Appendix 4E - Final Report
IMF (Australia) Ltd
ABN 45 067 298 088
Financial year ended
30 June 2013
Results for announcement to the market
Current reporting period:
Previous reporting period:
30 June 2013
30 June 2012
Revenue and Net Profit
Revenues from ordinary activities (interest)
Total income
Profit from ordinary activities after tax attributable to members
Net profit for the period attributable to members
Up/Down
Up
Down
Down
Down
Percentage
Change
23%
62%
68%
68%
$'000s
2,972
27,597
13,814
13,814
Dividends
Today the Directors have declared a final fully franked dividend. No interim dividend was declared.
Cents per share
5.0
In the previous reporting period the Directors declared a final fully franked dividend on 29
June 2012. The record date for this dividend is 29 August 2012.
Net Tangible Asset Backing
Net tangible asset per ordinary share
Net asset per ordinary share
10.0
Consolidated
2013
$
$0.32
$1.02
2012
$
$0.37
$0.91
Brief Explanation of Revenue and Net Profit
The principal activities of the Group during the financial year were investigation, management and funding litigation.
The Group generated income from 6 cases in 2013 including the Group's first result from its wholly owned subsidiary in the
United States.
The Group held $68.0m in cash as at 30 June 2013 (2012:$62.4m). During the year, $12.3m was paid in dividends (2012:
$6.1m).
Dividends Paid and Declared
Consolidated
2013
$'000s
2012
$'000s
No interim dividend was declared during the year (2012: nil)
-
-
A final fully franked dividend of 5.0 cents per share was declared today. The record date for
this dividend is 18 October 2013. The shares will trade ex-dividend on 14 October 2013.
(2012: A final fully franked dividend of 10.0 cents per share was declared on 29 June 2012)
6,160
6,160
12,321
12,321
Audit Report
This Appendix 4E (Final Report) is based on the audited financial statements for the year ended 30 June 2013, which are
attached.
Page 1
2013 ANNUAL REPORT
CONTENTS
Highlights
2013 Managing Director’s Report
2013 Directors’ Report
Auditor’s Independence Declaration
Statement of Comprehensive Income
Statement of Financial Position
Statement of Cash Flows
Statement of Changes in Equity
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Corporate Governance Statement
Shareholder Information
Corporate Information
1
3
4
5
22
23
24
25
26
27
63
64
66
73
76
2
IMF (AUSTRALIA) LTD | ANNUAL REPORT HIGHLIGHTS
IMF IS THE LEADING LITIGATION FUNDER IN AUSTRALIA.
WE WERE THE FIRST TO LIST ON THE AUSTRALIAN SECURITIES
EXCHANGE, AND HAVE NOW BEEN LISTED FOR OVER 10 YEARS.
WE HAVE BUILT UP AN EXPERIENCED TEAM TO ENSURE
THE STRONGEST CASES RECEIVE FUNDING AND ARE
MANAGED TO FACILITATE THEIR SUCCESSFUL RESOLUTION.
3
$13.8 MILLION
NET PROFIT
IMF is in a strong financial
position moving forward and
is capable of capitalising on
opportunities to fund cases
with larger potential returns.
$23.8 MILLION
NET INCOME
FROM
LITIGATION
FUNDING
IMF’S
TRACK
RECORD
149 CASES
COMPLETED
W
IT
3
5
H
D
R
A
W
A
L
S
5LOST
1 4 W O N
95
SETTLEMENTS
CASH
($ MILLION)
INVESTMENTS
($ MILLION)
NET ASSETS
($ MILLION)
6
.
9
5
$
0
.
6
6
$
1
.
6
8
$
2
.
7
8
$
7
.
1
1
1
$
.
5
5
2
1
$
.
0
5
5
$
.
4
2
6
$
.
0
8
6
$
.
.
6
9
5
$
6
9
5
$
.
.
0
6
6
$
0
6
6
$
1
.
6
8
$
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.
6
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$
.
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7
8
$
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7
8
$
7
.
1
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7
.
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.
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5
5
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1
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0
0
.
.
5
5
5
5
$
$
4
4
.
.
2
2
6
6
$
$
0
0
.
.
8
8
6
6
$
$
2013
2012
2011
2013
2012
2013
2012
2011
2011
2013
2013
2012
2012
2011
2011
2013
2013
2012
2012
2013
2013
2012
2012
2011
2011
2011
2011
2013 MANAGING DIRECTOR’S REPORT
4
2013 HAS BEEN A VERY EVENTFUL YEAR. NOT QUITE A ROLLER-COASTER AS
DEPICTED ON THE FRONT PAGE OF THIS REPORT, BUT ONE IN WHICH A NUMBER
OF VERY IMPORTANT DECISIONS WERE AWARDED IN FAVOUR OF OUR CLIENTS.
Firstly the case against Local Government Financial
Services, ABN Amro and Standard & Poor’s was
successful. This was the first major decision awarded
against a ratings agency anywhere in the world that
resulted in a rating agency being held accountable.
As a consequence of this decision we have launched
similar actions in Australia and the Netherlands. We
are also investigating launching a further action in the
United Kingdom.
On the regulatory front, changes were made to the
Corporations Act exempting funders from requiring
a financial services licence so long as they have an
acceptable conflicts management policy. IMF has such
a policy and we have therefore given up our licence.
However, we remain of the view that a licensing regime
offers necessary protection to funded clients and will
continue to lobby future governments for regulation of
funders to be placed back on the agenda.
Secondly the case against Lehman Bros Australia was
also found in favour of the three applicants. We still have
some work to do in applying this decision to the rest
of our clients, although we are hopeful that this case
will resolve successfully for the balance of our clients
in FY2014.
Thirdly the High Court overturned those parts we
appealed in the Bank Fees case. It found that certain fees
charged by ANZ could amount to penalties. This decision
was significant as the doctrine of penalties may have
potential application to many other fees and charges
imposed on everyday Australians. The main case against
ANZ will now be heard in December 2013.
In terms of operations, our team has never been busier.
Our thorough, forensic examination in the Wivenhoe
Dam case continues, and a decision on whether or not
to proceed with this case will be made within the next
three months. Our people in the USA have now funded
six cases and have a win under their belt after only 18
months. The increase in the value of the portfolio from
$1.2B to $1.6B, a figure that excludes Wivenhoe Dam and
Brisconnections, indicates that we are on the right path to
achieve our portfolio goal of $2B.
Competition remains fairly benign in Australia. Of perhaps
more import, there appears to be more awareness of
funding as a way of managing litigation in overseas
jurisdictions. We have watched with interest recent
changes in the legal market in the United Kingdom
where contingency fees have been implemented.
This presents an opportunity for IMF to further expand
internationally. Again, a thorough analysis of this
opportunity is presently underway, with a decision
expected by the end of the year.
HUGH MCLERNON
IMF (AUSTRALIA) LTD | ANNUAL REPORT 2013 DIRECTORS’ REPORT
The Directors of IMF (Australia) Ltd (“IMF” or “the Company” or “the Parent”)
submit their report for the year ended 30 June 2013.
5
DIRECTORS
The names and details of the Company’s directors in office during the financial year and until the date of this report are
noted below. Directors were in office for the entire period unless otherwise stated.
NAMES, QUALIFICATIONS, EXPERIENCE AND SPECIAL RESPONSIBILITIES
ROBERT FERGUSON
(NON-EXECUTIVE CHAIRMAN)
Robert Ferguson was appointed Non-Executive Director and Chairman on 1 December 2004
and was Executive Chairman and Chief Executive Officer between 18 June 2007 and
18 March 2009. On 19 March 2009 he resumed his role as Non-Executive Chairman.
Mr Ferguson graduated from Sydney University with a Bachelor of Economics (Honours) degree.
He commenced employment in 1971 with Bankers Trust Australia Ltd and was its CEO between
1985 and 1999 and Chairman from 1999 to 2001. He:
a. was a director of Westfield Holdings Ltd from 1994 to 2004;
b. was chairman and non-executive director of Vodafone Australia until November 2002;
c. was a director of Racing NSW from 2004 to 2009;
d. was chairman of MoneySwitch Limited from 14 November 2005 to 18 February 2010.
He continues as a non-executive director since 18 February 2010;
e. was deputy chair of the Sydney Institute, from April 1998 to February 2013;
f.
is a director of the Lowy Institute, from April 2003;
g. has been chairman of GPT Group since 10 May 2010 and prior to this was a director
and deputy chair from 25 May 2009;
h. has been chairman of Primary Health Care since 1 July 2009; and
i.
is a non-executive director of Watermark Market Neutral Fund Limited from May 2013.
During the past three years he has not served as a director of any listed company other than
those noted above.
Mr Ferguson is a member of the audit committee and remuneration committee.
6
DIRECTORS (CONTINUED)
HUGH MCLERNON
(MANAGING DIRECTOR)
Hugh McLernon is a lawyer by training. He holds a Bachelor of Laws degree from the University
of Western Australia. After graduation he worked as a Crown Prosecutor for eight years and then
as a barrister at the independent bar for a further nine years, before joining Clayton Utz for three
years as the litigation partner.
In 1988, Mr McLernon retired from legal practice and introduced the secondary life insurance
market into Australia. He also pioneered the financing of large-scale litigation through McLernon
Group Limited.
From 1996 to 2001, Mr McLernon was the Managing Director of the Hill Group of companies
which operates in the finance, mining, property, insurance and investment arenas of Australia.
Mr McLernon has been an Executive Director of IMF since December 2001 and became the
Managing Director on 18 March 2009.
During the past three years he has not served as a director of any other listed company.
JOHN WALKER
(EXECUTIVE DIRECTOR – DIRECTOR OF MARKETING)
John Walker obtained a Bachelor of Commerce degree from Melbourne University in 1981,
with qualifications as an accountant and economist.
He then practiced accountancy with Deloitte Haskins and Sells (as it then was) prior to
completing a Bachelor of Laws degree at Sydney University in 1986. Between 1987 and 1998,
Mr Walker practiced as a commercial litigator in Sydney.
In 1998, Mr Walker created Insolvency Litigation Fund Pty Ltd (“ILF”) and was its inaugural
Managing Director until the entity was purchased by IMF in 2001. Since then, Mr Walker has
been an Executive Director of IMF and was its Managing Director between December 2004
and June 2007.
During the past three years he has not served as a director of any other listed company.
CLIVE BOWMAN
(EXECUTIVE DIRECTOR – DIRECTOR OF OPERATIONS)
Clive Bowman has a degree in Economics and an honours degree in Law from the Australian
National University. He also holds a graduate diploma in Applied Finance and Investment from
the Securities Institute of Australia and has completed the Insolvency Practitioners Association
of Australia (“IPAA”) Advanced Insolvency course.
Mr Bowman began his career at law firm Minter Ellison and then moved to Denton Hall
(now SNR Denton) in London, where he continued to practice as a litigation lawyer. In 1997
Mr Bowman became involved in litigation funding and has been with IMF since its listing.
Mr Bowman became an Executive Director of IMF on 23 February 2011 and heads up IMF’s
case selection committee and investment managers committee.
During the past three years he has not served as a director of any other listed company.
IMF (AUSTRALIA) LTD | ANNUAL REPORT2013 DIRECTORS’ REPORT (continued) DIRECTORS (CONTINUED)
ALDEN HALSE
(NON-EXECUTIVE DIRECTOR)
7
Alden Halse is a Chartered Accountant and was a long-term principal of national chartered
accountancy firm, Ferrier Hodgson.
Over the last 30 years he has lectured and written extensively in relation to directors’ duties,
corporate governance issues and corporate and personal insolvency issues. Mr Halse:
a.
b.
is an associate member of the Institute of Chartered Accountants, the IPAA and the
Australian Institute of Company Directors;
is the immediate past president and current councillor and board member of the Royal
Automobile Club of WA (Inc);
c. was a non-executive director of Count Financial Ltd (resigned 29 November 2011); and
d.
is chairman of RAC Insurance Pty Limited, Western Australia’s largest home and
motor insurer.
Mr Halse is the Chairman of the audit committee and a member of the remuneration committee.
During the past three years he has not served as a director of any listed company other than
those noted above.
MICHAEL BOWEN
(NON-EXECUTIVE DIRECTOR)
Michael Bowen graduated from the University of Western Australia with Bachelors of Law,
Jurisprudence and Commerce. He has been admitted as a barrister and solicitor of the Supreme
Court of Western Australia and is a Certified Practicing Accountant of CPA Australia. Mr Bowen:
a.
is a partner of the law firm Hardy Bowen, practising primarily corporate, commercial and
securities law with an emphasis on mergers, acquisitions, capital raisings and resources; and
b. supports the Managing Director on matters concerning the corporations law.
Mr Bowen is Chairman of the remuneration committee and a member of the audit committee.
During the past three years he has also served as a director of the following listed companies:
a. MOD Resources Ltd (formerly Medical Corporation Australasia Limited ) (appointed
18 October 2004, resigned 13 April 2011); and
b. Sherwin Iron Limited (formerly Batavia Mining Limited) (appointed on 28 November 2008,
resigned 20 July 2011).
During the past three years he has not served as a director of any listed company other than those
noted above.
2013 DIRECTORS’ REPORT (continued) 8
SENIOR MANAGEMENT
DIANE JONES
COMPANY SECRETARY, CHIEF OPERATING OFFICER AND CHIEF FINANCIAL OFFICER
Diane Jones has been the Company Secretary since 14 June 2006. She has been a member
of the Institute of Chartered Accountants for over 20 years and holds a Masters of Business
Administration degree and a Bachelor of Economics degree from the University of Sydney.
After graduating Ms Jones spent ten years with a big four accounting firm before moving to
a consulting and private equity firm as a consultant and its Chief Financial Officer. Ms Jones is
IMF’s Chief Operating Officer whilst retaining her previous roles as Chief Financial Officer and
Company Secretary.
INTERESTS IN SHARES AND OPTIONS OF THE COMPANY
As at the date of this report, the interests of the Directors in shares, convertible notes and options of the Company were:
Robert Ferguson
Hugh McLernon
John Walker
Clive Bowman
Alden Halse
Michael Bowen
Total
Number of
convertible
notes
Number of
options over
ordinary shares
Number of
ordinary
shares
1,853,000
7,738,346
4,958,292
1,013,941
876,251
813,751
1,775,776
612,035
637,560
15,496
87,626
121,213
17,253,581
3,249,706
–
–
–
–
–
–
–
Further details of the interests of the Directors in the shares and options of the Company as at the date of this report
are set out in note 25 to the financial statements.
DIVIDENDS
The Directors have today declared a fully franked dividend of 5.0 cents per share for the 2013 financial year totalling
$6,160,470. The record date for this dividend is 18 October 2013 and the payment date will be 31 October 2013. No
interim dividend for 2013 was declared.
For the 2012 financial year the Directors declared a final fully franked dividend of 10.0 cents per share on 29 June 2012,
totalling $12,320,766. The record date for this dividend was 29 August 2012 and the payment date was on
13 September 2012. No interim dividend for 2012 was declared.
The Directors have determined that the Company should distribute any surplus funds in excess of between
$70,000,000 and $75,000,000, depending on the claim value of the portfolio, which has accumulated in the business
and where the Directors do not form the view that there is a better use for IMF’s cash.
IMF (AUSTRALIA) LTD | ANNUAL REPORT2013 DIRECTORS’ REPORT (continued) CORPORATE INFORMATION
Corporate Structure
9
IMF (Australia) Ltd is a company limited by shares which is incorporated and domiciled in Australia. IMF has prepared
a consolidated financial report incorporating the entities that it controlled during the financial year, being Financial
Redress Pty Ltd (formerly Insolvency Litigation Fund Pty Ltd), Bentham Holdings Inc., Bentham Capital LLC and Security
Finance LLC (the Group or consolidated entity).
Nature of Operations and Principal Activities
The principal activities of the Group during the financial year were the investigation, management and funding of
litigation. The operations of the consolidated entity remain in accordance with IMF’s business plan created in 2001.
IMF endeavours to have a mix of cases at any one time. These can broadly be categorised as commercial claims,
insolvency claims and group actions.
Investment portfolio report at 30 June 2013
Claims <$10M
Claims $10M – $50M
Claims >$50M
Total portfolio
Number
of claims
Estimated claim
value
4
14
11
$20,000,000
$300,000,000
$1,315,000,000
Percentage
of total
estimated
claim value
1%
18%
81%
29
$1,635,000,000
100%
The maximum claim value of IMF’s major cases increased in the year to 30 June 2013 from $1,233,000,000 to
$1,635,000,000. IMF commenced nine new cases during the year, which have a maximum claim value at 30 June 2013
of $465,000,000 (2012: four new cases which had a maximum claim value of $58,000,000). It should be noted that
during 2013 a significant amount of due diligence has been undertaken on the Wivenhoe Dam case, and a significant
number of clients have signed funding agreements with IMF. However, this matter has not been included in the portfolio
as at 30 June 2013.
An update on IMF’s principal investments is as follows:
In the Lehman Bros Australia case, judgment was given on 21 September 2012 in favour of the three representatives
and final orders were made on 18 March 2013. The liquidator has filed an appeal. At the same time the liquidator sought
to promote a Scheme of Arrangement that would have seen our clients’ claims subject to a resolution process outside
of the Court process. However, the creditors’ meeting to consider the Scheme has been adjourned. The applicants
continue to seek a resolution to their claims which may include a possible application to the Court for approval of a
settlement of the class action in terms substantially the same as those proposed in the Scheme of Arrangement.
After funding various examinations, IMF has now decided to fund the liquidator of ZYX Learning Centres (formerly
ABC Learning Centres Ltd) in claims that allege that a floating charge granted to a syndicate of banks is void to
the extent of certain monies received under the charge. The banks have now filed their defence and the matter is
progressing through the court system.
The Air Cargo case, which is a price fixing claim against various airlines under section 45 of the Trade Practices
Act, continues through the courts. Substantial progress has been made in relation to discovery. The separate
proceedings in which the Australian Competition and Consumer Commission (“ACCC”) sued several airlines in relation
to similar alleged conduct have been concluded, with the decision reserved (although most cases the ACCC brought
have settled).
2013 DIRECTORS’ REPORT (continued) 10
CORPORATE INFORMATION (CONTINUED)
The actions by Great Southern unitholders, funded by IMF, continue to advance through the courts. During the year
IMF funded a separate action on whether section 6 of the Law Reform (Miscellaneous Provisions) Act (1946) (NSW)
applies to give our clients a charge over insurance proceeds. The judgment is to the effect that our clients do not
have a charge. Special leave to appeal is to be sought from the High Court. There is not yet a hearing date for the
main cases.
In the case of PIF Unitholders v KPMG, IMF is funding unitholders and the new Responsible Entity in their claims for
alleged breaches of the Corporations Act by KPMG and two of the directors. Agreement was reached with some of
the directors to release them from the action with no order as to costs, which will simplify the claim and reduce costs.
