,996
Return of capital
Distributions
-
-
540,996
-
-
-
-
-
-
-
-
540,996
-
540,996
-
-
(68,281)
(68,281)
(32,430)
(32,430)
540,996
(100,711) 440,285
Balance at 30 June 2016
11,546,617 (6,072,408)
95,703 5,569,912
40,000 5,609,912
2017
Balance at 1 July 2016
Profit / (Loss) for the year
Other comprehensive income
Issued
capital
Retained
earnings
Share based
payments
reserve
Total
Non-
controlling
interests
Total
equity
11,546,617 (6,072,408)
95,703 5,569,912
40,000 5,609,912
-
-
(2,285,183)
-
-
-
(2,285,183)
(55,325) (2,340,508)
-
-
-
Total comprehensive income for the year
- (2,285,183)
- (2,285,183)
(55,325) (2,340,508)
Equity Transactions:
Contributions of equity (note 18)
13,318,494
Share based payments expense
Distributions
-
-
13,318,494
-
-
-
-
-
13,318,494
70,200
70,200
-
-
-
-
-
13,318,494
70,200
-
70,200 13,388,694
- 13,388,694
Balance at 30 June 2017
24,865,111 (8,357,591)
165,903 16,673,424
(15,325) 16,658,099
The above Consolidated Statement of Changes in Equity should be read in conjunction with accompanying Notes to the Financial Statements.
26 LITIGATION CAPITAL MANAGEMENT LIMITED
LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2017
Cash flows from operating activities
Payments to suppliers and employees
Receipts from management and performance fees
Interest income
Interest and other finance costs paid
Net cash (used in)/from operating activities
Cash flows from investing activities
Proceeds from litigation funding - settlements, fees and reimbursements
Payments for litigation funding and capitalised supplier costs
Purchase of property, plant and equipment
Net cash (used in)/from investing activities
Cash flows from financing activities
Proceeds from issue of shares
Share issue transaction costs
Repayment from borrowings
Income and capital distributions paid - non controlling interests
Net cash (used in)/from financing activities
CONSOLIDATED
June
2016
$
June
2017
$
NOTE
(2,500,437)
(3,123,939)
-
552,566
13,312
12,259
(1,665,149)
(101,913)
21
(4,152,274) (2,661,027)
3,415,084
1,612,870
(8,147,057)
(4,246,108)
(954)
(11,915)
(4,732,927) (2,645,153)
15,000,000
540,996
(2,319,321)
-
(7,851,698)
7,504,916
-
(159,235)
4,828,981
7,886,677
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
(4,056,219) 2,580,497
5,918,861
3,338,364
10
1,862,645
5,918,861
The above Consolidated Statement of Cash Flows should be read in conjunction with accompanying Notes to the Financial Statements.
ANNUAL REPORT 2017 27
LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509
NOTES TO THE FINANCIAL STATEMENTS
Note 1
Corporate Information
The financial report of Litigation Capital Management
Limited (“LCA”, “the Company” or “the Parent”) for
the year ended 30 June 2017 and its subsidiaries was
authorised for issue in accordance with a resolution of
the directors on 31 August 2017.
Litigation Capital Management Limited (ABN 13 608
667 509) is a for profit company incorporated and
domiciled in Australia and limited by shares that are
publicly traded on the Australian Securities Exchange
(ASX code: LCA).
Note 2
Accounting policies
a) Basis of preparation
b) New accounting standards and interpretations
The consolidated financial report is a general
purpose financial report, which has been prepared in
accordance with the requirements of the Corporations
Act 2001 and Australian Accounting Standards, other
authoritative pronouncements of the Australian
Accounting Standards Board. The financial report has
also been prepared on a historical cost basis.
The consolidated financial report complies with
Australian Accounting Standards and International
Financial Reporting Standards (“IFRS”), as issued by
the International Accounting Standards Board.
For the purposes of preparing the consolidated
financial statements, the Parent is a for profit entity.
i) Accounting Standards and Interpretations issued
not yet effective
The following new or amended accounting standards
and interpretations have been issued, but are not
mandatory for financial years ended 30 June 2017.
They have not been adopted in preparing the financial
statements for the year ended 30 June 2017 and are
expected to impact the entity in the period of initial
application. In all cases, the consolidated entity intends
to apply these standards from application date as
indicated in the table below.
28 LITIGATION CAPITAL MANAGEMENT LIMITED
LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509 AASB
reference
Title
AASB 9
Financial
Instruments
This standard is applicable to annual reporting periods beginning on or after
1 January 2018. The standard replaces all previous versions of AASB 9 and
completes the project to replace IAS 39 ‘Financial Instruments: Recognition and
Measurement’.
Application
date of
Standard
Application
date for
Group
1 January 2018 1 July 2018
AASB 9 introduces new classification and measurement models for financial
assets. The main changes are described below:
AASB 9 amendments the classification and measurement of financial assets:
- Financial assets will either be measured at amortised cost, fair value through
other comprehensive income (FVTOCI) or fair value through profit or loss
(FVTPL).
- Financial assets are measured at amortised cost or FVTOCI if certain restrictive
conditions are met. All other financial assets are measured at FVTPL.
- All investments in equity instruments will be measured at fair value. For
those investments in equity instruments that are not held for trading, there is
an irrevocable election to present gains and losses in OCI. Dividends will be
recognised in profit or loss.
The following requirements have generally been carried forward unchanged from
AASB 139 Financial Instruments: Recognition and Measurement into AASB 9:
- Classification and measurement of financial liabilities, and
- Derecognition requirements for financial assets and liabilities.
However, AASB 9 requires that gains or losses on financial liabilities measured at
fair value are recognised in profit or loss, except that the effects of changes in the
liability’s credit risk are recognised in other comprehensive income. AASB 9 is not
mandatorily effective until 1 January 2018 and the Group has not yet determined
the financial impacts of the Standard. The Group does not intend to early adopt
the Standard.
Impairment
The new impairment model in AASB 9 is now based on an ‘expected loss’ model
rather than an ‘incurred loss’ model.
A complex three stage model applies to debt instruments at amortised cost or at
fair value through other comprehensive income for recognising impairment losses.
A simplified impairment model applies to trade receivables and lease receivables
with maturities that are less than 12 months.
For trade receivables and lease receivables with maturity longer than 12 months,
entities have a choice of applying the complex three stage model or the simplified
model.
AASB 15
Revenue from
contracts from
customers
This standard is applicable to annual reporting periods beginning on or after 1
January 2018. The standard provides a single standard for revenue recognition.
1 January 2018 1 July 2018
An entity will recognise revenue to depict the transfer of promised goods or
services to customers in an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods or services. This means
that revenue will be recognised when control of goods or services is transferred,
rather than on transfer of risks and rewards as is currently the case under AASB 118
Revenue.
AASB 15 is not mandatorily effective until 1 January 2018 and the Group has not yet
determined the potential financial impacts of the above Standard. The Group does
not intend to early adopt the Standard.
ANNUAL REPORT 2017 29
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FINANCIAL YEAR ENDED 30 JUNE 2017LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509 Title
AASB 16 eliminates the operating and finance lease classifications for lessees
currently accounted for under AASB 117 Leases. It instead requires an entity to
bring most leases into its statement of financial position in a similar way to how
existing finance leases are treated under AASB 117. An entity will be required
to recognise a lease liability and a right of use asset in its statement of financial
position for most leases.
There are some optional exemptions for leases with a period of 12 months or less
and for low value leases. Lessor accounting remains largely unchanged from AASB
117.
AASB 16 is not mandatorily effective until 1 January 2019 and the Group is currently
assessing the impacts of the new Standard. The Group does not intend to early
adopt the Standard.
This Standard amends AASB 112 Income Taxes (July 2004) and AASB 112 Income
Taxes (August 2015) to clarify four issues with respect to recognising deferred tax
assets (DTAs) for unrealised tax losses:
- If all other recognition criteria are met, DTAs must be recognised for the
deductible temporary difference between the fair value and tax base on fixed rate
debt instruments that are not deemed to be impaired.
- Deductible temporary differences must be compared to taxable profits of
the same type (e.g. capital or revenue profits) to determine whether there are
sufficient taxable profits against which the deductible temporary differences can
be utilised.
- When comparing deductible temporary differences against the amount of
future taxable profits, the calculation of future taxable profits must exclude tax
deductions resulting from the reversal of those deductible temporary differences.
- The estimate of future taxable profits can include recovery of certain assets at
amounts more than their carrying amount if there is enough evidence that it is
probable that the entity will recover the asset for more than its carrying amount.
Examples would include:
- Property measured using cost model for which an external valuation has been
conducted
- Fixed rate debt instruments held to maturity.
The Group expects that the impacts will not be material on the Group’s accounting
policies or financial statements.
This Standard amends AASB 107 Statement of Cash Flows (August 2015) to
requires additional disclosures to enable users to evaluate changes in liabilities
arising from financing activities, including both cash flow and non-cash flow
changes.
The Group expects that the impacts will not be material on the Group’s accounting
policies or financial statements.
