Litigation Capital Management Annual Report 2018

FY2018 Annual Report · Litigation Capital Management
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ANNUAL REPORT 2018

Litigation Capital Management Limited 
ACN 608 667 509

About LCM

Founded in 1998, Litigation Capital Management (LCM) is one of Australia’s 
most experienced and successful litigation finance companies. LCM is 
a specialist in providing litigation finance to enable the pursuit and 
successful recovery of funds in a range of litigation projects, both 
single-case and portfolio, including class actions, commercial 
claims, claims arising out of insolvency and international 
arbitration. LCM provides strategic input and assists with 
the management of litigation projects to support these 
projects reaching a successful conclusion.

LCM is headquartered in Sydney and has offices  
in Melbourne and Brisbane. The company has been 
listed on the Australian Stock Exchange (ASX) 
since December 2016.

Contents

STRATEGIC REPORT 
About LCM  
FY 2018 Financial Highlights  
Chairman’s Letter  
Chief Executive’s Report 
Market Overview  
Strategic Review  
Financial Review  
Operational Review  

GOVERNANCE
Our Board  
Corporate and Social Responsibility 
Directors Report  

FINANCIAL STATEMENTS
Consolidated Financial Statements 
Notes to the Financial Statements 

OTHER INFORMATION
Shareholder Information 

IFC
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Strategic Report
Highlights

FY 2018 Financial Highlights

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LCM has a disciplined approach and methodology employed in assessing 
claims that will likely result in a successful outcome. This has been reﬁ ned 
over our 20-year history and is the backbone of our success. 

FY 2018 Gross income from 
Litigation Projects

A$29.2m

 754% on prior year

FY 2018 Return on equity

41%

FY 2018 Net proﬁ t before tax

FY 2018 Equity

A$12.0m

 518% on prior year

A$25.4m

 53% on prior year

Cumulative IRR

83%

80% in FY 2018

Cumulative ROIC

138%

137% in FY 2018

Cash generation ($ in millions)

Net assets ($ in millions)

27.1

25.4

CAGR 
159%

0.6

1.6

3.4

CAGR 
36%

16.7

7.4

5.6

2015

2016

2017

2018

2015

2016

2017

2018

Financial Year Ended 30 June

Financial Year Ended 30 June

 LCM Annual Report 2018      1

 
Strategic Report
Chairman’s Letter 

Chairman’s Letter 

It is our view that it is the robustness of LCM’s processes which make 
the Company exceptional.

Dear Shareholders, 

I am delighted to present to you the 
Litigation Capital Management (LCM) 2018 
Annual Report - our second as an ASX-
listed company and our ﬁ rst reﬂ ecting a 
full year as a constituent of the ASX - and 
am I even more delighted to report our 
strongest ﬁ nancial results to date. It is 
worth reﬂ ecting on this within the context 
that the Company is celebrating its 20th 
anniversary this year and it is the disciplined 
approach and rigorous selection criteria when 
selecting litigation ﬁ nance projects that we 
have honed over that period that has driven 
this performance. 

Following the successful IPO of the Company in 

December 2016 and the completion of FY 2017, 

our priority has been driving litigation project 

performance and generating shareholder value while 

continuing to review potential opportunities for future 

revenue growth. 

We are pleased to inform shareholders that in addition 

to strong ﬁ nancial performance, the details of which 

are included in the report of our Chief Executive 

Ofﬁ cer Patrick Moloney, our litigation project 

performance continues to be outstanding, with the 

Company’s track record over the past seven ﬁ nancial 

years providing a 138% return on invested capital 

over an average 27 month period and a cumulative 

IRR of 83%. These exceptional ﬁ gures demonstrate a 

continuation of the performance we reported in 2017’s 

Annual Report and are testament to the consistent 

quality of our approach. 

Our existing portfolio of litigation projects is well 

diversiﬁ ed in terms of the type and size of projects that 

we have committed capital to and we are comfortable 

with our exposure to these. The same is true of the 

strong pipeline of future projects, which is discussed 

further in the Chief Executive’s Report. 

As a Board, a key area of focus for us has been the 

continuous review of the processes that the Company 

uses in its determination of which litigation projects 

to support. We are committed to delivering high 

standards of corporate governance and embedding 

the right culture and behaviour throughout the 

business. We recognize the duty that we have to our 

shareholders to ensure that robust rules, practices 

and processes are in place and that these operate 

efﬁ ciently at all levels of the business. 

It is our view that it is the robustness of LCM’s 

processes which make the Company exceptional. 

It is vital that we maintain and improve on the high 

standards we’ve set, as we look to capitalize on our 

position as one of the longest-standing and one of the 

few listed litigation ﬁ nancing entities in the world. 

On behalf of the Board, I take this opportunity to 

recognise the exceptional work that has led us to 

these record results. I would like to thank my fellow 

directors and all LCM employees, both existing and 

new, for their efforts in 2018.

I speak for the Board when I say that we are 

committed to delivering value to our shareholders 

in the years ahead and I look forward to welcoming 

those shareholders who can attend our AGM 

in November. 

Yours Sincerely, 

Dr. David King 

Chairman (cid:2)

2      LCM Annual Report 2018       

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We are committed to 
delivering high standards 
of corporate governance 
and embedding the right 
culture and behaviour 
throughout 
the business. 

 
Strategic Report
Chief Executive’s Report

Chief Executive’s Report

These completions resulted in record results and a strong increase in 
gross income from Litigation Projects by 754% to A$29.2 million.

2018 was a very successful year for LCM, 
during which we continued to deliver results 
for our clients and value for our shareholders. 
These results demonstrate our highly 
disciplined approach towards investing in 
litigation. Our robust performance in FY 2018 
is testament to our investment methodology, 
the strength of the business and team we 
have built, and the solutions we provide. 

Our focus on originating high quality litigation projects 

and successfully completing these projects drive our 

proﬁ tability. We completed six litigation projects in 

FY 2018. These completions resulted in record results 

and a strong increase in gross income from Litigation 

Projects by 754% to A$29.2 million Proﬁ t before tax 

was A$12.0 million, an increase of 518% compared to 

FY 2017 and after movements in deferred taxes we 

produced a Net Proﬁ t after Tax of A$8.6 million. 

The seven-year performance metrics outlined in 

the Chairman’s Letter validate the systems and 

methodologies developed by LCM over its 20-year 

history in identifying and managing litigation projects 

to a proﬁ table conclusion. The seven-year cumulative 

IRR is 83%, demonstrating that we can consistently 

produce attractive results within a reasonable 

investment period. These key metrics generated over 

a seven-year period are most representative of the 

business as it will be going forward.

As one of the few listed litigation ﬁ nancing entities in 

the world and combined with our 20-year heritage, 

LCM is well positioned to capitalise on a global 

environment which is seeing rapid and dynamic 

change. We are a business with the ability to scale 

up quickly and we have a team that can manage a 

substantial number of additional projects without a 

material increase to our cost base. 

While many litigation ﬁ nanciers across the world 

are discussing the provision of funding and risk 

management solutions to the corporate world, our 

understanding is that very few transactions have 

actually occurred. During FY 2018, we entered into our 

ﬁ rst conditional corporate portfolio transaction. The 

provision of a ﬁ nance product across a portfolio of 

individual litigious disputes represents a very signiﬁ cant 

opportunity for us as a business. Corporate portfolio 

transactions are a sector of the potential marketplace 

which are signiﬁ cant in size and potentially could dwarf 

the entire current addressable market for litigation 

ﬁ nance worldwide.

As well as an increase in the number of applications 

for litigation ﬁ nance being received during FY 2018, 

the number of opportunities by sector also increased. 

This enabled us to build a strong qualiﬁ ed pipeline (as 

at 24 October 2018) of future diversiﬁ ed opportunities 

compromised of 31 litigation projects. Our current 

portfolio is comprised of 14 litigation projects and 

we have an additional seven litigation projects which 

are subject to conditional funding agreements. These 

seven conditional funding agreements include our 

ﬁ rst international arbitration and our ﬁ rst corporate 

portfolio transaction. 

The opportunities and market for litigation ﬁ nance 
is set to become increasingly global and we will 

continually monitor and assess attractive regions 

for our international expansion ambitions. These 

future growth markets for LCM must have (i) a legal 

framework and jurisdiction with similar foundation 

to Australian law, (ii) a maturing and growing 

recognition of litigation ﬁ nance as a corporate and 

risk management tool and (iii) have in place suitable 

frameworks and rules for the resolution of disputes 

and enforcements of judgments arbitral awards.

4      LCM Annual Report 2018       

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Our approach to selecting litigation ﬁ nance projects 

Our international expansion will be combined with 

to support is reﬂ ected in our approach to considering 

a focus on continuing to strengthen our presence in 

expansion into new markets and products; we are 

established markets. To capture the growth in our 

open to capitalising on the opportunities these 

existing domestic markets we established an ofﬁ ce in 

markets present, but we are not willing to compromise 

Melbourne in 2017, the second largest economic hub 

LCM’s robust and diligent approach to do so simply 

in Australia. Since establishing the Melbourne ofﬁ ce, 

for the sake of growth. It is important that as a 

we have seen an increase in applications for litigation 

business we approach these opportunities with a level 

ﬁ nance from the Victorian jurisdiction.

head so that future growth is based on the discipline 

we have practised over the past 20 years and that we 

continue to create value for our shareholders. 

Looking forward, we expect the outlook to remain 

positive for the sector. The nature of litigation 

funding makes it notoriously difﬁ cult to make 

It is important to highlight this, as it is with this 

accurate predictions or forecasts about the timing 

outlook that we have begun the process of expanding 

and proﬁ tability of individual litigation projects. 

the capabilities and operations of our team beyond 

Notwithstanding this fact, we are expecting nine of 

Australia and the Asia-Paciﬁ c region. The most 

the litigation projects in the current unconditional 

signiﬁ cant growth opportunity we’ve identiﬁ ed is in 

portfolio to complete during FY 2019 (two of which 

the United Kingdom and Europe and the Company 

have already completed). Although, as always, the 

has over the course of 2018 been considering the 

resolution of litigation matters is not easy to forecast, 

provision of litigation ﬁ nance and funding into the 

the current forecast for litigation projects to complete 

United Kingdom. We took the step in early 2018 

in FY 2019 would represent another signiﬁ cant 

to retain Queens Counsel in London to assist with 

increase year-on-year for us (compared to FY 2018). 

considering applications for funding from that 

The ﬁ nal litigation project subject to the International 

jurisdiction as well as to assist with opportunities 

Litigation Funding Partner Agreement and an 

arising within Australasia. 

additional eight projects being funded directly by LCM 

We have the exciting opportunity to bring on board 

are all expected to complete during FY 2019.

an experienced and functioning team to establish a 

Our ability to grow our portfolio of Litigation Projects 

London ofﬁ ce to target the growth markets of the UK 

is heavily dependent on our capacity to access 

and Europe. In order to make the most of the growing 

appropriate and affordable capital sources. As a result, 

opportunity in one of the most mature litigation 

we are exploring an initiative to de-list from ASX and 

ﬁ nance markets, and wider Europe, we have identiﬁ ed 

seek admission of LCM to AIM, a market for growth 

Mr Nicholas Rowles-Davies to head up and build LCM’s 

companies operated by the London Stock Exchange. 

European ofﬁ ce in London. Nick is a true industry 

The directors believe the move to AIM will better 

pioneer, the creator of portfolio litigation ﬁ nance and 

position us to broaden our shareholder base, access a 

the author of the seminal text regarding the industry, 

deeper pool of equity capital to support growth and 

and his appointment will provide us with an immediate 

therefore position us for a re-rating. LCM shareholders 

and considerable presence in the region. Nick will 

will have an opportunity to vote on proposals relating 

lead the newly-formed European ofﬁ ce, comprised of 

to this initiative in the near future.

highly-experienced litigation funders, in the origination 

of litigation ﬁ nance projects and their execution, with 

a particular focus on portfolio litigation ﬁ nance.

Overall, myself and the management team are 

very pleased with the ﬁ nancial performance of the 

company during FY 2018. We are very conﬁ dent, given 

LCM’s ongoing performance metrics, that future years 

will repeat and build on our current success. It is vital 

that as LCM grows, we retain our disciplined approach, 
as this is what has underpinned our previous success 

and it is what will drive the growth of the business 

going forward.

   LCM Annual Report 2018      5

 
Our robust performance 
in FY 2018 is testament 
to our investment 
methodology, the 
strength of the business 
and team we have built, 
and the solutions 
we provide. 

6      LCM Annual Report 2018       

Strategic Report
Market Overview

Market Overview

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The signiﬁ cant growth of the litigation 
ﬁ nance and funding market in recent years 
has begun to draw the attention of broader 
market participants and media over the 
past year – a theme is set to continue as the 
industry continues to grow and mature at an 
incredible rate. 

Any doubts as to the permanence of the litigation 

ﬁ nance industry in the Australasian marketplace were 

dispelled with the parliaments in both Hong Kong 

and Singapore passing legislation establishing a 

framework for litigation ﬁ nance and funding products 

to be utilised in association with international arbitral 

disputes. At the time of passing that legislation, 

indications were given that, over time, any prohibition 

with respect to the use of litigation ﬁ nance and 

both the integrity and transparency of Australian 

corporate public markets. The litigation ﬁ nance and 

funding industry has made those securities class 

actions possible. Without a source of funding and 

the availability of ﬁ nancial support in the form of 

indemnities against adverse costs, the vast majority of 

class actions currently pursued within Australia would 

not be possible.

While litigation ﬁ nancing continues to have signiﬁ cant 

growth and expansion in single case funding, the 

market for sophisticated corporates is also becoming 

increasingly attractive. Ongoing growth of this 

market is driven by the prohibitive cost of large scale 

litigation, the desire to avoid signiﬁ cant risks and the 

recognition of the value of professional management 

of litigation which ﬁ nanciers provide.

funding products in association with other disputes 

As a result, servicing the sophisticated corporate 

in addition to international arbitration will be 

considered. The industry as a whole has embraced 

those developments and expects that the permissible 

use of litigation ﬁ nance with respect to commercial 

disputes being resolved or adjudicated through the 

market has seen funders diversify further from offering 

funding for one-off large cases, to considering funding 

portfolios of litigation. Portfolio funding allows funders 

to take on multiple cases and minimize risk. One of the 

ﬁ rst of these deals was reported in the press in 2006 

courts of both Hong Kong and Singapore will follow in 

when British Telecom utilised a USD$45M portfolio 

future years.

funding arrangement.  

“The Corporations Act provides key avenues for 
shareholders and consumers to enforce their rights. 
Where private action can achieve a similar outcome 

to that which action by ASIC could achieve, it 

allows ASIC to allocate its enforcement resources to 

other priorities. Shareholder class actions provide 

a number of beneﬁ ts to consumers and ﬁ nancial 

markets and play an important role in shareholder 

access to justice.”

We view the above comment made by the Australian 
Securities and Investments Commission, Australia’s 
corporate regulator, in September 20181 as a 

positive endorsement of the effect that increased 

securities class actions are having with respect to 

This market offers a compelling opportunity as it is 

relatively new and largely under-developed. 

Geographically, the UK market is fast becoming an 

attractive region for litigation funders. It is much 

bigger than any single market in Australia or Asia, is 

an established center for international arbitration and 

home to over 200 law ﬁ rms and four of the top 10 

global law ﬁ rms. The addition of Nick Rowles-Davies 

to the LCM team and the opening of a London ofﬁ ce 

for LCM will uniquely position LCM to take advantage 

of this market. 

1 Australian Law Reform Commission Inquiry into Class Action Proceedings and Third Party Litigation Funders Submission by the 
Australian Securities and Investments Commission dated September 2018

   LCM Annual Report 2018      7

 
Table 1: LCM’s risk management 
process in assessing projects

1

 Preliminary due diligence by the 
investment manager

2

3

4

5

6

Investment committee review

Board review and approval

Conditional ﬁ nancing agreement

Additional due diligence

Unconditional ﬁ nancing agreement

Strategic Report
Strategic Review

8      LCM Annual Report 2018       

Strategic Report
Strategic Review

Strategic Review

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LCM continues to receive an increased number 
of applications for litigation ﬁ nance and risk 
management products year on year, both 
from within the single case funding market 
and the corporate funding market, across the 
jurisdictions in which LCM operates. 