Orders were made on 21 June 2013 for the future conduct of the proceedings with a 12-week hearing commencing on
7 October 2014 (for both cases).
In the Bank Fees case (an action by customers to recover unfair exception fees charged to their bank accounts and
credit cards) proceedings have been issued against a number of banks. All have been stayed other than the ANZ case.
The High Court has now clarified that a number of fees charged by the Banks could amount to penalties at law. The
matter has returned to the Federal Court where the case is set down for trial starting on 2 December 2013.
The action to remove the receiver in the Westgem matter was lost. New proceedings for damages against Bankwest
have now been filed. The Bank has applied to the Court to strike out parts of the claim but no date has yet been set for
the hearing. The case is presently at the discovery stage.
The Rivercity claim against Aecom and two Rivercity companies, alleging misleading and deceptive conduct
and omissions in relation to the traffic forecast included in the product disclosure statement (“PDS”), is in the
discovery phase.
The case IMF is funding against the Bank of Queensland (“BOQ”) by BOQ franchisees in New South Wales for alleged
misleading and deceptive conduct, primarily concerning business that could or would be generated by the franchisees,
is substantially complete. Final written and oral submissions are expected to be made in September 2013.
The class action IMF is funding by persons who bought shares in Gunns, alleging misleading and deceptive conduct
and non disclosure of material information, continues to be assessed by the lawyers to determine whether the claim
should proceed against others given that Gunns is now in Administration.
A Foundation has been incorporated in the Netherlands called “Stitching Ratings Redress” to pursue claims in the
Netherlands in respect of losses suffered by investors in CPDOs, arranged by ABN Amro and rated by Standard &
Poor’s. Stitching Ratings Redress has entered into a funding agreement with IMF pursuant to which IMF will fund claims
assigned to it by CPDO purchasers. A claim has been drafted and proceedings are expected to commence in the
near future.
Bentham Capital LLC (IMF’s wholly owned United States subsidiary) has now funded six cases since being established
in August 2011 with one being completed in the current financial year. IMF has taken the policy position not to disclose
specific details about Bentham’s investments until after the resolution of the cases and all appeal avenues have
been finalised.
IMF has conditionally funded persons who suffered loss due to the Brisbane floods in 2011 (the Wivenhoe Dam case)
and IMF expects that a decision whether or not to proceed with this claim will be made within the next six months.
IMF withdrew from two investments during 2013 (2012: two cases). IMF continues to provide the ASX with a summary
of the cases funded by IMF in which IMF’s potential fee is greater than $500,000 per case (IMF’s Investment Portfolio
Report). This Schedule is updated every three months. IMF also provides case updates on its website: www.imf.com.au.
Employees
At 30 June 2013, IMF employed 28 permanent staff, including the three Executive Directors, providing investigative,
computer, accounting and management expertise (2012: 26 permanent staff).
IMF (AUSTRALIA) LTD | ANNUAL REPORT2013 DIRECTORS’ REPORT (continued) OPERATING AND FINANCIAL REVIEW
Operating Results for the Financial Year
The following summary of operating results reflects the Group’s performance for the year ended 30 June 2013:
Shareholder Returns
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Return on assets % (NPAT/Total Assets)
Return on equity % (NPAT/Total Equity)
Net debt/equity ratio % *
2013
11.21
9.78
7.12%
11.01%
nil
11
2012
34.87
29.84
20.11%
38.46%
nil
* Net debt (cash and short term deposits less total debt) is positive as cash and short term deposits are greater than total debt.
Six matters generated income greater than $500,000 during 2013, including four cases which were finalised,
underpinning the Group’s profitability and shareholder returns.
The following summarises the major cases finalised during 2013:
Date
commenced
Litigation contract’s
matter name
Claim value
included in
investment
portfolio report
at 30 June
2012
Total litigation
contract’s
income
Total litigation
contract’s
expenses
(including
capitalised
overheads)
Net gain/(loss)
on disposal
of intangible
asset
$
$
$
$
Jun-10
Apr-09
May-12
Sep-10
Jun-10
Mar-10
Local Government
Financial Services,
ABN Amro and Standard
& Poor’s (“LGFS”)*
20,000,000
17,447,346
(8,629,942)
Lehman Bros Australia**
70,000,000
10,960,217
(3,236,224)
Confidential USA Matter*
28,000,000
5,111,891
(2,871,783)
Confidential
Collyer Bristow
Uniloc***
Other matters
10,000,000
2,782,500
–
1,802,749
(891,237)
(169,685)
75,000,000
4,004,546
(2,521,619)
40,000,000
1,797,151
(1,822,202)
(25,051)
243,000,000
43,906,400
(20,142,692)
23,763,708
8,817,404
7,723,993
2,240,108
1,891,263
1,633,064
1,482,927
* The LGFS case and the confidential USA matter are being appealed by the defendants.
** The Lehman Bros Australia income relates to IMF’s share of income generated by the three applicants during the period. The
corresponding costs relating to the three applicants have been derecognised. This matter is not finalised as IMF expects to receive
additional income from this matter in future years.
*** The Uniloc income relates to IMF’s share of income generated by Uniloc during the period. Total gross revenue generated from
this matter to IMF was $12,582,150, whilst the total gain on disposal was $5,771,741.
The Group has finalised 149 investments since listing, with an average investment period of 2.3 years (2012: 2.3 years).
The Group has generated a gross return on every dollar invested of 2.90 times (excluding overheads) (2012: 3.10 times).
IMF has a target to complete cases within 2.5 years and to generate a gross return on every dollar invested of 3 times
(excluding overheads).
The investment portfolio as at 30 June 2013 has a mixture of both mature and new investments, with 45% of the
investment portfolio expected to finalise over the next 12 months (2012: 48%). IMF is focused on replacing and growing
the investment portfolio within its conservative investment protocols. During the course of the year IMF again received
numerous requests for litigation funding from outside Australia.
2013 DIRECTORS’ REPORT (continued) 12
OPERATING AND FINANCIAL REVIEW (CONTINUED)
IMF’s share price closed at $1.76 per share on 30 June 2013 (2012: $1.40), a 26% increase over the 12 month period.
IMF entered the ASX top 300 companies on 20 March 2009, when its share price was $1.15. Since entering this index
and up to 30 June 2013, IMF’s share price has increased 53%, which exceeds the index movement of 38%. IMF’s share
price has outperformed the major indices as detailed below:
Change in 12 months to 30 June 2013
Change since 20 March 2009
IMF
Share
Price
26%
53%
S&P200
AXJO
17%
37%
S&P300
AXKO
15%
38%
Small
Ords
AXSO
–9%
25%
All Ords
AORD
15%
39%
The share price increase over the last 12 months is shown graphically below:
Relative change in Small Ordinaries Index, S&P/ASX and IMF during 2013 Financial Year
3
1
0
2
e
n
u
J
8
2
o
t
l
2
1
0
2
y
u
J
2
m
o
r
f
e
g
n
a
h
c
e
v
i
t
a
e
R
l
Small Ordinaries Index
IMF
S&P/ASX 300
1.4
1.3
1.2
1.1
1.0
0.9
0.8
2
1
0
2
/
7
0
/
2
0
2
1
0
2
/
8
0
/
2
0
2
1
0
2
/
9
0
/
2
0
2
1
0
2
/
0
1
/
2
0
2
1
0
2
/
1
1
/
2
0
2
1
0
2
/
2
1
/
2
0
3
1
0
2
/
1
0
/
2
0
3
1
0
2
/
2
0
/
2
0
3
1
0
2
/
3
0
/
2
0
3
1
0
2
/
4
0
/
2
0
3
1
0
2
/
5
0
/
2
0
3
1
0
2
/
6
0
/
2
0
3
1
0
2
/
6
0
/
8
2
Liquidity and Capital Resources
The consolidated Statement of Cash Flows illustrates that there was an increase in cash and cash equivalents for the
year ended 30 June 2013 of $5,559,717 (2012: increase of $7,412,574). Operating activities used $26,805,154 of net
cash outflows (2012: net cash outflow of $10,379,993), whilst investing cashflows generated $43,794,777 of net cash
inflows (2012: net cash inflow of $23,984,792), and financing cashflows used $12,320,766 of net cash outflows
(2012: net cash outflow of $6,160,085) principally as a result of the payment of the final dividend for 2012
of $12,320,766.
IMF (AUSTRALIA) LTD | ANNUAL REPORT2013 DIRECTORS’ REPORT (continued)
OPERATING AND FINANCIAL REVIEW (CONTINUED)
13
Asset and Capital Structure
Cash and short term deposits
Total debt
Net debt
Total equity
Gearing *
2013
$
67,984,284
(36,324,499)
31,659,785
125,504,384
nil
2012
$
62,424,566
(34,945,316)
27,479,250
111,717,938
nil
Change
%
9%
4%
15%
12%
n/a
* Net debt is positive as cash and short term deposits are greater than debt.
On 13 December 2010 the Board of Directors took the decision to issue 23,702,415 convertible notes raising
total capital of $39,108,985 (excluding costs). Each convertible note has a face value of $1.65 and the right to
convert into one ordinary share. The convertible notes are convertible at the option of the Noteholder on or before
31 December 2014. The Company has the ability to request the Noteholder to elect to either convert or be repaid
after 31 December 2012.
The Company is required to pay the Noteholder interest of 10.25% per annum, payable quarterly in arrears. As at
30 June 2013 there were 23,223,385 convertible notes outstanding (2012: 23,225,095), with a redemption value of
$38,318,585 (2012: $38,321,407). The Group has no other debts.
Profile of Debts
The profile of the Group’s debt finance is as follows:
Current
Interest bearing loans and borrowings
Non current
Convertible notes
Total debt
Shares Issued During the Year
2013
$
–
2012
$
–
(36,324,499)
(36,324,499)
(34,945,316)
(34,945,316)
Change
%
-
4%
4%
During the year 1,710 convertible notes were converted at $2,712 (after apportioned costs) (2012: 5,946 convertible
notes were converted at $9,161 (after apportioned costs)).
Capital Expenditure
There has been a decrease in capital expenditure during the year ended 30 June 2013 to $70,120 from $652,262
in the year ended 30 June 2012. The capital expenditure in 2013 mainly related to the purchase of new computer
equipment, whilst in 2012 it mainly related to the fitout of the new Sydney office.
Risk Management
The major risk for the Company continues to be the choice of cases to be funded. The extent of the mitigation of that
risk can best be identified, from time to time, by reference to the fact that in the first 10 years of operation IMF has lost
only four cases out of 149 matters funded and completed. The Company has an Investment Protocol in relation to case
selection and a rigorous due diligence process which ensures that only cases with very good chances of success are
accepted for funding.
Another risk which needs constant management is liquidity. This principally involves holding a cash balance buffer and
taking on new investments only in accordance with IMF’s Investment Protocol. The Board of Directors has authorised
management to identify options for raising capital to fund further expansion of IMF’s business, if required.
2013 DIRECTORS’ REPORT (continued) 14
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Total equity increased 12% to $125,504,384 from $111,717,937. This was mainly as a result of the Group’s net profit for the
period. There have been no significant changes in the state of affairs during this reporting period other than disclosed
in this report.
SIGNIFICANT EVENTS AFTER REPORTING DATE
Intangible Assets
On 20 August 2013 a piece of litigation funded by the Group was settled.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
As stated earlier, approximately 45% of the investment portfolio as at 30 June 2013 is expected to mature over the
next 12 months. Accordingly, the Directors consider that the Company is likely to generate a strong level of profit in
this period.
In addition, IMF expects there to be an increasing demand for its funding arising from the fallout from the recent
tightening in credit and depressed worldwide economic cycle. The establishment of our first wholly owned subsidiary
in the United States of America should also result in increased funding opportunities in that jurisdiction.
Competition, however, is expected to increase in the coming years as new entrants coming into the market, particularly
from overseas, see litigation funding as an attractive counter-cyclical investment.
ENVIRONMENTAL REGULATION AND PERFORMANCE
The consolidated entity’s operations are not presently subject to significant environmental regulation under the laws
of the Commonwealth and the States.
SHARE OPTIONS
Unissued Shares
As at the date of this report there were no options on issue, other than the conversion rights attaching to the
convertible notes.
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
During the financial year the Company has paid premiums in respect of an insurance contract insuring all the Directors
and Officers of the Group against any legal costs incurred in defending proceedings for conduct other than:
a. a wilful breach of duty; or
b. a contravention of sections 182 or 183 of the Corporations Act 2001, as may be permitted by section 199B of the
Corporations Act (2001).
The total amount of premiums paid under the insurance contract referred to above and for professional indemnity
cover was nil during the year ending 30 June 2013 as the previous payments were for an 18 month period.
(2012: $440,114).
IMF (AUSTRALIA) LTD | ANNUAL REPORT2013 DIRECTORS’ REPORT (continued) REMUNERATION REPORT (AUDITED)
15
This Remuneration Report outlines the director and executive remuneration arrangements of the Group in accordance
with the requirements of the Corporations Act 2001 and its Regulations. For the purposes of this report Key
Management Personnel of the Group are defined as those persons having authority and responsibility for planning,
directing and controlling the major activities of the Group, directly or indirectly, including any Director (whether
executive or otherwise) of the Company.
KEY MANAGEMENT PERSONNEL
Details of IMF’s key management personnel are:
(i) Directors
Robert Ferguson
Non-Executive Chairman
Hugh McLernon
Managing Director
John Walker
Executive Director – Director of Marketing
Clive Bowman
Executive Director – Director of Operations
Alden Halse
Non-Executive Director
Michael Bowen
Non-Executive Director
(ii) Executives
Diane Jones
Chief Operating Officer, Chief Financial Officer and Company Secretary
Charlie Gollow
Managing Director, Bentham Capital LLC
There were no changes to IMF’s key management personnel after the reporting date and before the financial report
was authorised for issue.
Remuneration Committee
The Remuneration Committee of the Board of Directors of the Company is responsible for determining and reviewing
remuneration arrangements for the Board and executives.
The Remuneration Committee assesses the appropriateness of the nature and amount of the emoluments of the
directors and executive team on a periodic basis by reference to relevant employment market conditions, with the
overall objective of ensuring the best stakeholder benefit from the Board and executive team.
Remuneration Philosophy
The performance of the Company depends upon the quality of its directors and executives. Accordingly, the Company
must attract, motivate and retain highly skilled directors and executives.
The Company embodies the following principles in its remuneration framework:
• determination of appropriate market rates for the fixed remuneration component; and
• establishment of appropriate performance hurdles for the variable remuneration component.
Remuneration Structure
In accordance with best practice corporate governance, the structure of non-executive director and executive
remuneration is separate and distinct. Historically, the Company obtained assistance from remuneration experts
in relation to setting its remuneration structure. There were no consultations in relation to remuneration during the
current year.
2013 DIRECTORS’ REPORT (continued) 16
REMUNERATION REPORT (AUDITED) (CONTINUED)
Details of the nature and amount of each element of the emoluments of each director and executive of the Company
for the financial year are set out below.
Non-Executive Director Remuneration
Fees and payments to non-executive directors reflect the demands which are made on, and the responsibilities of,
the non-executive directors. Non-executive directors’ fees and payments totalled $260,000 (including superannuation),
as disclosed in the following tables. At the 2009 Annual General Meeting shareholders approved payments up to
$300,000 to non-executive directors.
There are no retirement allowances for non-executive directors, nor do they participate in any incentive programs.
Non-executive directors may, however, elect to have a portion of their remuneration paid into their personal
superannuation plans.
Executive Remuneration
Objective
The Company aims to reward executives with a level and mix of compensation elements commensurate with their
position and responsibilities, within the following framework:
reward executives for company and individual performance against targets set to appropriate benchmarks;
•
• align the interests of executives with those of shareholders;
•
• ensure total compensation is competitive by market standards.
link rewards with the internal strategic goals of the Company; and
Structure
It is the Remuneration Committee’s policy that employment contracts are entered into with all Key Management
Personnel. Details of these contracts are provided below.
Compensation consists of the following key elements:
• fixed remuneration; and
• variable remuneration.
Fixed Remuneration
Objective
Fixed compensation is reviewed annually by the Remuneration Committee. The process consists of a review of
Company wide and individual performance, relevant comparative compensation in the market and internally and,
where appropriate, external advice on policies and practices.
Structure
Executives are given the opportunity to receive their fixed remuneration in a variety of forms including cash and fringe
benefits such as motor vehicles and expense payment plans. It is intended that the manner of payment chosen will be
optimal for the recipient without creating undue cost to the Group.
Variable Remuneration
Objective
The objective of the variable compensation incentive is to reward executives in a manner that aligns this element of
their compensation with the objectives and internal key performance indicators of the Company. The total potential
incentive available is set at a level so as to provide sufficient incentive to the executive to achieve the operational
targets and such that the cost to the Group is reasonable in the circumstances.
IMF (AUSTRALIA) LTD | ANNUAL REPORT2013 DIRECTORS’ REPORT (continued) REMUNERATION REPORT (AUDITED) (CONTINUED)
17
Structure
The short term executive incentive plan (“STI”) was designed and implemented with the assistance of external
remuneration consultants, Mastertek Pty Limited, in 2007. This STI replaced the Employee Share Option Plan.
All executives have the opportunity to qualify for participation in the STI when specified criteria are met. The Group
has not implemented any long term incentive plans, although the Remuneration Committee may elect to make
payments under the STI in the form of cash, options or shares.
From time to time remuneration consultants are engaged by, and report directly to, the Remuneration Committee.
In selecting remuneration consultants, the Committee considers potential conflicts of interest and requires
independence from the Group’s key management personnel and other executives as part of their terms of
engagement. No remuneration consultants were engaged in the current or prior periods.
The Group has pre-determined benchmarks that must be met in order to trigger payments under the STI. In summary,
the benchmarks set by the Remuneration Committee for 2013 and 2012 were as follows:
• A minimum “hurdle” of net profit before tax (“NPBT”) must be achieved prior to any incentive being paid. From 2008
this hurdle was set at 20% of weighted net assets of the prior year. From 2011 this hurdle was increased to 25% of
weighted net assets of the prior year. This hurdle was not met in the current financial year and therefore there was
no bonus pool generated in the year ended 30 June 2013.
• A fixed percentage of NPBT above this hurdle may be allocated to the incentive pool. From 2008 this was set at
35% (i.e. 35% of any NPBT over the hurdle may be allocated to the incentive pool).
• The incentive pool is capped at the total salaries paid to those employees eligible to participate (there is no
individual cap within the pool).
• Once the pool size is quantified, the Remuneration Committee determines the amount, if any, of the STI to be
allocated to each executive following consideration of the individual employee’s contribution. Since 2008 the
Remuneration Committee has not distributed the full amount of the total incentive pool available. In 2012 the
Remuneration Committee allocated 98% of the available incentive pool to be distributed under the STI in 2012.
