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International Personal Finance PlcAppendix 4E - Final Report
IMF Bentham Limited
ABN 45 067 298 088
Financial year ended
30 June 2015
Results for announcement to the market
Current reporting period:
Previous reporting period:
30 June 2015
30 June 2014
Revenue and Net Profit
Revenue 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
378%
(3%)
(36%)
(36%)
$'000s
12,460
27,050
6,304
6,304
Today the Directors have declared a final fully franked dividend which will be paid on 9 October 2015. The
record date is 25 September 2015 and the shares will trade ex dividend from 23 September 2015.
A fully franked interim dividend was paid on 10 April 2015. The record date for that dividend was 16 March
2015.
Total dividends per share for the current reporting period
In the previous reporting period the Directors declared a final fully franked dividend on 21 August 2014. The
record date was 19 September 2014. This dividend was paid on 3 October 2014. There was an interim
dividend declared on 10 February 2014 which was paid on 4 April 2104.
The final dividend declared today is an Eligible Dividend under the Company's Dividend Reinvestment Plan.
The 2015 interim dividend was also an Eligible dividend under the Dividend Reinvestment Plan.
Cents per share
5.0
5.0
10.0
10.0
Net Tangible Asset Backing
Net tangible assets per ordinary share
Net assets per ordinary share
Consolidated
2015
$
$0.52
$1.11
2014
$
$0.56
$1.16
Additional Appendix 4E dislosure requirements can be found in the Directors' Report, Financial Statements and the Notes to
the Financial Statements contained in the IMF Bentham Annual Report for the year ended 30 June 2015.
Audit Report
This Appendix 4E (Final Report) is based on the audited financial statements for the year ended 30 June 2015, which are
contained within the IMF Bentham Annual Report, attached.
Page 1
Annual Report 2015
CONTENTS
Highlights
Board of Directors
Chairman and Managing Director’s Report
2015 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
2
3
4
24
25
26
27
28
29
65
66
68
76
79
IMF BENTHAM LIMITED HIGHLIGHTS
IMF BENTHAM LIMITED IS THE WORLD’S MOST EXPERIENCED AND SUCCESSFUL
LITIGATION FUNDER. WE ARE THE LEADING LITIGATION FUNDER IN AUSTRALIA
AND THE FIRST TO LIST ON THE AUSTRALIAN SECURITIES EXCHANGE. WE HAVE
NOW SUCCESSFULLY EXPANDED INTO THE USA AND EUROPE.
WE HAVE AN EXPERIENCED TEAM TO ENSURE THE STRONGEST CASES RECEIVE
FUNDING AND ARE MANAGED TO FACILITATE THEIR SUCCESSFUL RESOLUTION.
IMF’S TRACK RECORD
117
Settlements
$6.3
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.
175 Cases
Completed
10
35
13
Won
Withdrawals
Lost
$43.2
Million
NET INCOME
FROM LITIGATION
FUNDING
(before lost cases)
150
120
90
60
30
0
200
150
100
50
0
CASH ($ Million)
130.1
105.6
62.4
68.0
55.0
FY11
FY12
FY13
FY14
FY15
100
80
60
40
20
0
INVESTMENTS ($ Million)
98.6
99.5
86.1
59.6
66.0
FY11
FY12
FY13
FY14
FY15
NET ASSETS ($ Million)
TOTAL DIVIDEND (cents/share)
191.1
185.9
125.5
111.7
87.2
FY11
FY12
FY13
FY14
FY15
15
12
9
6
3
0
15
10
10
10
5
FY11
FY12
FY13
FY14
FY15
1
ANNUAL REPORT 2015 BOARD OF DIRECTORS
Michael Kay
Andrew Saker
Hugh McLernon
Alden Halse
Michael Bowen
Wendy McCarthy
Diane Jones
Board of Directors
Michael Kay
Non-Executive Director
and Chairman
Andrew Saker
Managing Director
and CEO
Hugh McLernon
Executive Director
Alden Halse
Non-Executive Director
Michael Bowen
Non-Executive Director
Wendy McCarthy
Non-Executive Director
Company Secretary
Diane Jones
Company Secretary,
Chief Operating Officer
and Chief Financial
Officer
2
IMF BENTHAM LIMITED CHAIRMAN AND MANAGING DIRECTOR’S
REPORT
The 2015 financial year has seen a number
of changes, both organisationally and
operationally, that have been necessary
to set a strong foundation for the
Company’s future.