In FY 2018 the total applications increased by 

27.6% to 125 applications, compared with 98 

applications in FY 2017. Not only has the volume 

of applications continued to increase, but also the 

size and quality of the opportunities has improved. 

Maintaining our disciplined approach and rigorous 

selection criteria when assessing litigation projects 

has remained an absolute focus for LCM in 2018, 

underpinned by thorough due diligence, the active 

management of investments and the continuity of our 

experienced team. 

Moreover, competition in the global marketplace 

for litigation funding undoubtedly continues to 

increase – a trend which LCM generally views as a 

Australia
The ongoing maturing of the Australian marketplace 

for litigation funding has been evidenced by increased 

competition in the past year. This has been particularly 

notable within the class action segment of the market, 

largely due to activity from offshore funders, primarily 

from the UK. Competition in the high-proﬁ le securities 

and shareholder class actions segment of the market 

was notable in 2018; an example of such competition 

was the three competing shareholder class actions 

brought against Get Swift Limited and ﬁ ve competing 

class actions brought against AMP Limited. 

The funding of class actions in Australia is presently 

attended with some judicial uncertainty and risk 

as the courts work their way through resolving the 

case management issues posed by competing class 

actions. LCM has, throughout FY 2018, been cautious 

in its approach to potential investments in the 

competitive end of the class action market in Australia, 

given the current backdrop. LCM will maintain its 

prudent approach and policy until the applicable legal 

positive indication of the market maturing. Our team 

principles are settled.

has continued to adapt to this theme, focussing 

on its sourcing pipeline to avoid the intensely 

competitive areas of the market and instead selecting 

opportunities in new areas and sectors. 

LCM is committed to the continuation of this 

disciplined approach towards its investments as 

it builds its portfolio of projects into FY 2020 and 

beyond. Looking forward, ensuring our portfolio 

of litigation projects is balanced both in terms of 

the size of claim and by sector is key. By way of an 

indicative outline: commercial claims lead our pipeline 
composition2 (42%) with class actions forming a 
quarter (26%) of future projects. We have a pipeline 

of insolvency projects (16%) which will grow with an 

Notwithstanding the market temptation to be involved 

in the funding of high-proﬁ le claims - whether 

they be representative of shareholder class actions 

or otherwise - LCM has adhered strictly to the 

methodologies of project selection developed over 

its 20-year history. An important criterion for LCM to 

provide funding and invest in a litigation project is that 

the legal principles and jurisprudence be well settled.

LCM has maintained its strict discipline in sourcing its 

pipeline. Rather than focus on this intensely competitive 

area of securities class actions, LCM’s focus is instead 

on developing our expertise and the opportunities 

associated with different and new sectors.

economic downturn; and international arbitration 

During 2018, LCM developed its focus on servicing 

(16%) which is expected to grow following our 

the sophisticated corporate landscape both in 

international expansion. These ﬁ gures do not include 

the Australasian market and in other developed 

the pipeline of projects which the addition of the 

economies and judicial systems. The provision 

team headed by Nick Rowles- Davies will bring which 

of ﬁ nancial and risk management solutions to 

when added, will signiﬁ cantly increase the volume and 

sophisticated and well-capitalised corporate entities 

diversity of our pipeline. LCM aims to make further 

for use in their litigious disputes is relatively new to the 

balanced investments into insolvency related projects, 

litigation ﬁ nance industry.

complex commercial litigation, international arbitration 

and class actions.

2 As at 24 October 2018

   LCM Annual Report 2018      9

 
Strategic Report
Strategic Review

LCM considers the most important aspect of its 

There is clear alignment between the existing 

business to be its people who implement its strategy 

management of LCM and Nick regarding the 

for the identiﬁ cation and assessment of litigation 

opportunity and addressable market for corporate 

projects for ﬁ nancing. In 2018 LCM strengthened its 

portfolio transactions. The provision of corporate 

Australian team through the hires of two talented and 

ﬁ nance products in established economies and 

experienced investment managers. Siba Diqer joined 

legal systems throughout the world will become a 

LCM’s Melbourne ofﬁ ce from Herbert Smith Freehills, 

signiﬁ cant opportunity for LCM in the future. Creating 

contributing her considerable experience in litigation 

new markets such as corporate portfolio transactions 

and particular expertise in insolvency, corporate and 

will negate the need for LCM to enter into more 

ﬁ nancial litigation. Additionally, Philip Lomax will 

competitive areas of the marketplace.

join LCM in late 2018 from another litigation funder. 

Philip, who has worked in both the UK and Australian 

markets, brings 4 years’ experience in litigation ﬁ nance. 

The recruitment of such high-quality candidates is 

testament to LCM’s increasing proﬁ le and reputation in 

the litigation ﬁ nance and funding industry.

International
In addition to the continued growth of LCM’s team 

Our international expansion strategy also includes 

opening a new Singapore ofﬁ ce in November 2018, 

led by Roger Milburn. Roger is an international 

arbitration specialist with 10 years’ experience; he 

joins LCM from Bryan Cave Leighton Paisner LLP in 

Singapore. The ofﬁ ce will service the Singapore and 

Hong Kong markets for the provision of litigation 

ﬁ nance. A number of litigation ﬁ nanciers have already 

in the Australian market, we are very pleased to 

announced a presence in the Singapore and to a 

have progressed our review of strategic options in 

lesser extent the Hong Kong markets. LCM has been 

the northern hemisphere, where LCM has continued 

deliberately patient to wait for the right candidate 

to receive an increased number of applications 

with deep and relevant experience in the international 

arbitration market to become available to head 

up our Asian expansion. LCM has already seen a 

signiﬁ cant increase in the number of applications 

for funding relating to international arbitral disputes 

from the markets of Hong Kong and Singapore. Those 

markets provide an exciting opportunity for LCM as it 

continues to expand its funding products and market 

share. Not only is international arbitration growing as a 

market for the litigation ﬁ nance industry, but it is also 

a growing market worldwide as an alternate means 

by which sophisticated corporations can resolve trade 

disputes without competing for jurisdiction.

When expanding into new markets and jurisdictions, 

LCM will maintain the strict application of its funding 

criteria and risk management. All risk management 

and treasury functions will remain centralised within 

LCM’s head ofﬁ ce in Sydney.

for projects. 

LCM has been disciplined in its approach to expansion 

into markets where it does not have the necessary 

skillset and experience. Despite the desire to explore 

the markets for the provision of litigation ﬁ nance 

in the UK and Europe, the focus on growth and 

expansion is against a backdrop of an industry that 

has only been in existence for approximately 20 years, 

resulting in a very small pool of experienced and 

talented practitioners in the ﬁ eld of litigation ﬁ nance 

and funding.

The introduction of Nick Rowles-Davies and his 

team in the UK not only gives LCM an extremely 

experienced and functional team operating in the UK 

and Europe, it also adds signiﬁ cant expertise in the 

area of corporate portfolio funding. While at Burford 

Capital, Nick was responsible for the origination and 

negotiation of one of the few corporate portfolio 

transactions completed worldwide. Nick has continued 

to focus on developing the product of corporate 

portfolio transactions and has become a leading 

authority with respect to transactions of that nature.

10      LCM Annual Report 2018       

Strategic Report
Financial Review

Financial Review

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The two principle performance metrics that are driving 

In addition to completing more projects than FY 

current (and future) performance are: 

2017, LCM more than doubled its invested capital in 

(1) Cumulative ROIC of 138% (for 2011-18), and 

(2) Cumulative IRR3 of 83% (for 2011-18)

LCM has provided litigation ﬁ nance and risk 

management products associated with litigation for 

approximately 20 years. The last seven years since 2011 

are most representative of LCM’s business in terms 

of the projects LCM supports and will continue to do 

so going forward. Prior to 2011, LCM was providing 

funding products to different sectors of the market 

and was subject to different capital constraints. The 

management of the business during those years 

was also signiﬁ cantly different to the systems and 

methodologies to which LCM now adheres; this period 

better reﬂ ects the current strategy based on a diverse 

portfolio of increasing quality as discussed above. 

The Cumulative ROIC of 138% is evidence of the 

success of the systems and methodologies employed 

by LCM when selecting projects, deploying capital, 

and managing those projects to a proﬁ table 

conclusion. The IRR of 83% demonstrates LCM’s 

ability to generate consistently strong returns over a 

reasonable investment period. Together the ROIC and 

IRR demonstrate that LCM can continue to provide 

excellent returns both in the private and public markets, 

and through the management of third-party funds. 

Completed Projects
LCM’s record results in FY 2018 were driven by the 

completion of six litigation projects, which helped 

grow revenue and proﬁ tability. Gross income from 

Litigation Projects increased by 754% to A$29.2 million 

and proﬁ t before tax was A$12.0 million, an increase 

of 518% compared to FY 2017. After the movements in 

litigation projects to A$14.6 million, helping drive the 

ﬁ nancial performance we experienced. LCM generated 

an outstanding Return on Equity of 41% and the net 

asset backing per share increased from 29.5 cents 

to 45.1 cents per share. Similarly, the basic earnings 

per share increased to 15.24 cents, from a negative 

position the year before.

Capital Base
LCM grew its capital base organically to A$27.1 million 

during the ﬁ nancial year, representing an increase of 

697% from the prior ﬁ nancial year. This cash was used 

for growth and expansion of the business, as well as 

the repayment of the A$4 million debt capital facility 

which was completed in the ﬁ rst quarter of 2018. 

LCM increased its net asset position from A$16.7 

million to A$25.4 million by the end of FY 2018, 

reﬂ ecting the successful reinvestment of cash into 

proﬁ table litigation projects. LCM achieved these 

results at the same time as reducing its operating 

costs from A$4.2 million to A$3.7 million.

Portfolio Policy
LCM increased its portfolio of litigation projects under 

management in FY 2018, and as at 30 June 2018 was 

funding 14 unconditional litigation projects had an 

additional six litigation projects subject to conditional 

funding arrangements (that ﬁ gure is now seven). 

LCM grew the aggregated gross claim size of all 

litigation projects under its management from A$905 

million in FY 2017 (of which A$169 million related to 

the International Funding Partner Arrangement) to 

A$1.5 billion as at the close of FY2018, including the 

conditional projects (with only A$55 million relating 

to the arrangement with the International Funding 

deferred taxes LCM produced a Net Proﬁ t after Tax of 

Partner Agreement). 

A$8.6 million. 

3  LCM calculates its Cumulative IRR by treating our entire investment portfolio as one undifferentiated pool of capital and measuring 
inﬂ ows and outﬂ ows from that pool. Cumulative IRR only includes completed investments and does not include unrealised gains 
or losses.

   LCM Annual Report 2018      11

 
Strategic Report
Financial Review

As at 24 October 2018 LCM has a pipeline4 of qualiﬁ ed 

approximately A$108 million. This expanded portfolio, 

litigation funding projects (subject to due diligence) of 

with its combination of conditional and unconditional 

31 separate opportunities with an aggregate gross claim 

projects is key to LCM’s diversiﬁ cation policy, allowing it 

size of approximately A$3.1 billion. This pipeline was 

to better withstand earnings volatility.

estimated to have had an aggregate funding budget of 

Investment performance

A$ in millions

Total projects concluded for FY 2012

Total projects concluded for FY 2013

Total projects concluded for FY 2014

Total projects concluded for FY 2015

Total projects concluded for FY 2016

Total projects concluded for FY 2017

Total projects concluded for FY 2018

Total

* Multiple on Invested Capital
** Return on Invested Capital

Projects 
concluded

Total 
invested

Total 
recovered

MOIC*

ROIC**

4

4 

5 

8 

3 

2 

6 

A$0.2

A$1.6

A$1.2

A$3.6

A$3.6

A$0.8

A$15.7
A$26.8

A$0.8

A$0.9

A$3.7

A$10.9

A$7.2

A$2.9

A$37.3
A$63.8 

3.80

0.56

3.10

2.98

2.00

3.76

2.38

2.80

(0.44)

2.10

1.98

1.00

2.76

1.38

ROIC 
high

 9.85 

 2.09 

 10.27 

 39.42 

 6.52 

 4.12 

 13.44 

ROIC 
low

 1.36 

 - 

 - 

 - 

 0.57 

 2.19 

 0.49 

4  This pipeline represents a set of qualiﬁ ed opportunities at various stages of due diligence. LCM can provide no guarantee or 
warranty that the opportunities in its pipeline will become projects funded by LCM. These opportunities are subject to due 
diligence and the negotiation of commercial terms and it is likely that only a proportion of the opportunities in this pipeline will 
convert into funded projects. 

12      LCM Annual Report 2018       

 
Strategic Report
Operational Review

Operational Review

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Over its 20 years in business, LCM has 
established clear best practice and high 
operational standards which contribute 
directly to the stability and strength of 
the company. 

Finance function & controls
LCM centralises its ﬁ nance functions in its head ofﬁ ce 

in Sydney, enabling ﬁ nance to participate in the review 

of investment managers’ existing projects and their 

investment pipeline. This creates alignment between 

origination, treasury, ﬁ nance and corporate reporting 

teams and minimizes volatility between forecasting 

and the completion of projects.

3)    Written Evidence – The claim should be supported 
by clear evidence, which is documentary in nature, 

not oral.

4)   Recoverability – There must be a clear line to 

recovery for the claim and it must be demonstrated 
that the defendant has the capacity to meet a 

judgment of the size which will be brought.

5)    Experienced Legal Team – There must be a highly 
competent and experienced legal team in place 
with the relevant expertise to pursue the claim. 

As a result, LCM provides funding to only around 4% 

of the applications it receives. This process allows 

LCM to be cautious and to protect itself from risk and 

LCM has robust controls around payments which 

the temptation of unnecessary growth. The funding 

incorporate both internal and external systems. These 

criteria are applied across all of the core legal claims 

controls require that all payments, regardless of their 

sectors that LCM has expertise in: Commercial Claims, 

size, are loaded into a central system by a member of 

Class Actions, Insolvency, International Arbitration, and 

the team that does not have the authority to release 

Corporate Portfolios.

that payment. They also require at least three different 

people from three different internal teams to provide 

authorization before any payments leave LCM. The 

largest payments relate to litigation projects and these 

are circulated amongst the investment team, risk team 

and ﬁ nance team ahead of them being loaded into 

and becoming part of the three-step approval process.

Risk management
LCM has a proven and robust risk management 

process. It applies rigorous selection criteria which 

have been developed over the company’s 20-year 

history and embody a clear understanding of what is 

likely to constitute a successful and proﬁ table litigation 

project. This process is central to the discipline shown 

when sourcing deal pipeline, which in turn has led 

directly to the current strong ﬁ nancial position.

Investment managers consider applications for 

ﬁ nancing against LCM’s ﬁ ve key criteria:

1)    Proportionality – There must be proportionality 
between the size of the claim and the funding 
commitment. Many applications for funding are 

instantly dismissed on the basis that it would not be 

commercially viable for LCM to fund them.

2)    Clear Legal Principles – The claim must be based 
on clear legal principles and not any novel points 
of law.

Each Litigation Project LCM funds is managed by an 

Investment Manager, who is responsible for ensuring 

that the litigation project continues to meet the key 

criteria and is expected to achieve the funder’s return 

as at the likely Completion Date. LCM’s investment 

managers meet weekly and the status of all litigation 

projects are reviewed quarterly. 

Whilst LCM’s business has always had a robust focus 

on risk management, we will shortly move to appoint 

a dedicated risk ofﬁ cer. The Head of Risk will conduct 

a biannual audit of all litigation projects against the 

following:

a.  Regulatory Risk

b.  Portfolio Risk

c.  Reputational Risk

d.  Service Provider Risk

e.  Sovereign Risk

f.  Foreign Currency Risk

g  Competition Risk

h. 

 Risk in relation to obligations of market disclosure.

The Head of Risk will also be required to provide a 

biannual report to the Board setting out the outcome 

of his or her audit of the Litigation Projects. 

   LCM Annual Report 2018      13

 
Strategic Report
Operational Review

IT & cybersecurity
Data security and privacy is very important to LCM. 

Foreign exchange transaction risk is the risk that 

LCM’s cash ﬂ ows will be adversely affected by 

As a manager of litigation assets, LCM is in possession 

movements in exchange rates that will increase the 

of highly conﬁ dential information that contains 

sensitive details about client litigation matters. As 

Australian dollar (‘AUD’) value of foreign currency 

payables or will diminish the AUD value of foreign 

a publicly listed entity, LCM is also in possession of 

currency receivables.

conﬁ dential information that needs to be disseminated 

in compliance with regulatory frameworks including 

listing rules, securities licensing regimes and other 

stakeholders. Data is stored on third party cloud 

servers and LCM continues to review suppliers of 

these services to ensure the highest security. 