The unallocated portion of prior years’ incentive pools may be used in calculating future incentive pools at the
discretion of the Remuneration Committee. The unallocated portion carried forward into 2013 was not distributed
by the Remuneration Committee.
• Payments of amounts awarded to employees under the STI will be paid in the following reporting period, if the
employee remains employed by the Group during the loyalty service period under the STI, where 50% of each
employee’s bonus will be paid on 15 September and on 15 March in the following financial year.
The total allocation under the 2013 STI was nil. In 2012 the total amount allocated under the STI was $6,877,300,
which was accrued in the prior financial year and paid during the current financial year. Details of allocations made
under the STI to Key Management Personnel are set out in Table 1 on page 19.
Group Performance
The objectives and philosophy of the Remuneration Committee are based upon aligning the performance of the
Group’s executives with increasing shareholders’ wealth. The graph on page 12 shows the performance of the Group
as measured by its share price and compared to other shares listed on the ASX.
2013 DIRECTORS’ REPORT (continued) 18
REMUNERATION REPORT (AUDITED) (CONTINUED)
The following is a summary of the Group’s earnings per share (shown as cents per share) over the last five years.
Earnings per share (cents per share)
Diluted earnings per share (cents per share)
Employment Contracts
a. Hugh McLernon, Managing Director:
2009
17.35
16.93
2010
9.77
9.70
2011
18.56
17.32
2012
34.87
29.84
2013
11.21
9.78
• new rolling 12 month contract commenced 1 July 2007;
• gross salary package of $1,040,000 pa including super;
•
salary to be reviewed annually, with the 2013 review determining there should be a 4% increase in salary
(2012: no increase); and
• notice period is 12 months.
b. John Walker, Executive Director – Director of Marketing:
• new rolling 12 month contract commenced 1 July 2007;
• gross salary package of $832,000 pa including super;
•
salary to be reviewed annually, with the 2013 review determining there should be a 4% increase in salary
(2012: no increase); and
• notice period is 12 months.
c. Clive Bowman, Executive Director – Director of Operations:
• new rolling 12 month contract commenced 1 July 2012;
• gross salary package of $832,000 pa including super;
• contract to be reviewed annually with the 2013 review determining there should be a 4% increase in salary
(2012: a 23% increase); and
• notice period is 12 months.
d. Diane Jones, Chief Operating Officer, Chief Financial Officer & Company Secretary:
• contract commenced 5 June 2006;
• gross salary package of $426,400 pa including super;
• contract to be reviewed annually with minimum CPI increases, with the 2013 review determining an increase in
salary of 4% (2012: a 2.5% increase); and
• notice period is 3 months.
e. Charlie Gollow, Managing Director of Bentham Capital LLC:
• contract commenced 22 April 2003;
• gross salary package of $478,400 pa including super;
• contract to be reviewed annually with minimum CPI increases, with the 2013 review determining an increase in
salary of 4% (2012: a 2.2% increase); and
• notice period by the employee is 3 months and 6 months’ notice by the Company.
IMF (AUSTRALIA) LTD | ANNUAL REPORT2013 DIRECTORS’ REPORT (continued) REMUNERATION REPORT (AUDITED) (CONTINUED)
19
Remuneration of Key Management Personnel
Table 1: Remuneration for the year ended 30 June 2013
2013
Directors
Robert Ferguson
Hugh McLernon
John Walker
Alden Halse
Michael Bowen
Clive Bowman
Salary &
Fees
110,092
983,530
783,530
64,220
70,000
783,530
Executives
Charlie Gollow
Diane Jones
Total
443,530
393,530
3,631,962
Short-term
2013
Bonus
Accrued 1
Post
Employment
Super
Perform-
ance
Related
2012
Bonus
Paid 2
2013
Unpaid
Bonus 1
Total ³
–
–
–
–
–
–
–
–
–
9,908
16,470
16,470
5,780
–
16,470
120,000
1,000,000
800,000
70,000
70,000
800,000
–
0%
0%
1,200,000
0% 1,000,000
0%
–
–
0%
0% 1,000,000
16,470
16,470
98,038
460,000
410,000
3,730,000
375,000
0%
0%
350,000
0% 3,925,000
–
–
–
–
–
–
–
–
–
Table 2: Remuneration for the year ended 30 June 2012
Short-term
2012
Bonus
Accrued 2
Post
Employment
Super
Salary &
Fees
Perform-
ance
Related
2011
Bonus
Paid 4
2012
Unpaid
Bonus 1
Total ³
110,092
984,225
784,225
64,220
70,000
634,225
–
1,200,000
1,000,000
–
–
1,000,000
9,908
15,775
15,775
5,780
–
15,775
120,000
2,200,000
1,800,000
70,000
70,000
1,650,000
0%
–
55% 1,000,000
750,000
56%
–
0%
–
0%
750,000
61%
–
1,200,000
1,000,000
–
–
1,000,000
434,225
384,225
375,000
350,000
3,465,437 3,925,000
15,775
15,775
94,563
825,000
750,000
7,485,000
45%
300,000
275,000
47%
52% 3,075,000
375,000
350,000
3,925,000
2012
Directors
Robert Ferguson
Hugh McLernon
John Walker
Alden Halse
Michael Bowen
Clive Bowman
Executives
Charlie Gollow
Diane Jones
Total
1. There was no bonus awarded by the Remuneration Committee under the STI in the current financial year.
2. This Bonus was awarded by the Remuneration Committee under the STI on 29 June 2012 and was paid in the 2013 financial year.
This bonus was accrued in the 2012 financial year as the Group believed that a constructive obligation to pay the 2012 bonus
under the STI arose during that year.
3. Total Key Management Personnel remuneration recognised in the Statement of Comprehensive Income. The professional indemnity
insurance and insurance premiums for directors and officers was $nil in the current period as the previous period included
insurance for an 18 month period (2012: $440,114). These insurances have not been allocated to specific individuals as the Directors
do not believe there is a reasonable basis for allocation.
4. The bonus awarded by the Remuneration Committee on 30 June 2011 was paid during the 2012 financial year. This bonus was
accrued in the 2011 financial year as the Group believed that a constructive obligation to pay the 2011 bonus under the STI arose
during that year.
2013 DIRECTORS’ REPORT (continued)
20
REMUNERATION REPORT (AUDITED) (CONTINUED)
Compensation and Remuneration Options
No options were granted to Key Management Personnel in 2013 or 2012. No options expired in 2013 or 2012.
END OF REMUNERATION REPORT
DIRECTORS’ MEETINGS
The number of meetings of Directors held during the period under review and the number of meetings attended
by each Director were as follows:
Total number of meetings held:
Board
Meetings
4
Audit
Committee
3
Remuneration
Committee
1
Meetings Attended:
R Ferguson
M Bowen
A J Halse
H McLernon
J F Walker
C Bowman
Committee Membership
4
4
4
4
4
4
3
3
3
–
–
–
1
1
1
–
–
–
As at the date of this report, the Company had an Audit Committee, a Remuneration Committee and a Nomination
Committee. Directors acting on committees of the Board during the year were as follows:
Audit Committee
A J Halse (Chairman)
M Bowen
R Ferguson
Rounding
Remuneration Committee
M Bowen (Chairman)
A J Halse
R Ferguson
Nomination Committee
R Ferguson (Chairman)
H McLernon
The amounts contained in this report have been rounded to the nearest $1 (where rounding is applicable) under
the option available to the Company under ASIC Class Order 98/100. The Company is an entity to which the Class
Order applies.
Auditor’s Independence Declaration
EY, the Company’s auditors, have provided a written declaration to the Directors in relation to their audit of the Financial
Report for the year ended 30 June 2013. This Independence Declaration can be found at page 22.
Non-Audit Services
The Directors are satisfied that the provision of non-audit services is compatible with the general standard of
independence for auditors imposed by the Corporations Act 2001. The nature and scope of each type of non-audit
service provided means that auditor independence was not compromised.
EY received or are due the following amounts for the provision of non-audit services:
Tax compliance services and other non audit services $109,301 (2012: $86,710).
IMF (AUSTRALIA) LTD | ANNUAL REPORT2013 DIRECTORS’ REPORT (continued) CORPORATE GOVERNANCE
21
The Company has an extensive Corporate Governance Manual which includes a compliance program and complaint
handling procedures which will enable the Company to interact with its clients and the public in a consistent and
transparent manner. The Company’s corporate governance statement is noted from page 66 of this Annual Report.
Signed in accordance with a resolution of the Directors.
ROBERT FERGUSON
CHAIRMAN
Sydney 21 August 2013
HUGH MCLERNON
MANAGING DIRECTOR
2013 DIRECTORS’ REPORT (continued)
AUDITOR’S INDEPENDENCE DECLARATION
22
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
Auditor’s Independence Declaration to the Directors of IMF (Australia)
Ltd
In relation to our audit of the financial report of IMF (Australia) Limited for the financial year ended 30
June 2013, to the best of my knowledge and belief, there have been no contraventions of the auditor
independence requirements of the Corporations Act 2001 or any applicable code of professional
conduct.
Ernst & Young
G H Meyerowitz
Partner
21 August 2013
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
GHM:MM:IMF:140
IMF (AUSTRALIA) LTD | ANNUAL REPORT
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2013
Continuing Operations
Revenue
Other income
Total Income
Finance costs
Depreciation expense
Employee benefits expense
Corporate and office expense
Other expenses
Consolidated
2012
$
2013
$
23
2,971,843
2,409,106
24,625,335
70,592,507
27,597,178
73,001,613
(146,508)
(246,362)
(4,692,615)
(1,647,113)
(723,697)
(416,495)
(238,409)
(6,999,311)
(2,970,128)
(965,818)
Note
6
7
8(a)
8(b)
8(c)
8(d)
8(e)
Profit From Continuing Operations Before Income Tax
20,140,883
61,411,452
Income tax expense
Net Profit for the Year
9
(6,326,816)
(18,445,660)
13,814,067
42,965,792
Other Comprehensive Income
Items that may be subsequently reclassified to profit and loss:
Net fair value gains/(loss) on available-for-sale financial assets
Transfer from net unrealised gains reserve to profit and loss
upon disposal of available-for-sale assets
Other comprehensive income for the year, net of tax
–
30,332
(30,332)
(30,332)
–
30,332
Total Comprehensive Income for the Year
13,783,735
42,996,124
Earnings per share attributable to the ordinary equity holders of the Company (cents per share)
Basic profit (cents per share)
Diluted profit (cents per share)
11
11
11.21
9.78
34.87
29.84
The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2013
24
ASSETS
Current Assets
Cash and cash equivalents
Trade and other receivables
Other assets
Total Current Assets
Non-Current Assets
Trade and other receivables
Plant and equipment
Financial assets
Intangible assets
Total Non-Current Assets
TOTAL ASSETS
LIABILITIES
Current Liabilities
Trade and other payables
Income tax (receivable)/payable
Provisions
Other liabilities
Total Current Liabilities
Non-Current Liabilities
Provisions
Convertible notes
Other liabilities
Deferred income tax liabilities
Total Non-Current Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Retained earnings
TOTAL EQUITY
Consolidated
2012
$
2013
$
Note
12
13
14
13
15
16
17
18
19
19
20
9
67,984,284
23,927,978
94,015
92,006,277
62,424,566
67,227,799
380,355
130,032,720
15,252,854
622,425
18,890
86,127,315
102,021,484
194,027,761
16,330,417
798,667
476,158
66,004,218
83,609,460
213,642,180
7,833,156
(1,540,364)
1,644,718
74,555
8,012,065
24,532,246
13,889,127
8,118,689
–
46,540,062
229,026
36,324,499
205,026
23,752,761
60,511,312
68,523,377
125,504,384
259,530
34,945,316
–
20,179,335
55,384,181
101,924,243
111,717,937
21
22(b)
22(a)
41,912,195
7,235,936
76,356,253
125,504,384
41,909,483
7,266,268
62,542,186
111,717,937
The above Statement of Financial Position should be read in conjunction with the accompanying notes.
IMF (AUSTRALIA) LTD | ANNUAL REPORT STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2013
Cash flows from operating activities
Payments to suppliers and employees
Interest income
Interest paid
Income tax paid
25
Consolidated
2012
$
2013
$
Note
(8,095,009)
(6,148,274)
3,360,448
2,262,965
(3,887,712)
(3,939,814)
(18,182,881)
(2,554,870)
Net cash flows (used in) operating activities
23
(26,805,154)
(10,379,993)
Cash flows from investing activities
Proceeds from litigation funding – settlements, fees and reimbursements
87,030,664
74,910,264
Payments for litigation funding and capitalised suppliers and employee costs
(44,382,824)
(49,488,862)
Proceeds from/(advances for) loans to external parties
Purchase of plant and equipment
Proceeds from disposal of available-for-sale investments
800,000
(800,000)
(70,120)
417,057
(652,262)
15,652
Net cash flows from/(used in) investing activities
43,794,777
23,984,792
Cash flows from financing activities
Dividends paid
Net cash flows (used in)/from financing activities
Net increase in cash and cash equivalents held
Net foreign exchange difference
Cash and cash equivalents at beginning of year
(12,320,766)
(6,160,085)
(12,320,766)
(6,160,085)
4,668,857
7,444,714
890,861
(32,140)
62,424,566
55,011,992
Cash and cash equivalents at end of year
12
62,984,284
64,424,566
The above Statement of Cash Flows should be read in conjunction with the accompanying notes.
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2013
26
CONSOLIDATED
As at 1 July 2012
Profit for the year
Other comprehensive
income
Total Comprehensive
Income for the Year
Option
premium
reserve
$
Net
unrealised
gains
reserve
$
Convertible
notes
reserve
$
Issued
capital
$
Retained
earnings
$
Total
$
41,909,483
3,403,720
30,332
3,832,216
62,542,186
111,717,937
–
–
–
–
–
–
13,814,067
13,814,067
(30,332)
–
–
(30,332)
41,909,483
3,403,720
–
3,832,216 76,356,253 125,501,672
Equity Transactions:
Dividend paid
Dividend declared (unpaid)
Convertible notes
converted
–
–
2,712
–
–
–
As at 30 June 2013
41,912,195
3,403,720
As at 1 July 2011
41,900,322
3,403,720
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,712
3,832,216 76,356,253 125,504,384
3,832,216 38,057,246
87,193,504
–
42,965,792
42,965,792
30,332
–
–
30,332
41,900,322
3,403,720
30,332
3,832,216
81,023,038 130,189,628
–
–
9,161
–
–
–
–
–
–
–
–
–
(6,160,086)
(6,160,086)
(12,320,766)
(12,320,766)
–
9,161
As at 30 June 2012
41,909,483
3,403,720
30,332
3,832,216
62,542,186
111,717,937
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
Profit for the year
Other comprehensive
income
Total Comprehensive
Income for the Year
Equity Transactions:
Dividend paid
Dividend declared (unpaid)
Convertible notes
converted
IMF (AUSTRALIA) LTD | ANNUAL REPORT NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2013
NOTE 1: CORPORATE INFORMATION
27
The financial report of IMF (Australia) Ltd (IMF, the Company or the Parent) for the year ended 30 June 2013 and its
subsidiaries (the Group or consolidated entity) was authorised for issue in accordance with a resolution of the Directors
on 21 August 2013.
IMF (Australia) Ltd (ABN 45 067 298 088) is a for profit company incorporated and domiciled in Australia and limited by
shares that are publicly traded on the Australian Securities Exchange (ASX code: IMF).
The nature of the operations and principal activities of the Group are described in note 5.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Basis of preparation
The financial report is a general-purpose financial report, which has been prepared in accordance with the
requirements of the Corporations Act 2001 and Australian Accounting Standards and other authoritative
pronouncements of the Australian Accounting Standards Board. The financial report has also been prepared on a
historical cost basis, except for available-for-sale and held for trading investments which have been measured at
fair value.
The financial report is presented in Australian dollars.
The amounts contained within this report have been rounded to the nearest $1 (where rounding is applicable) under
the option available to the Company under ASIC Class Order 98/100.
b. Compliance with IFRS
The financial report complies with Australian Accounting Standards and International Financial Reporting Standards
(“IFRS”), as issued by the International Accounting Standards Board.
For the purposes of preparing the consolidated financial statements, the parent entity is a for profit entity.
c. New accounting standards and interpretations
The accounting policies adopted are consistent with those of the previous financial year except as follows:
(i) Changes in accounting policy and disclosures.
The Group has adopted all new and amended Australian Accounting Standards and AASB Interpretations effective
as of 30 June 2013, including:
Reference
AASB 2011-9 Amendments to Australian Accounting Standards – Presentation of Other
Title
Comprehensive Income
[AASB 1, 5, 7, 101, 112, 120, 121, 132, 133, 134, 1039 & 1049]
This standard requires entities to group items presented in other
comprehensive income on the basis of whether they might be reclassified
subsequently to profit or loss and those that will not.
Application
date of
standard*
1 July 2012
Application
date for
Group*
1 July 2012
The adoption of the above amendments resulted in changes to disclosures, but had no impact on the financial position
or financial performance of the Group.
28
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
c. New accounting standards and interpretations (continued)
(ii) Accounting Standards and Interpretations issued but not yet effective.
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet
effective and have not been adopted by the Group for the annual reporting period ended 30 June 2013 are outlined
in the table below. The impact of these new standards and interpretations has not been assessed, except for those
otherwise outlined below.
Reference Title
AASB 12
Disclosure of Interests in
Other Entities
Summary
AASB 12 includes all disclosures relating to an entity’s interests in
subsidiaries, joint arrangements, associates and structured entities.
New disclosures have been introduced about the judgments made
by management to determine whether control exists, and to require
summarised information about joint arrangements, associates,
structured entities and subsidiaries with non-controlling interests.
There will be no impact on the Group from this standard other than
certain disclosure requirements.
AASB 13
Fair Value Measurement AASB 13 establishes a single source of guidance for determining
the fair value of assets and liabilities. AASB 13 does not change
when an entity is required to use fair value, but rather, provides
guidance on how to determine fair value when fair value is
required or permitted. Application of this definition may result in
different fair values being determined for the relevant assets.
AASB 13 also expands the disclosure requirements for all assets or
liabilities carried at fair value. This includes information about the
assumptions made and the qualitative impact of those assumptions
on the fair value determined.
Consequential amendments were also made to other standards
via AASB 2011-8.
There will be no impact to the Group from this standard as it does
not change the way the Group estimates the fair value of its assets
and liabilities.
The revised standard changes the definition of short-term
employee benefits. The distinction between short-term and other
long-term employee benefits is now based on whether the benefits
are expected to be settled wholly within 12 months after the
reporting date.