Some of the changes that have been implemented
include Board, organisational and operational
restructuring.
During the past financial year the Company has seen a
change in Chairman and Managing Director. Further, to
improve corporate governance, two executive directors
have resigned from the Board. These changes reflect the
evolution of the Company from the structure established
by its initial founders to a model for the future.
The change in Managing Director has been seamless,
with Hugh McLernon remaining as an Executive Director.
Given Hugh’s role in establishing the Company, and
the industry, his continued direct involvement has
been positive, and of great assistance in relation to the
changes that have been, and are yet to be implemented.
The Company has now secured the services of a new
Chairman. Prior to that, Michael Bowen assumed the
role of interim chairman from 5 January 2015 to 1 July
2015. The Company thanks Mr Bowen for his service in
this capacity.
This financial year was a tale of two very different halves.
The first six months of the financial year saw a strong
financial result and growth in all key metrics including
the share price. The second six months saw most of the
first-half gains lost on the back of cases associated with
the appeals in National Potato Company (NPC), Bank of
Queensland, and bank fees, and two smaller losses in the
courts at first instance in the US.
Notwithstanding these losses, we remain confident in the
risk management processes the Company pioneered in
the industry. The losses in NPC and bank fees evolved
from appeals from successes in the courts at first
instance. The bank fees case was always expected to
proceed to the High Court. One of the losses in the US
will be repleaded and recommenced this financial year.
Whilst we remain confident in our risk management
processes, the cases lost in the past three financial years
have negatively impacted on profit. To address this issue
the Company has undertaken a strategic review of its
operations and proposes to embark on an approach to
further diversify risk and reduce the impact of one-off
material losses.
In Australia, we propose increasing the number and
types of cases funded each year. We have rolled out
a new financial product focussed on smaller-sized,
insolvency related claims. We are reviewing several
other new financial products to roll out in the next 12 to
24 months. These investments will be in conjunction with
continued funding of large, complex, multi-party actions
where the Company established its reputation.
In the US, the Company has increased its geographic
footprint, opening an office in San Francisco in May
2015, its third office in the US, and increasing headcount
in other offices. The US operations have now reached
critical mass, and have made, and are expected to
continue to make, a significant contribution to the
group’s investment portfolio and profitability.
In Europe, the Joint Venture (JV) Agreement was
finalised in March 2014. IMF transferred a senior
Investment Manager to the European operations in
March 2014 to establish the office, recruit appropriate
staff and commence sourcing investments. After a
period of time in temporary accommodation, the
London office was officially opened in October 2014 and
a Chief Investment Officer was employed on 20 October
2014. The JV has conditionally funded the Tesco multi-
party claim this financial year, and is reviewing several
other major investments. Numerous requests for funding
have been declined since May 2014 as the JV adopts
a cautious entry into this new market. We continue to
work with our JV partner to develop this business.
The Company will continue to explore opportunities
in other jurisdictions, including Asia. To this end, we
have seen the Singaporean and Hong Kong courts
embrace litigation funding in certain circumstances.
The Company has now funded its third case in Hong
Kong, and is searching for opportunities to fund
appropriate matters in Singapore.
Subject to the approval of shareholders, the Company
proposes to implement a new reward structure
that comprises short-term cash and long-term
equity incentives for employees. This structure was
developed in response to shareholders’ concerns
with the Company’s previous reward structure. This
structure aligns the interests of employees with those
of shareholders whilst providing an adequate incentive
to employees to achieve extraordinary results for
the benefit of the shareholders. We commend this
structure to shareholders.
The competitive environment has remained largely
constant over the past 12 months. There have been
some attempts by other funders to establish or expand
their presence in the jurisdictions in which we operate.
We remain vigilant in protecting our market share, and
developing our point of differentiation, but generally
welcome competition as both an endorsement of the
industry, and of our business model.
Whilst we have experienced some challenges over the
past 12 months, we remain confident of our execution
skills in delivering more consistent growth in the future.