AASB
reference
AASB 16
Leases
AASB 2016-1
Amendments
to Australian
Accounting
Standards -
Recognitions
of Deferred
Tax Assets for
Unrealised Tax
Losses
AASB 2016-2
Amendments
to Australian
Accounting
Standards
- Disclosure
initiative:
Amendments to
AASB 107
Application
date of
Standard
Application
date for
Group
1 January 2019 1 July 2019
1 January 2017 1 July 2017
1 January 2017 July 2017
30 LITIGATION CAPITAL MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FINANCIAL YEAR ENDED 30 JUNE 2017LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509 AASB
reference
AASB 2016-5
Amendments
to Australian
Accounting
Standards -
Classification and
Measurement
of Share-Based
Payment
Transactions
Title
Application
date of
Standard
Application
date for
Group
This Standard clarifies three issues with respect to classification and measurement
share-based payment transactions as follows:
1 January 2018 1 July 2018
Vesting and non-vesting conditions
The measurement of a cash-settled share-based payment liability takes into
account vesting and non-vesting conditions in a similar manner to equity-settled
transactions.
Net settlement feature for withholding tax obligations
Tax laws in some countries require an entity to withhold an amount of equity
instruments to settle the employee’s withholding tax obligation, usually in cash.
These transactions are classified as equity-settled in their entirety if, without the
net settlement clause, it would have been classified as equity-settled, and the
entity does not withhold instruments with a value that exceeds the employee’s
withholding tax obligation.
Changing classifications from cash-settled to equity-settled
Guidance has been added to clarify that the difference between the carrying
amount of the cash-settled liability, and the fair value of the equity instruments
granted, is recognised immediately in profit or loss when a share-based payment
transaction changes from being cash-settled, to equity-settled.
The Group expects that the impacts will not be material on the Group’s accounting
policies or financial statements. This Standard is not mandatory for the Group until
1 January 2018 however early adoption is permitted.
ii) New, revised or amending Accounting Standards
and Interpretations adopted
The consolidated entity has adopted all of the new,
revised or amending Accounting Standards and
Interpretations issued by the Australian Accounting
Standards Board (‘AASB’) that are mandatory for
the current reporting period. Any new, revised or
amending Accounting Standards or Interpretations
that are not yet mandatory have not been early
adopted. The adoption of these Accounting Standards
and Interpretations did not have any significant
impact on the financial performance or position of the
consolidated entity.
transaction provides evidence of the impairment
of the asset transferred. Accounting policies of
subsidiaries have been changed where necessary to
ensure consistency with the policies adopted by the
consolidated entity.
Non-controlling interest in the results and equity of
subsidiaries are shown separately in the statement
of comprehensive income, statement of financial
position and statement of changes in equity of
the consolidated entity. Losses incurred by the
consolidated entity are attributed to the non-
controlling interest in full, even if that results in a deficit
balance.
c) Principles of consolidation
The consolidated financial statements comprise
the financial statements of Litigation Capital
Management Limited (LCA, the Company or Parent)
and its subsidiaries as at 30 June each year. Control is
achieved when the Group is exposed, or has rights, to
variable returns from its involvement with the investee
and has the ability to affect those returns through it
power over the investee.
The financial statements of subsidiaries are prepared
for the same reporting period as the Company, using
consistent accounting policies.
Intercompany transactions, balances and unrealised
gains on transactions between entities in the
consolidated entity have been eliminated in full.
Unrealised losses are also eliminated unless the
d) Critical accounting, judgments, estimates and
assumptions
The preparation of the Group’s consolidated
financial statements requires management to make
judgements, estimates and assumptions that affect
the reported amounts in the financial statements.
Management continually evaluates its judgments and
estimates in relation to assets, liabilities, contingent
liabilities, revenue and expenses. Management bases
its judgments on historical experience and on other
various factors, including expectations of future
events, management believes to be reasonable under
the circumstances. Actual results may differ from these
estimates under different assumptions and conditions.
The judgments, estimates and assumptions that have a
significant risk of causing a material adjustment to the
ANNUAL REPORT 2017 31
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FINANCIAL YEAR ENDED 30 JUNE 2017LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509 carrying amounts of assets and liabilities (refer to the
respective notes) within the financial year ending 30
June 2017 are included in the following Notes:
Note 8 - Recovery of deferred tax asset
Note 12 - Impairment testing of intangible assets -
litigation contracts
g) Foreign Currency Transactions and Balances
The Group’s consolidated financial statements are
presented in Australian dollars, which is also the
Parent’s functional currency. For each entity, the Group
determines the functional currency and items included
in the financial statements of each entity are measured
using that functional currency.
e) Current and non-current classification
Transactions and balances
Assets and liabilities are presented in the statement of
financial position based on current and non-current
classification.
An asset is classified as current when: it is either
expected to be realised or intended to be sold
or consumed in normal operating cycle; it is held
primarily for the purpose of trading; it is expected to
be realised within 12 months after the reporting period;
or the asset is cash or cash equivalent unless restricted
from being exchanged or used to settle a liability for
at least 12 months after the reporting period. All other
assets are classified as non-current.
A liability is classified as current when: it is either
expected to be settled in normal operating cycle; it is
held primarily for the purpose of trading; it is due to be
settled within 12 months after the reporting period; or
there is no unconditional right to defer the settlement
of the liability for at least 12 months after the reporting
period. All other liabilities are classified as non-current.
Deferred tax assets and liabilities are always classified
as non-current.
f) Leases
The determination of whether an arrangement is or
contains a lease is based on the substance of the
arrangement and requires an assessment of whether
the fulfilment of the arrangement is dependent on the
use of a specific asset or assets and the arrangement
conveys a right to use the asset.
A distinction is made between finance leases, which
effectively transfer from the lessor to the lessee
substantially all the risks and benefits incidental to
the ownership of leased assets, and operating leases,
under which the lessor effectively retains substantially
all such risks and benefits.
Operating lease payments, net of any incentives
received from the lessor, are charged to profit or loss
on a straight-line basis over the term of the lease.
Transactions in foreign currencies are initially recorded
by the Group’s entities at their respective functional
currency spot rates at the date the transaction first
qualifies for recognition. Monetary assets and liabilities
denominated in foreign currencies are translated at
the functional currency spot rates of exchange at the
reporting date.
Differences arising on settlement or translation of
monetary items are recognised in profit or loss with
the exception of monetary items that are designated
as part of the hedge of the Group’s net investment
of a foreign operation. These are recognised in other
comprehensive income until the net investment is
disposed of, at which time, the cumulative amount
is reclassified to profit or loss. Tax charges and
credits attributable to exchange differences on
those monetary items are also recorded in other
comprehensive income.
Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated
using the exchange rates at the dates of the initial
transactions. Non-monetary items measured at fair
value in a foreign currency are translated using the
exchange rates at the date when the fair value is
determined. The gain or loss arising on translation of
non-monetary items measured at fair value is treated
in line with the recognition of gain or loss on change
in fair value of the item (i.e. translation differences on
items whose fair value gain or loss is recognised in
other comprehensive income or profit or loss are also
recognised in other comprehensive income or profit or
loss, respectively).
32 LITIGATION CAPITAL MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FINANCIAL YEAR ENDED 30 JUNE 2017LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509 Note 3
Financial risk management objective and policies
a) Financial risk management and policies
The Group’s principal financial instruments comprise
cash and short-term deposits, receivables and
payables.
The Group actively manages its exposure to key
financial risks, including interest rate risk. The objective
is to support the delivery of the Group’s financial
targets whilst protecting its future financial security.
The main risks arising from the Group’s financial
instruments are interest rate risk, credit risk and
liquidity risk. The Group uses different methods to
measure and manage difference types of risks to
which it is exposed. These include monitoring levels of
exposure to interest rates and assessments of market
forecasts. Aging analyses and monitoring of specific
debtors are undertaken to manage credit risk. Liquidity
is monitored through the development of future rolling
cash flow forecasts.
b) Risk exposures and responses
Interest rate risk
The Group’s exposure to the risk of changes in market
interest rates relates to the Group’s cash holdings with
a floating interest rate, and the Group’s borrowings
with a fixed interest rate. At reporting date, the Group
had the following financial instruments exposed to
interest rate risk.
CONSOLIDATED
June 2017
$
June 2016
$
Financial Instruments
Cash and cash equivalents
1,862,645
5,918,861
Borrowings
-
(7,504,916)
1,862,645 (1,586,055)
The following sensitivity analysis is based on the
interest rate risk exposures in existence at the
reporting date. At 30 June 2017, if interest rates had
moved as illustrated in the following table, with all
other variables held constant, post tax profit and
equity would have been affected as follows:
Potential reasonably possible movements:
+0.5% (2016: +0.5%)
-0.5% (2016: -0.5%)
9,313
(7,930)
(9,313)
7,930
Credit Risk
Credit risk arises from the financial assets of the
Group, which comprises cash and cash equivalents
and receivables. The Group’s exposure to credit risk
arises from potential default of the counterparty.
The maximum exposure equals the carrying amount
of these instruments. Exposure at reporting date is
addressed in each applicable note.
The Group’s cash and cash equivalents are held in
financial institutions with a AA credit rating and are
subject to the prudential regulation of the Reserve
Bank of Australia.
The Group assesses the defendants in the matters
funded by the Group prior to entering into any
agreement to provide funding and continues this
assessment during the course of funding. Whenever
possible the Group ensures that security for
settlements sums is provided, or the settlements
funds are placed into solicitors’ trust accounts. As at
30 June 2017, no receivables existed as at 30 June
2017. However, the Group’s continual monitoring of the
defendants’ financial capacity mitigates this risk.
Foreign Currency Risk
The Group was exposed to currency risk on a USD
bank account and the credit facility from Burford
Capital. The credit facility from Burford Capital was
fully paid down at 31 December 2016.