Consequential amendments were also made to other standards
via AASB 2011-10.
AASB 2012-2 principally amends AASB 7 Financial Instruments:
Disclosures to require disclosure of the effect or potential effect
of netting arrangements. This includes rights of set-off associated
with the entity’s recognised financial assets and liabilities on the
entity’s financial position, when the offsetting criteria of AASB 132
are not all met.
AASB 2012-5 makes amendments resulting from the 2009-2011
Annual Improvements Cycle. The standard addresses a range of
improvements, including the following:
• Repeat application of AASB 1 is permitted (AASB 1)
• Clarification of the comparative information requirements
when an entity provides a third balance sheet (AASB 101
Presentation of Financial Statements).
AASB 2012-9 amends AASB 1048 Interpretation of Standards
to evidence the withdrawal of Australian Interpretation 1039
Substantive Enactment of Major Tax Bills in Australia.
AASB 119
Employee Benefits
AASB
2012-2
AASB
2012-5
AASB
2012-9
Amendments to
Australian Accounting
Standards – Disclosures
– Offsetting Financial
Assets and Financial
Liabilities
Amendments to
Australian Accounting
Standards arising from
Annual Improvements
2009-2011 Cycle
Amendment to AASB
1048 arising from the
withdrawal of Australian
Interpretation 1039
Application
date of
standard*
1 January
2013
Application
date for
Group*
1 July 2013
1 January
2013
1 July 2013
1 January
2013
1 July 2013
1 January
2013
1 July 2013
1 January
2013
1 July 2013
1 January
2013
1 July 2013
IMF (AUSTRALIA) LTD | ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued) NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
29
c. New accounting standards and interpretations (continued)
(ii) Accounting Standards and Interpretations issued but not yet effective (continued)
Reference Title
AASB
2011-4
Amendments to
Australian Accounting
Standards to Remove
Individual Key
Management Personnel
Disclosure Requirements
[AASB 124]
AASB 1053 Application of Tiers of
Australian Accounting
Standards
AASB
2012-3
Amendments to
Australian Accounting
Standards – Offsetting
Financial Assets and
Financial Liabilities
AASB 10
Consolidated Financial
Statements
Application
Application
date for
date of
Group*
standard*
1 July 2013 1 July 2013
1 July 2013 1 July 2013
1 January
2014
1 July 2014
1 Jan 2013 1 July 2013
Summary
This amendment deletes from AASB 124 individual key
management personnel disclosure requirements for disclosing
entities that are not companies. It also removes the individual KMP
disclosure requirements for all disclosing entities in relation to
equity holdings, loans and other related party transactions.
This standard establishes a differential financial reporting
framework consisting of two tiers of reporting requirements for
preparing general purpose financial statements:
a. Tier 1: Australian Accounting Standards
b. Tier 2: Australian Accounting Standards – Reduced
Disclosure Requirements
Tier 2 comprises the recognition, measurement and presentation
requirements of Tier 1 and substantially reduced disclosures
corresponding to those requirements.
The following entities apply Tier 1 requirements in preparing
general purpose financial statements:
a. For-profit entities in the private sector that have public
accountability (as defined in this standard)
b. The Australian Government and State, Territory and
Local governments
The following entities apply either Tier 2 or Tier 1 requirements in
preparing general purpose financial statements:
a. For-profit private sector entities that do not have
public accountability
b. All not-for-profit private sector entities
c. Public sector entities other than the Australian Government
and State, Territory and Local governments.
Consequential amendments to other standards to implement the
regime were introduced by AASB 2010-2, 2011-2, 2011-6, 2011-11,
2012-1, 2012-7 and 2012-11.
AASB 2012-3 adds application guidance to AASB 132 Financial
Instruments: Presentation to address inconsistencies identified
in applying some of the offsetting criteria of AASB 132, including
clarifying the meaning of “currently has a legally enforceable
right of set-off” and that some gross settlement systems may be
considered equivalent to net settlement.
AASB 10 establishes a new control model that applies to all
entities. It replaces parts of AASB 127 Consolidated and Separate
Financial Statements dealing with the accounting for consolidated
financial statements and UIG-112 Consolidation - Special
Purpose Entities.
The new control model broadens the situations when an entity is
considered to be controlled by another entity and includes new
guidance for applying the model to specific situations, including
when acting as a manager may give control, the impact of potential
voting rights and when holding less than a majority voting rights
may give control.
Consequential amendments were also made to this and other
standards via AASB 2011-7 and AASB 2012-10.
There will be no impact to the Group from this standard as the
Group’s subsidiaries are wholly owned and there is no change to
the way they are consolidated.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued) 30
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
c. New accounting standards and interpretations (continued)
(ii) Accounting Standards and Interpretations issued but not yet effective (continued)
Reference Title
AASB 11
Joint Arrangements
AASB 9
Financial Instruments
Application
Application
date for
date of
Group*
standard*
1 Jan 2013 1 July 2013
1 Jan 2015 1 July 2015
Summary
AASB 11 replaces AASB 131 Interests in Joint Ventures and UIG-113
Jointly- controlled Entities - Non-monetary Contributions by Ventures.
AASB 11 uses the principle of control in AASB 10 to define joint
control, and therefore the determination of whether joint control exists
may change. In addition it removes the option to account for jointly
controlled entities (JCEs) using proportionate consolidation. Instead,
accounting for a joint arrangement is dependent on the nature of the
rights and obligations arising from the arrangement. Joint operations
that give the venturers a right to the underlying assets and obligations
themselves is accounted for by recognising the share of those assets
and obligations. Joint ventures that give the venturers a right to the
net assets is accounted for using the equity method.
Consequential amendments were also made to this and other
standards via AASB 2011-7, AASB 2010-10 and amendments to
AASB 128.
There will be no impact to the Group from this standard as the
Group does not have any joint arrangements.
AASB 9 includes requirements for the classification and
measurement of financial assets. It was further amended by
AASB 2010-7 to reflect amendments to the accounting for
financial liabilities.
These requirements improve and simplify the approach for
classification and measurement of financial assets compared
with the requirements of AASB 139. The main changes are
described below.
a. Financial assets that are debt instruments will be classified
based on (1) the objective of the entity’s business model for
managing the financial assets; (2) the characteristics of the
contractual cash flows.
b. Allows an irrevocable election on initial recognition to present
gains and losses on investments in equity instruments that are
not held for trading in other comprehensive income. Dividends
in respect of these investments that are a return on investment
can be recognised in profit or loss and there is no impairment
or recycling on disposal of the instrument.
c. Financial assets can be designated and measured at fair value
through profit or loss at initial recognition if doing so eliminates
or significantly reduces a measurement or recognition incon-
sistency that would arise from measuring assets or liabilities, or
recognising the gains and losses on them, on different bases.
d. Where the fair value option is used for financial liabilities the
change in fair value is to be accounted for as follows:
•
The change attributable to changes in credit risk are
presented in other comprehensive income (OCI)
The remaining change is presented in profit or loss
•
If this approach creates or enlarges an accounting mismatch in
the profit or loss, the effect of the changes in credit risk are also
presented in profit or loss.
Further amendments were made by AASB 2012-6 which amends
the mandatory effective date to annual reporting periods beginning
on or after 1 January 2015. AASB 2012-6 also modifies the relief from
restating prior periods by amending AASB 7 to require additional
disclosures on transition to AASB 9 in some circumstances.
Consequential amendments were also made to other standards
as a result of AASB 9, introduced by AASB 2009-11 and
superseded by AASB 2010-7 and 2010-10.
* Designates the beginning of the applicable annual reporting period unless otherwise stated
IMF (AUSTRALIA) LTD | ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued) NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
31
d. Basis of consolidation
The consolidated financial statements comprise the financial statements of IMF (Australia) Ltd (IMF, the Company or
Parent) and its subsidiaries Financial Redress Pty Limited (formerly Insolvency Litigation Fund Pty Limited), Bentham
Holdings Inc., Bentham Capital LLC and Security Finance LLC (“the Group”) as at 30 June each year.
The financial statements of the subsidiaries are prepared for the same reporting period as the Company, using
consistent accounting policies.
In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses
and profits and losses resulting from intra-group transactions have been eliminated in full.
The Parent’s investment in the subsidiaries is measured at cost in the separate financial statements of the Parent less
any impairment charges. Dividends received from subsidiaries are recorded as a component of other revenues in the
Statement of Comprehensive Income of the Parent and do not impact the recorded cost of the investment.
e. Foreign currency
Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates
ruling at the date of transaction. Monetary assets and liabilities denominated in foreign currencies are converted at
the exchange rate ruling at the reporting date. Gains and losses arising from these transactions are recognised in the
Statement of Comprehensive Income.
f. Cash and cash equivalents
Cash and cash equivalents in the Statement of Financial Position comprise cash at bank and in hand and short-term
deposits with an original maturity of three months or less, that are readily convertible to known amounts of cash on
hand and which are subject to an insignificant risk of changes in value.
For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as
defined above.
g. Trade and other receivables
Trade receivables, which generally have 30-90 day terms, are recognised initially at fair value less an allowance for any
uncollectible amounts.
Collectability of trade receivables is reviewed on an ongoing basis. Debts that are known to be uncollectible are written
off when identified. An impairment loss is recognised when there is objective evidence that the Group will not be
able to collect the debt. Financial difficulties of the debtor and loss of cases on appeal are considered to be objective
evidence of impairment.
h. Investments and other financial assets
Investments and financial assets in the scope of AASB 139 Financial Instruments: Recognition and Measurement
are categorised as either financial assets at fair value through profit or loss, loans and receivables, held-to-maturity
investments, or available-for-sale financial assets. The classification depends on the purpose for which the investments
were acquired. The Group determines the classification of its financial assets at initial recognition.
When financial assets are recognised initially, they are measured at fair value, plus, in the case of investments not at fair
value through profit or loss, directly attributable transaction costs.
Recognition and derecognition
All regular way purchases and sales of financial assets are recognised on the trade date i.e. the date that the Group
commits to purchase the asset. Regular way purchases or sales are purchases or sales of financial assets under
contracts that require delivery of the assets within the period established generally by regulation or convention in
the market place. Financial assets are derecognised when the right to receive cash flows from the financial asset has
expired or been transferred.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued) 32
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
h. Investments and other financial assets (continued)
(i) Financial assets at fair value through profit or loss
Financial assets classified as held for trading are included in the category “financial assets at fair value through profit
or loss”. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near term
with the intention of making a profit. Gains or losses on financial assets held for trading are recognised in the Statement
of Comprehensive Income and the related assets are classified as current assets in the Statement of Financial Position.
(ii) Loans and receivables
Loans and receivables including loan notes and loans to Key Management Personnel are non-derivative financial assets
with fixed or determinable payments that are not quoted in an active market. Such assets are carried at amortised cost
using the effective interest method. Gains and losses are recognised in the Statement of Comprehensive Income when
the loans and receivables are derecognised or impaired, as well as through the amortisation process.
(iii) Available-for-sale securities
Available-for-sale investments are those non-derivative financial assets, principally equity securities, that are designated
as available for sale or are not classified as any of the preceding categories. After initial recognition available-for-
sale are measured at fair value with gains or losses being recognised as a separate component of equity until the
investment is derecognised or until the investment is determined to be impaired, at which time the cumulative gain or
loss previously reported in equity is recognised in the Statement of Comprehensive Income.
The fair value of investments that are actively traded in organised financial markets are determined by reference to
quoted market bid prices at the close of business on the balance sheet date. For investments with no active market, fair
values are determined using valuation techniques. Such valuation techniques include: using recent arm’s length market
transactions; reference to the current market value of another instrument that is substantially the same; discounted
cash flow analysis and option pricing models making as much use of available and supportable market data as possible
and keeping judgmental inputs to a minimum.
i. Plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and any accumulated impairment losses.
Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing parts is
incurred. All other repairs and maintenance are recognised in the Statement of Comprehensive Income as incurred.
Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets as follows:
Plant and equipment – over 5 to 15 years
The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each
financial year end.
Derecognition
An item of plant and equipment is derecognised upon disposal or when no further future economic benefits are
expected from its use or disposal.
j. Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and
requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or
assets and the arrangement conveys a right to use the asset.
Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased
item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value
of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the
lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are
recognised as an expense in the Statement of Comprehensive Income.
IMF (AUSTRALIA) LTD | ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued) NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
33
j. Leases (continued)
Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term
if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term.
Operating lease payments are recognised as an expense in the Statement of Comprehensive Income on a straight-line
basis over the lease term. Operating lease incentives are recognised as a liability when received and subsequently
reduced by allocating lease payments between rental expense and reduction of the liability.
k. Intangible assets
Litigation Contracts In Progress
Litigation Contracts In Progress represent future economic benefits controlled by the Group. As Litigation Contracts
In Progress may be exchanged or sold, the Group is able to control the expected future economic benefit flowing
from the Litigation Contracts In Progress. Accordingly, Litigation Contracts In Progress meets the definition of
intangible assets.
Litigation Contracts In Progress are measured at cost on initial recognition. Litigation Contracts In Progress are not
amortised as the assets are not available for use until the determination of a successful judgment or settlement, at
which point the assets are realised.
Gains or losses arising from derecognition of Litigation Contracts in Progress are measured as the difference
between the net disposed proceeds and the carrying amount of the asset and are recognised in the Statement of
Comprehensive Income when the asset is derecognised.
The following specific asset recognition rules have been applied to Litigation Contracts In Progress:
(A) 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 all of the following criteria:
a. demonstration of ability of the Group to complete the litigation so that the asset will be available for use and the
benefits embodied in the asset will be realised;
b. demonstration that the asset will generate future economic benefits;
c. demonstration that the Group intends to complete the litigation;
d. demonstration of the availability of adequate technical, financial and other resources to complete the litigation; and
e. ability to measure reliably the expenditure attributable to the intangible asset during the Litigation Contracts
In Progress.
(B) Successful Judgment:
Where 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 Statement of
Comprehensive Income.
Any future costs relating to the defence of an appeal by the defendant are expensed as incurred.
(C) Unsuccessful Judgment:
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 judgment, then
future costs incurred by the Company on the appeal are expensed as incurred.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued) 34
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
l. Trade and other payables
Trade payables and other payables are carried at amortised cost. Due to their short-term nature they are not
discounted. They represent liabilities for goods and services provided to the Group prior to the end of the financial year
that are unpaid and arise when the Group becomes obliged to make future payments in respect of the purchase of
these goods and services. The amounts are unsecured and are usually paid within 30 days of recognition.
m. Interest-bearing loans and borrowings
All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable
transaction costs.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the
effective interest method. Fees paid on the establishment of loan facilities that are yield related are included as part of
the carrying amount of the loan and borrowings.
The borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the
liability for at least 12 months after the balance sheet date.
n. Provisions and employee benefits
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event,
it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a
reliable estimate can be made of the amount of the obligation.
When the Group expects some or all of the provision to be reimbursed, for example under an insurance contract, the
reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The expense
relating to any provision is presented in the Statement of Comprehensive Income net of any reimbursement.
Provisions are measured at the present value of management’s best estimate of the expenditure required to settle
the present obligation at the balance sheet date using a discounted cash flow methodology. If the effect of the time
value of money is material, provisions are discounted using a current pre-tax rate that reflects the time value of money
and the risks specific to the liability. The increase in the provision resulting from the passage of time is recognised in
finance costs.
Employee leave benefits
(i) Wages, salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave due to be
settled within 12 months of the reporting date are recognised in other payables in respect of employees’ services up to
the reporting date. They are measured at the amounts expected to be paid when the liabilities are settled. Expenses for
non-accumulating sick leave are recognised when the leave is taken and are measured at the rates paid or payable.
(ii) Long service leave
The liability for long service leave is recognised and measured as the present value of expected future payments to
be made in respect of services provided by employees up to the reporting date. 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 national government bonds with terms to maturity and
currencies that match, as closely as possible, the estimated future cash outflows.
o. Share-based payment transactions
(i) Equity-settled transactions
Previously, the Company had an Employee Share Option Plan (“ESOP”), which provided benefits to directors and
employees in the form of share-based payments. During 2007 the Company implemented a short term incentive
plan (“STI”), which replaced the ESOP, and which may also, at the discretion of the Remuneration Committee, provide
benefits to employees in the form of share-based payments.
IMF (AUSTRALIA) LTD | ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued) NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
35
o. Share-based payment transactions (continued)
(i) Equity-settled transactions (continued)
The cost of equity-settled transactions with employees (for awards granted after 7 November 2002 that were unvested
at 1 January 2005) is measured by reference to the fair value of the equity instruments at the date at which they are
granted. The fair value is determined using a Black Scholes model.
In valuing equity-settled transactions, no account is taken of any vesting conditions, other than conditions linked to the
price of the shares of IMF (i.e. market conditions) if applicable.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period
in which the performance and/or service conditions are fulfilled (the vesting period), ending on the date on which the
relevant employees become fully entitled to the award (the vesting date).
At each subsequent reporting date until vesting, the cumulative charge to the Statement of Comprehensive Income
is the product of (i) the grant date fair value of the award; (ii) the current best estimate of the number of awards that
will vest, taking into account such factors as the likelihood of employee turnover during the vesting period and the
likelihood of non-market performance conditions being met; and (iii) the expired portion of the vesting period.
The charge to the Statement of Comprehensive Income for the period is the cumulative amount as calculated above
less the amounts already charged in previous periods. There is a corresponding credit to equity.
Equity-settled awards granted by IMF to employees of subsidiaries are recognised in the Parent’s separate financial
statements as an additional investment in the subsidiary with a corresponding credit to equity. These amounts are
eliminated through consolidation. As a result, the expenses recognised by IMF (Australia) Ltd in relation to equity-settled
awards only represents the expense associated with grants to employees of the Parent. The expense recognised by
the Group is the total expense associated with all such awards.
Until an award has vested, any amounts recorded are contingent and will be adjusted if more or fewer awards vest
than were originally anticipated to do so. Any award subject to a market condition is considered to vest irrespective of
whether or not that market condition is fulfilled, provided that all other conditions are satisfied.
If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not
been modified. An additional expense is recognised for any modification that increases the total fair value of the share-
based payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification.
If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and an expense not
yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award
and designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if
they were a modification of the original award, as described in the previous paragraph.
The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of diluted
earnings per share.
(ii) Cash-settled transactions
The Group does not provide cash-settled share-based benefits to employees or senior executives.
p. Convertible notes
The component of the convertible notes that exhibits characteristics of a liability is recognised as a liability in the
Statement of Financial Position, net of transaction costs.