To this end, the Company has finalised a strategy for
implementation that looks to diversification of risk
through, amongst other things, geography, case size
and case type. This strategy is aimed at enhancing our
business offering, and delivering a stable earning pattern.
This is a three to five year strategy to implement given
the average term of our investments.
Andrew Saker
Managing Director
and CEO
Michael Kay
Non-Executive Chairman
3
ANNUAL REPORT 2015
2015 DIRECTORS’ REPORT
THE DIRECTORS OF IMF BENTHAM LIMITED (FORMERLY BENTHAM IMF
LIMITED AND IMF (AUSTRALIA) LTD) (“IMF” OR “THE COMPANY” OR “THE
PARENT”) SUBMIT THEIR REPORT FOR THE YEAR ENDED 30 JUNE 2015.
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
Michael Kay
(NON-EXECUTIVE CHAIRMAN – APPOINTED
1 JULY 2015)
Michael Kay was appointed the Company’s Non-
Executive Chairman on 1 July 2015. Mr Kay holds a
Bachelor of Laws degree from the University of Sydney.
Mr Kay brings a wealth of commercial experience
to IMF. Most recently he was Chief Executive Officer
and Managing Director of listed salary packaging
company McMillan Shakespeare Ltd, a position he
held for six years. Previously Mr Kay had been CEO
of national insurer AAMI after serving in a variety of
senior roles with that company. Prior to joining AAMI
he had spent 12 years in private legal practice. He is
a former member of the Commonwealth Consumer
Affairs Advisory Council, the Administrative Law
Committee of the Law Council of Australia, the
Victorian Government Finance Industry Council
and the Committee for Melbourne. Mr Kay is
currently a director of:
a. RAC Insurance Pty Limited; and
b. TFS Corporation Limited.
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) (NON-EXECUTIVE
CHAIRMAN – 5 JANUARY 2015 TO 1 JULY 2015)
Michael Bowen graduated from the University
of Western Australia with Bachelors of Law,
Jurisprudence and Commerce degrees. He has been
admitted as a barrister and solicitor of the Supreme
Court of Western Australia and is an Associate and
Certified Practicing Accountant of the Australian
Society of Accountants. Mr Bowen:
a. is a partner of the law firm DLA Piper and formerly
of Hardy Bowen which merged with DLA Piper
on 1 July 2015, practicing 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.
4
Mr Bowen is Chairman of the remuneration committee
and corporate governance committee and a member
of the audit and risk committee and nomination
committee.
During the past three years he has not served
as a director of any other listed company.
Andrew Saker
(MANAGING DIRECTOR AND CEO – APPOINTED
5 JANUARY 2015)
Andrew Saker holds a Bachelor of Commerce degree
in Accounting and Finance. He is a Member of the
Institute of Chartered Accountants and was an Official
Liquidator of the Supreme and Federal Courts until
his appointment at IMF. Andrew was a partner at a
leading provider of corporate recovery, insolvency
management and restructuring services throughout
Australia and Asia for 16 years. During this period he
managed the Indonesian and Perth operations and
assisted with billion dollar cross-border restructuring
assignments throughout the world including in
Indonesia, the Philippines, Singapore, China, Argentina,
Kazakhstan, Europe, the US and Canada.
Mr Saker has managed hundreds of large claims
across a range of industries including mining,
telecommunications, energy, aquaculture, property,
manufacturing, infrastructure, banking and finance.
During the past three years he has not served as
a director of any other listed company.
Wendy McCarthy AO
(NON-EXECUTIVE DIRECTOR)
Wendy McCarthy AO started her career as a
secondary school teacher, graduating from the
University of New England with a Bachelor of Arts
degree and Diploma of Education. She moved out
of the classroom into public life in 1968 and since
then has worked for change across the business,
government and not-for-profit sectors, in education,
family planning, human rights, public health, overseas
aid and development, conservation, heritage, and
media.
She has held many significant leadership roles in
key national and international bodies including eight
years as Deputy Chair of the Australian Broadcasting
Corporation, ten years as Chancellor of the University
of Canberra, and 12 years of service to Plan Australia
as Chair, with three years as Global Deputy Chair for
Plan International. She has just retired after 15 years
as Chair of McGrath Estate Agents and seven years as
Chair of the Pacific Friends of the Global Fund to fight
AIDS, Tuberculosis and Malaria.