Compliance
At LCM, we have a very simple philosophy around 

ethical conduct that is entrenched within our culture. 

Ethical conduct is of paramount importance to every 

LCM employee and it is non-negotiable. We do not 

permit second chances, we do not allow anyone to 

exploit grey areas and there is zero tolerance towards 

anyone looking to bend the rules.

Our compliance regime has grown in tandem with our 

international expansion and it addresses the various 

legal and regulatory obligations LCM has across 

multiple jurisdictions.

Foreign exchange
LCM is an AUD reporting business with the majority 

LCM’s approach to foreign exchange transaction risk 

management is as follows:

• 

 The overall purpose of hedging is to mitigate risks 

and achieve known outcomes. 

• 

 Foreign exchange risk management is the 

responsibility of Treasury

• 

 It is the responsibility of Investment Managers 

to identify foreign exchange risks in their areas 

of responsibilities and notify Treasury in a timely 

manner of these exposures through the monthly 

reporting system established by Treasury 

The sources of LCM’s foreign exchange transaction 

exposures are as follows:

• 

 Investments in cases which are in a foreign 

currency

• 

 Foreign operating costs, such as salaries, ofﬁ ces 

and other business expenses in a foreign currency

• 

 Capital equipment priced in foreign currency or 

of our operations occurring in AUD denominated 

subject to price change due to movements in 

activities. Going forward, our international expansion 

exchange rates

will see LCM deploy additional capital into litigation 

assets domiciled outside of Australia. To this end, 

we have brought into LCM an experienced ﬁ nancial 

markets advisor, Stephen Conrad, who has over 25 

years’ experience working for international investment 

banks in Singapore, Hong Kong and Sydney in their 

ﬁ nancial markets divisions. Stephen also has a strong 

skillset in governance and risk management. LCM has 

now adopted a dedicated Treasury Policy.

• 

 Payments or receipts of royalties, franchise or 

license fees denominated in a foreign currency

14      LCM Annual Report 2018       

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It is vital that as LCM grows we 
retain our disciplined approach, as 
this is what has underlined our 
previous success and it is what 
will drive the growth of the 
business going forward.

   LCM Annual Report 2018      15

 
 
Governance
Our Board

Our Board

Dr David King
Chairman

Patrick Moloney 
Chief Executive Offi  cer

Steven McLean 
Non-executive Director

Appointed Director and 

Appointed Director in 2003 

Appointed Director in 

Chairman of LCM 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.

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 Cellmid 
Ltd and African Petroleum 
Corporation Ltd, and a non-
executive director of Galilee 
Energy Ltd and Tap Oil Ltd

and Managing 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 in 
Australia and Europe. Steven has 
led equity transactions which 
have raised in excess of A$50 
billion 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.

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 practise law in 1996.

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 
signiﬁ cant monies from investors 
and operated an enhanced equity 

income strategy

16      LCM Annual Report 2018       

Governance
Corporate and Social Responsibility

Corporate and Social Responsibility

LCM is a partner of the Adverse Costs Order 
Guarantee Fund (ACO Fund) which has been 
established by the Public Interest Advocacy 
Centre (PIAC).

The ACO Fund aims to promote access to justice 

for public interest litigation by responding to the 

signiﬁ cant barrier that is posed by the risk of an 

adverse cost order. Under the ACO Fund, LCM has 

agreed to commit an amount annually of AUD$25,000 

by way of guarantee towards protecting PIAC clients 

from adverse cost orders in public interest cases. LCM 

reviews the amount of this guarantee regularly as 

demand is required from PIAC.

There is no ﬁ nancial return to LCM from the ACO Fund 

and our involvement represents our commitment to 

supporting social justice and public interest litigation.

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   LCM Annual Report 2018      17

Governance
Directors report

Directors report

The Directors of Litigation Capital Management 

Limited (LCM) present their report together with 

Committee membership
Audit Committee and Remuneration Committee

the annual ﬁ nancial report of the consolidated entity 

consisting of LCM and its subsidiaries (collectively 

Patrick Moloney

LCM Group or the Group) for the period ended 30 

June 2018 and the auditors’ report thereon.

Chief Executive Offi  cer

LLB

1. Directors
The Directors of LCM at any time during or since the 

end of the ﬁ nancial period are:

•  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.

Experience and expertise
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.

Appointed Director in 2003 and Managing Director in 

December 2013.

Experience and expertise
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.

Prior to establishing his own ﬁ rm, Patrick was an 

employed solicitor for 3 years and then a partner in 

the ﬁ rm 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 signiﬁ cant monies from investors and operated 

an enhanced equity income strategy

David is a Fellow of the Australian Institute of 

Steven McLean

Non-executive Director

BEc
Appointed Director in November 2015.

Experience and expertise
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$50 

billion for corporates across various countries including 

Australia, USA, UK, Switzerland, Finland, Holland, 

Austria, France, Russia, Singapore and Bermuda.

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 Cellmid Ltd and African 

Petroleum Corporation Ltd, and a non-executive 

director of Galilee Energy Ltd.

Directorships of listed companies (last 3 years)
Current directorships
Galilee Energy Limited (ASX: GLL) – Non-executive 

Director since 24 September 2013 (Chairman from 30 

October 2013 until 7 March 2018).

Cellmid Limited (ASX:CDY) – Non-executive Director 

and Chairman since 18 January 2008

Previous directorships
Robust Resources Limited, Republic Gold Limited and 
Tengri Resources Limited

18      LCM Annual Report 2018       

Governance
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In additional to his role with LCM, Steven is currently 

4. Meetings of Committees

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

Committee membership
Audit Committee and Remuneration Committee

2. Company Secretaries
Steven McLean (whose details appear above) resigned 

as Company Secretary on 7 September 2016.

Both an Audit and Risk Committee and Remuneration 

Committee were established by the Board on 20 

September 2017.

The number of meetings of the Audit and Risk 

Committee together with the meetings attended 

during the ﬁ nancial period are:

Audit and Risk Committee Meetings

Number eligible 
to attend

Number 
attended

2

-

2

2

- 

2

Directors

David King

Patrick Moloney

Steven McLean

Anna Sandham was appointed Company Secretary 

of LCM on 7 September 2016. Anna is an experienced 

The number of meetings of the Remuneration 

Committee together with the meetings attended 

company secretary and governance professional with 

during the ﬁ nancial period are:

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), 

Directors

David King

Graduate Diploma of Applied Corporate Governance 

Patrick Moloney

(Governance Institute of Australia) and is a Chartered 

Steven McLean

Secretary.

Remuneration Committee Meeting

Number eligible 
to attend

Number 
attended

0

 -

0

0

- 

0

3. Meetings of Directors
The number of meetings of the Company’s Board of 

5. Principal Activities
Litigation Capital Management provides ﬁ nancial and 

Directors (“the Board”) and the number of meetings 

risk management services associated with the legal 

attended by each Director during the ﬁ nancial period 

services industry and most particularly, litigation. The 

are:

Directors

David King

Patrick Moloney

Steven McLean

Number eligible 
to attend

Number 
attended

10

10

10

10

10

10

company provides service including the funding of 

contentious commercial litigation and class actions as 

well as corporate risk management associated with 

litigation.

   LCM Annual Report 2018      19

Governance
Directors report

6. Operating and ﬁ nancial review

Review of LCM’s portfolio of Litigation Projects

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 

ofﬁ ce and principal place of business is Suite 12.06, 

Level 12 The Chiﬂ ey Tower, 2 Chiﬂ ey Square Sydney 

NSW 2000.

Litigation Capital Management operates its business 

through a series of wholly owned subsidiaries. The 

principal activity of those subsidiaries is the provision 

of litigation ﬁ nance and risk management associated 

with individual and portfolios of litigation projects.

Review of ﬁ nancial performance

The Board of LCM is extremely happy with the 

performance of the Group and the ﬁ nancial results 

for FY 2018 being the ﬁ rst full ﬁ nancial year of trade 

since listing. The Group has transited from a statutory 

loss in FY 2017 to a healthy cash proﬁ t of $12 million. 

After the derecognition of LCM’s deferred tax asset 

in accordance with AASB, the company posted an 

accounting NPAT of $8.6 million. LCM’s ﬁ nancial 

performance during FY 2018 represents a signiﬁ cant 

turnaround in its ﬁ nancial position. It provided the 

Group with additional organically generated capital 

which permitted the growth and expansion of its 

business. The Return on Invested Capital (ROIC) 

throughout the year was 137% with an Internal Rate 

of Return (IRR) of 80%. During the FY 2018 year, the 

Return on Equity (ROE) was 41%. The company’s 

ﬁ nancial performance was excellent across all metrics.

LCM’s running IRR for the past seven years (including 

losses) is 83% with a ROIC of 138%. The Group’s long 

running and stable IRR over a sustained period in 

the low 80% and ROIC of 138% demonstrates LCM’s 

LCM continues to grow its portfolio of Litigation 

Projects. During FY 2018, six Litigation Projects were 

completed (compared with two projects in FY 2017) all 

of which yielded a proﬁ t for the group. Of these, ﬁ ve 

were funded from LCM’s own balance sheet and one 

Litigation Project was funded through the International 

Funding Partner (IFP) arrangement.

As at 30 June 2018, LCM has a portfolio of 14 Litigation 

Projects (unconditionally funded) with an estimated 

aggregate gross claim size of approximately $1.25 

billion. Of these, 12 projects are expected to resolve 

during FY 2019 (including a Litigation Project funded 

through the IFP which has already completed 

leaving only 1 Litigation Project subject to that IFP 

arrangement). That portfolio compares with the 

position as at 30 June 2017 where the portfolio of 

projects comprised 12 with an aggregate gross claim 

size of approximately $800 million. That represents 

an increase in the size of the portfolio (by aggregate 

claim size) of 56% and an enhanced return proﬁ le.

During FY 2018 the number of applications received by 

LCM for funding increased signiﬁ cantly. There were 125 

applications received compared with 98 for FY 2017 

representing an increase of 27.6%. In addition, LCM 

expanded its offering of litigation ﬁ nance into the ﬁ eld 

of international arbitration.

During FY 2017, 24 applications were received in 

respect of international arbitral disputes. LCM has 

entered into its ﬁ rst conditional funding arrangement 

in an international arbitral dispute and is currently 

conducting due diligence in respect of a number of 

other applications. LCM has moved to secure the 

necessary skillsets internally to properly manage those 

opportunities.

Signiﬁ cant Changes in the State of Affairs

depth of knowledge and experience in the sector 

No matters or circumstances have arisen since the end 

and its ability to select and manage investments over 

of the ﬁ nancial year which have signiﬁ cantly affected 

an extended investment period. That said, IRR’s can 

or could signiﬁ cantly affect the operations of LCM 

be highly susceptible to cases that experience early 

or the LCM group, the results of those operations, or 

settlement. As LCM’s book of Litigation Projects 

the state of affairs of the consolidated group in future 

continues to grow, diversity will be the key to ensure 

ﬁ nancial years.

we can maintain a stable and consistent earnings 

proﬁ le and hence we would expect future IRR’s to 

reﬂ ect this.

20      LCM Annual Report 2018       

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Future Developments, Prospects and Business 
Strategies

9. Likely developments
The growth and maturation of LCM’s current book 

The growth and maturing of litigation ﬁ nance as an 

asset class is seeing a progression by more funders 

to public listings versus remaining private. Currently 

LCM is one of three publicly listed litigation ﬁ nance 

entities worldwide and there are expected to be a 

number of other litigation ﬁ nance companies listing 

on the London Stock Exchange during the remainder 

of this calendar year. LCM is monitoring this situation 

in relation to these opportunities and how they may 

apply to the Group.

As previously announced to the market, the 

jurisdictions of Hong Kong and Singapore have 

recently legislated to permit litigation funding and 

ﬁ nance products in the international arbitration space. 

In response to signiﬁ cant numbers of enquiries and 

applications from those jurisdictions, LCM is currently 

in the process of establishing an ofﬁ ce in Singapore 

with initial stafﬁ ng of an investment manager to 

facilitate project origination and due diligence. The 

opening of a Singapore branch ofﬁ ce is expected to 

be completed by the end of this calendar year.

All risk management in respect of the Singapore and 

Hong Kong business will remain under the control of 

the head ofﬁ ce in Sydney.

Capital Management

During FY 2018 LCM utilised debt as a capital 

management tool and has repaid that facility in full. 

With the signiﬁ cant growth of LCM’s pipeline, the 

Board expects to source funding for a portion of its 

future opportunities from a range of sources including 

managed funds, debt and where appropriate, 

additional equity.

7. Dividends
No dividends were paid during the ﬁ nancial year.

8. Matters subsequent to the end of the 
ﬁ nancial period
In the Directors’ opinion, no matter or circumstance 

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.

LCM is looking closely at markets and opportunities 

in Asia and beyond. The market and the asset class 

of litigation ﬁ nance and funding is maturing rapidly. 

The market opportunities are extending well beyond 

the traditional opportunities where a claimant in 

litigation is either impecunious or unwilling to use their 

own funds to pursue their rights into a tool used by 

sophisticated and well capitalised entities to manage 

cash ﬂ ow and risk. That development opens very 

signiﬁ cant opportunities and sectors of the market 

previously untapped by litigation ﬁ nance.

As noted above, LCM is in the process of opening an 

ofﬁ ce in Singapore. That Singapore ofﬁ ce will service 

the markets of Singapore and Hong Kong. In respect 

of each of those jurisdictions, litigation ﬁ nance is 

available in respect of insolvency based litigation 

and international arbitration. Neither Singapore nor 

Hong Kong have opened with respect to mainstream 

commercial disputes. It is expected that those markets 

will become available in the future. Whilst LCM 

believes that there is a viable market available to it 

in respect of insolvency based litigation projects and 

international arbitrations immediately, it also believes 

that the opportunities will increase over time when 

mainstream commercial disputes become available 

to the funding market. Given this, we are taking a 

cautious approach to monetising these opportunities.

LCM is receiving an increasing number of applications 

for litigation ﬁ nance and other related funding 

products from the Northern Hemisphere and more 

particularly the United Kingdom and Europe. To 

address those opportunities, LCM has, for some time, 

retained a Queen’s Counsel located in the United 

Kingdom to assist with respect to considering those 

has arisen since the end of the ﬁ nancial year, that 

opportunities. The services of that Queen’s Counsel 

has signiﬁ cantly affected, or may signiﬁ cantly affect, 

has also been utilised in the evaluation and due 

the operations of the Group, the results of those 

diligence of potential projects in Australia and Asia. 

operations, or the state of affairs of the Group in 

With the increase in the number of international 

future years.

applications being received, LCM is considering the 

use of additional resources in the United Kingdom 

   LCM Annual Report 2018      21

Governance
Directors report

to assist with respect to evaluating opportunities 

companies to continuously disclose to the market and 

and conducting due diligence but also originating 

various other less signiﬁ cant matters. LCM has made a 

opportunities. LCM has for some time been very 

submission to the ALRC and this, together with other 

cautious not to enter markets and invest in litigation 

industry participants, can be accessed at https://www.

projects in jurisdictions in which it does not have a 

alrc.gov.au/inquiries/class-action-funding/submissions.

core skillset. Such issues are likely to be addressed 

by building or acquiring a suitably qualiﬁ ed and 

experienced team within the United Kingdom or 

Europe. LCM continues to assess those markets and 

consider opportunities.

10. Regulation
The Group’s operations are not currently subject 
to signiﬁ cant regulation under a law of the 

Commonwealth or of a state or territory.