On issuance of the convertible notes, the fair value of the liability component is determined using an estimated market
rate for an equivalent non-convertible bond and this amount is carried as a long-term liability on an amortised cost basis
until extinguished on conversion or redemption. The increase in the liability due to the passage of time is recognised
as a finance cost. Interest on the liability component of the instruments is recognised as an expense in the Statement of
Comprehensive Income.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued) 36
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
p. Convertible notes (continued)
The fair value of any derivative features embedded in the convertible notes, other than the equity component, are
included in the liability component. Subsequent to initial recognition, these derivative features are measured at fair
value with gains and losses recognised in the Statement of Comprehensive Income.
The remainder of the proceeds is allocated to the conversion option that is recognised and included in shareholders’
equity, net of transaction costs. The carrying amount of the conversion option is not remeasured in subsequent years.
Transaction costs are apportioned between the liability and equity components of the convertible notes based on the
allocation of proceeds to the liability and equity components when the instruments are first recognised.
q. Contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of tax, from the proceeds.
r. Revenue recognition
Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent that it
is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following
specific recognition criteria must also be met before revenue is recognised:
(i) Interest income
Revenue is recognised as interest accrues using the effective interest method. This is a method of calculating the
amortised cost of a financial asset and allocating the interest income over the relevant period using the effective
interest rate, which is the rate that exactly discounts estimated future cash receipts through the expected life of the
financial asset to the net carrying amount of the financial asset.
(ii) Dividends
Revenue is recognised when the Group’s right to receive the payment is established.
s. Income tax and other taxes
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be
recovered from or paid to the taxation authorities based on the current period’s taxable income. The tax rates and tax
laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.
Deferred income tax is provided on all temporary differences at the statement of financial position date between the
tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences except:
• when the deferred income tax liability arises from the initial recognition of goodwill or of 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
profit nor taxable profit or loss; or
• when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint
ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the
temporary difference will not reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets
and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible
temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except:
IMF (AUSTRALIA) LTD | ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued) NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
37
s. Income tax and other taxes (continued)
• when the deferred income tax asset relating to the deductible temporary difference arises from the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable profit or loss; or
• when the deductible temporary difference is associated with investments in subsidiaries, associates or interests
in joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the
temporary difference will reverse in the foreseeable future and taxable profit will be available against which the
temporary difference can be utilised.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it
is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset
to be utilised.
Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that
it has become probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when
the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively
enacted at the reporting date.
Income taxes relating to items recognised directly in equity are recognised in equity and not in the Statement of
Comprehensive Income.
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax
assets against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the
same taxation authority.
IMF and its 100% owned subsidiary have formed a tax consolidated group with effect from 1 July 2002. IMF is the head
of the tax consolidated group.
Members of the tax consolidated group have not entered into a tax sharing/funding agreement. Under UIG 1052:
Tax Consolidation Accounting, where a tax consolidated group has not entered into a tax sharing/funding agreement,
the assumption of current tax liabilities and tax losses by the Parent entity is recognised as a contribution/distribution in
the subsidiary’s equity accounts. The Group has applied the group allocation approach in determining the appropriate
amount of current and deferred taxes to allocate to the members of the tax consolidated group.
Other taxes
Revenues, expenses and assets are recognised net of the amount of GST, except:
• when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in
which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item, as
applicable; and
receivables and payables, which are stated with the amount of GST included.
•
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or
payables in the Statement of Financial Position.
Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows arising
from investing and financing activities, which is recoverable from, or payable to, the taxation authority is classified as
part of cash flows from operating activities.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the
taxation authority.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued) 38
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
t. Earnings per share
Basic earnings per share is calculated as net profit attributable to members of the Parent, adjusted to exclude any costs
of servicing equity (other than dividends), divided by the weighted average number of ordinary shares outstanding
during the financial year, adjusted for any bonus element.
Diluted earnings per share is calculated as net profit attributable to members of the Parent, adjusted for:
• costs of servicing equity (other than dividends);
•
the after tax effect of interest dividends and associated with dilutive potential ordinary shares that have been
recognised as expenses; and
• other non-discretionary changes in revenue or expenses during the period that would result from dilution of
potential ordinary shares,
divided by the weighted average number of shares and dilutive shares, adjusted for any bonus element.
u. Borrowing costs
Borrowing costs directly attributable to the acquisition and development of a qualifying asset (i.e. an asset that
necessarily takes a substantial period of time to get ready for its intended use or sale) are capitalised as part of the cost
of that asset. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and
other costs that an entity incurs in connection with the borrowing of funds.
NOTE 3: FINANCIAL RISK MANAGEMENT OBJECTIVE AND POLICIES
The Group’s principal financial instruments comprise cash and short-term deposits, receivables and payables and
convertible notes.
The Group manages its exposure to key financial risks, including interest rate risk and currency risk in accordance
with the Group’s financial risk management policy. The objective of the policy is to support the delivery of the Group’s
financial targets whilst protecting its future financial security.
The main risks arising from the Group’s financial instruments are interest rate risk, foreign currency risk, credit risk and
liquidity risk. The Group uses different methods to measure and manage different types of risks to which it is exposed.
These include monitoring levels of exposure to interest rates, currencies and assessments of market forecasts for
interest rates and foreign currencies. Aging analyses and monitoring of specific credit allowances are undertaken to
manage credit risk. Liquidity risk is monitored through the development of future rolling cash flow forecasts.
Risk Exposures and Responses
Interest Rate Risk
The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s cash holdings
with a floating interest rate. The Group’s convertible notes coupon payments are fixed at 10.25% per annum and are
therefore not exposed to Australian variable interest rate risk.
At reporting date the Group had the following financial assets exposed to Australian variable interest rate risk:
Financial Assets
Cash and cash equivalents
Net exposure
2013
$
2012
$
67,984,284
67,984,284
62,424,566
62,424,566
The Group regularly analyses its interest rate exposure. Within this analysis consideration is given to expected interest
rate movements and the Group’s future cash requirements, potential renewals of existing positions, alternative
financing, and the mix of fixed and variable interest rates.
The following sensitivity analysis is based on the interest rate risk exposures in existence at the reporting date.
IMF (AUSTRALIA) LTD | ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued) NOTE 3: FINANCIAL RISK MANAGEMENT OBJECTIVE AND POLICIES (CONTINUED)
39
Risk Exposures and Responses (continued)
At 30 June 2013, if interest rates had moved, as illustrated in the following table, with all other variables held constant,
post tax profit and equity would have been affected as follows:
Judgment of reasonably possible movements:
+1.0% (100 basis points) (2012: +1.0%)
–1.0% (100 basis points) (2012: –1.0%)
Post Tax Profit
Higher/(Lower)
Equity
Higher/(Lower)
2013
$
297,184
(297,184)
2012
$
240,911
(240,911)
2013
$
297,184
(297,184)
2012
$
240,911
(240,911)
Credit Risk
Credit risk arises from the financial assets of the Group, which comprises cash and cash equivalents and receivables.
The Group’s exposure to credit risk arises from potential default of the counterparty, with a maximum exposure equal to
the carrying amount of these instruments. Exposure at reporting date is addressed in each applicable note.
The Group’s deposits are spread amongst a number of financial institutions to minimise the risk of default of
counterparties, all of whom have been pre-approved by the Board, have AA credit ratings 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. Wherever possible the Group ensures that
security for settlement sums is provided, or the settlement funds are placed into solicitors’ trust accounts. As at 30 June
2013, a significant portion of the Group’s receivables were not under any such security. However, the Group’s continual
monitoring of the defendants’ financial capacity mitigates this risk.
Liquidity Risk
The liquidity position of the Group is managed to ensure sufficient liquid funds are available to meet the Group’s
expected financial commitments in a timely and cost effective manner.
Management continually reviews the Group’s liquidity position, including the preparation of cash flow forecasts, to
determine the forecast liquidity position and to maintain appropriate liquidity levels. All financial liabilities of the Group
are current and payable within 30 days.
The maturity profile of the Group’s financial liabilities based on contractual maturity on an undiscounted basis are:
2013
Financial Liabilities
Trade and other payables
Convertible notes
Convertible notes interest
2012
Financial Liabilities
Trade and other payables
Convertible notes
Convertible notes interest
<6 months
$
6-12 months
$
1-5 years
$
>5 years
$
Total
$
7,833,156
–
1,963,827
9,796,983
–
–
1,963,827
1,963,827
–
38,318,585
1,963,827
40,282,412
–
–
–
–
7,833,156
38,318,585
5,891,481
52,043,222
21,122,846
–
1,963,972
23,086,818
3,409,400
–
1,963,972
5,373,372
–
38,321,407
5,891,916
44,213,323
–
–
–
–
24,532,246
38,321,407
9,819,860
72,673,513
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued) 40
NOTE 3: FINANCIAL RISK MANAGEMENT OBJECTIVE AND POLICIES (CONTINUED)
Risk Exposures and Responses (continued)
Fair Value
The methods for estimating fair value are outlined in the relevant notes to the financial statements. The carrying
amounts of financial assets and liabilities of the Group approximate their fair values, except for the convertible note
liabilities (refer to note 20).
Foreign Currency Risk
The Group is currently funding cases outside Australia. The investment in these cases and the subsequent income
generated by these cases are subject to exchange rate movements. The Group has managed this risk by ensuring
that it has sufficient levels of the foreign currency available to cover the total expected investment in each case.
The exposure to foreign currency risk is not considered to be material.
Equity Price Risk
The Group has investments in companies which are listed on the Australian Securities Exchange and the London Stock
Exchange. The value of these investments fluctuate with equity price movements. The Group manages this risk by
monitoring its investments on a regular basis. The exposure to equity price risk is not considered to be material.
NOTE 4: SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS
The preparation of the financial statements requires management to make judgments, estimates and assumptions that
affect the reported amounts in the financial statements. Management continually evaluates its judgments and estimates
in relation to assets, liabilities, contingent liabilities, revenues and expenses. Management bases its judgments on
historical experience and on other factors it believes to be reasonable under the circumstances, the results of which
form the basis of the carrying values of assets and liabilities that are not readily apparent from other sources. Actual
results may differ from these estimates under different assumptions and conditions.
Management has identified the following critical accounting policies for which significant judgments, estimates and
assumptions are made. Actual results may differ from these estimates under different assumptions and conditions and
may materially affect financial results or the financial position reported in future periods.
Further details of the nature of these assumptions and conditions may be found in the relevant notes to the
financial statements.
(i) Significant accounting judgments
Classification of and valuation of investments
The Group has decided to classify certain investments in listed securities as ‘available-for-sale’ or ‘held for trading’
investments and movements in fair value are recognised directly in equity or in the Statement of Comprehensive Income.
The fair value of listed shares has been determined by reference to published price quotations in an active market.
Taxation
The Group’s accounting policy for taxation requires management’s judgment in assessing whether deferred tax assets
and certain deferred tax liabilities are recognised on the Statement of Financial Position. Deferred tax assets, including
those arising from un-recouped tax losses, capital losses and temporary differences, are recognised only where it is
considered more likely than not that they will be recovered, which is dependent on the generation of sufficient future
taxable profits.
Assumptions about the generation of future taxable profits depend on management’s estimates of future cash flows.
These depend on estimates of future income, operating costs, capital expenditure, dividends and other capital
management transactions. Judgments and assumptions are also required about the application of income tax legislation.
These judgments and assumptions are subject to risk and uncertainty, hence there is a possibility that changes in
circumstances will alter expectations, which may impact the amount of deferred tax assets and deferred tax liabilities
recognised on the Statement of Financial Position and the amount of other tax losses and temporary differences not yet
recognised. In such circumstances, some or all of the carrying amounts of recognised deferred tax assets and liabilities
may require adjustment, resulting in a corresponding credit or charge to the Statement of Comprehensive Income.
IMF (AUSTRALIA) LTD | ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued) NOTE 4: SIGNIFICANT ACCOUNTING JUDGMENTS, ESTIMATES AND ASSUMPTIONS
(CONTINUED)
41
(ii) Significant accounting estimates and assumptions
Impairment of non-financial assets other than goodwill
The Group assesses impairment of all assets at each reporting date by evaluating conditions specific to the Group and
to the particular asset that may lead to impairment. This includes an assessment of each individual Litigation Contract In
Progress as to whether it is likely to be successful, the cost and timing to completion and the ability of the defendant to
pay upon completion. If an impairment trigger exists the recoverable amount of the asset is determined. This involves
value in use calculations, which incorporate a number of key estimates and assumptions (refer to note 17).
Impairment of intangibles with indefinite useful lives
The Group determines whether intangibles with indefinite useful lives are impaired at least on an annual basis. This
requires an estimation of the recoverable amount of the cash-generating units, using a value in use discounted cash
flow methodology, to which the intangibles with indefinite useful lives are allocated. The assumptions used in this
estimation of the recoverable amount and the carrying amount of intangibles with indefinite useful lives are discussed
in note 17.
Long service leave provision
As discussed in note 2, the liability for long service leave is recognised and measured at the present value of the
estimated future cash flows to be made in respect of all employees at balance date. In determining the present value of
the liability, attrition rates and pay increases through promotion and inflation have been taken into account.
Estimation of useful lives of assets
The estimation of the useful lives of assets has been based on historical experience for plant and equipment. In
addition, the condition of the assets is assessed at least once per year and considered against the remaining useful life.
Adjustments to useful life are made when considered necessary. Depreciation charges are included in note 8(b) and
note 15.
Provision for adverse costs
The Group raises a provision for adverse costs when it has lost a matter which it has funded and no appeal from that
decision is to be made. When a matter is lost and an appeal is lodged, the Group raises a provision if the judgment at
first instance is not stayed pending the outcome of the appeal. The provision raised is the Group’s best estimate of the
amount of adverse costs it will have to remit following consultation with external advisors.
NOTE 5: SEGMENT INFORMATION
For management purposes, the Group is organised into one operating segment which provides only one service,
being litigation funding. Accordingly, all operating disclosures are based upon analysis of the Group as one segment.
Geographically, the Group operates in Australia and the United States of America.
The Group continues to investigate other markets and has identified the following markets outside of Australia and
the United States as being favourable to litigation funding: the United Kingdom, Singapore, Hong Kong, Canada,
South Africa, the European Union (other than the United Kingdom) and New Zealand.
Interest received from National Australia Bank Ltd of $2,313,111 (2012: $1,750,018) and Westpac Banking Group Ltd of
$461,499 (2012: $605,945) contributed more than 93% of the Group’s bank interest revenue (2012: 97%).
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued) 42
NOTE 5: SEGMENT INFORMATION (CONTINUED)
Other income can be represented geographically as follows:
Australia
United States
Total other income
Non-Current assets can be represented geographically as follows:
Australia
United States
Net exposure
NOTE 6: REVENUE
Revenue
Bank interest received and accrued
NOTE 7: OTHER INCOME
Other income
Litigation contracts in progress – settlements
Litigation contracts in progress – expenses
Litigation contracts in progress – written-off 1
Net gain on disposal of intangible assets
GST recoverable/(written-off) from prior periods2
Gain on receivable measured at amortised cost
Other income/(loss)
2013
$
21,020,545
3,604,790
24,625,335
Consolidated
2012
$
66,979,557
3,612,950
70,592,507
2013
$
97,097,604
4,923,880
102,021,484
Consolidated
2012
$
81,300,509
2,308,951
83,609,460
Consolidated
2012
$
2013
$
2,971,843
2,409,106
2,971,843
2,409,106
Consolidated
2012
$
2013
$
43,906,400
(18,783,625)
(1,359,067)
23,763,708
7,973
853,654
–
24,625,335
117,807,365
(44,049,601)
(3,190,718)
70,567,046
5,605
–
19,856
70,592,507
1.
Included in this balance are costs related to cases not pursued by the Group due to the cases not meeting the Group’s required
rate of return and any adverse costs provisions raised when a litigation contract in progress has been written-off due to it being lost.
2. The GST recoverable/(written-off) from prior periods relates to an over/(under) accrual of GST payable from previous years.
IMF (AUSTRALIA) LTD | ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued) NOTE 8: EXPENSES
43
(a)
Finance costs
Interest expense and convertible note accretion
Other finance charges
(b) Depreciation
Depreciation expense
(c)
Employee benefits expense
Wages and salaries
Superannuation expense
Directors’ fees
Payroll tax
Long service leave provision
(d) Corporate and office expense
Insurance expense
Network expense
Marketing expense
Occupancy expense
Professional fee expense
Recruitment expense
Telephone expense
Travel expense
(e) Other expenses
ASX listing fees
General expenses
Postage, printing and stationery
Repairs and maintenance
Share registry costs
Software supplies
Unrealised foreign exchange gain/(loss)
Net revaluation gain/(loss) on shares held for trading
Impairment of receivables
Loss on derecognition of available for sale investments
Impairment of plant and equipment
Consolidated
2012
$
2013
$
–
(146,508)
(146,508)
(320,951)
(95,544)
(416,495)
(246,362)
(238,409)
(3,022,955)
(619,661)
(242,136)
(790,125)
(17,738)
(4,692,615)
(305,956)
(112,657)
(414,322)
(106,556)
(370,663)
(8,117)
(86,077)
(242,765)
(1,647,113)
(63,058)
(328,814)
(97,773)
(30,786)
(112,124)
(14,961)
890,861
(2,296)
(957,224)
(7,522)
–
(723,697)
(5,219,659)
(676,841)
(241,665)
(686,270)
(174,876)
(6,999,311)
(851,635)
(115,579)
(586,834)
(89,699)
(1,021,614)
(22,372)
(115,232)
(167,163)
(2,970,128)
(51,029)
(660,394)
(78,669)
(29,324)
(56,152)
(21,493)
(32,140)
19,069
–
–
(55,686)
(965,818)
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued) 44
NOTE 9: INCOME TAX
The major components of income tax expense are:
Income statement
Current income tax
Current income tax charge
Adjustment in respect of current income tax expense of previous year
Deferred income tax
Relating to origination and reversal of temporary differences
Other
Derecognition of unrealised capital losses
Adjustment in respect of deferred income tax of previous year
Income tax expense reported in the Statement of Comprehensive Income
Consolidated
2012
$
2013
$
1,663,025
16,774,885
1,080,365
(368,135)
4,317,300
1,659,871
(16,741)
–
3,925
–
(717,133)
6,326,816
375,114
18,445,660
A reconciliation between tax expense and the product of accounting
profit before income multiplied by the Group’s applicable income tax rate
is as follows:
Accounting profit before income tax
20,140,883
61,411,452
At the Group’s statutory income tax rate of 30% (2012: 30%)
6,042,265
18,423,435
Adjustment in respect of income tax of previous years
Income not assessable for income tax purposes
Derecognition of unrealised capital losses
Other
Income tax expense reported in the Statement of Comprehensive Income
363,232
–
–
6,979
11,321
–
(78,681)
6,326,816
3,925
18,445,660
IMF (AUSTRALIA) LTD | ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued) NOTE 9: INCOME TAX (CONTINUED)
45
Deferred income tax
Deferred income tax at 30 June relates to
the following:
CONSOLIDATED
Deferred income tax liabilities
Intangibles
Convertible notes
Financial instruments
Receivables
Gross deferred income tax liabilities
Deferred income tax assets
Depreciable assets
Accruals and provisions
Expenditure deductible for income tax over
time
Gross deferred income tax assets
Statement of
Financial Position
2012
$
2013
$
Statement of
Comprehensive Income
2012
$
2013
$
24,364,388
427,754
–
(325,686)
24,466,456
19,801,266
729,017
–
282,617
20,812,900
4,563,122
(301,263)
–
(608,302)
3,653,557
2,046,472
(286,381)
–
282,617
2,042,708
73,066
637,886
2,743
713,695
70,464
557,615
5,486
633,565
(2,602)
(80,271)
(6,712)
171
2,743
80,130
2,743
2,038,910
Net deferred income tax liabilities
23,752,761
20,179,335
Unrecognised temporary differences and tax losses
At 30 June 2013 the Group had no unrecognised temporary differences and tax losses.