Cash and cash equivalents
Borrowings
CONSOLIDATED
June 2017
$
June 2016
$
- 5,427,548
-
(7,504,916)
- (2,077,368)
The following sensitivity analysis is based on the
currency rate risk exposures in existence at the
reporting date. At 30 June 2017, if currency rates had
moved as have been illustrated in the following table,
with all other variables held constant, post tax profit
and equity would affected as follows:
Potential reasonably possible movements:
+0.5% (2016: +0.5%)
-0.5% (2016: -0.5%)
Liquidity Risk
-
-
(10,387)
(10,387)
The liquidity position of the Group is managed to ensure
sufficient liquid funds are available to meet the Group’s
expected financial commitments in a timely and cost
effective manner. Management continually reviews the
Group’s liquidity position, including the preparation of
cash flow forecasts, to determine the forecast liquidity
position and to maintain appropriate liquidity levels. All
trade and other payable financial liabilities of the Group
are current and payable within 30 days.
ANNUAL REPORT 2017 33
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FINANCIAL YEAR ENDED 30 JUNE 2017LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509
The maturity profile of the Group’s financial liabilities based on contractual maturity on an undiscounted basis are:
2017
Financial Liabilities
Trade and other payables
Borrowings
2016
Financial Liabilities
Trade and other payables
Borrowings
Fair Value
< 30 days < 12 months
Total
1,926,074
-
1,926,074
-
-
-
1,926,074
-
1,926,074
3,075,866
-
3,075,866
-
7,504,916
7,504,916
3,075,866
7,504,916
10,580,782
The methods for estimating fair value are outlined in the relevant notes to the financial statements.
Note 4
Segment information
Management has determined the operating segments
based on internal reports reviewed by chief operating
decision maker, being the Chief Executive Officer
and other members of the Board. The Board provide
strategic director and management oversight of the
entity in terms of monitoring results and approving
strategic planning of the business.
Each litigation project is an operating segment.
However, based on the similarity of the services
provided and the nature of the risks and returns
Note 5
Revenue
associated with each litigation project, the Board
consider the business as one reportable segment.
Accordingly, all segment disclosures are based upon
analysis of the group as one reportable segment.
The Group operates in one geographical location,
being Australia. The Group’s customers are all
commercial litigants with specific information
disclosed within the Operating and Financial Review of
the Directors Report.
Revenue
Management Fees
Performance Fees
Distribution Income
Interest received
CONSOLIDATED
June 2017
$
June 2016
$
-
-
-
42,000
510,547
19
13,312
12,259
13,312
564,825
revenue, which is based on a percentage of the funds
managed by the Group, is recognised as Revenue
in the Consolidated Statement of Profit or Loss and
Other Comprehensive Income as it is earned and
calculated in accordance with the agreements set by
the Fund.
Performance fees
Performance fees are recognised on the settlement
of a litigation project to the extent of the commission
agreed upon in the contract for the management of
the litigation project.
Significant Accounting Policies
Interest
Revenue is recognised at the fair value of
consideration received or receivable to the extent that
it is probable that the economic benefits will flow to
the Group and the revenue can be reliably measured.
The following specific recognition criteria must also be
met before revenue is recognised:
Management fees
Management fees are recognised when the Group has
performed investment management services for LCM
Litigation Investment Fund No 2. Management fee
34 LITIGATION CAPITAL MANAGEMENT LIMITED
Interest revenue is recognised as interest accrues using
the effective interest method. This is a method of
calculating the amortised cost of a financial asset and
allocating the interest income over the relevant period
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.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FINANCIAL YEAR ENDED 30 JUNE 2017LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509
Note 6
Other income
Other income
Litigation contracts in progress - settlements and judgments
Litigation contracts in progress - expenses
Litigation contracts - written down
Net gain on derecognition of intangible assets
Significant Accounting Policies
Litigation contracts in progress
Gains or losses arising from derecognition of Litigation
Contracts in Progress are measured as the difference
between the net disposal proceeds and the carrying
amount of the asset and are recognised in the
Consolidated Profit or Loss and Other Comprehensive
Income when the asset is derecognised.
The carrying amount of Litigation Contracts in
Progress is written off when the case is lost by the
Group or the Group decides not to pursue cases that
do not meet the Group’s required rate of return.
When the litigation has been determined in favour of
the Group or a positive settlement has been agreed,
this constitutes a derecognition of the intangible asset
and accordingly a gain or loss is recognised in the
Consolidated Statement of Profit or Loss and Other
Comprehensive Income.
CONSOLIDATED
June 2017
$
June 2016
$
3,415,086
840,137
(1,226,016)
(620,098)
(6,644)
(111,990)
2,182,426
108,049
ANNUAL REPORT 2017 35
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FINANCIAL YEAR ENDED 30 JUNE 2017LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509
Note 7
Expenses
CONSOLIDATED
June 2017
$
June 2016
$
CONSOLIDATED
June 2017
$
June 2016
$
a) Finance costs
Interest expense
1,460,091
101,859
Employee benefits expense
1,165,308
1,082,049
c) Employment Expenses
Borrowing expense
205,058
-
Superannuation
91,861
1,665,149
101,859
Provision for employee entitlements 52,714
b) Depreciation
Depreciation expense
6,258
4,898
Note 8
Income tax
The major components of tax expense comprise:
Movement in deferred tax assets
Movement in deferred tax liabilities
Income tax benefit reported in profit or loss
85,007
42,027
20,968
-
Payroll tax
22,410
Share based payments expense
70,200
1,402,493
1,230,051
d) Rental expense relating to operating leases
Minimum lease payments
304,003
274,786
CONSOLIDATED
June 2017
$
June 2016
$
2,003,700
2,164,290
(1,481,128)
(1,175,702)
522,572
988,588
The prima facie income tax expense on pre-tax accounting profit from operations reconciles to the income tax
benefit in the financial statements as follows:
Profit/(loss) for the year
At the Group’s statutory income tax rate of 27.5% (2016: 30%)
(2,863,080) (3,202,004)
(787,347)
(960,601)
Non-deductible expenses:
- fines and penalties
- other non-deductible expenses
Change in tax rate
Non-assessable distributions to non-controlling interests
Income tax benefit
Amounts charged/(credited) directly to equity
Deferred tax assets (note 13)
Franking credit balance for the Group
20
-
264,755
187
(3,852)
-
-
(24,322)
(522,572)
(988,588)
637,813
-
As at 30 June 2017, franking credits available for use in future distribution amounts amount to $nil (2016: $nil).
Changes in applicable tax rates
The effective tax rate for the year ended 30 June 2017 was 27.5%, down from 30% from the prior year.
Unrecognised temporary differences and tax losses
At 30 June 2017 the Group had no (2016:nil) unrecognised temporary differences and tax losses.
36 LITIGATION CAPITAL MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FINANCIAL YEAR ENDED 30 JUNE 2017LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509
Significant Accounting Policies
The income tax expense or benefit for the period is
the tax payable on that period’s taxable income based
on the applicable income tax rate for each jurisdiction,
adjusted by the changes in deferred tax assets and
liabilities attributable to temporary differences, unused
tax losses and the adjustment recognised for prior
periods, where applicable.
Deferred tax assets and liabilities are recognised for
temporary differences at the tax rates expected to be
applied when the assets are recovered or liabilities are
settled, based on those tax rates that are enacted or
substantively enacted, except for:
■ When the deferred income tax asset or liability
arises from the initial recognition of goodwill or
an asset or liability in a transaction that is not a
business combination and that, at the time of the
transaction, affects neither the accounting nor
taxable profits; or
■ When the taxable temporary difference is
associated with interests in subsidiaries, associates
or joint ventures, and the timing of the reversal can
be controlled and it is probable that the temporary
difference will not reverse in the foreseeable future.
Deferred tax assets are recognised for deductible
temporary differences and unused tax losses only
if it is probable that future taxable amounts will be
available to utilise those temporary differences and
losses.
The carrying amount of recognised and unrecognised
deferred tax assets are reviewed at each reporting
date. Deferred tax assets recognised are reduced to
the extent that it is no longer probable that future
taxable profits will be available for the carrying amount
to be recovered. Previously unrecognised deferred tax
assets are recognised to the extent that it is probable
that there are future taxable profits available to recover
the asset.
Deferred tax assets and liabilities are offset only where
there is a legally enforceable right to offset current tax
assets against current tax liabilities and deferred tax
assets against deferred tax liabilities; and they relate to
the same taxable authority on either the same taxable
entity or different taxable entities which intend to
settle simultaneously.
Litigation Capital Management Limited (the ‘head
entity’) and its wholly-owned Australian subsidiaries
have formed an income tax consolidated group
under the tax consolidation regime from 1 July
2003. The head entity and each subsidiary in the
tax consolidated group continue to account for their
own current and deferred tax amounts. The tax
consolidated group has applied the ‘separate taxpayer
within group’ approach in determining the appropriate
amount of taxes to allocate to members of the tax
consolidated group.
In addition to its own current and deferred tax
amounts, the head entity also recognises the current
tax liabilities (or assets) and the deferred tax assets
arising from unused tax losses and unused tax credits
assumed from each subsidiary in the tax consolidated
group.
Assets or liabilities arising under tax funding
agreements with the tax consolidated entities are
recognised as amounts receivable from or payable to
other entities in the tax consolidated group. The tax
funding arrangement ensures that the intercompany
charge equals the current tax liability or benefit
of each tax consolidated group member, resulting
in neither a contribution by the head entity to the
subsidiaries nor a distribution by the subsidiaries to
the head entity.