IMF BENTHAM LIMITED Ms McCarthy currently chairs headspace – the National
Youth Mental Health Foundation and Circus Oz, and is
a non-executive director of Goodstart Early Learning.
She is a Patron of the Sydney Women’s Fund and
Ambassador for 1 Million Women.
Ms McCarthy was appointed an Officer of the Order of
Australia for outstanding contributions to community
affairs, women’s affairs and the Bicentennial
celebrations, and received a Centenary of Federation
Medal for business leadership. She was also awarded
an Honorary Doctorate from the University of South
Australia.
Ms McCarthy is a member of the audit and risk
committee, remuneration committee, nomination
committee and the corporate governance committee.
During the past three years she has not served as
a director of any other listed company.
Alden Halse
(NON-EXECUTIVE DIRECTOR)
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. is an associate member of the Institute of Chartered
Accountants and the Australian Institute of
Company Directors;
b. is a past president and current councillor of the
Royal Automobile Club of WA (Inc);
In 1988, Mr McLernon retired from legal practice and
introduced the secondary life insurance market into
Australia through the Capital Life Exchange. He also
pioneered the funding of large-scale litigation into
Australia 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 was the inaugural Managing
Director through to December 2004. He became the
Managing Director again on 18 March 2009 and retired
from that role on 5 January 2015.
During the past three years he has not served as
a director of any other listed company.
Robert Ferguson
(NON-EXECUTIVE CHAIRMAN – RESIGNED
5 JANUARY 2015)
Robert Ferguson was appointed Non-Executive
Director on 26 November 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 resigned from his role with the Company
on 5 January 2015.
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. Mr Ferguson:
a. was a director of Westfield Holdings Ltd from 1994
c. is non-executive chairman of RACWA Holdings
to 2004;
Pty Ltd; and
d. is non-executive chairman of RAC Insurance Pty
Limited, Western Australia’s largest home and
motor insurer.
Mr Halse is the Chairman of the audit and risk
committee and nomination committee and a
member of the remuneration committee and
corporate governance committee.
During the past three years he has not served as
a director of any listed company other than those
noted above.
Hugh McLernon
(EXECUTIVE 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 a litigation partner.
b. was chairman and non-executive director
of Vodafone Australia until November 2002;
c. was chairman of MoneySwitch Limited from
14 November 2005 to 18 February 2010. He
continued as a non-executive director since
18 February 2010;
d. was deputy chair of the Sydney Institute,
from April 1998 to February 2013;
e. is a director of the Lowy Institute, from April 2003;
f. has been chairman of GPT Group since 10 May 2010
and prior to this was a director and deputy chair
from 25 May 2009;
g. has been chairman of Primary Health Care since
1 July 2009; and
h. is a non-executive director of Watermark Market
Neutral Fund Limited, since 25 May 2013.
During the past three years he has not served as
a director of any listed company other than those
noted above.
Prior to his resignation, Mr Ferguson was a member of
the audit and risk committee, nomination committee
and remuneration committee.
5
ANNUAL REPORT 2015 2015 DIRECTORS’ REPORT
(continued)
John Walker
(EXECUTIVE DIRECTOR – RESIGNED 17 JUNE 2015)
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 incorporated Insolvency Management Fund Pty Ltd and was the 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. Mr Walker gave the Company notice of his
resignation as an employee on 5 January 2015 and resigned as a Director of the Company on 17 June 2015.
During the past three years he has not served as a director of any other listed company.
Clive Bowman
(EXECUTIVE DIRECTOR – RESIGNED 5 JANUARY 2015)
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 Dentons) 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 resigned from this role on 5 January
2015. Mr Bowman remains as an employee of the Company and is its Chief Executive – Australia and Asia.
He also chairs IMF’s investment committee.
During the past three years he has not served as a director of any other listed company.