A number of observations should be made in relation 

to the enquiries which have been completed and/or 

are pending. First, the Commonwealth Productivity 

Commission produced a report into Access to Justice 

in 2014 which commented upon the litigation funding 

industry. It recommended that litigation ﬁ nanciers 

and funders be licenced and that certain prudential 

obligations be put in place. No regulation has resulted 

from those recommendations. Secondly, even in 

circumstances where all of the current matters being 

Notwithstanding that there is no signiﬁ cant regulation 

considered by the Commonwealth Productivity 

of the litigation ﬁ nance and funding industry at either 

Commission were implemented it would not impact 

a Commonwealth or state level, two law reform 

signiﬁ cantly on the business model of LCM. Indeed 

commission enquiries have been initiated. The ﬁ rst 

issues such as licencing and prudential requirements 

is an enquiry in the State of Victoria. That enquiry 

might well create a barrier to entry to new prospective 

involved consideration as to whether the litigation 

litigation ﬁ nanciers and make it difﬁ cult for existing 

ﬁ nance and funding industry should be subject to 

smaller operators to compete. It is therefore LCM’s 

greater regulation than is currently in place. That 

position that regulation of the kind currently subject 

enquiry could only ever make recommendations with 

to consideration and debate would be positive and 

respect to the laws of Victoria. It is widely accepted 

complimentary to LCM’s business.

that if any regulation of the litigation ﬁ nance and 

funding industry was to take place it would need, for 

practical reasons, to take place at a Commonwealth 

level.

In addition to the Victorian enquiry, the Australian Law 

Reform Commission (ALRC) is currently investigating 

and conducting an enquiry into the litigation ﬁ nance 

and funding industry insofar as it concerns class 

or representative actions. That enquiry is yet to 

be completed and no ﬁ nal recommendations have 

been made. In a preliminary report for consideration 

and discussion, various issues have been raised for 

debate. Those issues include the licensing of litigation 

ﬁ nanciers or funders, what, if any, restrictions or 

requirements should be attached to such licensing, 

whether law ﬁ rms should be permitted to enter into 

damages based charging agreements in respect of 

class actions, whether a review should be undertaken 

in relation to the Commonwealth laws requiring public 

22      LCM Annual Report 2018       

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11. Directors’ interests
The relevant interests of each director in the shares and rights or options over shares issued by LCM, as notiﬁ ed by 

ASX in accordance with s205G(1) of the Corporations Act 2001 (Cth) (Act), at the date of this report is as follows:

Directors

David King

Steven McLean

Patrick Moloney

Ordinary shares
(held directly 
and indirectly)

1,601,484

577,499

5,212,557

Loan Plan Shares 
exercisable at
$0.5965 issued 
in 2 tranches and 
subject to vesting 
conditions

Unlisted 
options over 
ordinary shares 
exercisable at
$0.47*

Unlisted 
options over 
ordinary shares 
exercisable at
$1.00**

-

-

600,000

-

Unlisted partly 
paid shares

-

-

2,000,000

1,595,058

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.

12. Share Options and Rights 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.

A Loan Share Plan (“LSP”) was approved by LCM shareholders at the Annual General Meeting in November 2017. 

Also at the 2017 AGM, the shareholders approved the issue of 2,000,000 Plan Shares to Patrick Moloney.

The terms and condition of Plan Shares issued to Patrick Moloney granted during the ﬁ nancial year are summarised below:

Tranche

Tranche 1:

Tranche 2:

Grant date

Vesting date

4 December 2017

4 December 2019

4 December 2017

4 December 2020

Number of Plan
Shares

1,000,000

1,000,000

Issue price

$0.5965

$0.5965

Each tranche of Plan Shares will vest if the relevant Vesting Conditions set out below are met:

Tranche 1:

Vesting conditions 
a)   Mr Moloney has been continuously employed by the Company from the Grant Date to the date that is 24 

months after the Grant Date and has been continuously been employed by the Group over that period; and

b)   The VWAP of the Company’s shares over any 5 trading day period is at least $1.00 per share (or such equivalent 

price if a capital reconstruction occurs in relation to the Company) (Target Price Condition).

Tranche 2:

Vesting conditions 
a)   Mr Moloney has been continuously employed by the Company from the Grant Date to the date that is 36 

months after the Grant Date and has been continuously been employed by the Group over that period; and

b)  The Target Price Condition has been met.

Further details of the LSP and the issue of shares under the LSP to Mr Moloney are provided in section 1.5 and 2.4 

in the Remuneration Report.

No ordinary shares have been issued during or since the year end as a result of the exercise of options.

   LCM Annual Report 2018      23

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Directors report

13. Indemnity and insurance of ofﬁ cers and 
auditors

17. Auditor
BDO Audit (SA) Pty Ltd continues in ofﬁ ce in 

Indemniﬁ cation
Under the LCM Constitution, to the maximum extent 

permitted by the Act, LCM must indemnify each 

person who is or has been an Ofﬁ cer against any 

liability incurred as an Ofﬁ cer and may pay a premium 

for a contract insuring an Ofﬁ cer against that liability. 

During the ﬁ nancial period, LCM has paid premiums in 

respect of contracts insuring the directors and ofﬁ cers 

of LCM against any liability of this nature.

accordance with section 327 of the Act.

18. Ofﬁ cers of the Company who are former 
partners of BDO Audit (SA) Pty Ltd
There are no ofﬁ cers of LCM who are former partners 

of BDO Audit (SA) Pty Ltd.

19. Remuneration Report
The Remuneration Report which forms part of this 

Directors’ Report is presented separately on pages 

LCM has not, during or since the end of the ﬁ nancial 

25 - 32.

20. Rounding of amounts
LCM is of a kind referred to 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.

period, indemniﬁ ed or agreed to indemnify an ofﬁ cer 

or auditor of LCM or any related entity against a 

liability as such by an ofﬁ cer 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 conﬁ dential.

14. Non-audit services
No amounts have been paid or are payable to the 

Auditor for non-audit services provided during the 

ﬁ nancial year.

15. 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.

16. Lead Auditor’s independence declaration
The Auditor’s independence declaration as required 

under section 307C of the Act is included on page 33 

of the Annual Report.

24      LCM Annual Report 2018       

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21. Remuneration report
The Directors present this Remuneration Report 

We will provide further detail on the remuneration and 

reward framework in future reports and the linkages 

(Report) for Litigation Capital Management Limited 

this provides with business performance.

(“LCM” and together with its controlled entities, 

the “LCM Group”) for the 12 months ended 30 June 

2018 which has been audited in accordance with the 

Corporations Act 2001 (Cth) (Act) and its regulations, 

and outlines key aspects of our remuneration 

framework. 

1.  Remuneration Framework

1.1  Overview of remuneration framework 

Relationship between remuneration policy, the 

company’s performance and shareholder wealth

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 

The below table illustrates the link to Executive 

remuneration over the past two ﬁ nancial years 

(including FY18):

Financial 
Performance 
Measure

Link to 
Executive 
Remuneration  

N/A

N/A

Group 
NPAT ($)

Dividends 
per share 
($)

Share Price 
as at 30 
June ($)

Loan Share 
Plan (refer 
1.5)

FY18

FY17

AUD 
$8,637,354

AUD 
$(2,340,508)

N/A

N/A

0.72

0.48

1.2  Role of the Remuneration Committee
The Remuneration Committee ensures that the 
remuneration of Directors and senior executives is 
consistent with market practice and sufﬁ cient to 

ensure that the LCM Group can attract, develop and 

retain the best individuals.

Group’s vision, values and overall business objectives.

The Remuneration Committee ensures that the 

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 ﬁ xed 

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 achieving the Group’s 

strategy and business objectives; and

and variable pay elements;

• 

 Link incentives to the creation of shareholder value.

• 

 Delivery of a competitive remuneration framework 

that assists with attracting and retaining high 

calibre non-executive and executive talent to 

ensure business success; and

The Remuneration Committee shall meet formally 

at such frequency as circumstances demands for 

the purposes referred to above. The Remuneration 

Committee did not meet during the 2018 year.

• 

 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 

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 

and that supports the execution of our strategy to 

during the past ﬁ nancial year:

the beneﬁ t of long term value creation. The Board 

welcomes feedback from external stakeholders 

around its remuneration practices and disclosures.

   LCM Annual Report 2018      25

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1.3.1  Non-executive directors
Dr David King 

Non-executive Chairman

Steven McLean  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 ﬁ nancial year.

1.5  Long term incentive scheme
A Loan Share Plan (“LSP”) was approved by LCM 
shareholders at the Annual General Meeting in 

November 2017 (“2017 AGM”). The LSP was adopted 

to retain, motivate and attract executives and to 

better align the interests of employees with those of 

the Company and its shareholders by providing an 

opportunity for eligible senior executives to acquire 

shares subject to the terms and conditions of the LSP. 

Patrick Moloney is currently the only participant in the 

LSP, and the issue of shares to Mr. Moloney under the 

LSP was approved by shareholders at the 2017 AGM.

Further details of the LSP and the issue of shares under 

the total amount paid to Non-executive Directors’ may 

not exceed:

(i)   The amount ﬁ xed by LCM in general meeting for 

that purpose; or

(ii)   If no amount has been ﬁ xed by LCM in general 

meeting for that purpose, $200,000 per annum.

As no amount has been ﬁ xed 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 in the foreseeable 

future.

The Non-executive Director annual fee structure 

(including superannuation) paid during the 12 months 

ended 30 June 2018 is as follows:

Fee ($ per annum)

Non-executive Chairman

Non-executive Director

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 

ﬁ nancial year to each non-executive director.

the LSP to Mr. Moloney are provided in section 2.4 below.

Following a review of Non-executive Director fees 

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 ﬁ xed term. Non-executive Directors receive a fee 

for their contribution as Directors.

The following persons acted as Non-executive Directors 

of the Company in the past ﬁ nancial year and are 

considered members of Key Management Personnel:

Non-executive Directors

Dr David King

Non-executive Chairman

and consideration of the time commitment and 

responsibilities, Non-executive Director fees (excluding 

superannuation) were increased effective from 20 July 

2018 and are:

Non-executive Chairman

Non-executive Director

100,000

75,000

Fee ($ per annum)

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 

Steven McLean

Non-executive Director

their independence. The Board also believes that 

Fees payable to non-executive directors reﬂ ect the 

demands which are made on, and the responsibilities 

of, directors. Directors’ fees are reviewed regularly by 

the Board.

remuneration for Non-executive Directors should 

reﬂ ect the time commitment and responsibilities of the 
role as well as taking into account market levels.

LCM do not pay lump sum retirement beneﬁ ts to 

Non-executive Directors. Additionally, Non-executive 

LCM’s Constitution provides that LCM may remunerate 

Directors do not receive any bonus payments whilst 

each Director as the Directors decide, provided that 

holding ofﬁ ce as a Non-executive Director.

26      LCM Annual Report 2018       

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Dr David King
In recognition of his assistance with the Offer to 

acquire new shares as detailed in the Initial Public 

Offering (“IPO”) Prospectus dated 17 November 

2016, 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

20 Sep 
2016

1 Nov 
2018

Expiry 
date

1 Nov 
2021

Exercise 
price

Number of 
Options

$1.00 per 
share

600,000*

*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.

Mr. Steven McLean
No additional remuneration was received by Mr. 
Steven McLean or any of his related parties during the 
last ﬁ nancial year.

2.2  Remuneration payable to Chief Executive 
Offi  cer
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 Chief Executive Ofﬁ cer. As 

part of that employment agreement and subsequent 

reviews, the Chief Executive Ofﬁ cer is entitled to a 
ﬁ xed 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 Chief Executive Ofﬁ cer’s 
remuneration package are the following:

Grant 
date

Vesting 
date

Expiry 
date

Exercise 
price

20 Sep 
2016

1 Dec 
2013

1 Nov 
2018

1 Dec 
2013

1 Nov 
2021

1 Dec 
2018

$1.00 per 
share

$0.47 per 
share

Number of 
Options

900,000*

1,595,058

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 reviewing and ﬁ nalising the Chief Executive 
Ofﬁ cer’s base remuneration package and beneﬁ ts.

2.3  Share based payment arrangements
The terms and condition of each grant of options in 
existence during the ﬁ nancial year are summarised 
below:

Grant 
date

Vesting 
date

Expiry 
date

Exercise 
price

Value at 
Grant date

Number of 
Options

20 Sep 
2016

1 Nov 
2018

1 Nov 
2021

$1.00 per 
share

20 Sep 
2016

1 Nov 
2018

1 Nov 
2021

$1.00 per 
share

1 Dec 
2013

1 Dec 
2013

1 Dec 
2018

$0.47 per 
share

$75,750 600,000

$113,625 900,000

$201,377 1,595,058

2.4  Loan Share Plan

Details of Loan Share Plan
As outlined in section 1.5 above, the shareholders 
of LCM resolved to approve a Loan Share Plan 
(LSP) at the 2017 AGM. The Board adopted the LSP 
to retain, motivate and attract executives and to 
better align the interest of employees with those of 
the Company and its shareholders by providing an 
opportunity for eligible senior executives to acquire 
shares subject to the terms and conditions of the 
LSP (Plan Shares).
The Plan Shares can be either issued or transferred 

to the participants of the LSP at market value, 

determined by the Board in its absolute discretion. 

The Company may provide a limited recourse loan to 

senior executives who are invited to participate in the 
LSP to assist them to purchase Plan Shares (Loan).

The terms of the LSP are summarised below:

Eligibility
• 

 A person is eligible to participate in the LSP if he 

or she is a Director, ofﬁ cer or employee of a group 
company (Eligible Person).

*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 Chief Executive Ofﬁ cer in recognition of his 
assistance with the Offer and in recognition of his 
ongoing services to LCM.

 The Board may at any time make invitations 
to Eligible Persons to participate in the LSP 
specifying the total number of Plan Shares 
being offered or the manner for determining 
that number, the closing date for applications, 
the issue price, vesting conditions and any other 
speciﬁ c terms and conditions of issue (Invitation).

   LCM Annual Report 2018      27

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Plan Shares
• 

 Each Plan Share entitles the participation to one 

Compulsory divestment 
• 

 Plan Shares may be compulsorily divested in 

fully paid ordinary Share in the company.

a number of circumstances, including non-

• 

• 

 Unless otherwise speciﬁ ed in an Invitation, Plan 
Shares issued or transferred to a participant will 
rank equally with all existing shares from the 
date of issue or transfer.

 Unless the Board resolves otherwise, the 
Company will apply for ofﬁ cial quotation of Plan 
Shares issued.

Loan 
• 

 The Company may provide a limited recourse 

loan to a participant to allow them to fund the 

full consideration for the Plan Shares (Loan). The 

terms of the Loan will be set out in a separate loan 

agreement.

• 

• 

 A participant’s obligation to repay the Loan will 
be the lesser of the Loan balance or the market 
value of the relevant Plan Shares.

 Any after-tax value of cash distributions (including 
dividends) received in respect of Plan Shares must 
be applied to repayment of the Loan.

Vesting 
The Plan Shares will vest of the satisfaction of 

any application performance condition, service 

requirement or other conditions speciﬁ ed in an 

Invitation.

Change of control
In the event of a change in control of the Company, 
the Board may in its absolute discretion, determine 

the manner in which any or all of the participant’s 

unvested Plan Shares will be dealt with.

Disposal conditions 
• 

 A participant must not dispose of a Plan Share 

until the Plan Share has vested, the loan balance 

relating to that Plan Share has been repaid or 

discharged or any other disposal restrictions set 

out in the Invitation have expired.

• 

 The Company may implement any procedure it 

deems appropriate to ensure the compliance by 

the Participant with the disposal restrictions (i.e. 

may implement a holding lock in respect of the 

Plan Shares).

satisfaction of vesting conditions, fraudulent 

or dishonest actions, insolvency, termination 

of employment, non-repayment of a Loan or 

any other circumstances expressly set out in an 

Invitation.

• 

 Where in the reasonable opinion of the Board, a 

Plan Share has vested in fraudulent or dishonest 

circumstances, the Board may take any action 

to ensure no unfair beneﬁ t is obtained by the 

participant as a result of those circumstances.

Capital events 
• 

 Bonus issues - If the Company undertakes a pro-
rata bonus issue of shares to shareholders and 

shares are issued to a participant in respect of Plan 

Shares, those shares are deemed to be Plan Shares 

for the purposes of the LSP, and will be subject to 

the same vesting conditions as the Plan Shares to 

which they relate.

• 

 Rights issues – Participants may elect to take 
up their rights at their cost. Shares allotted to the 

Participant as a result of exercising such rights are 

not subject to the vesting conditions or the Plan 

• 

Rules.
 Other variations of capital - If there is a variation 
of capital, including a capitalisation, sub-division, 

consolidation or reduction in share capital. 

The Board may, subject to the Corporations 

Act and Listing Rules, make such adjustments 

as it considers appropriate to ensure that the 

consequences of application are fair as between 

the participants and other shareholders.

Administration 
The LSP is administered by the Board. The Board 

may make regulations and determine procedures 

to administer and implement the LSP and may also 

terminate or suspend the operation of the LSP at its 

discretion.