ANNUAL REPORT 2017 37
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FINANCIAL YEAR ENDED 30 JUNE 2017LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509 Note 9
Earnings per share
Profit/(loss) for the period used in earnings per share
Continuing operations
Weighted average number of shares used in earnings per share
CONSOLIDATED
June 2017
$
June 2016
$
(2,340,508)
(2,213,415)
Basic / diluted weighted average earnings per share per share
46,712,408
34,968,173
Basic / diluted weighted average earnings per share (cents per share)
(5.01)
(6.33)
Significant Accounting Policies
Basic earnings per share
Basic earnings per share is calculated as net profit
attributable to members of the Parent, adjusted to
exclude any costs of servicing equity (other than
dividends), divided by the weighted average number
of ordinary shares outstanding during the financial
year, adjusted for any bonus element.
Diluted earnings per share
Diluted earnings per share is calculated as net profit
attributable to members of the Parent, adjusted for:
■
costs of servicing equity (other than dividends);
Note 10
Cash and cash equivalents
■
■
■
the after tax effect of interest dividends associated
with dilutive potential ordinary shares that have
been recognised; and
other non-discretionary changes in revenue or
expenses during the period that would result from
dilution of potential ordinary shares, divided by the
weighted average number of shares and dilutive
shares, adjusted for any bonus element.
instruments that could potentially dilute basic
earnings per share in the future. 3,095,058 options
held by David King and Patrick Moloney were not
included in the calculation of diluted earnings per
share as they are antidilutive for the year ended 30
June 2017.
Cash at Bank
CONSOLIDATED
June 2017
$
June 2016
$
1,862,645
5,918,861
1,862,645
5,918,861
Reconciliation to the Consolidated Statement of
Cash Flows
For the purposes of the Consolidated Statement of
Cash Flows, cash and cash equivalents comprise the
following at 30 June:
Cash at Bank
CONSOLIDATED
June 2017
$
June 2016
$
1,862,645
5,918,861
1,862,645
5,918,861
Significant Accounting Policies
Cash and cash equivalents includes cash on hand,
deposits held at call with financial institutions, other
short-term, highly liquid investments with original
maturities of three months or less that are readily
convertible to known amounts of cash and which are
subject to an insignificant risk of changes in value.
Note 11
Other receivables
Other receivables
Security Deposit
CONSOLIDATED
June 2017
$
June 2016
$
-
644,035
43,666
28,610
43,666
672,645
38 LITIGATION CAPITAL MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FINANCIAL YEAR ENDED 30 JUNE 2017LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509
Note 12
Intangible assets
(a) Reconciliation of carrying amounts at the beginning and end of the period
Year ended 30 June 2016
Balance at 1 July 2015
Additions
Litigation contracts in progress - expenses
Litigation contracts in progress - written down
Balance at 30 June 2016
Balance at 1 July 2016
Additions
Litigation contracts in progress - expenses
Litigation contracts in progress - written down
Balance at 30 June 2017
Current
Non Current
CONSOLIDATED
$
2,575,239
4,651,092
(620,098)
(111,990)
6,494,243
6,494,243
7,208,966
(1,226,016)
(6,644)
12,470,549
CONSOLIDATED
June 2017
$
June 2016
$
11,683,991
3,573,866
786,558
2,920,377
12,470,549 6,494,243
ANNUAL REPORT 2017 39
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FINANCIAL YEAR ENDED 30 JUNE 2017LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509
(b) Description of Group’s intangible assets
Intangible assets consist of Litigation Contracts in
Progress. The carrying value of Litigation Contracts in
Progress includes the capitalisation of external costs of
funding the litigation, such as solicitors’ fees, counsels’
fees and experts’ fees. No internal costs are considered
directly attributable to managing current Litigation
Contracts in Progress.
■
■
■
■
the consolidated entity has the ability and
intention to complete the litigation;
the asset is expected to generate a future
economic benefit;
adequate, technical, financial and other resources
are available to complete the litigation; and
the expenditure attributable to the litigation during
it’s duration can be measured reliably.
(c) Write off of intangible assets
The carrying value of Litigation Contracts in Progress
is written off when the case is lost by the Group or the
Group decides not to pursue cases further.
(d) Impairment testing of intangible assets
The recoverable amount of each Litigation Contract
in Progress is determined based on a value in use
calculation using cash flow projections based on
financial budgets approved by management.
The following describes each key assumption on which
management has based its cash flow projections when
determining the value in use of Litigation Contracts in
Progress:
■
■
■
The estimated cost to complete a Litigation
Contract in Progress is budgeted, based on
estimates provided by the external legal advisors
handling the litigation.
The value to The Group of The Litigation Contracts
in Progress, once completed, is estimated based
on The expected settlement or judgement amount
of The Litigation and the fees due to the Group
under the litigation funding contract.
The discount rate applied to the cash flow
projections is based on the Group’s weighted
average cost of capital and other factors relevant to
the particular Litigation Contracts in Progress. The
discount rate applied ranged between 13% and 15%.
Significant Accounting Policies
Litigation Contracts in Progress
Litigation Contracts in Progress represent future
economic benefits controlled by the consolidated
entity. As Litigation Contracts in Progress may be
exchanged or sold, the consolidated entity is able to
control the expected future economic benefits, hence
meeting the definition of intangible assets.
Litigation Contracts in Progress are measured at cost
on initial recognition and are not amortised as the asset
is not available for use until a successful judgement or
settlement relating to the project has been determined.
It is at this point that the asset is derecognised.
Actions still outstanding
When litigation is outstanding and pending a
determination, Litigation Contracts in Progress are
carried at cost. Subsequent expenditure is capitalised
when it meets the following criteria:
40 LITIGATION CAPITAL MANAGEMENT LIMITED
Unsuccessful judgement
Where the litigation is unsuccessful at trial, this is a
trigger for impairment of the intangible asset and the
asset is written down to its recoverable amount. If the
claimant, having been unsuccessful at trial, appeals
against the judgement, then future costs of the appeal
are expensed as incurred.
Successful judgement
Where the litigation has been favourably determined
or a positive settlement has been agreed, this
constitutes a derecognition of the intangible asset
and accordingly a gain or loss is recognised in the
Consolidated Statement of Profit or Loss and Other
Comprehensive Income.
Any future costs relating to the defence of an appeal
of the defendant are expensed when incurred.
Critical Accounting Estimates and Judgements
The consolidated entity determines whether intangible
assets with indefinite useful lives are impaired at
least on an annual basis. The assumptions used in the
estimation of the recoverable amount and the carrying
amount of intangibles with indefinite useful lives are
discussed in note 12.
Impairment of non financial assets
Recoverable amount is the higher of an asset’s fair
value less costs of disposal and value-in-use. The
value-in-use is the present value of the estimated
future cash flows relating to the asset using a pre-tax
discount rate specific to the asset or cash-generating
unit to which the asset belongs. Assets that do not
have independent cash flows are grouped together to
form a cash-generating unit.
Classification of Intangible Assets
The classification of Litigation Contracts in Progress is
determined by management’s best estimate of resolution
of the Litigation Project, with those expected to be
resolved in the 12 month period to June 2018 classified
as current assets and the balance as non-current assets.
Litigation contracts in progress are classified as current
assets when the asset is expected to be realised within
twelve months after the reporting period. In making this
judgement in relation to specific assets the directors
take into account the circumstances of the associated
litigation, including whether a trial date has been set
within the twelve months after the reporting date.
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FINANCIAL YEAR ENDED 30 JUNE 2017LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509 Note 13
Deferred tax
Deferred tax asset comprises temporary differences attributable to:
Property, plant and equipment
Employee benefits
Other Provisions
Accrued expenses
Tax losses carried forward
Transaction costs on share issue
Movements in deferred tax assets - 2017
Property, plant and equipment
Employee benefits
Accrued expenses
Tax losses carried forward
Transaction costs on share issue
Closing balance
Movements in deferred tax assets - 2016
Property, plant and equipment
Employee benefits
Other Provisions
Accrued expenses
Tax losses carried forward
Transaction costs on share issue
Closing balance
CONSOLIDATED
June 2017
$
June 2016
$
523
895
37,923
25,556
-
-
12,561
34,586
7,100,444
4,955,511
615,386
108,775
7,766,837
5,125,323
Opening
Balance
(Charged)/
credited to
1 July 2016 profit or loss
$
$
(Charged)/
credited to
equity
$
Closing
Balance
30 June 2017
$
895
(372)
25,556
12,367
34,586
(22,025)
4,955,511
2,144,933
-
-
-
-
523
37,923
12,561
7,100,444
108,775
(131,202)
637,813
615,386
5,125,323 2,003,701
637,813 7,766,837
Opening
Balance
(Charged)/
credited to
1 July 2015 profit or loss
$
$
(Charged)/
credited to
equity
$
Closing
Balance
30 June 2016
$
1,275
(380)
12,948
12,608
54,390
(54,390)
6,860
27,726
2,736,232
2,219,279
149,328
(40,553)
-
-
-
-
-
-
895
25,556
-
34,586
4,955,511
108,775
2,961,033 2,164,290
- 5,125,323
Deferred tax liability comprises temporary differences attributable to:
Intangibles
June 2017
$
June 2016
$
3,429,401
1,948,273
3,429,401
1,948,273
ANNUAL REPORT 2017 41
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FINANCIAL YEAR ENDED 30 JUNE 2017LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509
Movements in deferred tax liabilities - 2017
Intangibles
Closing balance
Movements in deferred tax liabilities - 2016
Intangibles
Closing balance
Opening
Balance
(Charged)/
credited to
1 July 2016 profit or loss
$
$
(Charged)/
credited to
equity
$
Closing
Balance
30 June 2017
$
1,948,273
1,481,128
1,948,273
1,481,128
-
3,429,401
- 3,429,401
Opening
Balance
(Charged)/
credited to
1 July 2015 profit or loss
$
$
(Charged)/
credited to
equity
$
Closing
Balance
30 June 2016
$
772,572
1,175,701
772,572
1,175,701
-
-
1,948,273
1,948,273
Significant Accounting Policies
Critical Accounting Estimates and Judgements
Recognition of deferred tax assets
Recovery of deferred tax assets
Potential deferred tax assets attributable to carried
forward tax losses will be recognised and only utilised
when:
■
■
The Group derives future assessable income of a
nature or amount sufficient to enable the benefits
from the deductions for the losses to be utilised;
The conditions for deductibility imposed by tax
legislation continue to be complied with, and
■ No changes in tax legislation adversely affect the
Group in realising the benefit.