COMPANY SECRETARY, CHIEF OPERATING OFFICER AND CHIEF FINANCIAL OFFICER
Diane Jones
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 their chief financial officer. Ms Jones is IMF’s Chief Operating Officer,
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, Bonds and options of the Company were:
Michael Kay
Andrew Saker
Michael Bowen
Alden Halse
Wendy McCarthy
Hugh McLernon
Total
Number of
ordinary
shares
Number of
IMF bonds
Number of
options over
ordinary
shares
–
–
887,127
879,780
–
7,755,991
9,522,898
–
–
1,500
750
–
7,500
9,750
–
–
–
–
–
–
–
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 the Remuneration Report included with the Directors’ Report.
6
IMF BENTHAM LIMITED Dividends
The Directors have today declared a final fully franked dividend of 5.0 cents per share for the 2015 financial
year totalling $8,388,049. The record date for this dividend is 25 September 2015 and the payment date will
be 9 October 2015. Shareholders are able to elect to participate in the dividend reinvestment plan in relation
to this dividend.
On 10 February 2015 the Directors declared a fully franked interim dividend of 5.0 cents per share totalling
$8,329,048. The record date for this dividend was 16 March 2015 and the payment date was 10 April 2015.
The Directors declared a final fully franked dividend of 5.0 cents per share for the 2014 financial year totalling
$8,268,513. The record date for this dividend was 19 September 2014 and the payment date was 3 October 2014.
Shareholders were able to elect to participate in the dividend reinvestment plan in relation to this dividend.
On 10 February 2014 the Directors declared a fully franked interim dividend of 5.0 cents per share totalling
$8,219,005. The record date for this dividend was 21 March 2014 and the payment date was 4 April 2014.
The Directors have determined they will consider, and where appropriate, implement, a regular semi-annual
dividend which reflects the cash position of the Company at the time of the dividend and the likely demand for
cash over the ensuing twelve month period. The Company has put in place a dividend reinvestment plan and,
on appropriate occasions, will arrange underwriting to reduce the impact a particular dividend might otherwise
have on cash.
Corporate information
Corporate structure
IMF Bentham Limited 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).
Operating and financial review
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 Group enters into a contract, a litigation funding agreement, with claimants to provide these
services. The Group does not provide legal advice. The key business driver is to manage and fund the litigation to
a successful conclusion. If the litigation is successful, the Group earns a fee and, depending on the jurisdiction, may
also be reimbursed the costs it has paid during the course of the funded litigation, payable from the recovery. The
fee is generally a percentage of the settlement or judgment proceeds and will be lower the earlier the litigation is
resolved. If the litigation is unsuccessful the Group does not generate any income and will write off its investment
in the litigation. In certain jurisdictions the litigation funding agreement contains an undertaking to the client that
the Group will pay any adverse costs ordered in respect of the costs incurred by the defendant(s) during the period
of funding.
The Group undertakes these activities through offices around Australia and has done so since 2001. In 2011 the
Group expanded into the USA by opening an office in New York and opened another office in Los Angeles in 2014.
During the current financial year a further office was opened in San Francisco. Also during 2014 the Group entered
into a joint venture to investigate, manage and fund cases in Europe. Consequently the Group now also has a
presence in London and Amsterdam. The Group has funded three cases in Hong Kong.
The Group has funded this expansion by retaining earnings and issuing shares and bonds.
In any given year the Group’s profitability is dependent upon the outcome of funded cases resolved in that year,
however the successful completion of a case and the timing of that completion is not ultimately within the Group’s
control. Legislative, regulatory, judicial and policy changes may have an impact on future profitability.
The Group endeavours to have a mix of cases it is funding at any one time. These can broadly be categorised as
commercial claims, insolvency claims and group actions. The expansion overseas creates diversification across
jurisdictions.
The Group discloses the cases it manages and funds to the ASX as those cases are funded. The Group also
provides, on a quarterly basis, an estimated claim value of those cases in the portfolio.
7
ANNUAL REPORT 2015 2015 DIRECTORS’ REPORT
(continued)
Operating and financial review (continued)
Investment portfolio report at 30 June 2015
Claims <$10M
Claims $10M - $50M
Claims >$50M
Total portfolio
Number of
claims
Estimated
claim value
Percentage
of total
estimated
claim value
6
23
10
39
$25,500,000
$676,000,000
$1,301,000,000
1%
34%
65%
$2,002,500,000
100%
The estimated claim value of IMF’s cases decreased 3% in the year to 30 June 2015 from $2,067,000,000 to
$2,002,500,000. IMF commenced 21 new cases during the year, which have a maximum claim value at 30 June
2015 of $690,500,000 (2014: eight new cases which had a maximum claim value of $765,000,000).