Amendment 
• 

 The Board may at any time amend any rules 
governing the operation of the LSP or waive or 

modify the application of the rules in relation to 

any participant.

28      LCM Annual Report 2018       

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• 

 However, the Board may not amend the rules in a 

Tranche 2: a)   Mr Moloney has been continuously 

way that would decrease a participant’s rights in 

respect of Shares acquired by them, other than 

amendments required to comply or conform to 

legislation or Listing Rules, to correct any manifest 

error or mistake or to take into account any 

possible adverse tax implications.

Termination 
The LSP may be terminated or suspended at any time 

by a resolution of the Board, provided the termination 

or suspension does not materially adversely affect 

employed by the Company from the 
Grant Date to the date that is 36 
months after the Grant Date and has 
been continuously been employed by 
the Group over that period; and

b)   The Target Price Condition has been met.

Patrick Moloney has entered into an interest-free loan 

with Litigation Capital Management Limited to acquire 

a total of 2,000,000 ordinary shares.

the rights of persons holding shares or options issued 

The loan share plan is considered to be a share based 

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under the plan at that time. 

Other terms and conditions 
The LSP contains other customary terms and 

conditions relating to the operation and administration 

of the LSP.

Issue of shares to Patrick Moloney
At the 2017 AGM, the shareholders approved the issue 
of 2,000,000 Plan Shares to Patrick Moloney. 

Details of Plan Shares issued to Patrick Moloney 

following shareholder approval are as follows:

Date of grant 
4 December 2017

Number of shares granted 
The total number of Plan Shares issued was 
2,000,000, issued in 2 tranches as follows:

Tranche 1:

1,000,000 being 50% of the total award

Tranche 2:

1,000,000 being 50% of the total award

Total:

2,000,000

Issue price
$0.5965

Vesting conditions 
Each tranche of Plan Shares will vest if the relevant 
Vesting Conditions set out below are met:

Tranche

Vesting conditions

Tranche 1: a)  Mr Moloney has been continuously 

employed by the Company from the 
Grant Date to the date that is 24 months 
after the Grant Date and has been 
continuously been employed by the 
Group over that period; and

b)  The VWAP of the Company’s shares 

over any 5 trading day period is at least 
$1.00 per share (or such equivalent 
price if a capital reconstruction occurs 
in relation to the Company) (Target 
Price Condition).

payment arrangement. The fair value at grant date, of 

$0.28 per each share issued in December 2017 under the 

Loan Share Plan, was determined by using an American 

single barrier option calculation. The key model inputs 

for the valuation calculation were as follows:

•  grant date: 04/12/2017

• 

share price at grant date: $0.58

•  exercise price: $0.5965

•  option life: 10 years

•  expected volatility: 45%

•  expected dividend yield rate: 0%

• 

risk free rate: 2.5%

The fair value of the share based payment granted 

during the period is $565,380. An amount of $32,981 

has been expensed during the period, with the 

remainder to be expensed over the term of the loan.

Service Agreement

3 
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 Chief Executive Ofﬁ cer are formalised in an 

employment agreement. This agreement speciﬁ es the 

components of remuneration to which he is entitled 

and outlines base salary, eligibility for incentives and 

other beneﬁ ts including superannuation.

   LCM Annual Report 2018      29

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Key terms for the Chief Executive Ofﬁ cer are as follows:

Name

Term of Agreement

Termination arrangements

Patrick Moloney

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 beneﬁ ts 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 2018
The table below provides remuneration for KMPs for the 12 months ended 30 June 2018 and comparatives for the 

year ended 30 June 2017.

Short Term

Post employment

Long 

Term

Share-based Payments 

Total

Salary & 
Fees1

IPO 
Bonus2

Annual 
leave 
accrual for 
12 months STI

Total Short 
Term

Superan-
nuation

Total Post 
employ-
ment

Long 
Service 
Leave

Loan 
Share 

Plan Options

Total 
Share-
based 
Payments 

Total

In AUD

Directors

Non-executive Directors

Dr David 
King

Steven 
McLean

2018

68,493

2017

2018

51,370

45,662

-

-

-

2017

22,831 512,430

Executive Directors

-

-

-

-

Patrick 
Moloney

Total 
Directors' 
remuneration

2018 450,000

2017 450,000

2018

564,155

-

-

-

20,769

29,423

20,769

68,493

6,507

6,507

51,370

4,880

4,880

45,662

4,338

4,338

535,261

2,169

2,169

-

-

-

-

-

-

-

-

37,440

37,440

112,440

28,080

28,080

84,330

-

-

-

-

50,000

537,430

470,769 42,750

42,750

7,496 32,981

56,160

89,141

610,156

479,423 25,000

25,000

7,475

-

42,120

42,120

554,018

584,924 53,595

53,595

7,496 32,981 93,600

126,581

772,596

-

-

-

-

2017

524,201

 512,430

29,423

- 1,066,054 32,049

32,049

7,475

-

70,200

70,200

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 

4.2 

 Relative proportion of Remuneration

2018

Non-executive directors

Dr David King

Steven McLean

Executive directors

Fixed remuneration
2018
%

At Risk – Cash Bonus / Other
2018
%

At Risk - Securities
2018
%

67

100

-

-

33

N/A

Fixed remuneration
2018
%

At Risk – Cash Bonus / Other
2018
%

At Risk - Securities
2018
%

15

Patrick Moloney

85

-

30      LCM Annual Report 2018       

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 Performance holdings of key management personnel

4.3 
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 tables below provide the number of fully paid ordinary shares in the company held by each Non-executive 

Director and Executive KMP during the period and the previous period ended 30 June 2017:

2018

2018

Dr David King

Steven McLean

Patrick Moloney

Loan Share Plan shares

2018

2018

Dr David King

Steven McLean

Patrick Moloney

Balance as at 
1 July 2017
No.

1,601,484

577,499

3,212,557

Shares received during 
the period on exercise of 
Performance Options / Rights
No.

Net other change
No.

-

-

-

-

-

-

Balance as at 
1 July 2017
No.

Loan Share Plan shares 
received during the period
No.

Net other change
No.

-

-

-

-

-

2,000,000

-

-

0

Balance as at 
30 June 2018
No.

1,601,484

577,499

3,212,557

Balance as at 
30 June 2018
No.

-

-

2,000,000

Unlisted Options to acquire Shares (exercisable between 1 November 2018 and 1 November 2021)
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 ended 30 June 2018:

2018

2018

Balance as at 
1 July 2017
No.

Granted as 
compensation
No.

Exercised
No.

Net other 
change
No.

Balance as at 
30 June 2018
No.

Balance 
vested as at 
30 June 2018
No.

Options 
vested during 
the year
No.

Dr David King

600,000

Steven McLean

Patrick Moloney

Patrick Moloney

-

900,000

1,595,058

-

-

-

-

-

-

-

-

-

-

-

-

600,000

-

900,000

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 ended 30 June 2018 (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):

   LCM Annual Report 2018      31

Governance
Directors report

2018

2018

Dr David King

Steven McLean

Patrick Moloney

1,433,022 

5  Other Statutory Disclosures

Balance as at 
1 July 2017
No.

Granted as 
compensation
No.

Exercised
No.

Net other 
change
No.

Balance as at 
30 June 2018
No.

Balance 
vested as at 
30 June 2018
No.

Options 
vested during 
the year
No.

-

-

-

-

-

-

-

-

-

-

-

-

-

1,433,022

-

-

-

-
-

-

Loans to Non-executive Directors and Executive KMPs
No loans were made to Non-executive Directors or Executive KMPs at the end of the ﬁ nancial year.

Other transactions with Non-Executive Directors and Executive KMPs
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
20 August 2018 
Sydney

32      LCM Annual Report 2018       

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Financial Statements

Consolidated Statement of Proﬁ t or Loss and 
Other Comprehensive Income
for the year ended 30 June 2018

Revenue  

Other income  

Total Income  

Expenses

Finance Costs  

Depreciation  

Employment expenses  

Corporate and ofﬁ ce expenses  

Legal fees – Litigation  

Professional fees  

IPO Listing Expense  

Foreign exchange loss  

Proﬁ t/(Loss) Before Income Tax  

Income tax expense/(beneﬁ t)  

Net Proﬁ t/(Loss) For the Year  

NOTE 

5 

6 

7(a) 

7(b) 

7(c) 

7(e) 

CONSOLIDATED

June 
2018 
$ 

 542,682  

 16,453,592  

 16,996,274  

June
2017
$

 13,312

 2,182,426

 2,195,738 

 685,888  

 1,665,149

 21,967  

 2,057,834  

 1,239,002  

 822,943  

 197,107  

 –    

 8,063  

 6,258

 1,402,493

 1,272,033

 143,360

 56,973

 202,229

 310,323 

 5,032,804  

 5,058,818 

 11,963,470  

 (2,863,080)

8 

 3,326,116  

 (522,572)

 8,637,354  

 (2,340,508)

Other comprehensive income  

 – 

–   

Total comprehensive income for the year  

 8,637,354  

 (2,340,508)

Proﬁ t/(loss) for the year and total comprehensive income

attributable to:

Owners of the parent  

Non-controlling interest  

 8,596,163  

 (2,285,183)

18 

 41,191  

 (55,325)

 8,637,354  

 (2,340,508)

Earnings Per Share for proﬁ t attributable to the owners of the parent entity during the year (cents per share): 

Earnings per share: 

Basic  (cents per share)  

Diluted  (cents per share)  

NOTE 

9 

9 

CONSOLIDATED

June 
2018 

June
2017

 15.24  

 (5.01)

 15.06  

 (5.01)

The above Consolidated Statement of Proﬁ t or Loss and Other Comprehensive Income should be read in conjunction with 
accompanying Notes to the Financial Statements. 

   LCM Annual Report 2018      35

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial Statements

Consolidated Statement of Financial Position 
for the year ended 30 June 2018

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 

TOTAL ASSETS 

CURRENT LIABILITIES

Trade and other payables 

Employee Beneﬁ ts 

TOTAL CURRENT LIABILITIES 

NON-CURRENT LIABILITIES

Deferred tax liability 

Employee Beneﬁ ts 

TOTAL NON-CURRENT LIABILITIES 

TOTAL LIABILITIES 

NET ASSETS 

EQUITY

Issued Capital 

Share Based Payments Reserve 

Retained Earnings 

Parent interest 

Non-controlling interest 

TOTAL EQUITY 

NOTE 

10 

11 

12 

12 

13 

14 

15 

13 

15 

16 

17 

CONSOLIDATED

June 
2018 
$ 

June
2017
$

 13,786,949  

 1,862,645 

 638,891  

 43,666 

 11,048,971  

 11,683,991 

 25,474,811  

 13,590,302 

 175,114  

 7,779 

 2,865,675  

 786,558 

 4,837,848  

 7,766,837 

 7,878,637  

 8,561,174 

 33,353,448  

 22,151,476 

 3,816,048  

 1,926,074 

 254,481  

 111,040 

 4,070,529  

 2,037,114 

 3,826,528  

 3,429,401 

 34,358  

 26,862 

 3,860,886  

 3,456,263 

 7,931,415  

 5,493,377 

 25,422,033  

 16,658,099 

 24,865,111  

 24,865,111 

 292,484  

 238,572  

 165,903 

 (8,357,591)

 25,396,167  

 16,673,424 

 25,866  

 (15,325)

 25,422,033  

 16,658,099 

The above Consolidated Statement of Financial Position should be read in conjunction with accompanying Notes to the Financial 
Statements.

36      LCM Annual Report 2018       

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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Consolidated Statement of Changes in Equity
for the year ended 30 June 2018

2017 

Issued 
capital 

Retained 
earnings 

Share based 
payments 
reserve 

Non-
controlling 
interests 

Total 

Total
equity

Balance at 1 July 2016 

 11,546,617  

 (6,072,408) 

 95,703  

 5,569,912  

 40,000  

 5,609,912 

Proﬁ t/(Loss) for the year 

– 

 (2,285,183) 

– 

 (2,285,183) 

 (55,325) 

 (2,340,508)

Other comprehensive 

income 

Total comprehensive  

income for the year 

Equity Transactions:

Contributions of equity 

– 

– 

– 

 (2,285,183) 

– 

– 

– 

– 

–

 (2,285,183) 

 (55,325)   (2,340,508)

(note 16) 

13,318,494  

Share based payments 

reserve 

Distributions 

– 

– 

13,318,494  

– 

– 

– 

– 

– 

 13,318,494  

– 

 13,318,494 

 70,200  

 70,200  

– 

– 

 70,200  

 13,388,694  

– 

– 

– 

 70,200 

–

 13,388,694 

Balance at 30 June 2017 

 24,865,111  

 (8,357,591) 

 165,903  

 16,673,424  

 (15,325)   16,658,099 

2018 

Issued 
capital 

Retained 
earnings 

Share based 
payments 
reserve 

Non-
controlling 
interests 

Total 

Total
equity

Balance at 1 July 2017 

 24,865,111  

 (8,357,591) 

 165,903  

 16,673,424  

 (15,325) 

 16,658,098 

Proﬁ t/(Loss) for the 

year 

Other comprehensive 

income

Total comprehensive  

income for the year 

Equity Transactions:

Share based payments 

expense 

– 

 8,596,163  

– 

 8,596,163  

 41,191  

 8,637,354 

– 

 8,596,163  

– 

 8,596,163  

 41,191  

 8,637,354 

– 

– 

– 

– 

 126,581  

 126,581  

 126,581  

 126,581  

– 

– 

 126,581 

 126,581 

Balance at 30 June 2018 

 24,865,111  

 238,572  

 292,484  

 25,396,167  

 25,866    25,422,033 

The above Consolidated Statement of Changes in Equity should be read in conjunction with accompanying Notes to the Financial 
Statements.

   LCM Annual Report 2018      37

 
  
 
 
 
 
 
 
 
 
 
  
 
 
  
  
 
 
 
 
 
 
 
 
 
 
 
 
Financial Statements

Consolidated Statement of Cash Flows 
for the year ended 30 June 2018

Cash ﬂ ows from operating activities

Payments to suppliers and employees 

Receipts from management and performance fees 

Interest income 

Interest and other ﬁ nance costs paid 

NOTE 

CONSOLIDATED

June 
2018 
$ 

June
2017
$

 (3,065,616) 

 (2,500,437)

– 

 29,544  

–

 13,312 

 (685,888) 

 (1,665,149)

Net cash (used in)/from operating activities 

20(a) 

 (3,721,960) 

 (4,152,274)

Cash ﬂ ows from investing activities

Proceeds from litigation funding – settlements, fees and 

reimbursements 

20(c) 

 27,127,894  

 3,415,084 

Payments for litigation funding and capitalised supplier 

costs 

20(c) 

 (11,292,327) 

 (8,147,057)

Purchase of property, plant and equipment 

Net cash (used in)/from investing activities 

Cash ﬂ ows from ﬁ nancing activities

Proceeds from issue of shares 

Share issue transaction costs 

Proceeds from borrowings 

Repayment of borrowings 

Income and capital distributions paid 
non controlling interests 

Net cash (used in)/from ﬁ nancing activities 

 (189,302) 

 (954)

 15,646,265  

 (4,732,927)

– 

– 

 15,000,000 

 (2,319,321)

7(a) & 20(b) 

7(a) & 20(b) 

 4,250,000  

–

 (4,250,000) 

 (7,851,698)

– 

– 

–

 4,828,981 

Net increase/(decrease) in cash and cash equivalents 

Cash and cash equivalents at beginning of year 

 11,924,304  

 (4,056,216)

 1,862,645  

 5,918,861 

Cash and cash equivalents at end of year 

10 

 13,786,949  

 1,862,645 

The above Consolidated Statement of Cash Flows should be read in conjunction with accompanying Notes to the Financial 
Statements. 

38      LCM Annual Report 2018       

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Notes to the ﬁ nancial statements

1.  Corporate Information
The ﬁ nancial report of Litigation Capital Management Limited (“LCA”, “the Company” or “the Parent”) for the year 
ended 30 June 2018 and its subsidiaries was authorised for issue in accordance with a resolution of the directors 
on 20 August 2018.

Litigation Capital Management Limited (ABN 13 608 667 509) is a for proﬁ t company incorporated and domiciled 
in Australia and limited by shares that are publicly traded on the Australian Securities Exchange (ASX code: LCA).