Deferred tax assets are recognised for tax losses
and deductible temporary differences only if the
Group considers it is probable that future taxable
amounts will be available to utilise those temporary
differences and tax losses. The Group has deferred
tax assets relating to timing differences and tax losses
arising from prior years totalling of $25,819,796 (2016:
$16,518,369). The potential tax benefit at the statutory
income tax rate for the Group is $7,100,444 (2016:
$4,955,511).
Management has performed a prima facie analysis
of future taxable profits to determine the likelihood
of being able to recover the unused tax losses in the
short term. Management has concluded that, based
on past performance and accuracies of forecast cash
flow from operations, the Group will generate taxable
earnings in the short term in order to utilise recognised
deferred tax assets.
Note 14
Current liabilities - trade and other payables
Trade payables
Distribution payable
Other payables
CONSOLIDATED
June 2017
$
June 2016
$
1,911,072
2,849,163
32,430
32,430
(17,428)
194,273
1,926,074 3,075,866
Significant Accounting Policies
These amounts represent liabilities for goods and
services provided to the consolidated entity prior to
the end of the financial year and which are unpaid.
Due to their short-term nature they are measured at
amortised cost and are not discounted. The amounts
are unsecured and are usually paid within 30 days of
recognition.
42 LITIGATION CAPITAL MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FINANCIAL YEAR ENDED 30 JUNE 2017LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509
Note 15
Current and non-current liabilities - Employee benefits
CONSOLIDATED
June 2017
$
June 2016
$
Significant Accounting Policies
Short-term employee benefits
Current
Employee benefits
- Annual Leave
Non-current
Employee benefits
- Long Service Leave
111,040
111,040
85,188
85,188
26,862
26,862
-
-
Liabilities for wages and salaries, including non-
monetary benefits, annual leave and long service
leave expected to be settled within 12 months of the
reporting date are measured at the amounts expected
to be paid when the liabilities are settled.
Other long-term employee benefits
The liability for long service leave not expected to
be settled within 12 months of the reporting date are
measured as the present value of expected future
payments to be made in respect of services provided
by employees up to the reporting date using the
projected unit credit method. Consideration is given to
expected future wage and salary levels, experience of
employee departures and periods of service. Expected
future payments are discounted using market yields
at the reporting date on corporate bonds with terms
to maturity and currency that match, as closely as
possible, the estimated future cash outflows
Amounts not expected to be settled within the next 12
months
The current provision for employee benefits includes
all unconditional entitlements where employees
have completed the required period of service and
also those where employees are entitled to pro-
rata payments in certain circumstances. The entire
amount is presented as current, since the consolidated
entity does not have an unconditional right to defer
settlement. However, based on past experience, the
consolidated entity does not expect all employees
to take the full amount of accrued leave or require
payment within the next 12 months.
ANNUAL REPORT 2017 43
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FINANCIAL YEAR ENDED 30 JUNE 2017LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509
Note 16
Current liabilities - Borrowings
Secured current borrowings
CONSOLIDATED
June 2017
$
June 2016
$
-
7,504,916
- 7,504,916
The borrowings related to a facility provided by
Burford Capital was paid down in December 2016. As
at 30 June 2017, borrowings is $nil.
Significant Accounting Policies
Borrowings
All loans and borrowings are initially recognised at fair
value, including transaction costs incurred. Borrowings
are subsequently measured at amortised cost. Any
difference between the proceeds (net of transaction
costs) and the redemption amount is recognised
in profit or loss over the period of the loans and
borrowings using the effective interest method. Fees
paid for establishing loan facilities are recognised as
transaction costs if it is probable that some or all of the
facility will be drawn down, and deferred until the draw
down occurs. If it is not probable that the facility will
be drawn down, fees are capitalised as prepayments
for liquidity services and amortised over the period to
which the facility relates.
Borrowings are derecognised from the statement of
financial position when the obligation specified in the
contract has been discharged, cancelled or expires.
The difference between the carrying amount of the
borrowing derecognised and the consideration paid is
recognised in profit or loss as other income or finance
costs.
All borrowings are classified as current liabilities
unless the Group has an unconditional right to defer
settlement of the liability for at least 12 months after
the end of the reporting period.
Borrowing costs
Borrowing costs incurred for the construction of a
qualifying asset are capitalised during the period of
time that it is required to complete and prepare the
asset for its intended use or sale. Other borrowing
costs are expensed when incurred.
44 LITIGATION CAPITAL MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FINANCIAL YEAR ENDED 30 JUNE 2017LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509
Note 17
Equity - Issued capital
(a) Ordinary shares
(b) Partly paid shares
Ordinary shares entitle the holder to participate in
dividends and the proceeds on the winding up of the
company in proportion to the number of and amounts
paid on shares held. On a show of hands every
member present at a meeting in person or by proxy
shall have one vote and upon a poll each share shall
have one vote.
Ordinary shares - fully paid
Ordinary shares - partly paid
Partly paid shares entitle the holder to participate
in dividends and the proceeds of the company in
proportion to the number of and amounts paid on the
shares held. The partly paid shares do not carry the
right to participate in new issues of securities. As at
30 June 2017, there are currently 1,433,022 partly paid
shares and were issued at an issue price of $0.17 and
will become fully paid upon payment to LCM of $0.17
per share.
CONSOLIDATED
June 2017
Shares
June 2016
Shares
June 2017
$
June 2016
$
53,533,247 32,104,675
24,865,111
11,546,617
2,866,050 2,866,050
-
-
Movements in fully paid ordinary share capital
Date
No of shares
Issue price
$
Opening balance at 1 July 2015
Issue of ordinary shares - fully paid
Elimination of shares on reverse acquisition
by Litigation Capital Management Limited
Existing shares of Litigation Capital Management Limited
Balance at 30 June 2016
Opening balance at 1 July 2016
Issue of shares
Share issue transaction costs, net of tax
Balance at 30 June 2017
5,170,447
n/a 11,005,620
Jul-15
180,332
540,996
Oct-15 (5,350,779)
Oct-15 32,104,675
-
1
32,104,675
11,546,617
32,104,675
n/a
11,546,617
Dec-16 21,428,572
$0.70 15,000,000
53,533,247
24,865,111
(1,681,506)
Movements in partly paid ordinary share capital
Date
No of shares Issue price
$
Opening balance at 1 July 2016
Balance at 30 June 2016
Opening balance at 1 July 2016
Issue of shares
Balance at 30 June 2017
2,866,050
n/a
2,866,050
2,866,050
-
2,866,050
n/a
n/a
-
-
-
-
ANNUAL REPORT 2017 45
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FINANCIAL YEAR ENDED 30 JUNE 2017LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509
(c) Capital risk management
The Group considers its capital to comprise its
contributed equity, any accumulated retained earnings
as well as its credit facility which is classified as a
financial liability in the Consolidated Statement of
Financial Position.
When managing capital, management’s objective is
to ensure that the consolidated entity continues as
a going concern, has sufficient capital to meet its
growth aspirations and to provide optimal returns
to shareholders. The Company is not subject to any
regulatory imposed capital requirements.
In making decisions to adjust its capital structure to
achieve these aims, the Group considers not only its
short-term position but also its long-term operational
and strategic objectives. In order to maintain or adjust
the capital structure, the group may adjust the amount
of dividends paid to shareholders, return capital to
shareholders, issue new shares or sell assets to reduce
debt. The capital risk management policy has not
changed during the year.
Significant Accounting Policies
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue
of new shares or options are shown in equity as a
deduction, net of tax, from the proceeds.
Note 18
Share based payments reserve
The share-based payments reserve is used to
recognise the fair value of options issued to employees
under the Employee Share Option Scheme. This
reserve can be reclassified as retained earnings if
options lapse and subsequently be declared as a
dividend.
Options issued under option plan
165,903
95,703
CONSOLIDATED
June 2017
$
June 2016
$
Employee option plan
The Option Plan gives directors David King and Patrick
Moloney the opportunity to participate in the plan. The
directors have been granted 600,000 and 900,000
options respectively, which vest 3 years after grant
date.
When vesting occurs, each option can be exercised
to purchase 1 ordinary share in Litigation Capital
Management Limited at an exercise price of $1.00. The
options granted on 1 December 2013 can be exercised
to purchase 1 ordinary share in Litigation Capital
Management Limited at an exercise price of $0.47.