An update on IMF’s principal funded cases is as follows:
The Bank Fees matter continues to work its way through the court system to a final decision by the High Court.
The original action claimed repayment of late payment fees as well as honour and dishonour fees. After a number
of hearings and appeals, the Federal Court gave judgment in favour of the class action members in the ANZ case in
relation only to late payment fees.
That judgment was then overturned by the Full Court of the Federal Court. An application for special leave to
appeal to the High Court is currently pending and is likely to be heard within 3 months or so. The High Court appeal
will be the final step in the ANZ litigation.
The litigation against the other banks has been stayed awaiting the outcome of the claims against the ANZ bank.
The pleadings in the Westgem matter are all but finalised and major discovery has been provided by each party
to the other. The Court has ordered a mediation between the parties for December 2015. Numerous interlocutory
hearings have now been completed and the parties are preparing for the mediation.
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, also continues through the
Court (the case did not settle at the Court ordered mediation in May 2015). The case has a trial date commencing
on 29 August 2016.
A further amended statement of claim was filed on 29 July 2015 in the proceedings concerning the Wivenhoe
Dam class action, which is by persons who suffered loss due to increased flooding in the Brisbane floods in
2011, alleged to have been caused by the negligence of the Dam operators. IMF has entered into a participation
agreement with interests associated with its European joint venturer to share equally the costs (including any
adverse costs) of, and any return from, this claim. There is expected to be a challenge to the admissibility of the
expert evidence of a key witness for the Representative, to be heard beginning 14 September 2015. The case has
a date for trial commencing on 18 July 2016.
Proceedings were commenced in December 2013 in the Netherlands by a Foundation incorporated under Dutch
law, de Stichting Ratings Redress (“SRR”), to pursue claims (assigned to SRR) for losses suffered by investors
in CPDOs arranged by ABN Amro Bank NV (now Royal Bank of Scotland NV (“RBS”)) and rated by Standard &
Poor’s (“S&P”). SRR entered into a funding agreement with IMF pursuant to which IMF provides funding to SRR
for the prosecution of the claims.
S&P commenced proceedings in the English courts, prior to and without notice to SRR, seeking declarations that
it is not liable to SRR and two of the investors, and seeking contribution from RBS. On 1 May 2015, the Amsterdam
District Court ruled that it did not have jurisdiction to hear SRR’s claims against S&P and it stayed the claims
against RBS. The claims are accordingly continuing in the English courts, where S&P now has commenced
proceedings against each of the investors who assigned their claims to SRR, as well as SRR. IMF has entered into
a funding agreement with each of the investors to provide funding for the prosecution of their defence to S&P
and to enable them to counter-claim against S&P and claim against RBS. A Case Management Conference in
the English proceedings will be held in November 2015 to decide a timetable for these proceedings. IMF has also
entered into a participation agreement with interests associated with its European joint venturer to share equally
the costs (including adverse costs) and any returns from the claims.
8
IMF BENTHAM LIMITED Operating and financial review (continued)
IMF is funding a claim by investors against McGraw Hill Financial Inc. (“S&P”) for losses allegedly suffered due
to the rating of 8 SCDO products by S&P which investors purchased from Lehman Brothers Australia Limited
(in liquidation) (“LBA”) (the S&P Lehman case). The claim was filed in April 2013 and is proceeding through
interlocutory processes. A trial date commencing on 12 October 2015 has been set. This claim is linked to the one
IMF is funding by investors against LBA (the Wingecarribee proceedings, in which judgment was given in favour
of the Applicants) for losses on SCDO products, including the 8 mentioned above.
Bentham Capital LLC (“Bentham”), IMF’s wholly owned US subsidiary, funded 17 matters in the US during the
reporting period, making a total of 25 cases funded by Bentham since being established in August 2011. This last
year was a turning point, justifying IMF’s decision to establish this US business, as can be seen by this increased
deal flow and Bentham’s profitability in 2015. In line with the increase in matters funded, Bentham’s contribution
to the claim value of IMF’s investment portfolio has increased to $619M over the year. This now represents 31% of
IMF’s investment portfolio.