2.  Accounting policies

a) Basis of preparation

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The consolidated ﬁ nancial report is a general purpose ﬁ nancial report, which has been prepared in accordance 
with the requirements of the Corporations Act 2001 and Australian Accounting Standards and other authoritative 
pronouncements of the Australian Accounting Standards Board. The ﬁ nancial report has also been prepared on a 
historical cost basis.

The consolidated ﬁ nancial 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 ﬁ nancial statements, the Parent is a for proﬁ t entity.

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b) New accounting standards and interpretations

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 ﬁ nancial year ended 30 June 2018. They have not been adopted in preparing the ﬁ nancial statements for the 
year ended 30 June 2018 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.

   LCM Annual Report 2018      39

 
Application date of 
Standard

Application 
date for Group

 1 January 2018

1 July 2018

Financial Statements

Notes to the ﬁ nancial statements continued

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 AASB 139 ‘Financial Instruments: 
Recognition and Measurement’. 

AASB 9 introduces new classiﬁ cation and measurement 
models for ﬁ nancial assets. The main changes are 
described below:

AASB 9 amends the classiﬁ cation and measurement of 
ﬁ nancial assets:
–    Financial assets will either be measured at amortised 
cost, fair value through other comprehensive income 
(FVTOCI) or fair value through proﬁ t or loss (FVTPL).

–    Financial assets are measured at amortised cost or 
FVTOCI if certain restrictive conditions are met. All 
other ﬁ nancial 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 proﬁ t or loss.

The following requirements have generally been 
carried forward unchanged from AASB 139 Financial 
Instruments: Recognition and Measurement into AASB 9:
–   Classiﬁ cation and measurement of ﬁ nancial liabilities, 
and
–    Derecognition requirements for ﬁ nancial assets and 

liabilities. 

However, AASB 9 requires that gains or losses on 
ﬁ nancial liabilities measured at fair value are recognised 
in proﬁ t 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 for the Group until 1 July 2018. The Group is 
in the process of assessing the impact of AASB 9 and 
is not yet able to reasonably estimate the impact on its 
ﬁ nancial statements.

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 for recognising 
impairment losses applies to debt instruments 
at amortised cost or at fair value through other 
comprehensive income. 

A simpliﬁ ed 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 simpliﬁ ed model.

40      LCM Annual Report 2018       

Notes to the ﬁ nancial statements continued

AASB reference

Title

AASB 15
Revenue from 
contracts from 
customers

AASB 16
Leases

The AASB issued AASB 15 in October 2015. The standard 
is not mandatorily effective for the Group until 1 July 
2018. AASB 15 contains new requirements for the 
recognition of revenue and additional disclosures about 
revenue. AASB 138 Intangible Assets has been amended 
to ensure that for reporting periods beginning on or 
after 1 January 2018, the derecognition of intangible 
assets are subject to the principles of AASB 15. 
Consideration for Litigation Contracts is variable with 
the amount and timing based on factors outside of the 
control of the Group. On this basis, the Group recognises 
gains or losses arising from derecognition of Litigation 
Contracts in Progress only when a judgement has been 
awarded or a settlement agreement has been agreed. 
The Group has assessed the impact of the new standard 
and has not identiﬁ ed any potential material ﬁ nancial 
impacts and it is expected that this standard will not 
materially change the revenue recognition criteria of the 
Group. The Group does not intend to early adopt the 
Standard.

AASB 16 eliminates the operating and ﬁ nance lease 
classiﬁ cations for lessees currently accounted for under 
AASB 117 Leases. It instead requires an entity to bring 
most leases into its statement of ﬁ nancial position in a 
similar way to how existing ﬁ nance 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 
ﬁ nancial 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, 
with early adoption permitted. The Group is currently 
assessing the impacts of the new Standard on the 
ﬁ nancial statements however the Group expects that the 
impacts will not be material on the Group’s accounting 
policies or ﬁ nancial statements. The Group does not 
intend to early adopt the Standard.

Application date of 
Standard

Application 
date for Group

1 January 2018

1 July 2018

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1 July 2019

   LCM Annual Report 2018      41

 
Application date of 
Standard

Application 
date for Group

1 January 2018

1 July 2018

Financial Statements

Notes to the ﬁ nancial statements continued

AASB reference

Title

AASB 2016-5
Amendments 
to Australian 
Accounting 
Standards – 
Classiﬁ cation 
and 
Measurement 
of Share-Based 
Payment 
Transactions

This Standard amends AASB 2 Share-based Payment, 
clarifying how to account for certain types of share-based 
payment transactions. It is not mandatorily effective for 
the Group until 1 July 2018. The amendments provide 
requirements on the accounting for:

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 classiﬁ ed as equity-settled in their 
entirety if, without the net settlement clause, it would 
have been classiﬁ ed as equity-settled, and the entity does 
not withhold instruments with a value that exceeds the 
employee’s withholding tax obligation.

Changing classiﬁ cations 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 proﬁ t 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 ﬁ nancial 
statements.

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 signiﬁ cant impact 
on the ﬁ nancial performance or position of the consolidated entity.

c) Principles of consolidation

The consolidated ﬁ nancial statements comprise the ﬁ nancial 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 ﬁ nancial 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 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 ﬁ nancial 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 deﬁ cit balance.

42      LCM Annual Report 2018       

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Notes to the ﬁ nancial statements continued

d) Critical accounting, judgments, estimates and assumptions

The preparation of the Group’s consolidated ﬁ nancial statements requires management to make judgements, 
estimates and assumptions that affect the reported amounts in the ﬁ nancial 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 signiﬁ cant risk of causing a material adjustment to 
the carrying amounts of assets and liabilities (refer to the respective notes) within the ﬁ nancial year ending 
30 June 2018 are included in the following Notes:

–  Note 8 – Recovery of deferred tax asset

–  Note 12 – Impairment testing of intangible assets – litigation contracts

–  Note 12 – Classiﬁ cation of intangible assets – litigation contracts

–  Note 13 – Recovery of deferred tax assets

e) Current and non-current classiﬁ cation

Assets and liabilities are presented in the statement of ﬁ nancial position based on current and non-current 
classiﬁ cation.

An asset is classiﬁ ed 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 classiﬁ ed as non-current.

A liability is classiﬁ ed 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 classiﬁ ed as non-current.

Deferred tax assets and liabilities are always classiﬁ ed 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 fulﬁ lment of the arrangement is dependent on the use of a speciﬁ c 
asset or assets and the arrangement conveys a right to use the asset.

A distinction is made between ﬁ nance leases, which effectively transfer from the lessor to the lessee substantially 
all the risks and beneﬁ ts incidental to the ownership of leased assets, and operating leases, under which the lessor 
effectively retains substantially all such risks and beneﬁ ts.

Operating lease payments, net of any incentives received from the lessor, are charged to proﬁ t or loss on a 
straight-line basis over the term of the lease.

g) Foreign Currency Transactions and Balances

The Group’s consolidated ﬁ nancial 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 
ﬁ nancial statements of each entity are measured using that functional currency.

Transactions and balances

Transactions in foreign currencies are initially recorded by the Group’s entities at their respective functional currency 
spot rates at the date the transaction ﬁ rst qualiﬁ es 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 proﬁ t 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 reclassiﬁ ed to proﬁ t or loss. Tax charges and credits attributable to exchange 
differences on those monetary items are also recorded in other comprehensive income.

   LCM Annual Report 2018      43

 
Financial Statements

Notes to the ﬁ nancial statements continued

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 proﬁ t or loss are also recognised in other comprehensive income or 
proﬁ t or loss, respectively).

3.  Financial risk management objective and policies

a) Financial risk management and policies

The Group’s principal ﬁ nancial instruments comprise cash and short-term deposits, receivables and payables.

The Group actively manages its exposure to key ﬁ nancial risks, including interest rate risk. The objective is to 
support the delivery of the Group’s ﬁ nancial targets whilst protecting its future ﬁ nancial security.

The main risks arising from the Group’s ﬁ nancial 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 speciﬁ c debtors are undertaken to manage credit risk. Liquidity is monitored through the 
development of future rolling cash ﬂ ow 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 
ﬂ oating interest rate, and the Group’s borrowings with a ﬁ xed interest rate. At reporting date, the Group had the 
following ﬁ nancial instruments exposed to interest rate risk.

Financial Instruments

Cash and cash equivalents 

CONSOLIDATED

June 
2018 
$ 

June
2017
$

 13,786,949  

 1,862,645

 13,786,949  

 1,862,645

The following sensitivity analysis is based on the interest rate risk exposures in existence at the reporting date. At 
30 June 2018, if interest rates had moved as illustrated in the following table, with all other variables held constant, 
post tax proﬁ t and equity would have been affected as follows:

Potential reasonably possible movements:

+0.5% (2017: +0.5%) 

-0.5% (2017: -0.5%) 

Credit Risk

 68,935  

 (68,935) 

 9,313

 (9,313)

Credit risk arises from the ﬁ nancial 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 ﬁ nancial 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 2018, no receivables existed in relation to matters funded by the Group. However, the Group’s 
continual monitoring of the defendants’ ﬁ nancial capacity mitigates this risk.

44      LCM Annual Report 2018       

 
 
 
 
 
 
 
 
 
 
 
 
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Notes to the ﬁ nancial statements continued

Liquidity Risk

The liquidity position of the Group is managed to ensure sufﬁ cient liquid funds are available to meet the Group’s 
expected ﬁ nancial commitments in a timely and cost effective manner. Management continually reviews the 
Group’s liquidity position, including the preparation of cash ﬂ ow forecasts, to determine the forecast liquidity 
position and to maintain appropriate liquidity levels. All trade and other payable ﬁ nancial liabilities of the Group are 
current and payable within 30 days.

The maturity proﬁ le of the Group’s ﬁ nancial liabilities based on contractual maturity on an undiscounted basis are:

2018 
Financial Liabilities

Trade and other payables 

2017

Financial Liabilities

Trade and other payables 

Fair Value

< 6 months 

> 6 months 

Total

 3,816,048  

 3,816,048  

 1,926,074  

 1,926,074  

–  

–  

–  

–  

 3,816,048

 3,816,048

 1,926,074

 1,926,074

The methods for estimating fair value are outlined in the relevant notes to the ﬁ nancial statements.

4.  Segment information
Management has determined the operating segments based on internal reports reviewed by chief operating 
decision maker, being the Chief Executive Ofﬁ cer 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 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 speciﬁ c information disclosed within the Operating and Financial Review of the Directors Report.

5.  Revenue

Revenue

Performance Fees 

Interest received 

CONSOLIDATED

June 
2018 
$ 

 513,138  

 29,544  

 542,682  

June
2017
$

–

 13,312

 13,312

Signiﬁ cant Accounting Policies

Revenue is recognised at the fair value of consideration received or receivable to the extent that it is probable that 
the economic beneﬁ ts will ﬂ ow to the Group and the revenue can be reliably measured. The following speciﬁ c 
recognition criteria must also be met before revenue is recognised:

   LCM Annual Report 2018      45

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial Statements

Notes to the ﬁ nancial statements continued

Performance fees

Performance fees are derived from the management of Litigations Projects under externally ﬁ nanced ﬁ nancing 
arrangements and governed by the agreement in place with external investors. Performance fees are recognised 
when a judgement has been awarded or a settlement agreement has been agreed on the Litigation Projects.

Interest

Interest revenue is recognised as interest accrues using the effective interest method. This is a method of 
calculating the amortised cost of a ﬁ nancial 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 ﬁ nancial asset to the net carrying amount of the ﬁ nancial asset.

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 

Recoveries of legal costs other than in relation to Litigation 

Contracts in Progress 

Miscellaneous income 

CONSOLIDATED

June 
2018 
$ 

June
2017
$

29,170,177  

 3,415,086

 (13,135,844) 

 (1,226,016)

 (37,805) 

 (6,644)

 15,996,528  

 2,182,426

 454,064  

 3,000  

 457,064  

– 

– 

– 

 16,453,592  

 2,182,426

Recoveries of legal costs relates to the legal fees incurred and subsequently recovered from Mr Patrick Coope 
under a costs order in favour of the Group which related to proceedings previously brought by the Group against 
Mr Patrick Coope.

Signiﬁ cant 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 
Proﬁ t 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 Proﬁ t or Loss and Other Comprehensive Income.

46      LCM Annual Report 2018       

 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
Notes to the ﬁ nancial statements continued

7.  Expenses

a) Finance costs

Interest expense 

Borrowing expense 

CONSOLIDATED

June 
2018 
$ 

June
2017
$

 515,888  

170,000  

 1,460,091

 205,058

 685,888  

 1,665,149

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The ﬁ nance costs related to a facility provided by Ambro Nominees Pty Ltd on 31 August 2017. The credit facility 
provided the Group with a line of credit of $4.25 million over a term of 18 months. Interest was incurred at a rate 
of 15% and a drawdown fee of 4% was incurred on the funds provided. The Group paid down the facility, including 
interest and borrowing costs, on 22 May 2018. As at 30 June 2018, borrowings is $nil.

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b) Depreciation

Depreciation expense 

c) Employment Expenses

Employee beneﬁ ts expense 

Superannuation 

Provision for employee entitlements 

Payroll tax 

Share based payments expense 

d) Rental expense relating to operating leases

Minimum lease payments 

e) Legal fees - Litigation 

CONSOLIDATED

June 
2018 
$ 

June
2017
$

 21,967  

 6,258

 1,684,747  

 1,165,308

150,533  

45,936  

50,037  

 126,581  

 91,861

 52,714

 22,410

 70,200

 2,057,834  

 1,402,493

 343,153  

 304,003

 822,943  

 143,360

Legal fees relates to the costs of litigation commenced by Australian Insolvency Group Pty Limited against the 
Group and the recovery of the costs of the proceedings brought by the Group against Mr Patrick Coope.

   LCM Annual Report 2018      47

 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
 
  
  
  
 
 
 
 
 
Financial Statements

Notes to the ﬁ nancial statements continued

8.  Income tax

The major components of tax expense comprise:

Movement in deferred tax assets 

Movement in deferred tax liabilities 

Income tax beneﬁ t/(expense) reported in proﬁ t or loss 

The prima facie income tax expense on pre-tax accounting proﬁ t from 

operations reconciles to the income tax beneﬁ t in the ﬁ nancial statements 

as follows:

Proﬁ t/(loss) for the year 

At the Group’s statutory income tax rate of 30% (2017: 27.5%) 

Non-deductible expenses:

–  share based payment expense 

–  ﬁ nes and penalties 

Change in tax rate 

Income tax expense / (beneﬁ t) 

Amounts charged/(credited) directly to equity

Deferred tax assets (note 13) 

Franking credit balance for the Group

CONSOLIDATED

June 
2018 
$ 

June
2017
$

(2,928,989) 

 2,003,701

 (397,127) 

 (1,481,129)

 (3,326,116) 

 522,572

11,963,470  

 (2,863,080)

3,589,041  

 (787,347)

37,974  

 1,474  

 (302,374) 

 3,326,116  

 – 

 20

 264,755

 (522,572)

–  

 637,813

As at 30 June 2018, franking credits available for use in future distribution amounts amount to $nil (2017: $nil).

Changes in applicable tax rates

A reduced tax rate of 27.5% is available to Australian entities with aggregated turnover below $25 million for 
the year ended 30 June 2018. As the gross value of settlements and judgements (included in other income) are 
included in turnover for tax purposes, the group has exceeded this threshold resulting in an increase in tax rate to 
30%. The Group’s turnover is expected to be below the threshold of $50 million for the year ending 30 June 2019, 
and as a result the reduced rate of 27.5% has been applied in determining deferred taxes.

Unrecognised temporary differences and tax losses

At 30 June 2018 the Group had no (2017:nil) unrecognised temporary differences and tax losses.

Signiﬁ cant Accounting Policies

The income tax expense or beneﬁ t 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 proﬁ ts; 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.

48      LCM Annual Report 2018       

 
 
 
 
 
 
 
  
 
 
  
  
  
 
 
 
 
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Notes to the ﬁ nancial statements continued

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 proﬁ ts 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 proﬁ ts 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 beneﬁ t 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.