Details of options outstanding as part of the employee option plan during the period are as follows:
30 June 2017
Grant
date
Exercise date
Expiry
date
Balance at
beginning of the
year
Granted during
the year
Exercised during
the year
Balance at the
end of year
Exercisable at
the end of the
year
1/12/2013
1/12/2013
1/12/2018
3,190,116
-
20/9/2016
1/11/2018
1/11/2021
-
1,500,000
3,190,116
1,500,000
Weighted average exercise price of
those with an exercise price
0.47
1.00
-
-
-
-
3,190,116
3,190,116
1,500,000
4,690,116
3,190,116
0.64
0.47
The weighted average remaining contractual life of
share options outstanding at the end of the period
was 5.13 years. (2016: 2.58 years)
■
options are granted for no consideration, have a 3
year life and are exercisable after the vesting date
of 1 November 2018
Fair value of options granted
The fair value at grant date was determined by using
a Black-Scholes option pricing model that takes into
account the share price at grant date, exercise price,
expected volatility, option life, expected dividends,
the risk free rate, vesting and performance criteria,
the impact of dilution, the fact that the options are
not tradeable. The inputs used for the Black-Scholes
option pricing model for options granted during the
year ended 30 June 2017 were as follows:
46 LITIGATION CAPITAL MANAGEMENT LIMITED
■ grant date: 20/09/2016
■
share price at grant date: $0.70
■ weighted average exercise price: $1.00
■
■
■
■
expiry date: 01/11/2021
expected volatility: 25%
expected dividend yield: 0%
risk free rate: 5%
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FINANCIAL YEAR ENDED 30 JUNE 2017LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509
Expected volatility was determined based on the
historic volatility (based on the remaining life of the
option), adjusted for any expected changes to future
volatility based on publicly available information.
The fair value of the options issued during the period is
$195,000. An amount of $70,200 has been expensed
during the period, with the remainder to be expensed
over the remaining vesting period.
Note 19
Subsidiaries and Transactions With Non-Controlling Interests
Interests in Subsidiaries
Information relating to the group’s interests in
subsidiaries at 30 June 2017 is set out below. All
entities are incorporated in and operate within
Australia. The ownership of each subsidiary is equal to
the voting rights of each entity.
Name of Entity
LCM Litigation Fund Pty Ltd
ALF No.4 Pty Ltd
ALF No 9 Pty Ltd
LCM Litigation Management Pty Ltd
LCM Litigation Investment Fund No 1 Pty Ltd
LCM Operations Pty Ltd
LCM Unit Trust
Basis Partnership
1 entity was deregistered during the year.
Ownership Interest
2017
%
100%
n/a¹
100%
100%
100%
100%
60%
30%2
2016
%
100%
100%
100%
100%
100%
-
60%
30%2
Ownership Interest held
by non-controlling
interests
2017
%
2016
%
-
-
-
-
-
-
-
-
-
-
-
-
40%
70%
40%
70%
2 the consolidated entity is deemed to control Basis Partnership as it directs activities of the entity as part of it’s
role as Partnership Manager and the non-controlling interests do not have sufficient voting rights to remove the
Partnership Manager without the consolidated entities vote.
ANNUAL REPORT 2017 47
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FINANCIAL YEAR ENDED 30 JUNE 2017LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509
Non-controlling interests (NCI)
The table below sets out the summarised financial
information for each subsidiary that has non-
controlling interests that are material to the group.
Amounts disclosed are before intercompany
eliminations.
Summarised statement of financial position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
LCM Unit Trust
2017
$
2016
$
Basis Partnership
2016
2017
$
$
46,063
248,451
-
-
46,063
248,451
84,375
148,451
-
-
84,375
148,451
(38,312)
100,000
Summarised statement of profit or loss and other comprehensive income
Revenue
Other income
Expenses
Profit/(loss) before income tax expense
Income tax expense
Profit/(loss) after income tax expense
Other comprehensive income
Total comprehensive income
Statement of cash flows
Net cash from operating activities
Net cash used in investing activities
Net cash used in financing activities
-
-
154,108
-
138,313
73,034
(138,313)
81,074
-
-
(138,313)
81,074
-
-
(138,313)
81,074
(202,389)
(5,658)
-
-
357,374
(103,266)
Net increase/(decrease) in cash and cash equivalents
(202,389)
248,451
Other financial information
Profit attributable to non-controlling interests
Accumulated non-controlling interests at year end
Distributions paid to non-controlling interests
(55,325)
32,430
(15,325)
40,000
-
32,430
Transactions with non-controlling interests
On 13 February 2014 the LCM Unit Trust was
established. The consolidated entity sold rights to
performance fees to LCM Unit Trust for $150,000,
which this amount contributed back to LCM Unit Trust
for a 60% ownership in the entity. The remaining 40%
is equally owned by Australian Insolvency Group Pty
Ltd of which Patrick Coope is a shareholder and Heli-
Saw Holdings Pty Ltd of which Patrick Moloney is a
shareholder.
48 LITIGATION CAPITAL MANAGEMENT LIMITED
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(111,328)
(111,328)
-
-
77,929
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FINANCIAL YEAR ENDED 30 JUNE 2017LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509
Note 20
Remuneration of auditors
During the financial year the following fees were paid
or payable for services provided by BDO Audit (SA)
Pty Ltd, the auditor of the company, its network firms
and unrelated firms:
Audit Services
Amounts paid/payable for audit and review of financial statements
for the entity or any entity in the Group
Taxation Services
Amounts paid/payable to a related practice of the auditor for tax
compliance and advisory services
Other Services
CONSOLIDATED
June 2017
$
June 2016
$
68,861
52,427
11,235
9,978
Amounts paid/payable to a related practice of the auditor for corporate finance services
58,470
161,819
Note 21
Reconciliation of profit after
income tax to net cash from operating activities
Profit/(loss) after income tax expense for the year
Adjustments for:
Net impact of the reclassification of litigation related cash flows
to cash flows to/(from) investing activities
Depreciation and amortisation
Change in operating assets and liabilities:
Decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Increase/(decrease) in deferred taxes
Increase in employee benefits
Increase in share based payments
Net cash from operating activities
CONSOLIDATED
June 2017
$
June 2016
$
(2,340,508)
(2,213,415)
(2,182,426)
(108,049)
6,258
4,898
628,979
(287,375)
135,081
889,477
(522,572)
(988,589)
52,714
70,200
42,027
-
(4,152,274) (2,661,026)
ANNUAL REPORT 2017 49
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FINANCIAL YEAR ENDED 30 JUNE 2017LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509
Note 22
Related party transactions
(a) Parent entity
Litigation Capital Management Limited is the parent
entity of the Group. Litigation Capital Management
Limited was incorporated on 9 October 2015 and
is domiciled in Australia. The registered address of
Litigation Capital Management Limited is Level 25,
Aurora Place, 88 Phillip Street, Sydney, NSW, 2000.
of the issued share capital of LCM Litigation Fund Pty
Ltd on 16 November 2015. Upon completion of the
acquisition, Litigation Capital Management Limited
issued 6 shares for every 1 held in LCM Litigation Fund
Pty Ltd to existing shareholders as consideration for
the share in LCM Litigation Fund Pty Ltd.
(b) Subsidiaries
Litigation Capital Management Limited acquired 100%
Interests in subsidiaries are disclosed in note 19.
(c) Key Management Personnel Compensation
The aggregate compensation made to directors and other
members of key management personnel of the consolidated entity is set out below:
Short-term employee benefits
Post-employment benefits
Long term benefits
CONSOLIDATED
June 2017
$
June 2016
$
1,066,054
450,000
32,049
77,675
25,000
-
1,175,778
475,000
(d) Transactions with related parties
The following transactions occurred with related
parties:
Patrick Moloney is a director and shareholder of 101
Capital Pty Ltd. 101 Capital Pty Ltd is the Trustee
of LCM Litigation Investment Fund and engages
LCM Litigation Management Pty Ltd to manage this
entity on it’s behalf. During the year, LCM Litigation
Management Pty Ltd has earned a management fee
of $nil (2016: $42,000) and performance fee of $nil
(2016: $356,537). As at 30 June 2017 there were no
amounts owing to 101 Capital (2016: $nil).
Patrick Moloney is a shareholder of Litigation Insurance
Pty. Ltd which carries out insurance broking services.
This entity arranges After The Event insurance policies
for either the consolidated entity or Litigants to
whom the consolidated entity is providing funding
to. Litigation Insurance Pty Ltd is not paid a fee or
commission from the consolidated entity for these
insurance broking services however brokerage fees are
paid by the insurer.
Steven McLean is a shareholder and director of 145
Fleet Pty Ltd, which carries out financial advisory
services. During the year, 145 Fleet has consulted to
LCM and earned fees of $512,430 (2016: $119,000). As
at 30 June 2017 there were no amounts owing to 145
Fleet (2016: $11,000).
During the 2016 year, the following related parties loan
funds to Litigation Capital Management Limited which
were repaid with interest during the 2016 year.
Start Date
Amount
Interest
Total
Repayment Date
Douglas Battersby
Steven McLean
David King
Patrick Moloney
19/4/2016
21/4/2016
27/4/2016
3/5/2016
150,000
140,000
50,000
40,639
Patrick Moloney
12/5/2016
200,000
6,295
5,692
1,770
1,332
5,377
156,295
145,692
51,770
41,971
22/6/2016
22/6/2016
20/5/2016
22/6/2016
205,377
24/6/2016
580,639
20,466
601,105
Transactions with non-controlling interests
Director Patrick Moloney has a non-controlling interest in LCM Unit Trust and Basis Partnership.