NOTE 10: DIVIDENDS PAID AND PROPOSED
(a) Recognised amounts:
Declared and paid during the year
Dividends on ordinary shares
2013: Nil recognised
2012: Final 10.0 cents per share
(b) Unrecognised amounts:
Dividends on ordinary shares
2013: Final 5.0 cents per share unrecognised
2012: Nil unrecognised
Consolidated
2012
$
2013
$
–
–
–
–
12,320,766
12,320,766
6,160,470
–
6,160,470
–
–
–
On 21 August 2013 a final fully franked dividend of 5.0 cents per share was declared in respect of the 2013 financial
year. The record date for this dividend is 18 October 2013 and the payment date will be 31 October 2013.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued) 46
NOTE 10: DIVIDENDS PAID AND PROPOSED (CONTINUED)
On 29 June 2012 a final dividend of 10.0 cents per share was declared in respect of the 2012 financial year. The record
date for this dividend was 29 August 2012 and payment was made on 13 September 2012. This dividend was recognised
in the financial statements as at 30 June 2012.
(c) Franking credit balance
The amount of franking credits for the subsequent financial year are:
– Franking account balance as at the end of the financial year at 30%
– Franking debits that arose from the payment of last year’s final dividend
– Franking credits that arose from the payment of income tax payable
during the financial year
– Franking credits that will arise from the (refund)/payment of income tax
(receivable)/payable as at the end of the financial year
Impact of franking debits that will arise from the payment of the final dividend
(d) Tax rates
The tax rate at which paid dividends have been franked is 30% (2012: 30%).
NOTE 11: EARNINGS PER SHARE
IMF (Australia) Ltd
2012
$
2013
$
14,034,551
202,566
(5,280,329)
(2,640,036)
4,293,754
2,582,894
(1,540,364)
11,507,612
(2,640,201)
8,867,411
13,889,127
14,034,551
(5,280,329)
8,754,222
Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity
holders of the Parent by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share amounts are calculated by dividing the net profit attributable to ordinary equity holders
of the Parent (after deducting interest on the convertible notes) by the weighted average number of ordinary shares
outstanding during the year plus the weighted average number of ordinary shares that would be issued on the
conversion of all the dilutive potential ordinary shares into ordinary shares.
The following reflects the income and share data used in the basic and diluted earnings per share computations:
(a) Earnings used in calculating earnings per share
Consolidated
2012
$
2013
$
For basic earnings per share
Net profit attributable to ordinary equity holders of the Parent
13,814,067
42,965,792
For diluted earnings per share
Net profit from continuing operations attributable to ordinary equity holders
of the Parent
Tax effected interest expense on convertible notes
Net profit attributable to ordinary equity holders adjusted for the effect of
convertible note holders (used in calculating diluted EPS)
13,814,067
42,965,792
506,919
730,013
14,320,986
43,695,805
IMF (AUSTRALIA) LTD | ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued) NOTE 11: EARNINGS PER SHARE (CONTINUED)
47
(b) Weighted average number of shares
2013
Number
2012
Weighted average number of ordinary shares outstanding for basic
earnings per share
123,209,372
123,207,662
Effect of dilution:
Convertible notes
23,223,385
23,225,095
Weighted average number of ordinary shares adjusted for the effect of dilution
146,432,757
146,432,757
There are no instruments (e.g. share options) excluded from the calculation of diluted earnings per share that
could potentially dilute basic earnings per share in the future because they are anti-dilutive for either of the
periods presented.
There have been no transactions involving ordinary shares or potential ordinary shares that would significantly
change the number of ordinary shares outstanding between the reporting date and the date of completion of these
financial statements.
(c) Information on the classification of securities
(i) Options
As at 30 June 2013 there were no options issued over shares in the Company (2012: nil).
(ii) Convertible notes
The convertible notes as described in note 20 are considered to be potential ordinary shares and have been included
in the determination of diluted earnings per share to the extent they are dilutive. The convertible notes have not been
included in the determination of basic earnings per share.
NOTE 12: CURRENT ASSETS – CASH AND CASH EQUIVALENTS
Cash at bank
Short-term deposits
Consolidated
2012
$
2013
$
16,982,685
24,393,740
51,001,599
67,984,284
38,030,826
62,424,566
Cash at bank earns interest at floating rates based on daily bank deposit rates. The carrying amounts of cash and cash
equivalents represent fair value.
Short-term deposits are made for varying periods of between one day and six months, depending on the immediate
cash requirements of the Group, and earn interest at the respective short-term deposit rates. The Group’s short-term
deposits beyond three months can be withdrawn with one day’s notice without penalty.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued) 48
NOTE 12: CURRENT ASSETS – CASH AND CASH EQUIVALENTS (CONTINUED)
Reconciliation to Statement of Cash Flows
For the purposes of the Statement of Cash Flows, cash and cash equivalents comprise the following at 30 June:
Cash at bank
Short-term deposits
Consolidated
2012
$
2013
$
16,982,685
24,393,740
51,001,599
67,984,284
38,030,826
62,424,566
Bank Guarantees
Bank guarantees have been issued by the Group’s bankers as security for leases over premises, banking facilities
and as security for adverse costs orders for matters funded under litigation contracts. As at 30 June 2013 guarantees
of $1,650,819 were outstanding (2012: $1,776,558). The guarantees are secured by an offset arrangement with a term
deposit of $5,000,000 (2012: $5,000,000).
Set off of assets and liabilities
The Group has established a legal right of set off with two banks enabling it to set off certain deposits with the banks
against bank guarantees issued totalling $1,650,819 (2012: $1,776,558). The total of the bank guarantee facilities is
$5,000,000 (2012: $5,000,000). The guarantee facility is secured by an offset arrangement against term deposits of
$5,000,000 (2012: $5,000,000).
NOTE 13: TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Interest receivable
Non current
Trade receivables
Consolidated
2012
$
2013
$
23,374,525
65,485,741
553,453
23,927,978
942,058
67,227,799
Consolidated
$
$
15,252,854
15,252,854
16,330,417
16,330,417
i. Trade receivables are non-interest bearing and generally on 30-90 day terms. There is $19,979,327 included in
current trade receivables which is subject to appeal (2012: nil).
ii.
Interest receivable is payable upon the maturity of the Group’s short term deposits (between 30 and 90 days).
iii. Non-current trade receivables are non-interest bearing and occur as a result of settlements with a repayment plan
greater than 12 months or where a judgment is subject to an appeal and the appeal is not expected to be heard
within the next 12 months. A total of $15,252,854 is included in the non-current trade receivable balance in 2013
which is subject to appeal (2012: $14,399,200).
IMF (AUSTRALIA) LTD | ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued) NOTE 13: TRADE AND OTHER RECEIVABLES (CONTINUED)
49
At 30 June, the aging analysis of trade and other receivables is as follows:
0-30
days
$
31-90
days
$
91-180
days1
$
+180
days1
$
Total
$
2013 Consolidated
2012 Consolidated
1,485,626
5,111,891
3,627,455
28,955,860
39,180,832
65,191,121
1,933,096
–
16,433,999
83,558,216
1. These amounts are not due and therefore not impaired.
During the year the Group wrote off receivable balances totalling $957,224 (2012: $Nil).
(a) Fair value and credit risk
Due to the nature of these receivables, their carrying value is assumed to approximate their fair value. The maximum
exposure to credit risk is the fair value of receivables. Collateral is not held as security, nor is it the Group’s policy
to transfer (on-sell) receivables. Current receivables greater than 180 days are expected to be received within the
following twelve months.
NOTE 14: CURRENT ASSETS – OTHER ASSETS
Prepayments
2013
$
94,015
94,015
Consolidated
2012
$
380,355
380,355
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued) 50
NOTE 15: NON CURRENT ASSETS – PLANT AND EQUIPMENT
Reconciliation of carrying amounts at the beginning and end of the year
Cost
Accumulated depreciation
Net carrying amount
Cost
Balance as at 1 July 2011
Additions
Disposals
At 30 June 2012
Additions
Disposals
At 30 June 2013
Accumulated depreciation
Balance as at 1 July 2011
Depreciation charge for the year
Disposals
At 30 June 2012
Depreciation charge for the year
Disposals
At 30 June 2013
Net book value
At 30 June 2013
At 30 June 2012
2013
$
2,282,838
(1,660,413)
622,425
Consolidated
2012
$
2,212,718
(1,414,051)
798,667
Consolidated
Plant and
Equipment
$
1,694,950
652,262
(134,494)
2,212,718
70,120
–
2,282,838
1,254,450
238,409
(78,808)
1,414,051
246,362
–
1,660,413
622,425
798,667
The useful life of the assets was estimated between 5 to 15 years for both 2012 and 2013.
IMF (AUSTRALIA) LTD | ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued) NOTE 16: NON-CURRENT ASSETS – FINANCIAL ASSETS
51
At fair value
Shares – Australian listed – available-for-sale
Shares – United Kingdom listed – held for trading
Closing balance as at 30 June
(a) Listed shares
2013
$
–
18,890
18,890
Consolidated
2012
$
455,012
21,146
476,158
The fair value of listed financial assets has been determined based on quoted market prices (Level 1). Quoted market
price represents the fair value based on quoted prices on active markets as at the reporting date without any deduction
for transaction costs.
NOTE 17: INTANGIBLE ASSETS
(a) Reconciliation of carrying amounts at the beginning and end of the period
Year ended 30 June 2012
Cost (gross carrying amount)
Additions
Disposals
Write-down of Litigation Contracts In Progress
At 30 June 2012, net of accumulated amortisation and impairment
Year ended 30 June 2013
Balance as at 1 July 2012, net of accumulated amortisation and impairment
Additions
Disposals
Write-down of Litigation Contracts In Progress
At 30 June 2013, net of accumulated amortisation and impairment
(b) Description of Group’s intangible assets
Consolidated
$
59,625,438
53,955,208
(44,049,601)
(3,526,827)
66,004,218
66,004,218
40,265,789
(18,783,625)
(1,359,067)
86,127,315
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, the capitalisation of certain directly attributable internal costs of managing the litigation, such as certain wages,
occupancy costs, other out of pocket expenses and the capitalisation of borrowing costs as described in note 17(e).
The capitalised wages in 2013 equated to approximately 61% of the total salary costs (2012: 49%). The other internal
capitalised expenses equated to approximately 24% of overhead costs (2012: 23%).
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued) 52
NOTE 17: INTANGIBLE ASSETS (CONTINUED)
(b) Description of Group’s intangible assets (continued)
The carrying value of Litigation Contracts In Progress can be summarised as follows:
Capitalised external costs
Capitalised internal costs
Capitalised borrowing costs
Balance at 30 June
(c) Write off of intangible assets
Consolidated
2012
$
2013
$
58,629,287
46,324,595
19,005,769
14,883,061
8,492,259
86,127,315
4,796,562
66,004,218
The carrying amount of Litigation Contracts In Progress is written off when the Group decides not to pursue cases that
do not meet the Group’s required rate of return.
(d) Impairment testing of intangible assets
The recoverable amount of each of the Litigation Contracts In Progress is determined based on a value in use
calculation using cash flow projections based on financial budgets approved by management.
The following describes each key assumption on which management has based its cash flow projections when
determining the value in use of Litigation Contracts In Progress:
• The estimated cost to complete a Litigation Contract In Progress is budgeted, based on estimates provided by the
external legal advisors handling the litigation.
• The value to the Group of the Litigation Contracts In Progress, once completed, is estimated based on the expected
settlement or judgment amount of the litigation and the fees due to the Group under the litigation funding contract.
• The discount rate applied to the cash flow projections is based on the Group’s weighted average cost of capital,
which resulted in a discount rate of 13.5% (2012: 13.5%).
Any reasonable changes in the key assumptions to the cash flow projections would not result in the carrying value of
intangible assets exceeding its recoverable amount.
(e) Capitalised borrowing costs
The Group has determined that Litigation Contracts In Progress meet the definition of qualifying asset. The amount of
borrowing costs capitalised during the year ended 30 June 2013 was $3,695,697 (2012: $2,946,062). The rate used to
determine the borrowing costs eligible for capitalisation was 13.5%, which is the effective interest rate.
IMF (AUSTRALIA) LTD | ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued) NOTE 18: CURRENT LIABILITIES – TRADE AND OTHER PAYABLES
53
Trade payables1
Convertible note interest accrual
Wage accruals
Dividend payable
2013
$
6,514,925
1,011,570
306,661
–
7,833,156
Consolidated
2012
$
10,944,955
944,536
321,989
12,320,766
24,532,246
1. Trade payables are non-interest bearing and are normally settled on 30 day terms.
(a) Fair value
Due to the nature of trade and other payables, their carrying value is assumed to approximate their fair value.
NOTE 19: CURRENT AND NON-CURRENT LIABILITIES – PROVISIONS
Current
Annual leave and long service leave
Bonus
Non-Current
Long service leave
(a) Movement in provisions
As at 1 July 2012
Arising during the year
Utilised
As at 30 June 2013
Current 2013
Non-current 2013
Current 2012
Non-current 2012
2013
$
1,371,368
Consolidated
2012
$
1,241,389
273,350
6,877,300
1,644,718
8,118,689
229,026
229,026
259,530
259,530
Annual
leave
$
598,220
631,422
(549,685)
679,957
Employee
bonus
$
6,877,300
273,350
(6,877,300)
273,350
679,957
273,350
–
–
679,957
273,350
598,220
6,877,300
–
–
598,220
6,877,300
Long service
leave
$
902,699
118,472
(100,734)
920,437
691,411
229,026
920,437
643,169
259,530
902,699
Total
$
8,378,219
1,023,244
(7,527,719)
1,873,744
1,644,718
229,026
1,873,744
8,118,689
259,530
8,378,219
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued) 54
NOTE 19: CURRENT AND NON-CURRENT LIABILITIES – PROVISIONS (CONTINUED)
(b) Nature and timing of provisions
Adverse costs
There is no provision for adverse costs as at 30 June 2013 as the Group does not have any unpaid outstanding adverse
costs orders.
Annual leave and long service leave
Refer to note 2 for the relevant accounting policy and discussion of significant estimations and assumptions applied in
the measurement of this provision.
NOTE 20: NON-CURRENT LIABILITIES
Convertible notes 1
1.
Includes transaction costs of $1,366,366.
2013
$
36,324,499
Consolidated
2012
$
34,945,316
On 13 December 2010 the Company issued 23,702,415 convertible notes raising total capital of $39,108,985 (excluding
costs). Each convertible note has a face value of $1.65 and has the right to convert into one ordinary share. The
Noteholders have been granted security over the Company’s assets.
The convertible notes are convertible at the option of the Noteholder by 31 December 2014. The Company has the
ability to request the Noteholder to elect to either convert or be repaid after 31 December 2012. During the period
1,710 Noteholders elected to convert their convertible notes into shares (2012: 5,946 converted). Accordingly as at
30 June 2013, there were 23,223,385 convertible notes on issue with a face value of $38,318,585 (2012: 23,225,095
convertible notes on issue with a face value of $38,321,407).
The Company is required to pay the Noteholders interest of 10.25% per annum, payable quarterly in arrears, with
the first interest quarter being 31 December 2010. The application of AASB 123 Borrowing Costs (revised 2007) has
resulted in the capitalisation of $8,492,259 (2012: $4,796,562) as part of the Litigation Contracts in Progress intangible
assets deemed to be qualifying assets post the application date of AASB 123 (revised) of 1 July 2009 (refer to note 17).
At 30 June 2013, the fair value of the convertible note liability is $39,651,593.
The application of AASB 132 Financial Instruments: Disclosure and Presentation has resulted in $4,068,682 (net of
transaction costs before tax) of these convertible notes being classified as equity.
IMF (AUSTRALIA) LTD | ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued) NOTE 21: CONTRIBUTED EQUITY
55
Contributed equity
Issued and fully paid ordinary shares
(a) Ordinary shares
2013
$
41,912,195
Consolidated
2012
$
41,909,483
Effective 1 July 1998, the Corporations legislation abolished the concepts of authorised capital and par value shares.
Accordingly, the Company does not have authorised capital or par value in respect of its issued capital.
Fully paid ordinary shares carry one vote per share and the right to dividends.
Movement in ordinary shares
As at 30 June 2011
Convertible notes converted
As at 30 June 2012
Convertible notes converted
As at 30 June 2013
(b) Share options
Number
$
123,201,716
41,900,322
5,946
123,207,662
1,710
123,209,372
9,161
41,909,483
2,712
41,912,195
At 30 June 2013, there were no unissued ordinary shares in respect of which options were outstanding (2012: nil).
(c) Capital management
Capital includes convertible notes and equity attributable to the equity holders of the Parent. When managing capital,
Management’s objective is to ensure the Group continues as a going concern as well as to maintain optimal returns to
shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that ensures
the lowest cost of capital available to the Group.
The earnings of the Group are lumpy and this is forecast to continue into the future. Management’s policy is to pay
dividends to shareholders from earnings where there is capital surplus to the needs of the business. The present view
of Management is that the business requires a cash balance of between $70 million and $75 million.
At 30 June 2013 the cash balance of the Group was below its preferred optimum level of between $70 million to
$75 million. However, Management expects the cash balance to be excess of this level as trade receivables are
collected (refer to note 13).