9.  Earnings per share

Earnings per ordinary share:

Basic (cents per share)  

Diluted (cents per share)  

Reconciliation of earnings used in calculation of earnings per share: 

Net Proﬁ t/(Loss) For the Year  

Less: Non-controlling interests  

CONSOLIDATED

June 
2018 

15.24  

 15.06  

CONSOLIDATED

June 
2018 
$ 

June
2017

 (5.01)

 (5.01)

June
2017
$

 8,637,354  

 (2,340,508)

 (41,191) 

 55,325

Earnings used in calculation of basic / diluted earnings per share  

8,596,163  

 (2,285,183)

Weighted average number of ordinary shares used in the calculation of 

basic earnings per share  

Effect of dilutive securities1 

CONSOLIDATED

June 
2018 

June
2017

56,399,297  

 46,712,408

 665,950  

– 

Weighted average number of ordinary shares used in the calculation of 

diluted earnings per share  

 57,065,247  

46,712,408

1   Securities that could potentially dilute basic earnings per share in the future. 3,190,116 options granted in December 2013 

were included in the calculation of diluted earnings per share. 1,500,000 options held by David King and Patrick Moloney and 
2,000,000 loan share plan shares were not included in the calculation of diluted earnings per share as they are antidilutive for the 
year ended 30 June 2018.

   LCM Annual Report 2018      49

 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
  
 
 
Financial Statements

Notes to the ﬁ nancial statements continued

Signiﬁ cant Accounting Policies

Basic earnings per share

Basic earnings per share is calculated as net proﬁ t 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 ﬁ nancial year, adjusted for any bonus element.

Diluted earnings per share

Diluted earnings per share is calculated as net proﬁ t attributable to members of the Parent, adjusted for:
–  costs of servicing equity (other than dividends);

–    the after tax effect of interest dividends associated with dilutive potential ordinary shares that have been 

recognised;

–   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.

10. Cash and cash equivalents

Cash at Bank  

Signiﬁ cant Accounting Policies

CONSOLIDATED

June 
2018 
$ 

June
2017
$

 13,786,949  

 1,862,645

 13,786,949  

 1,862,645

Cash and cash equivalents includes cash on hand, deposits held at call with ﬁ nancial 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 insigniﬁ cant risk of changes in value.

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 
2018 
$ 

June
2017
$

 13,786,949  

 1,862,645

13,786,949  

 1,862,645

50      LCM Annual Report 2018       

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
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Notes to the ﬁ nancial statements continued

11.  Other receivables

Other receivables 

Security Deposit 

CONSOLIDATED

June 
2018 
$ 

 513,138  

 125,753  

 638,891  

June
2017
$

– 

 43,666

 43,666

The other receivables related to performance fees receivable on a litigation project which was managed by the 
Group and settled during the year. Due to the nature of this receivable, the carrying value of the current receivable 
reﬂ ects its fair value.

12. Intangible assets

(a) Reconciliation of carrying amounts at the beginning and end of the period 

Year ended 30 June 2017

Balance at 1 July 2016 

Additions 

Litigation contracts in progress - expenses 

Litigation contracts in progress - written down 

Balance at 30 June 2017 

Balance at 1 July 2017 

Additions 

Litigation contracts in progress - expenses 

Litigation contracts in progress - written down 

Balance at 30 June 2018 

Current 

Non Current 

CONSOLIDATED
$

 6,494,243

 7,208,966

 (1,226,016)

 (6,644)

 12,470,549

 12,470,549

 14,617,746

 (13,135,844)

 (37,805)

 13,914,646

CONSOLIDATED

June 
2018 
$ 

June
2017
$

 11,048,971  

 11,683,991

 2,865,675  

 786,558

13,914,646  

 12,470,549

(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.

(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 ﬂ ow projections based on ﬁ nancial budgets approved by management.

   LCM Annual Report 2018      51

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
Financial Statements

Notes to the ﬁ nancial statements continued

The following describes each key assumption on which management has based its cash ﬂ ow 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 ﬂ ow 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%.

Signiﬁ cant Accounting Policies

Litigation Contracts in Progress

Litigation Contracts in Progress represent future economic beneﬁ ts 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 beneﬁ ts, hence meeting the deﬁ nition 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:

–    the consolidated entity has the ability and intention to complete the litigation;

–    the asset is expected to generate a future economic beneﬁ t;

–    adequate, technical, ﬁ nancial and other resources are available to complete the litigation; and

–    the expenditure attributable to the litigation during it’s duration can be measured reliably.

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 
Proﬁ t 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 indeﬁ nite 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 indeﬁ nite useful lives are discussed in note 12.

Impairment of non ﬁ nancial 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 ﬂ ows relating to the asset using a pre-tax discount rate speciﬁ c to 
the asset or cash-generating unit to which the asset belongs. Assets that do not have independent cash ﬂ ows are 
grouped together to form a cash-generating unit.

52      LCM Annual Report 2018       

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Notes to the ﬁ nancial statements continued

Classiﬁ cation of Intangible Assets

The classiﬁ cation 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 2019 classiﬁ ed as current 
assets and the balance as non-current assets. Litigation contracts in progress are classiﬁ ed 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 speciﬁ c 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.

13. Deferred tax

Deferred tax asset comprises temporary differences attributable to:

Property, plant and equipment  

Employee beneﬁ ts  

Other Provisions  

Accrued expenses  

Tax losses carried forward  

Transaction costs on share issue  

CONSOLIDATED

June 
2018 
$ 

 523  

 50,556  

–  

 14,591  

June
2017
$

 523

 37,923

– 

 12,561

4,331,692  

 7,100,444

440,486  

 615,386

4,837,848  

 7,766,837

Opening Balance 

(Charged)/ 
credited to 
1 July 2017  proﬁ t or loss 
 $  

 $  

Closing
(Charged)/ 
credited 
Balance
to equity  30 June 2018 
 $

 $  

Movements in deferred tax assets – 2018

Property, plant and equipment  

Employee beneﬁ ts  

Other Provisions  

Accrued expenses  

Tax losses carried forward  

Transaction costs on share issue  

Closing balance  

Movements in deferred tax assets – 2017

Property, plant and equipment  

Employee beneﬁ ts  

Accrued expenses  

Tax losses carried forward  

Transaction costs on share issue  

Closing balance  

 523  

–  

 37,923  

 12,633  

–  

–  

 12,561  

 2,030  

 7,100,444  

 (2,768,752) 

 615,386  

 (174,900) 

 7,766,837  

 (2,928,989) 

–  

–  

–  

–  

–  

–  

–  

 523

 50,556

– 

 14,591

 4,331,692

 440,486

 4,837,848

Opening Balance 

(Charged)/ 
credited to 
1 July 2016  proﬁ t or loss 
 $  

 $  

Closing
(Charged)/ 
credited 
Balance
to equity  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

   LCM Annual Report 2018      53

 
 
 
 
 
 
 
 
 
 
 
 
  
  
 
  
 
 
 
 
  
 
 
 
 
  
Financial Statements

Notes to the ﬁ nancial statements continued

Deferred tax liability comprises temporary differences attributable to

Intangibles 

2018 
$ 

2017
$

 3,826,528  

 3,429,401

3,826,528  

 3,429,401

Opening Balance 

(Charged)/ 
credited to 
1 July 2017  proﬁ t or loss 
 $  

 $  

Closing
(Charged)/ 
credited 
Balance
to equity  30 June 2018 
 $

 $  

Movements in deferred tax liabilities – 2018

Intangibles 

Closing balance  

 3,429,401  

 3,429,401  

 397,127  

 397,127  

–  

–  

 3,826,528

 3,826,528

Opening Balance 

(Charged)/ 
credited to 
1 July 2016  proﬁ t or loss 
 $  

 $  

Closing
(Charged)/ 
credited 
Balance
to equity  30 June 2017 
 $

 $  

Movements in deferred tax liabilities – 2017  

Intangibles 

Closing balance  

Signiﬁ cant Accounting Policies

Recognition of deferred tax assets

 $  

 $  

 1,948,273  

 1,481,128  

 1,948,273  

 1,481,128  

 $  

–  

–  

 $

 3,429,401

 3,429,401

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 sufﬁ cient to enable the beneﬁ ts 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 beneﬁ t.

Critical Accounting Estimates and Judgements

Recovery of deferred tax assets

Deferred tax assets are recognised for tax losses only if the Group considers it is probable that future taxable 
amounts will be available to utilise those tax losses. The Group has deferred tax assets relating to tax losses 
arising from prior years totalling of $15,751,608 (2017: $25,819,796). The potential tax beneﬁ t of $4,331,692 
(2017: $7,100,444) has been determined using the reduced tax rate of 27.5% which is the rate expected to apply 
when the asset is realised.

Management has performed a prima facie analysis of future taxable proﬁ ts 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 ﬂ ow from operations, the Group will generate taxable earnings in the 
short term in order to utilise recognised deferred tax assets.

54      LCM Annual Report 2018       

 
 
 
 
 
 
  
 
 
 
 
  
 
 
 
 
  
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Notes to the ﬁ nancial statements continued

14. Current liabilities – trade and other payables

Trade payables 

Distribution payable  

Other payables 

Signiﬁ cant Accounting Policies

CONSOLIDATED

June 
2018 
$ 

3,696,208 

32,430  

87,410 

June
2017
$

1,911,072

32,430

(17,428)

3,816,048  

1,926,074

These amounts represent liabilities for goods and services provided to the consolidated entity prior to the end of 
the ﬁ nancial 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.

15. Current and non-current liabilities – Employee beneﬁ ts

Current

Employee beneﬁ ts – Annual Leave 

Employee beneﬁ ts – Bonuses payable 

Non-current

Employee beneﬁ ts – Long Service Leave 

Signiﬁ cant Accounting Policies

Short-term employee beneﬁ ts

CONSOLIDATED

June 
2018 
$ 

149,481  

105,000  

 254,481  

June
2017
$

111,040

–

 111,040

34,358  

  34,358  

 26,862

 26,862

Liabilities for wages and salaries, including non-monetary beneﬁ ts, 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 beneﬁ ts

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 outﬂ ows

Amounts not expected to be settled within the next 12 months

The current provision for employee beneﬁ ts 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.

   LCM Annual Report 2018      55

 
 
 
 
 
 
 
 
 
 
 
  
  
 
 
 
 
 
 
 
 
  
 
  
 
 
 
Financial Statements

Notes to the ﬁ nancial statements continued

16. Equity – Issued capital

(a) Ordinary 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 the shares held. The fully paid ordinary shares have no par 
value and the company does not have a limited amount of authorised capital.

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.

(b) Partly paid shares

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 2018, there are currently 2,866,050 partly paid shares issued at an issue 
price of $0.17 and will become fully paid upon payment to LCM of $0.17 per share.

(c) Ordinary shares - Loan Share Plan

On 16 November 2017, Director Patrick Moloney was issued with 2,000,000 ordinary shares under Loan Share Plan. 
For further details of this transaction refer to Note 17.

CONSOLIDATED

June 
2018 
Shares 

June 
2017 
Shares 

June 
2018 
$ 

June
2017
$

 53,533,247  

 53,533,247  

 24,865,111  

 24,865,111

 2,866,050  

 2,866,050  

–  

–

 $

Ordinary shares – fully paid 

Ordinary shares – partly paid 

Movements in fully paid ordinary share capital 

Date 

 No of shares  

 Issue price  

Opening balance at 1 July 2016 

Issue of ordinary shares – fully paid 

Share issue transaction costs, net of tax 

Balance at 30 June 2017 

Opening balance at 1 July 2017 

Balance at 30 June 2018 

32,104,675  

 n/a  

 11,546,617

Dec-16 

 21,428,572  

$0.70 

 15,000,000

53,533,247  

 (1,681,506)

 24,865,111

53,533,247  

n/a 

 24,865,111

53,533,247  

24,865,111

Movements in partly paid ordinary share capital 

Date 

 No of shares  

 Issue price  

Opening balance at 1 July 2016 

Balance at 30 June 2017 

Opening balance at 1 July 2017 

Balance at 30 June 2018 

 2,866,050  

n/a 

2,866,050

 2,866,050  

 n/a  

 2,866,050  

Movements in ordinary share capital in relation to Loan Share Plan

Opening balance at 1 July 2017 

Issue of shares (Refer to Note 17) 

Balance at 30 June 2018 

(d) Capital risk management

Date 

 No of shares  

 Issue price  

–  

Nov-17 

 2,000,000 

n/a  

 2,000,000  

 $

–

–

–

 $

–

–

–

The Group considers its capital to comprise its contributed equity, any accumulated retained earnings as well as its 
credit facility which is classiﬁ ed as a ﬁ nancial 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 sufﬁ cient capital to meet its growth aspirations and to provide optimal returns to shareholders. The 
Company is not subject to any regulatory imposed capital requirements. 

56      LCM Annual Report 2018       

 
 
 
 
  
 
 
 
  
 
  
  
  
 
  
 
 
 
 
 
 
 
 
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Notes to the ﬁ nancial statements continued

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.

Signiﬁ cant Accounting Policies

Ordinary shares are classiﬁ ed 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.

17. Share based payments reserve
The share-based payments reserve is used to recognise the fair value of shares and options issued to employees 
under the Employee Share Option Scheme and Loan Share Plan.

Share based payments reserve 

Movements in share based payments reserve

Opening balance 

Expenses arising from share-based payments transactions during the period:

Employee Share Option Scheme 

Loan Share Plan 

Closing balance 

Loan Share Plan

CONSOLIDATED

June 
2018 
$ 

June
2017
$

 292,484  

 165,903

 165,903  

 95,703

 93,600  

32,981  

 292,484  

 70,200

–

 165,903

On 16 November 2017, the shareholders of Litigation Capital Management Limited resolved to approve the Loan 
Share Plan. Under the plan, Director Patrick Moloney was granted with two tranches of 1,000,000 ordinary shares 
each on 4 December 2017. Each tranche will vest 24 and 36 months after the grant date respectively given 
vesting conditions on each tranche are satisﬁ ed by Mr Moloney which include customary continuous employment 
conditions and a share price hurdle of $1.00. Mr Moloney entered into an interest-free loan with Litigation Capital 
Management Limited to acquire a total of 2,000,000 ordinary shares.

The loan is provided under a limited recourse borrowing arrangement and has a term of 10 years. The loan value 
is $1,193,000 and is calculated at the issue price of the Plan Shares, being $0.5965, on the issue date of the shares. 
The entitlement to the plan is lost once the Director is no longer an eligible participant.

The cost of share based payment transactions in relation to the Loan Share Plan to Patrick Moloney is measured 
at fair value at date of grant. The fair value determined at the grant date of these payments are expensed on a 
straight line basis over the term of the loan, based on the Group’s estimate of shares under Loan Share Plan that 
will vest, with a corresponding increase in equity. At each balance sheet date, the Group revises its estimates of 
the number of options that are expected to vest for service and non-market performance conditions. The expense 
recognised each year takes into account the most recent estimate. Dividends on the shares issued under the Loan 
Share Plan are to be offset against the outstanding loan balance.

   LCM Annual Report 2018      57

 
 
 
 
 
 
 
 
 
 
 
  
 
Financial Statements

Notes to the ﬁ nancial statements continued

The fair value at grant date, of $0.28 per each share issued under the Loan Share Plan, was determined using a 
American single barrier option calculation. Key model inputs include:

Grant date: 4 December 2017
Share price at grant date: $0.58
Exercise price: $0.5965
Option life: 10 years
Expected volatility: 45%
Expected dividend yield: 0%
Risk free interest rate: 2.5%

The fair value of these shares granted during the period is $565,380. An amount of $32,981 has been expensed 
during the period, with the remainder to be expensed over the term of the loan.

Employee Share Option Scheme

The Option Plan gives directors David King and Patrick Moloney the opportunity to participate in the plan. 
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. The options granted on 20 September 2016 can be exercised to 
purchase 1 ordinary share in Litigation Capital Management Limited at an exercise price of $1.00. Details of options 
outstanding as part of the employee option plan during the period are as follows:

30 June 2018 

Grant 
date  

Exercise 
 date 

Expiry 
date 

Balance at 
beginning 
of the year 

Granted  Exercised  Balance 
during 
the year 

during  at the end 
the year  of year 

Exercisable
at the end
of the year

01/12/2013  01/12/2013  01/12/2018 

 3,190,116  

20/09/2016  01/11/2018  01/11/2021   1,500,000  

4,690,116  

–  

–  

–  

Weighted average
exercise price of those
with an exercise price 

0.64  

–  

–  

–  

–  

–  

3,190,116  

 3,190,116

 1,500,000  

– 

 4,690,116  

 3,190,116

 0.64  

 0.47

18. Subsidiaries and Transactions With Non-Controlling Interests

Interests in Subsidiaries

Information relating to the group’s interests in subsidiaries at 30 June 2018 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.