50 LITIGATION CAPITAL MANAGEMENT LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FINANCIAL YEAR ENDED 30 JUNE 2017LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509
Note 23
Parent entity information
Set out below is the supplementary information about the parent entity.
Statement of profit or loss and other comprehensive income
Profit/(loss) after income tax
Total comprehensive income
Statement of financial position
Total current assets
Total assets
Total current liabilities
Total liabilities
Equity
Issued capital
Share based payments reserve
Retained profits
Total equity
June 2017
$
June 2016
$
(2,150,133)
(2,550,153)
(2,150,133) (2,550,153)
13,544,239
10,087,927
22,160,032
18,084,352
2,028,246
10,566,164
20,352,609
12,514,438
11,546,617
11,546,617
95,703
95,703
(9,834,897) (6,072,406)
1,807,423
5,569,914
Significant accounting policies
The accounting policies of the parent entity are
consistent with those of the consolidated entity.
Note 24
Events after the reporting period
On 31 August 2017 the Group entered into a credit
facility with a private investor, Ambro Nominees Pty
Ltd. The credit facility provides the Group with a line
of credit up to $4 million over a term of 18 months.
The credit facility has been provided on normal
commercial terms and is secured by charges granted
by the Group and two of its operating subsidiaries.
The entry into the credit facility enables the Group to
enter into a number of litigation funding opportunities,
which will be announced to the market in due course,
and continue with the growth of its portfolio of
Litigation Projects.
In addition, the Group is engaged in advanced
negotiations with a number of parties in respect of
both a larger commercial credit facility as well as a
commercial co-funding arrangement. A larger and
more permanent source of debt capital will enable the
Group to continue with the growth of its portfolio of
Litigation Projects and meet the increasing demand
for its services. A commercial co-funding arrangement
may enable the Group to enter into larger scale
Litigation Projects which might otherwise represent
concentration risk in its portfolio. The Group will
announce to the market the entry into either of those
anticipated facilities in due course.
Note 25 Commitments and Contingencies
(a) Operating lease commitments
Leasing Arrangement
Operating lease relate to business premises leased
in Melbourne, Adelaide, Brisbane and Sydney. The
Group has lease terms with between 1 and 6 month
cancellation period requirements.
Non-cancellable leases
- not later than 12 months
CONSOLIDATED
June 2017
$
June 2016
$
82,496
82,496
78,130
78,130
ANNUAL REPORT 2017 51
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) FINANCIAL YEAR ENDED 30 JUNE 2017LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509
DIRECTORS’ DECLARATION
In the directors’ opinion:
■
■
■
the attached financial statements and notes
comply with the Corporations Act 2001,
Corporations Regulations 2001, Australian
Accounting Standards and other mandatory
professional reporting requirements;
the attached financial statements and notes
comply with International Financial Reporting
Standards as issued by the International
Accounting Standards Board as described in note
1 to the financial statements;
the attached financial statements and notes give
a true and fair view of the consolidated entity’s
financial position as at 30 June 2017 and of its
performance for the financial year ended on that
date;
■
■
there are reasonable grounds to believe that the
company will be able to pay its debts as and when
they become due and payable; and
this declaration has been made after receiving
the declarations required to be made to the
directors in accordance with section 295A of the
Corporations Act 2001for the financial year ended
30 June 2017.
Signed in accordance with a resolution of directors. On behalf of the directors
_____________________________________
Dr David King
Chairman
31 August 2017
Sydney
52 LITIGATION CAPITAL MANAGEMENT LIMITED
LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509DIRECTORS’ REPORT Tel: +61 8 7324 6000
Fax: +61 8 7324 6111
www.bdo.com.au
BDO Centre
Level 7, 420 King William Street
Adelaide SA 5000
GPO Box 2018 Adelaide SA 5001
Australia
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF LITIGATION CAPITAL MANAGEMENT LIMITED
Report on the Audit of the Financial Report
Opinion
We have audited the financial report of Litigation Capital Management Limited (the Company)
and its subsidiaries (the Group), which comprises the consolidated statement of financial
position as at 30 June 2017, the consolidated statement of profit or loss and other
comprehensive income, the consolidated statement of changes in equity and the consolidated
statement of cash flows for the year then ended, and notes to the financial report, including a
summary of significant accounting policies and the directors’ declaration.
In our opinion the accompanying financial report of the Group, is in accordance with the
Corporations Act 2001, including:
(i)
(ii)
Giving a true and fair view of the Group’s financial position as at 30 June 2017 and of its
financial performance for the year ended on that date; and
Complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities
under those standards are further described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report. We are independent of the Group in accordance with the
Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical
Standards Board’s APES 110 Code of Ethics for Professional Accountants (the Code) that are
relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical
responsibilities in accordance with the Code.
We confirm that the independence declaration required by the Corporations Act 2001, which has
been given to the directors of the Company, would be in the same terms if given to the directors
as at the time of this auditor’s report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most
significance in our audit of the financial report of the current period. These matters were
addressed in the context of our audit of the financial report as a whole, and in forming our
opinion thereon, and we do not provide a separate opinion on these matters.
BDO Audit (SA) Pty Ltd ABN 33 161 379 086 is a member of a national association of independent entities which are all members of BDO Australia Ltd ABN 77
050 110 275, an Australian company limited by guarantee. BDO Audit (SA) Pty Ltd and BDO Australia Ltd are members of BDO International Ltd, a UK
company limited by guarantee, and form part of the international BDO network of independent member firms. Liability limited by a scheme approved under
Professional Standards Legislation, other than for the acts or omissions of financial services licensees.
Recoverable amount of Litigation Contract in Progress
Key audit matter
How the matter was addressed in our audit
Note 12 to the financial report discloses the intangible
Our audit procedures included, among others:
assets consisting of Litigation Contracts in Progress,
and the assumptions used by the Group in testing these
assets for impairment.
•
Assessing the Group’s value in use model which
calculates the recoverable amount of the
Group’s litigation contracts, in order to
The impairment assessment of intangible assets was a
determine if any asset impairments were
key audit matter due to the size of the recorded asset
required.
2017 $12,470,549 (2016 $6,494,243), the degree of
estimation and assumptions required to be made by the
Group, specifically concerning future discounted cash
flows.
•
Evaluating and challenging the Group’s
assumptions and estimates used to determine
the recoverable amount of its assets, including
those relating to estimated costs to complete a
Litigation Contract in Progress, the value to the
Group of the Litigation Contract in Progress once
completed, and the timing of completion of the
Litigation Contract in Progress.
Assessing the accuracy of the forecasts by
comparing previous forecasts with actual
business results.
Assessing the adequacy of the Group’s
disclosures in note 12 about those assumptions
to which the outcome of the impairment test is
most sensitive, that is, that have the most
significant effect on the determination of the
recoverable amount of the litigation contract
intangible assets.
•
•
Recognition of Deferred Tax Assets
Key audit matter
How the matter was addressed in our audit
As disclosed in note 13 in the financial report, the
Our audit procedures included, among others:
Group recognised gross deferred tax assets of
$7,766,837 at 30 June 2017, of which $7,100,444 arises
•
Evaluating the Group's rationale for the
recognition and measurement of the net
from tax losses carried forward.
deferred tax assets of $4,337,436 by obtaining
This area was a key audit matter due to the quantum
calculations of forecast taxable income for the
of the accumulated losses as well as the judgement
Group in order to evaluate the Group's
required in preparing forecasts to demonstrate the
conclusion that sufficient taxable income would
future utilisation of these losses in accordance with
likely be earned in the future to utilise the tax
the requirements of the Australian Accounting
losses for which deferred tax assets have been
Standards.
recognized.
54 LITIGATION CAPITAL MANAGEMENT LIMITED
Key audit matter
How the matter was addressed in our audit
•
Assessing and challenging management’s
judgements relating to the forecast of future
taxable profit and evaluating the reasonableness
of the assumptions underlying the preparation of
•
•
these forecasts.
Assessing the accuracy of the forecasts by
comparing previous forecasts with actual
business results.
Assessing the adequacy and accuracy of the
disclosures included in note 13 of the
consolidated financial statements, which outlines
the Board’s assessment and conclusion of the
recoverability of the tax benefits.
Other information
The directors are responsible for the other information. The other information comprises the
information contained in the directors’ report for the year ended 30 June 2017, but does not
include the financial report and our auditor’s report thereon, which we obtained prior to the
date of this auditor’s report, and the Chairman’s report and Managing Directors’ report, which
are expected to be made available to us after that date.
Our opinion on the financial report does not cover the other information and we do not express
any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is
materially inconsistent with the financial report or our knowledge obtained in the audit or
otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we obtained prior to the
date of this auditor’s report, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
When we read the Chairman’s report and Managing Director’s report, if we conclude that there
is a material misstatement therein, we are required to communicate the matter to the directors
and will request that it is corrected. If it is not corrected, we will seek to have the matter
appropriately brought to the attention of users for whom our report is prepared.
Responsibilities of the directors for the Financial Report
The directors of the Company are responsible for the preparation of the financial report that
gives a true and fair view in accordance with Australian Accounting Standards and the
Corporations Act 2001 and for such internal control as the directors determine is necessary to
enable the preparation of the financial report that gives a true and fair view and is free from
material misstatement, whether due to fraud or error.
ANNUAL REPORT 2017 55
In preparing the financial report, the directors are responsible for assessing the ability of the
group to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless the directors either intend to liquidate
the Group or to cease operations, or has no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the Financial Report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole
is free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with the Australian Auditing Standards will
always detect a material misstatement when it exists. Misstatements can arise from fraud or
error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of this financial report.