The Group has undertaken to the convertible note holders that it will not pay its shareholders a dividend if its cash
balance falls below $40 million. The Group is not subject to any externally imposed capital requirements.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued) 56
NOTE 22: RETAINED EARNINGS AND RESERVES
(a) Movements in retained earnings were as follows:
Balance 1 July
Net profit for the year
Dividend paid
Dividend payable
Balance 30 June
(b) Movements in reserves were as follows:
At 1 July 2011
At 30 June 2012
Transfer to profit and loss
At 30 June 2013
(c) Nature and purpose of reserves
Consolidated
2012
$
2013
$
62,542,186
38,057,246
13,814,067
42,965,792
–
(6,160,086)
–
76,356,253
(12,320,766)
62,542,186
Option
premium
reserve
$
3,403,720
3,403,720
–
3,403,270
Net unrealised
gains reserve
$
–
Convertible
notes reserve
$
3,832,216
Total reserves
$
7,235,936
30,332
(30,332)
–
3,832,216
7,266,268
–
3,832,216
(30,332)
7,235,936
(i) Option premium reserve
This reserve is used to record the value of equity benefits provided to employees and directors, including
Key Management Personnel, as part of their remuneration. Refer to note 25 for further details of these payments.
(ii) Net unrealised gains reserve
This reserve is used to record the unrealised gain on available-for-sale investments.
(iii) Convertible note reserve
This reserve is used to record the equity portion of the convertible notes.
IMF (AUSTRALIA) LTD | ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued) NOTE 23: STATEMENT OF CASH FLOWS RECONCILIATION
57
(a) Reconciliation of net profit after tax to net cash flows used in operations:
Consolidated
2012
$
2013
$
13,814,067
42,965,792
(42,647,840)
(25,421,402)
246,362
(2,296)
238,409
(19,069)
1,381,953
1,385,678
37,854
(890,861)
(25,739)
(12,303)
32,140
55,686
43,577,383
(46,418,669)
286,341
319,529
(20,123,097)
(6,378,780)
(4,445,357)
5,013,364
67,034
(6,224,895)
3,573,427
(15,429,490)
(26,805,154)
(35,118)
2,003,961
2,038,911
13,851,878
(10,379,993)
Net profit attributable to members of the Parent
Adjustments for:
Net impact of the reclassification of litigation intangibles related cashflows
to cashflows from investing activities
Depreciation
Loss recognised on remeasurement to fair value
Convertible note accretion
Profit on sale of shares
Unrealised foreign exchange (gain)/loss
Other
Changes in assets and liabilities
Decrease/(Increase) in receivables
Decrease/(Increase) in other current assets
Decrease/(Increase) in intangible assets
Increase/(Decrease) in trade creditors and accruals
Increase/(Decrease) in interest accruals
Increase/(Decrease) in provisions
Increase/(Decrease) in deferred tax liabilities
Increase/(Decrease) in current income tax liability
Net cash (used in) operating activities
(b) Disclosure of financing facilities
Refer to note 12.
NOTE 24: RELATED PARTY DISCLOSURE
Transactions with director related entities
The following table provides the total amount of transactions that were entered into with related parties for
the relevant financial year.
Transactions with related parties
2013
$
22,937
Consolidated
2012
$
3,204
During the year the Group obtained legal advice from Hardy Bowen, a legal firm associated with Director
Michael Bowen. The legal advice was obtained at normal market prices.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued)
58
NOTE 25: KEY MANAGEMENT PERSONNEL
(a) Details of Key Management Personnel
There were no changes to Key Management Personnel after the reporting date and before the date the financial report
was authorised for issue.
(b) Compensation of Key Management Personnel
Short-term employee benefits – salaries and wages
Short-term employee benefits – accrued and unpaid 1
Post-employment benefits
Consolidated
2012
$
2013
$
3,631,962
3,465,437
–
3,925,000
98,038
3,730,000
94,563
7,485,000
1. As at 30 June 2012 bonuses had been declared to be payable over the following nine month period.
(c) Option holdings of Key Management Personnel (Consolidated)
There were no options held by Key Management Personnel at 30 June 2012 or 30 June 2013.
(d) Shareholdings of Key Management Personnel
Directors
Robert Ferguson
Hugh McLernon
John Walker
Alden Halse
Michael Bowen
Clive Bowman
Executives
Charlie Gollow
Diane Jones
Directors
Robert Ferguson
Hugh McLernon
John Walker
Alden Halse
Michael Bowen
Clive Bowman
Executives
Charlie Gollow
Diane Jones
Balance
01-Jul-12
Received as
remuneration
Options
exercised
Net change
other
Balance
30-Jun-13
2,500,000
8,301,846
5,667,792
876,251
813,751
1,013,941
460,000
20,000
19,653,581
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(647,000)
(563,500)
(709,500)
–
–
–
1,853,000
7,738,346
4,958,292
876,251
813,751
1,013,941
–
–
(1,920,000)
460,000
20,000
17,733,581
Balance
01-Jul-11
Received as
remuneration
Options
exercised
Net change
other
Balance
30-Jun-12
2,500,000
9,518,975
6,884,920
876,251
813,751
1,013,941
460,000
20,000
22,087,838
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,217,129)
(1,217,128)
–
–
–
2,500,000
8,301,846
5,667,792
876,251
813,751
1,013,941
–
–
(2,434,257)
460,000
20,000
19,653,581
IMF (AUSTRALIA) LTD | ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued) NOTE 25: KEY MANAGEMENT PERSONNEL (CONTINUED)
59
(d) Shareholdings of Key Management Personnel (continued)
All equity transactions with Key Management Personnel other than those arising from the exercise of remuneration
options have been entered into under terms and conditions no more favourable than those the Group would have
adopted if dealing at arm’s length.
(e) Loans to Key Management Personnel
There have been no loans provided to Key Management Personnel in 2013 (2012: nil).
NOTE 26: SHARE-BASED PAYMENT PLAN
(a) Recognised share-based payment expenses
There were no options issued to employees during the year and the last time options were issued to employees was
1 July 2006.
(b) Types of share-based payment plans
In 2007 the Company implemented a STI, which replaced the ESOP, and which may also, at the discretion of the
Remuneration Committee, provide benefits to employees in the form of share based payments. STI payments to date
have been settled in cash.
Previously, the Company had an ESOP, which provided benefits to directors and employees in the form of share
based payments. The options were not quoted on the ASX and the granting of the options under the ESOP does not
entitle any option holder to any dividend or voting rights or any other rights held by a shareholder, until exercise of
the options. Each option entitled the option holder to one ordinary share in the Parent on exercise. There are no cash
settlement alternatives.
(c) Summaries of options
There are no options outstanding at 30 June 2013 or 30 June 2012.
(d) Weighted average remaining contractual life
There are no options outstanding at 30 June 2013 or 30 June 2012.
(e) Range of exercise prices
There are no options outstanding at 30 June 2013 or 30 June 2012.
(f) Weighted average fair value
There are no options outstanding at 30 June 2013 or 30 June 2012.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued) 60
NOTE 27: COMMITMENTS AND CONTINGENCIES
(a) Operating lease commitments – Group as lessee
The Group has entered into commercial leases for its premises. These leases have a life of between one and five
years with renewal options included in the contracts. There are no restrictions placed upon the lessee by entering into
these leases.
Future minimum rentals payable under non-cancellable operating leases as at 30 June are as follows:
Within one year
After one year but no more than five years
After more than five years
Total minimum lease payments
(b) Remuneration commitments
Commitments for the payment of salaries and other remuneration under
long-term employment contracts in existence at the reporting date but not
recognised as liabilities payable:
Within one year
After one year but no more than five years
2013
$
697,292
1,122,354
–
1,819,646
Consolidated
2012
$
671,597
1,743,464
–
2,415,061
Consolidated
2012
$
2013
$
4,419,257
–
4,419,257
3,386,831
–
3,386,831
Amounts disclosed as remuneration commitments include commitments arising from the service contracts of, and
bonuses payable to, directors and executives referred to in the Remuneration Report of the Directors’ Report that are
not recognised as liabilities and are not included in the compensation of Key Management Personnel.
(c) Contingencies
As at 30 June 2013, the Group has four cases that are under appeal. The total income recognised by the Group from
these cases in the current financial year is $34,373,108 (previous financial year: $14,506,945). The total current and non-
current receivables as at 30 June 2013 relating to the cases under appeal is $35,202,181.
The Group believes that it is possible, but not probable that these appeals will succeed against the Group’s clients.
Accordingly, no provision for any liability has been recognised in the financial statements.
NOTE 28: ECONOMIC DEPENDENCY
IMF (Australia) Ltd is not economically dependent on any other entity.
NOTE 29: EVENTS AFTER THE REPORTING DATE
On 20 August 2013 a piece of litigation funded by the Group was settled.
IMF (AUSTRALIA) LTD | ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued) NOTE 30: AUDITOR’S REMUNERATION
The auditor of IMF (Australia) Ltd is Ernst & Young.
61
Amounts received or due and receivable by Ernst & Young for:
An audit or review of the financial report of the Parent and any other entity
in the consolidated group
Other services in relation to the Parent and any other entity in the
consolidated group:
Tax compliance
NOTE 31: PARENT ENTITY INFORMATION
Information relating to IMF (Australia) Ltd:
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Issued capital
Retained earnings
Option premium reserve
Convertible note reserve
Unrealised gains reserve
Total shareholders’ equity
Profit or loss of the Parent
Total comprehensive income of the Parent
Consolidated
2012
$
2013
$
259,566
233,750
109,301
368,867
86,710
320,460
2013
$
2012
$
86,585,654
129,880,386
198,639,840
226,292,198
(22,521,126)
(69,098,050)
(83,032,440)
115,607,400
(124,482,231)
101,809,967
41,912,195
41,909,483
66,459,269
52,634,216
3,403,720
3,403,720
3,832,216
3,832,216
–
115,607,400
30,332
101,809,967
13,825,053
13,825,053
44,175,669
44,216,031
The Parent has not entered into any guarantees with any of its subsidiaries.
Details of the contingent liabilities of the Parent are contained in note 27(c). There are no contingent liabilities in relation
to the subsidiaries.
Details of the contractual commitments of the Parent entity are contained in note 27(a) and 27(b). There are no
contractual commitments in relation to the subsidiaries.
NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued) 62
NOTE 31: PARENT ENTITY INFORMATION (CONTINUED)
Tax consolidation
(i) Members of the tax consolidated group
IMF and its 100% owned Australian subsidiary have formed a tax consolidated group with effect from 1 July 2002.
IMF is the head of the tax consolidated group.
(ii) Tax effect accounting by members of the tax consolidated group
Members of the tax consolidated group have not entered into a tax sharing/funding agreement. Under UIG 1052:
Tax Consolidation Accounting, where a tax consolidated group has not entered into a tax sharing/funding agreement,
the assumption of current tax liabilities and tax losses by the Parent is recognised as a contribution/distribution of
the subsidiary’s equity accounts. The Group has applied the group allocation tax payer approach in determining the
appropriate amount of current and deferred taxes to allocate to the members of the tax consolidated group.
Tax consolidation contributions/(distributions)
IMF has recognised the following amounts as tax-consolidation contribution adjustments:
Total increase in tax liability and cost of investment in subsidiaries of
IMF (Australia) Ltd
IMF (Australia) Ltd
2012
$
2013
$
(3,398)
(27,024)
The consolidated financial statements include the financial statements of IMF and the subsidiaries listed in the
following table.
Name
Country of
Incorporation
Percentage owned
2012
%
2013
%
2013
$
Investment
2012
$
Financial Redress Pty Ltd 1
Australia
Bentham Holdings Inc.
Bentham Capital LLC
Security Finance LLC
USA
USA
USA
100
100
100
100
100
100
100
not incorporated
16,361,043
16,364,441
1
–
–
1
–
–
1 The movement in the investment reflects a tax consolidation adjustment to the Parent’s investment in the subsidiary as a result of the
transfer of the subsidiary’s income tax liability to the Parent.
IMF (AUSTRALIA) LTD | ANNUAL REPORTNOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2013 (continued) DIRECTORS’ DECLARATION
In accordance with a resolution of the Directors of IMF (Australia) Ltd, we state that:
63
In the opinion of the Directors:
a. the financial statements and notes of IMF (Australia) Ltd for the financial year ended 30 June 2013 are in accordance
with the Corporations Act 2001, including:
i. giving a true and fair view of its financial position as at 30 June 2013 and performance for the year ended on
that date; and
ii. complying with Accounting Standards (including the Australian Accounting Interpretations) and the Corporations
Regulations 2001;
b. the financial statements and notes also comply with International Financial Reporting Standards as disclosed in
note 2;
c.
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
d. this declaration has been made after receiving the declarations required to be made to the Directors in accordance
with section 295A of the Corporations Act 2001 for the financial year ending 30 June 2013.
On behalf of the Board
ROBERT FERGUSON
Non-Executive Chairman
Dated this 21st day of August 2013
HUGH MCLERNON
Managing Director
INDEPENDENT AUDITOR’S REPORT
64
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
Independent audit report to members of IMF (Australia) Ltd
Report on the financial report
We have audited the accompanying financial report of IMF (Australia) Ltd, which comprises the
consolidated statement of financial position as at 30 June 2013, the consolidated statement of
comprehensive income, the consolidated statement of changes in equity and the consolidated
statement of cash flows for the year then ended, notes comprising a summary of significant accounting
policies and other explanatory information, and the directors' declaration of the consolidated entity
comprising the company and the entities it controlled at the year's end or from time to time during the
financial year.
Directors' responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a
true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001
and for such internal controls as the directors determine are necessary to enable the preparation of
the financial report that is free from material misstatement, whether due to fraud or error. In Note 2,
the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial
Statements, that the financial statements comply with International Financial Reporting Standards.
Auditor's responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with Australian Auditing Standards. Those standards require that we comply with
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
reasonable assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial report. The procedures selected depend on the auditor's judgment, including the
assessment of the risks of material misstatement of the financial report, whether due to fraud or error.
In making those risk assessments, the auditor considers internal controls relevant to the entity's
preparation and fair presentation of the financial report in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness
of the entity's internal controls. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by the directors, as well as
evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Independence
In conducting our audit we have complied with the independence requirements of the Corporations Act
2001. We have given to the directors of the company a written Auditor’s Independence Declaration, a
copy of which is included in the directors’ report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
GHM:MM:IMF:139
IMF (AUSTRALIA) LTD | ANNUAL REPORT
INDEPENDENT AUDITOR’S REPORT
65
Opinion
In our opinion:
a.
the financial report of IMF (Australia) Ltd is in accordance with the Corporations Act 2001,
including:
i
ii
giving a true and fair view of the consolidated entity's financial position as at 30 June
2013 and of its performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations
2001; and
b.
the financial report also complies with International Financial Reporting Standards as
disclosed in Note 2.
Report on the remuneration report
We have audited the remuneration report included in pages 15 to 20 of the directors' report for the
year ended 30 June 2013. The directors of the company are responsible for the preparation and
presentation of the remuneration report in accordance with section 300A of the Corporations Act
2001. Our responsibility is to express an opinion on the remuneration report, based on our audit
conducted in accordance with Australian Auditing Standards.
Opinion
In our opinion, the remuneration report of IMF (Australia) Ltd for the year ended 30 June 2013,
complies with section 300A of the Corporations Act 2001.
Ernst & Young
G H Meyerowitz
Partner
Perth
21 August 2013
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
GHM:MM:IMF:139
CORPORATE GOVERNANCE STATEMENT
66
The Board of Directors of IMF (Australia) Ltd (“IMF”) is responsible for the corporate governance of the Group. The
Board guides and monitors the business and affairs of IMF on behalf of the shareholders by whom they are elected
and to whom they are accountable. The following table is a summary of the ASX Corporate Governance Principles
and Recommendations and the Group’s compliance with these guidelines and should be read in conjunction with the
further details and rationale of the Company’s corporate governance practices in this report.
Recommendation
Comply Yes / No
1.1
Companies should establish the functions reserved to the Board and those delegated to
senior executives and disclose those functions.
1.2 Companies should disclose the process for evaluating the performance of senior executives.
1.3 Companies should provide the information indicated in the Guide to reporting on Principle 1.
2.1 A majority of the Board should be independent directors.
2.2 The chair should be an independent director.
2.3 The roles of chair and chief executive officer should not be exercised by the same individual.
2.4 The Board should establish a nomination committee.
2.5 Companies should disclose the process for evaluating the performance of the Board, its
committees and individual directors.
2.6 Companies should provide the information indicated in the Guide to reporting on Principle 2.
3.1 Companies should establish a code of conduct and disclose the code or a summary of the
code as to:
•
•
•
the practices necessary to maintain confidence in the Company’s integrity;
the practices necessary to take into account their legal obligations and the reasonable
expectations of their stakeholders; and
the responsibility and accountability of individuals for reporting and investigating reports
of unethical practices.
3.2 Companies should establish a policy concerning diversity and disclose the policy or a
summary of that policy. The policy should include requirements for the board to establish
measurable objectives for achieving gender diversity for the board to assess annually both
the objectives and progress in achieving them.
3.3 Companies should disclose in each annual report the measurable objectives for achieving
gender diversity set by the board in accordance with the diversity policy and progress
towards achieving them.
3.4 Companies should disclose in each annual report the proportion of women employees in the
whole organisation, women in senior executive positions and women on the board.
3.5 Companies should provide the information indicated in the Guide to reporting on Principle 3.
4.1
The Board should establish an audit committee.
4.2 The audit committee should be structured so that it:
• consists of only non-executive directors:
• consists of a majority of independent directors;
•
• has at least three members.
is chaired by an independent chair, who is not chair of the Board; and
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
IMF (AUSTRALIA) LTD | ANNUAL REPORT
Recommendation
4.3 The audit committee should have a formal charter.
4.4 Companies should provide the information indicated in the Guide to reporting on Principle 4.
5.1 Companies should establish written policies designed to ensure compliance with ASX Listing
Rule disclosure requirements and to ensure accountability at a senior executive level for that
compliance and disclose those policies or a summary of those policies.
5.2 Companies should provide the information indicated in the Guide to reporting on Principle 5.
6.1 Companies should design a communication policy for promoting effective communication
with shareholders and encouraging their participation at general meetings and disclose their
policy or a summary of that policy.
6.2 Companies should provide the information indicated in the Guide to reporting on Principle 6.
7.1 Companies should establish policies for the oversight and management of material business
risks and disclose a summary of those policies.
7.2 The Board should require management to design and implement the risk management
and internal control system to manage the Company’s material business risks and report
to it on whether those risks are being managed effectively. The Board should disclose that
management has reported to it as to the effectiveness of the Company’s management of its
material business risks.
7.3 The Board should disclose whether it has received assurance from the Chief Executive
Officer and the Chief Financial Officer that the declaration provided in accordance with
Section 295A of the Corporations Act is founded on a sound system of risk management
and internal control and that the system is operating effectively in all material respects in
relation to reporting risks.
7.4 Companies should provide the information indicated in the Guide to reporting on Principle 7.
8.1
The Company should establish a remuneration committee.
8.2 The remuneration committee should be structured so that it:
• consists of a majority of independent directors;
•
• has at least three members.
is chaired by an independent chair; and
8.3 Companies should clearly distinguish the structure of non-executive directors’ remuneration
from that of directors and senior executives.