Ownership interest 

Ownership interest held by
non-controlling interests

2018 
%  

100% 

100% 

100% 

100% 

100%1 

60% 

2017 
 %  

100% 

100% 

100% 

100% 

0% 

60% 

2018 
 %  

2017
 %

– 

– 

– 

– 

– 

–

–

–

–

–

40% 

40%

Name of Entity 

LCM Litigation Fund Pty Ltd 

LCM Litigation Management Pty Ltd 

LCM Litigation Investment Fund No 1 Pty Ltd 

LCM Operations Pty Ltd  

LCM Corporate Services Pty Ltd 

LCM Unit Trust 

1 entity was incorporated during the year.

58      LCM Annual Report 2018       

 
 
 
 
 
 
 
  
  
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
 
 
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Notes to the ﬁ nancial statements continued

Non-controlling interests (NCI)

The table below sets out the summarised ﬁ nancial information for each subsidiary that has non-controlling 
interests that are material to the group. Amounts disclosed are before intercompany eliminations. 

Summarised statement of ﬁ nancial position

Current assets  

Non-current assets  

Total assets  

Current liabilities  

Non-current liabilities  

Total liabilities  

Net assets  

Summarised statement of proﬁ t or loss and other comprehensive income

Revenue  

Other income  

Expenses  

Proﬁ t/(loss) before income tax expense  

Income tax expense  

Proﬁ t/(loss) after income tax expense  

Other comprehensive income  

Total comprehensive income  

Statement of cash ﬂ ows

Net cash from operating activities  

Net cash used in investing activities  

Net cash used in ﬁ nancing activities  

LCM Unit Trust

2018 
$ 

2017
$

536,186  

 46,063

–   

 536,186  

471,521  

–   

 471,521  

 64,665  

513,138  

 3,000  

 413,161  

102,977  

–   

– 

 46,063

 84,375

– 

 84,375

 (38,312)

– 

– 

 138,313

 (138,313)

– 

 102,977  

 (138,313)

–   

– 

102,977  

 (138,313)

 (23,015) 

 (202,389)

–   

–   

– 

– 

Net increase/(decrease) in cash and cash equivalents  

 (23,015) 

 (202,389)

Other ﬁ nancial information

Proﬁ t attributable to non-controlling interests  

Accumulated non-controlling interests at year end  

Distributions paid to non-controlling interests  

Transactions with non-controlling interests

 41,191  

 25,866  

–   

 (55,325)

 (15,325)

– 

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 Keli-Saw Holdings Pty Ltd of which Patrick Moloney is a shareholder.

   LCM Annual Report 2018      59

 
 
 
 
 
 
  
 
 
  
 
 
 
  
 
 
  
 
 
 
  
 
 
 
 
 
 
 
Financial Statements

Notes to the ﬁ nancial statements continued

19. Remuneration of auditors
During the ﬁ nancial year the following fees were paid or payable for services provided by BDO Audit (SA) Pty Ltd, 
the auditor of the company, its network ﬁ rms and unrelated ﬁ rms:

CONSOLIDATED

June 
2018 
$ 

June
2017
$

Audit Services

Amounts paid/payable for audit and review of ﬁ nancial statements for 

63,199  

 68,861

the entity or any entity in the Group 

Taxation Services

Amounts paid/payable to a related practice of the auditor for 

–  

 11,235

tax compliance and advisory services

Other Services

Amounts paid/payable to a related practice of the auditor for 

–   

 58,470

corporate ﬁ nance services

20. Reconciliation of cash ﬂ ows 

(a) Reconciliation of proﬁ t after income tax to net cash from operating activities:

CONSOLIDATED

June 
2018 
$ 

June
2017
$

Proﬁ t/(loss) after income tax expense for the year  

8,637,354  

 (2,340,508)

Adjustments for:

Net (gain)/loss on derecognition of intangible assets included 

(15,494,528) 

 (2,182,426)

in 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 beneﬁ ts  

Increase in share based payments  

Net cash from operating activities  

 21,967  

 6,258

 (595,225) 

104,838  

3,326,116  

150,937  

126,581  

 628,979

 135,081

 (522,572)

 52,714

 70,200

 (3,721,960) 

 (4,152,274)

(b) Changes in Liabilities arising from Financing Activities:

Short-term borrowings  

Total liabilities from ﬁ nancing liabilities  

(c) Non-cash Financing and Investing Activities

2017 

Cash inﬂ ows  Cash outﬂ ows 

2018

–   

 4,250,000  

 (4,250,000) 

–     4,250,000    (4,250,000) 

–

–

During the year, proceeds from the settlement of Litigation Projects of $2,042,283 were not received by the 
Group as they were paid directly from the funded party’s solicitors trust account to the Group’s trade creditors to 
extinguish outstanding litigation funding costs payable. As the Group did not receive these proceeds, they have not 
been reﬂ ected in the proceeds or payments of litigation funding within the statement of cash ﬂ ows.

60      LCM Annual Report 2018       

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
  
 
 
 
Notes to the ﬁ nancial statements continued

21. 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 12, The Chiﬂ ey Tower, 2 Chiﬂ ey Square, Sydney, NSW, 2000.

Litigation Capital Management Limited acquired 100% 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.

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(b) Subsidiaries

Interests in subsidiaries are disclosed in note 18.

(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:

S
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Short-term employee beneﬁ ts  

Post-employment beneﬁ ts  

Long term beneﬁ ts  

Share-based payments  

CONSOLIDATED

June 
2018 
$ 

June
2017
$

584,924  

 1,066,054

53,595  

7,496  

126,581  

 32,049

 7,475

 70,200

772,596  

 1,175,778

(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. 

Steven McLean is a shareholder and director of 145 Fleet Pty Ltd, which carries out ﬁ nancial advisory services. 
During the year, 145 Fleet has earned fees of $nil (2017: $512,430). As at 30 June 2018 there were no amounts 
owing to 145 Fleet (2017: $nil).

Transactions with non-controlling interests

Director Patrick Moloney has a non-controlling interest in LCM Unit Trust and Basis Partnership.

(e) Signiﬁ cant transactions with Director’s and their associates

Patrick Moloney was provided with 2,000,000 ordinary shares in Litigation Capital Management Limited under the 
Loan Share Plan. The details of this transaction is included in Note 17.

   LCM Annual Report 2018      61

 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
Financial Statements

Notes to the ﬁ nancial statements continued

22. Parent entity information
Set out below is the supplementary information about the parent entity.

Statement of proﬁ t or loss and other comprehensive income 

Proﬁ t/(loss) after income tax  

Total comprehensive income  

Statement of ﬁ nancial position

Total current assets  

Total assets  

Total current liabilities  

Total liabilities  

Equity

Issued capital  

Share based payments reserve  

Retained proﬁ ts  

Total equity  

June 
2018 
$ 

June
2017
$

 (126,581) 

 (126,581) 

 (272,429)

 (272,429)

–   

– 

 24,662,882  

 24,662,882

–   

–   

– 

– 

24,865,111  

 24,865,111

 196,781  

 70,200

 (399,010) 

 (272,429)

24,662,882  

 24,662,882

The Group has revised this disclosure to reﬂ ect the legal parent entity being, Litigation Capital Management 
Limited, instead of the accounting parent entity being, LCM Litigation Fund Pty Ltd. The disclosure has been 
applied retrospectively.

Signiﬁ cant accounting policies

The accounting policies of the parent entity are consistent with those of the consolidated entity.

23. Events after the reporting period
In the Directors’ opinion, no matter or circumstance has arisen since the end of the ﬁ nancial year, that has 
signiﬁ cantly affected, or may signiﬁ cantly affect, the operations of the Group, the results of those operations, or 
the state of affairs of the Group in future years.

24. Commitments and Contingencies

(a) Operating lease commitments

Leasing Arrangement

Operating lease relate to business premises leased in Melbourne, Adelaide, Brisbane, Sydney and Melbourne. The 
Group has lease terms with between 1 and 6 month cancellation period requirements.

CONSOLIDATED

June 
2018 
$ 

171,529  

 193,879  

–  

June
2017
$

 82,496

–

–

365,408  

 82,496

Non-cancellable leases

–  not later than 12 months  

–  between 12 months and 5 years  

–  greater than 5 years  

62      LCM Annual Report 2018       

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  
 
 
 
 
 
 
 
 
  
 
 
  
  
Notes to the ﬁ nancial statements continued

(b) Contingencies

The majority of the Group’s funding agreements contain a contractual indemnity from the Group to the funded 
party that the Group will pay adverse costs awarded to the successful party in respect of costs incurred during 
the period of funding, should the client’s litigation be unsuccessful. The Group’s position is that for the majority of 
litigation projects which are subject to funding, the Group enters insurance arrangements which lessen or eliminate 
the impact of such awards and therefore any adverse costs order exposure.

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   LCM Annual Report 2018      63

 
Financial Statements

Litigation Capital Management Limited ABN 13 608 667 509
Directors’ Declaration

In the directors’ opinion:

the attached ﬁ nancial statements and notes comply with the Corporations Act 2001, Australian Accounting 
Standards and other mandatory professional reporting requirements;

the attached ﬁ nancial statements and notes comply with International Financial Reporting Standards as issued by 
the International Accounting Standards Board as described in note 1 to the ﬁ nancial statements;

the attached ﬁ nancial statements and notes give a true and fair view of the consolidated entity’s ﬁ nancial position 
as at 30 June 2018 and of its performance for the ﬁ nancial 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

Signed in accordance with a resolution of directors.

On behalf of the directors

Director

Dated this 20 day of August 2018 

64      LCM Annual Report 2018       

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   LCM Annual Report 2018      65

 
66      LCM Annual Report 2018       

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   LCM Annual Report 2018      67

 
68      LCM Annual Report 2018       

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Shareholder information
as at 5 October 2018

Shareholder Information required by the Australian Securities Exchange Limited (ASX) Listing Rules and not 
disclosed elsewhere in the Report is set out below. 

1.  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.lcmﬁ nance.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 2018 
ﬁ nancial year.

2.  Substantial shareholders 
The number of securities held by substantial shareholders and their associates (as notiﬁ ed to the ASX) are set out 
below: 

Fully paid Ordinary Shares 

Name  

Litigation Capital Management Limited 

Kanamex Pty Ltd and Mr Patrick John Moloney 

PFH (NSW) Pty Ltd ATD Paradice Family Trust 

Number 

21,869,407 

2,729,452 

2,400,000 

Collins St Asset Management ATF Collins St Value Fund 

4,119,735 

% 

Date of lodgement

40.85 

5.41 

4.76 

7.36% 

13/12/2016

13/12/2016

14/12/2016

26/09/2018

3.  Number of security holders and securities on issue  
Litigation Capital Management Limited has issued the following securities: 

(a)  55,945,219 fully paid ordinary shares held by 398 shareholders;

(b)  2,866,050 partly paid ordinary shares held by 3 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.

4.  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. 

Partly paid shares

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. 

   LCM Annual Report 2018      69

 
Financial Statements

Shareholder information continued

5.  Distribution of security holders 

(a) Fully Paid ordinary securities

Category 

1 – 1,000 

1,001 – 5,000 

5,001 – 10,000 

10,001 – 100,000 

100,001 and over  

Total  

(b) Unquoted securities – partly paid shares

Category 

1 – 1,000 

1,001 – 5,000 

5,001 – 10,000 

10,001 – 100,000 

100,001 and over  

Total  

(c) Unquoted securities – options exercisable at $1.00

Category 

1 – 1,000 

1,001 – 5,000 

5,001 – 10,000 

10,001 – 100,000 

100,001 and over  

Total  

(d) Unquoted securities – options exercisable at $0.47

Category 

1 – 1,000 

1,001 – 5,000 

5,001 – 10,000 

10,001 – 100,000 

100,001 and over  

Total  

Fully paid Ordinary shares 

Holders 

8 

77 

51 

168 

94 

398 

Shares  

3,332 

220,021 

432,296 

6,049,319 

49,240,251 

55,945,219 

Partly paid shares

Holders 

Shares 

0 

0 

0 

0 

4 

4 

0 

0 

0 

0 

2,866,050 

2,866,050 

Holders 

$1.00 Options

Options 

0 

0 

0 

0 

2 

2 

0 

0 

0 

0 

1,500,000 

1,500,000 

Holders 

$0.47 Options

Options 

0 

0 

0 

0 

2 

2 

0 

0 

0 

0 

3,190,116 

3,190,116 

%

0.01

0.44

0.77

10.81

88.02

100.00

%

0.00

0.00

0.00

0.00

100.00

100.00

%

0.00

0.00

0.00

0.00

100.00

100.00

%

0.00

0.00

0.00

0.00

100.00

100.00

6.  Unmarketable parcel of shares 
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 $1.00, on 5 October 2018.

70      LCM Annual Report 2018       

 
 
 
 
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Shareholder information continued

7.  Twenty largest shareholders of quoted equity securities 

Fully paid ordinary shares 

Details of the 20 largest shareholders by registered shareholding are:

Name 

1  J P MORGAN NOMINEES AUSTRALIA LIMITED 

2  KANAMEX PTY LTD 

3  BERNE NO 132 NOMINEES PTY LTD 

4  PFH (NSW) PTY LTD 

5  MR PATRICK MOLONEY 

6  UBS NOMINEES PTY LTD 

7  MJC PTY LTD 

8  VERUSE PTY LTD 

9  SEISTEND PTY LTD 

10  PJF SUPER PTY LTD 

11 MORGAN STANLEY AUSTRALIA SECURITIES (NOMINEE) PTY LIMITED 

12  RST SUPER PTY LTD 

13  PORTIGON AG 

14  MERRIC INVESTMENTS PTY LTD 

15  NATIONAL NOMINEES LIMITED 

16  F L BRAGG HOLDINGS PTY LTD 

17  AUSTRALIAN INSOLVENCY GROUP PTY LTD 

18  WOLSELEY (AUSTRALIA) PTY LTD 

19  ST JOHN STREET PTY LTD 

20  LEMPIP NOMINEES PTY LTD 

Total for Top 20 

Total on Register 

No. of shares 

4,123,735 

3,212,557 

2,457,143 

2,400,000 

2,000,000 

1,859,698 

1,720,002 

1,601,484 

1,601,484 

1,562,688 

1,549,024 

1,497,523 

1,080,000 

922,087 

920,241 

611,121 

606,824 

557,855 

555,033 

528,700 

%

7.37

5.74

4.39

4.29

3.57

3.32

3.07

2.86

2.86

2.79

2.77

2.68

1.93

1.65

1.64

1.09

1.08

1.00

0.99

0.95

31,852,912 

55,945,219 

56.94

100

8. The name of the entity’s secretary (in the case of a trust, the name of the responsible entity and its secretary). 
Ms Anna Sandham

9. The address and telephone number of the Company’s registered ofﬁ ce in Australia; and of its principal 
administrative ofﬁ ce, if the two are different. 

Suite 12.06 Level 12, The Chiﬂ ey Tower2 Chiﬂ ey Square, Sydney NSW 2000

T: +61 2 8098 1390

10. The address and telephone number of each ofﬁ ce at which a register of securities, register of depositary 
receipts or other facilities for registration of transfers is kept. 

Link Market Services Limited
Level 12, 680 George Street, SYDNEY, NSW, AUSTRALIA 2000

T: +61 1300 554 474

11. A list of other stock exchanges on which any of the Company’s securities are quoted.
Nil.

   LCM Annual Report 2018      71

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Financial Statements

Shareholder information continued

12. 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.

• 

• 

 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.

13. 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:

  o  Australian Insolvency Group Pty Ltd hold 764,778 shares;

  o  Litigation Support Services Pty Ltd hold 668,250 shares; and

  o  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:

  o  Kanamex Pty Ltd hold 900,000 options; and

  o  Seistend Pty Ltd hold 600,000 options.

•  3,190,116 unquoted options exercisable at $0.47 per option held by 2 option holders as follows:

  o  Mr Patrick Moloney holds 1,595,058 options; and

  o  Mr Patrick cope hold 1,595,058 options.

14. On market buy-back 
There is no current on market buy-back. 

15. Statement regarding use of cash and assets
During the period between 1 July 2017 and 30 June 2018, 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.

72      LCM Annual Report 2018       

Perivan Financial Print  252074

THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK

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

BRISBANE
Level 54,  
111 Eagle Street
Brisbane QLD 4000 
T 07 3012 6478

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