A further description of our responsibilities for the audit of the financial report is located at the
Auditing and Assurance Standards Board website (http://www.auasb.gov.au/Home.aspx) at:
http://www.auasb.gov.au/auditors_files/ar2.pdf
This description forms part of our auditor’s report.
Report on the Remuneration Report
Opinion on the Remuneration Report
We have audited the Remuneration Report included in pages 14 to 20 of the directors’ report for
the year ended 30 June 2017.
In our opinion, the Remuneration Report of Litigation Capital Management Limited, for the year
ended 30 June 2017, complies with section 300A of the Corporations Act 2001.
Responsibilities
The directors of the Company are responsible for the preparation and presentation of the
Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted
in accordance with Australian Auditing Standards.
BDO Audit (SA) Pty Ltd
Geoff Edwards
Director
Adelaide, 31 August 2017
56 LITIGATION CAPITAL MANAGEMENT LIMITED
ANNUAL REPORT 2017 57
LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509SHAREHOLDER INFORMATION Shareholder Information
AS AT 8 SEPTEMBER 2017
Shareholder Information required by the Australian
Securities Exchange Limited (ASX) Listing Rules and
not disclosed elsewhere in the Report is set out below.
In accordance with the 3rd edition ASX
Corporate Governance Council’s Principles and
Recommendations, the 2017 Corporate Governance
Statement, as approved by the Board, is available on
the Company’s website at: https://www.lcmfinance.
com/. The Corporate Governance Statement sets out
the extent to which Litigation Capital Management
Limited has followed the ASX Corporate Governance
Council’s 29 Recommendations during the 2017
financial year.
Substantial shareholders
The number of securities held by substantial
shareholders and their associates (as notified to the
ASX) are set out below:
Fully paid Ordinary Shares
Number of security holders and securities on issue
Litigation Capital Management Limited has issued the
following securities:
a) 53,533,247 fully paid ordinary shares held by 456
shareholders;
b) 2,866,050 partly paid ordinary shares held by 4
shareholders;
c) 1,500,000 unlisted options exercisable at $1.00 held
by 2 option holders; and
d) 3,190,116 unlisted options exercisable at $0.47 held
by 2 option holders.
Voting rights
Ordinary shares
The voting rights attached to ordinary shares are that
on a show of hands, every member present, in person
or proxy, has one vote and upon a poll, each share shall
have one vote for each fully paid share they hold.
Name
Number
%
Partly paid shares
Litigation Capital Management
Limited
Kanamex Pty Ltd and Mr Patrick
John Moloney
PFH (NSW) Pty Ltd ATD Paradice
Family Trust
Truebell Capital Pty Ltd (as trustee
of the Truebell Investment Fund)
21,869,407 40.85*
3,212,557
6.00
2,828,570
5.28
2,751,079
5.14
*As disclosed in the IPO Prospectus dated 17
November 2016, these shares are subject to a two
year mandatory restriction on transfer pursuant to the
ASX Listing Rules following LCM’s Shares becoming
Quoted.
The voting rights attached to partly paid shares are
that on a show of hands, every member present,
in person or proxy, has one vote and upon a poll, a
fraction of a vote for each partly paid share they hold.
The fraction must be equivalent to the proportion
which the amount paid (not credited) is of the total
amounts paid and payable (excluding amounts
credited). Amounts paid in advance of a call are
ignored.
Options
Option holders do not have any voting rights on the
options held by them.
58 LITIGATION CAPITAL MANAGEMENT LIMITED
LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509SHAREHOLDER INFORMATION Distribution of security holders
Unmarketable parcel of shares
(a) Quoted securities
Category
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
Fully paid Ordinary shares
Shares
Holders
%
The number of shareholders holding less than a
marketable parcel of ordinary shares is Nil (0) based
on Litigation Capital Management Limited closing
share price of $0.52, on 8 September 2017.
4
77
68
211
861
245,087
573,836
7,132,905
0.00
0.46
1.07
13.32
85.14
Twenty largest shareholders of quoted equity
securities
Fully paid ordinary shares
Details of the 20 largest shareholders by registered
shareholding are:
100,001 and over
96 45,580,558
Total
456 53,533,247
100.00
(b) Unquoted securities – partly paid shares
Category
Partly paid shares
Shares
Holders
%
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
0
0
0
0
4
0
0
0
0
0.00
0.00
0.00
0.00
Name
No. of
shares
1 KANAMEX PTY LTD
3,212,557
2 BERNE NO 132 NOMINEES
2,457,143
PTY LTD
3. PFH (NSW) PTY LTD
2,400,000
4 UBS NOMINEES PTY LTD
2,142,858
5
J P MORGAN NOMINEES
AUSTRALIA LIMITED
%
6.00
4.59
4.48
4.00
3.83
3.21
2.99
2.99
2.92
2,052,138
1,720,002
1,601,484
1,601,484
1,562,404
2,866,050
100.00
6 MJC PTY LTD
Total
4 2,866,050
100.00
(c) Unquoted securities – options exercisable at $1.00
Category
$1.00 Options
7 SEISTEND PTY LTD
8 VERUSE PTY LTD
9 NATIONAL NOMINEES
LIMITED
Holders Options
%
10 MERRIC INVESTMENTS
1,243,956
2.32
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Total
0
0
0
0
2
2
0
0
0
0
0.00
0.00
0.00
0.00
1,500,000
100.00
1,500,000
100.00
(d) Unquoted securities – options exercisable at $0.47
PTY LTD
11 PORTIGON AG
1,080,000
12 AUSTRALIAN INSOLVENCY
1,016,824
GROUP PTY LTD
13 RST SUPER PTY LTD
14 PJF SUPER PTY LTD
15 KEYGROWTH PTY LTD
16 STAMINA PTY LTD
999,996
999,996
752,898
720,000
Category
$0.47 Options
Holders Options
%
17 DRFT MANAGEMENT PTY
683,458
LTD
2.02
1.90
1.87
1.87
1.41
1.34
1.28
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Total
0
0
0
0
2
2
0
0
0
0
0.00
0.00
0.00
0.00
18 PARADICE CAPITAL PTY
600,000
1.12
LTD
19 WOLSELEY (AUSTRALIA)
589,998
1.10
PTY LTD
20 LEMPIP NOMINEES PTY
528,700
0.99
3,190,116
100.00
LTD
3,190,116
100.00
Total for Top 20
27,965,896
52.24
Total on Register
53,533,247 100.00
ANNUAL REPORT 2017 59
LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509SHAREHOLDER INFORMATION Company secretary
Ms Anna Sandham
■ Kanamex Pty Ltd hold 900,000 options; and
■
Seistend Pty Ltd hold 600,000 options.
Litigation Capital Management Limited registered
office in Australia; and of its principal administrative
office
■
3,190,116 unquoted options exercisable at $0.47 per
option held by 2 option holders as follows:
■ Mr Patrick Moloney holds 1,595,058 options;
and
■ Mr Patrick Coope hold 1,595,058 options.
On market buy-back
There is no current on market buy-back.
Statement regarding use of cash and assets
During the period between 12 December 2016 and
30 June 2017, Litigation Capital Management Limited
has used its cash and assets readily convertible to
cash that it had at the time of ASX admission in a way
consistent with its business objectives set out in the
prospectus dated 17 November 2016.
Level 25, Aurora Place,
88 Phillip Street, Sydney NSW 2000
T: +61 2 8211 0511
Litigation Capital Management Limited register of
securities, register of depositary receipts or other
facilities for registration of transfers
Link Market Services Limited
Level 12, 680 George Street, Sydney NSW 2000
T: +61 1300 554 474
The number and class of restricted securities or
securities subject to voluntary escrow that are on
issue and the date that the escrow period ends
The following restricted securities are subject
to escrow for 24 months from the date of
commencement of official quotation:
■
■
■
■
3,216,095 quoted fully paid ordinary shares;
1,128,600 unquoted partly paid ordinary shares;
1,500,000 unquoted options exercisable at $1.00
per option between 1 November 2018 and 1
November 2021; and
1,595,058 unquoted options exercisable at $0.48
per option on or before 1 December 2018.
Unquoted securities
Litigation Capital Management Limited have the
following unquoted securities on issue:
■
2,866,050 unquoted partly paid shares held by 4
shareholders as follows:
■ Australian Insolvency Group Pty Ltd hold
764,778 shares;
■
Litigation Support Services Pty Ltd hold
668,250 shares; and
■ Kanamex Pty Ltd hold 1,433,022 shares.
■
1,500,000 unquoted options exercisable at $1.00
per option held by 2 option holders as follows:
60 LITIGATION CAPITAL MANAGEMENT LIMITED
LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509SHAREHOLDER INFORMATION ANNUAL REPORT 2017 61
LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509 lcmfinance.com
SYDNEY
Level 12,
The Chifley Tower
2 Chifley Square
Sydney NSW 2000
T 02 8211 0511
MELBOURNE
Level 30,
Collins Place
35 Collins Street
Melbourne VIC 3000
T 03 9900 6270
ADELAIDE
Level 30,
Westpac House
91 King William Street
Adelaide SA 5000
T 08 7129 8137
BRISBANE
Level 36,
Riparian Plaza
71 Eagle Street
Brisbane QLD 4000
T 07 3121 3277
LITIGATION CAPITAL MANAGEMENT LIMITED | ABN 13 608 667 509