8.4 Companies should provide the information indicated in the Guide to reporting on Principle 8.
Comply Yes / No
67
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
CORPORATE GOVERNANCE STATEMENT (continued) 68
The Company’s corporate governance practices were in place throughout the year ended 30 June 2013.
Various corporate governance practices are discussed within this statement. For further information on corporate
governance policies adopted by the Company refer to our website www.imf.com.au.
Board Functions
The Board seeks to identify the expectations of the shareholders, as well as other regulatory and ethical expectations
and obligations. In addition, the Board is responsible for identifying areas of significant business risk and ensuring
arrangements are in place to adequately manage those risks.
To ensure that the Board is well equipped to discharge its responsibilities it has established guidelines for the
nomination and selection of directors and for the operation of the Board.
The responsibility for the operation and administration of the Company is delegated, by the Board, to the Managing
Director and the executive management team. The Board ensures that this team is appropriately qualified and
experienced to discharge their responsibilities and has in place procedures to assess the performance of the Managing
Director and the executive management team.
Whilst at all times the Board retains full responsibility for guiding and monitoring the Group, in discharging its
stewardship it makes use of sub-committees. Specialist committees are able to focus on a particular responsibility and
provide informed feedback to the Board.
To this end the Board has established the following committees:
• Audit;
• Remuneration; and
• Nomination.
The roles and responsibilities of these committees are discussed in this Corporate Governance Statement.
The Board is responsible for ensuring that Management’s objectives and activities are aligned with the expectations
and risks identified by the Board. The Board has a number of mechanisms in place to ensure this is achieved including:
• Board approval of a strategic plan designed to meet stakeholders’ needs and manage business risk;
• ongoing development of the strategic plan and approving initiatives and strategies designed to ensure the
continued growth and success of the Group; and
•
implementation of budgets by Management and monitoring progress against budget – via the establishment and
reporting of both financial and non financial key performance indicators.
Other functions reserved to the Board include:
• approval of the annual and half-yearly financial reports;
• approving and monitoring the progress of major capital expenditure, capital management, and acquisitions
and divestitures;
• ensuring that any significant risks that arise are identified, assessed, appropriately managed and monitored; and
•
reporting to shareholders.
IMF (AUSTRALIA) LTD | ANNUAL REPORTCORPORATE GOVERNANCE STATEMENT (continued) Structure of the Board
69
The skills, experience and expertise relevant to the position of director held by each director in office at the date of the
annual report is included in the Directors’ Report. Directors of IMF are considered to be independent when they are
independent of Management and free from any business of other relationship that could materially interfere with, or
could reasonably be perceived to materially interfere with, the exercise of their unfettered and independent judgement.
The composition of the Board consists of three executive directors and three independent non-executive directors. The
Board believes that the majority of the individuals on the Board can, and do, make independent judgements in the best
interests of the Group on all relevant issues, notwithstanding that the Board comprises three independent directors and
three non-independent directors.
The Board has in place a number of policy measures to ensure that independent judgment is achieved and maintained
in respect of its decision-making processes, including:
•
•
•
the Chairman is an independent director and has a casting vote at Board meetings where the votes of the directors
are tied;
the Chairman has been appointed for a fixed term ending on 4 November 2014;
the directors are able to obtain independent professional advice at the expense of the Group;
• Directors who have a conflict of interest in relation to a particular item of business must absent themselves from
the Board meeting before commencement of discussion on the topic; and
• at least half of the Board consists of independent directors.
In the context of director independence, ‘materiality’ is considered from both the Group and individual director
perspective. The determination of materiality requires consideration of both quantitative and qualitative elements.
An item is presumed to be quantitatively immaterial if it is equal to or less than 5% of the appropriate base amount.
It is presumed to be material (unless there is qualitative evidence to the contrary) if it is equal to or greater than 10% of
the appropriate base amount. Qualitative factors considered include whether a relationship is strategically important,
the competitive landscape, the nature of the relationship and the contractual or other arrangements governing it and
other factors that point to the actual ability of the director in question to shape the direction of the Group.
In accordance with the definition of independence above, and the materiality thresholds set, the following directors of
IMF are considered to be independent:
Name
Robert Ferguson
Alden Halse
Michael Bowen
Position
Chairman
Non-Executive Director
Non-Executive Director
There are procedures in place, agreed by the Board, to enable directors in furtherance of their duties to seek
independent professional advice at the Company’s expense.
The position held by each director in office at the date of this report is as follows:
Name
Robert Ferguson
Hugh McLernon
John Walker
Clive Bowman
Alden Halse
Michael Bowen
Position
Non-Executive Chairman
Managing Director
Executive Director – Director of Marketing
Executive Director – Director of Operations
Non-Executive Director
Non-Executive Director
For additional details regarding Board appointments, please refer to the Group’s website.
CORPORATE GOVERNANCE STATEMENT (continued) 70
Trading Policy
Under the Company’s Securities Trading Policy, an executive or director must not trade in any securities of the
Company at any time when they are in possession of unpublished, price-sensitive information in relation to
those securities.
The policy allows dealing in the Company’s securities during defined Trading Windows, being the four weeks after:
• one day following the announcement of the half-yearly and full year results as the case may be;
• one day following the holding of the Annual General Meeting;
• one day after any other form of profit guidance announcement is given to the market; and
• a period commencing on the day after the issue of a prospectus offering the Company’s securities (or a document
containing equivalent information) and ending on the day the offer closes.
Only in exceptional circumstances will approval be forthcoming outside of the Trading Windows.
As required by the ASX Listing Rules, the Company notifies the ASX of any transaction conducted by directors in the
securities of the Company. A copy of the Company’s trading policy can be obtained from its website.
Audit Committee
The Board has established an Audit Committee, which operates under a charter approved by the Board. It is the
Board’s responsibility to ensure that an effective internal control framework exists within the Group. This includes
internal controls to deal with both the effectiveness and efficiency of significant business processes, the safeguarding
of assets, the maintenance of proper accounting records, and the reliability of financial information as well as non-
financial considerations such as the benchmarking of operational key performance indicators. The Board has
delegated responsibility for establishing and maintaining a framework of internal control and ethical standards to the
Audit Committee.
The Committee also provides the Board with additional assurance regarding the reliability of financial information for
inclusion in the financial reports. All members of the Audit Committee are non-executive directors.
The members of the Audit Committee during the year were: Alden Halse (Chairman), Michael Bowen, and
Robert Ferguson.
For details on the number of meetings of the Audit Committee held during the year and the attendees at those
meetings, refer to the Directors’ Report.
Risk
The Board determines the Group’s risk profile and is responsible for overseeing and approving risk management
strategy and policies, internal compliance and internal control. The Company’s process of risk management and
internal compliance and control includes:
• establishing the Company’s goals and objectives, and implementing and monitoring strategies and policies to
achieve these goals and objectives;
• continuously identifying and measuring risks that might impact upon the achievement of the Company’s goals and
objectives, and monitoring the environment for emerging factors and trends that affect these risks;
•
formulating risk management strategies to manage identified risks, and designing and implementing appropriate
risk management policies and internal controls; and
• monitoring the performance of, and continuously improving the effectiveness of, risk management systems and
internal compliance and controls, including an annual assessment of the effectiveness of risk management and
internal compliance and control.
IMF (AUSTRALIA) LTD | ANNUAL REPORTCORPORATE GOVERNANCE STATEMENT (continued) To this end, comprehensive practices are in place that are directed towards achieving the following objectives:
71
• effectiveness and efficiency in the use of the Company’s resources;
• compliance with applicable laws and regulations; and
• preparation of reliable published financial information.
The Board oversees an annual assessment of the effectiveness of risk management and internal compliance and
control. The responsibility for undertaking and assessing risk management and internal control effectiveness is
delegated to Management. Management is required by the Board to assess risk management and associated
internal compliance and control procedures and report back on the efficiency and effectiveness of the Group’s
risk management.
Managing Director and Chief Financial Officer Certification
The Managing Director and Chief Financial Officer have provided a written statement to the Board that:
•
•
their view provided on the Group’s financial report is founded on a sound system of risk management and internal
compliance and control which implements the financial policies adopted by the Board; and
the Group’s risk management and internal compliance and control system is operating effectively in all
material respects.
Performance
The performance of the Board and key executives is reviewed regularly against both measurable and qualitative
indicators. The performance criteria against which directors and executives are assessed are aligned with the financial
and non-financial objectives of the Group.
In order to ensure that the Board continues to discharge its responsibilities in an appropriate manner, the performance
of directors is to be reviewed annually by the chairperson.
The Board of Directors aims to ensure that shareholders are informed of all information necessary to assess the
performance of the directors. Information is communicated to shareholders through:
•
•
•
the annual report which is distributed to all shareholders;
the half-yearly report circulated to the Australian Securities Exchange and the Australian Securities & Investments
Commission; and
the Annual General Meeting and other shareholder meetings so called to obtain approval of Board action
as appropriate.
Remuneration
It is the Company’s objective to provide maximum stakeholder benefit from the retention of a high quality Board
and executive team by remunerating directors and key executives fairly and appropriately with reference to relevant
employment market conditions. To assist in achieving this objective, the Remuneration Committee links the nature
and amount of executive directors’ and officers’ remuneration to the Company’s financial and operational performance.
The expected outcomes of the remuneration structure are:
•
retention and motivation of key executives;
• attraction of high quality management to the Group; and
• performance incentives that allow executives to share in the success of the Group.
For a full discussion of the Company’s remuneration philosophy and framework and the remuneration received by
directors and executives in the current period please refer to the Remuneration Report, which is contained within the
Directors’ Report.
CORPORATE GOVERNANCE STATEMENT (continued) 72
There is no scheme to provide retirement benefits to non-executive directors.
The Board is responsible for determining and reviewing compensation arrangements for the directors themselves and
the Managing Director and executive team. The Board has established a Remuneration Committee, comprising three
non-executive directors. Members of the Remuneration Committee throughout the year were:
Michael Bowen (Chairman)
Alden Halse
Robert Ferguson
For details on the number of meetings of the Remuneration Committee held during the year and the attendees at those
meetings, refer to the Directors’ Report.
Diversity
It is the Company’s objective to support female representation at senior leadership and Board levels. Although
the Company advocates greater transparency and measurability of progress, it does not endorse female
participation quotas.
The Company has implemented policies that promote the following:
• equal opportunity based upon capabilities and performance;
• attraction and retention of a diverse range of talented people;
• awareness of the differing needs of a diverse range of employees;
• provision of flexible work practices and policies to support all employees; and
• promotion of a culture that is free from discrimination, harassment and bullying.
The Board receives a report on an annual basis that provides the following information:
•
•
•
total female employees: 12 (2012: 10); total employees: 28 (2012: 26);
total female investment managers: 2 (2012: 2); total investment managers: 12 (2012: 12); and
total female Key Management Personnel: 1 (2012: 1); total Key Management Personnel: 5 (2012: 5).
The IMF Nomination Committee will endeavour to improve the diversity of the Board at any time nominations are
required to fill a Board position.
IMF (AUSTRALIA) LTD | ANNUAL REPORTCORPORATE GOVERNANCE STATEMENT (continued) SHAREHOLDER INFORMATION
Additional information required by the Australian Securities Exchange and not shown elsewhere in this report is as
follows. The information is current as at 2 August 2013.
73
(a) Distribution of Shareholders
Ordinary Share Capital
123,207,662 fully paid ordinary shares are held by 3,360 individual shareholders. All issued ordinary shares carry one
vote per share and carry the right to dividends.
Convertible Notes
There are 23,207,662 convertible notes issued held by 760 individual Noteholders. Each convertible note has a right to
convert to one ordinary share, however, until the convertible note is converted, the Noteholder does not have a right to
vote and the convertible notes do not carry the right to dividends.
Options
There are no options issued over ordinary shares.
The number of shareholders by size of holding, in each class are:
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
(b) Substantial Shareholders
Number
Fully paid
ordinary shares
Number
927
2,037
989
1,066
93
5,112
537,378
5,876,565
7,632,776
27,675,377
81,487,276
123,209,372
250
164
117
161
32
724
Convertible
notes
110,828
409,853
945,341
4,675,975
17,081,388
23,223,385
The names of the substantial shareholders listed in the Company’s register as at 2 August 2013 are:
Shareholder
Acorn Capital Limited
Hugh McLernon, McLernon Group Superannuation Pty Limited, Christine
McLernon, Toronto Holdings Pty Limited and Capital Consulting Pty Limited
John Walker, Legal Precedents Pty Limited, Namagi Pty Limited, Mary Walker,
Don Walker, Margaret Walker and Caroline Walker
No. of ordinary
Shares
% of
issued capital
11,743,719
7,738,346
4,958,291
24,440,356
9.53%
6.28%
4.02%
19.84%
74
(c) 20 Largest Holders of Quoted Equity Securities as at 2 August 2013
Ordinary Shares
J P Morgan Nominees Australia Limited
National Nominees Limited
HSBC Custody Nominees (Australia) Limited
JP Morgan Nominees Australia Limited
1.
2.
3.
4.
5. McLernon Group Superannuation Pty Ltd
6.
7.
8.
9.
Thorney Holdings Pty Ltd
HSBC Custody Nominees (Australia) Limited – A/C 2
Legal Precedents Pty Limited
Mr Hugh McLernon
10. Mr John Walker
11. Mr Robert Alexander Ferguson
12. Citicorp Nominees Pty Limited
13. HSBC Custody Nominees (Australia) Limited
14. Mr Dennis John Banks
15. Citicorp Nominees Pty Limited
16. HSBC Custody Nominees (Australia) Limited-GSCO ECA
17. Mr Clive Norman Bowman
18. Mr Dennis John Banks + Mrs Janine Anne Banks
Kleken Pty Ltd
19.
20. BNP Paribas Noms Pty Ltd
(d) Options as at 2 August 2013 – unquoted
There are no options issued.
(e) Securities subject to escrow
There are no securities subject to escrow.
Number of
ordinary shares
% of issued
capital
11,559,817
11,193,851
7,922,201
5,659,858
4,855,081
4,314,177
2,465,706
2,445,530
2,176,125
1,677,633
1,670,000
1,339,675
1,271,107
1,137,545
1,063,616
870,985
858,981
715,098
593,503
577,555
64,368,044
9.38%
9.09%
6.43%
4.59%
3.94%
3.50%
2.00%
1.98%
1.77%
1.36%
1.36%
1.09%
1.03%
0.92%
0.86%
0.71%
0.70%
0.58%
0.48%
0.47%
52.24%
IMF (AUSTRALIA) LTD | ANNUAL REPORTSHAREHOLDER INFORMATION (continued) (f) 20 Largest Holders of Quoted Convertible Notes as at 2 August 2013
75
Convertible Note Holders
HSBC Custody Nominees (Australia) Limited-GSCO ECA
HSBC Custody Nominees (Australia) Limited
RBC Investor Services Australia Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited – A/C 2
Bainpro Nominees Pty Limited
J P Morgan Nominees Australia Limited
Robert Ferguson + Jennifer Ferguson + Rachel Ferguson
Mr Robert Ferguson + Mrs Jennifer Ferguson + Ms Rachel Ferguson
Mr Robert Ferguson + Mrs Jennifer Ferguson + Ms Rachel Ferguson
Mr Simon Robert Evans + Mrs Kathryn Margaret Evans
McLernon Group Superannuation Pty Ltd
J P Morgan Nominees Australia Limited
Elixir Enterprises Pty Ltd
UBS Nominees Pty Ltd
Legal Precedents Pty Limited
Namangi Pty Limited
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17 Moore Family Nominee Pty Ltd
18
19
Charanda Nominee Company Pty Ltd
National Nominees Limited
20 Ms Yukari Burgess
Number of
convertible
notes
2,617,862
1,621,120
1,542,571
1,530,763
1,245,000
1,197,200
606,060
591,716
578,000
500,000
485,509
476,737
408,100
401,173
303,030
303,030
270,630
264,214
190,408
187,208
15,320,331
% of issued
capital
11.27%
6.98%
6.64%
6.59%
5.36%
5.16%
2.61%
2.55%
2.49%
2.15%
2.09%
2.05%
1.76%
1.73%
1.30%
1.30%
1.17%
1.14%
0.82%
0.81%
65.97%
SHAREHOLDER INFORMATION (continued) CORPORATE INFORMATION
76
This annual report covers both IMF (Australia) Ltd as an individual entity and
the consolidated entity comprising IMF (Australia) Ltd and its subsidiaries.
The Group’s functional and presentation currency is AUD ($).
A description of the Group’s operations and of its principal activities is included in the review of operations and
activities in the Directors’ Report on pages 5 to 21. The Directors’ Report is not part of the financial report.
DIRECTORS
Robert Ferguson
Hugh McLernon
John Walker
Clive Bowman
Alden Halse
Michael Bowen
Non-Executive Chairman
Managing Director
Executive Director – Director of Marketing
Executive Director – Director of Operations
Non-Executive Director
Non-Executive Director
COMPANY SECRETARY
Diane Jones
PRINCIPAL REGISTERED
OFFICE IN AUSTRALIA
Level 10, 39 Martin Place
Sydney NSW 2000
Phone: (02) 8223 3567 | Fax: (02) 8223 3555
www.imf.com.au
SOLICITORS
HARDY BOWEN
Level 1, 28 Ord Street
West Perth WA 6005
SHARE REGISTRY
COMPUTER SHARE REGISTRY
GPO Box 2975
Melbourne VIC 3001
Phone: 1300 557 010
AUDITORS
ERNST & YOUNG
The Ernst & Young Building
11 Mounts Bay Road
Perth WA 6000
BANKERS
NATIONAL AUSTRALIA BANK LIMITED
255 George Street
Sydney NSW 2000
The Company is listed on the Australian Securities Exchange with Sydney, Australia as its home exchange.
Its ASX code is “IMF” and its shares were trading as at the date of this report.
IMF (AUSTRALIA) LTD | ANNUAL REPORT concept and design mobius.com.au
www.imf.com.au
Sydney
Perth
Level 10, 39 Martin Place, Sydney NSW 2000
Phone: +61 (0)2 8223 3567
Level 6, Citibank House, 37 St George’s Terrace, Perth WA 6000
Phone: +61 (0)8 9225 2300
Melbourne
Level 31, 120 Collins Street, Melbourne VIC 3000
Brisbane
Adelaide
Level 7, 320 Adelaide Street, Brisbane QLD 4000
Level 7, 450 King William Street, Adelaide SA 5000
Phone: +61 (0)3 9913 3301
Phone: +61 (0)7 3108 1310
Phone: +61 (0)8 8212 1010
New York
14th Floor, 712 Fifth Avenue, New York, NY, 10019
Phone: +1 212 488 5331