In addition to a significantly increased number of cases funded, five cases were resolved or partially resolved during
the year, including one loss. Two of these matters involve aspects where further returns could be derived from
them in the future. Gross income generated from these cases was $38.9M.
During this period of growth over the last year, Bentham has also grown its staff numbers and recently opened
a third office in San Francisco, to add to offices in New York and Los Angeles. The US business now has 10 staff
including 6 investment managers and 2 legal counsel. The investment managers are all former senior litigation
attorneys, each of between 15 – 25 years’ legal experience. This enables significant case analysis to be performed
in-house, whilst providing great networks to attract new business.
Although uncertainty in US law concerning whether funders’ communications are protected from disclosure inhibit
IMF’s usual transparency about the cases it funds, we can say that Bentham’s US business now contains a diverse
group of litigation and arbitration matters. These involve commercial, patent and multi-party cases across a variety
of different jurisdictions. Bentham has also now provided funding to seven law firms secured across a portfolio of
cases being conducted by the law firms on a contingency basis, adding to the growth and diversity of our product
offerings in the US. It is worth noting that there are clear signs of growing competition in the US market, but market
knowledge of litigation funding remains at a relatively early stage and so we consider there remain good prospects
for the future growth of our US business.
IMF did not withdraw from any investments during 2015 (2014: nil cases withdrawn). 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 Report is updated every three months. IMF also provides case updates
on its website: www.imfbenthamltd.com.
Employees
At 30 June 2015, IMF employed 42 permanent staff (full time equivalents), including the two Executive Directors,
providing investigative, computer, accounting and management expertise (2014: 32 permanent staff).
Operating results for the financial year
The following summary of operating results reflects the Group’s performance for the year ended 30 June 2015:
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 % *
2015
3.78
3.78
2.24%
3.39%
nil
2014
6.56
6.56
3.51%
5.16%
nil
* Net debt (cash and short term deposits less total debt) is positive as cash and short term deposits are greater than total debt.
9
ANNUAL REPORT 2015 2015 DIRECTORS’ REPORT
(continued)
Operating and financial review (continued)
Thirteen matters generated income greater than $500,000 during 2015, underpinning the Group’s profitability
and shareholder returns. The following summarises the cases finalised during 2015:
Date commenced
Litigation contract’s
matter name
Claim value
included in
investment
portfolio
report at
30 June 2015
Total
litigation
contract’s
income
Total
litigation
contract’s
expenses
(including
capitalised
overheads)
Net gain/
(loss) on
disposal of
intangible
asset
$
$
$
$
Nov-12
Sep-09
May-14
Oct-09
Jun-10
Oct-12
Aug-14
Jul-14
Jun-13
May-05
Nov-09
May-13
May-13
USA Case 003
65,000,000
17,324,000
(6,030,634)
11,293,366
Premium Income Fund
75,000,000
18,282,579
(10,597,409)
7,685,170
USA Case 008
100,000,000
16,059,800
(8,465,736)
7,594,064
ABC Learning Centres (2 cases)
150,000,000
16,682,019
(11,572,822)
5,109,197
Confidential Australian Matter
25,000,000
2,386,442
(687,892)
1,698,550
Peninsula Colour Graphics
5,000,000
1,204,578
(171,088)
1,033,490
USA Case 0111
USA Case 0092
USA Case 006
ION
Firepower
–
–
986,971
(577,591)
409,380
1,062,248
(1,112,326)
(50,078)
20,000,000
3,431,900
(1,404,672)
2,027,228
5,000,000
1,492,210
(390,856)
1,101,354
3,000,000
2,284,779
(2,666,273)
(381,494)
Retail Adventures
30,000,000
1,427,844
(1,582,557)
(154,713)
Confidential Australian Matter
50,000,000
6,461,281
(1,112,052)
5,349,229
Other matters3
12,000,000
3,258,555
(31,383,945)
(28,125,390)
540,000,000
92,345,206
(77,755,853)
14,589,353
1.
2.
3.
USA Case 011 was included in the investment portfolio report for $50,000,000 in the quarter ended 30 September 2014.
It was removed in the quarter ended 31 December 2014.
USA Case 009 was included in the investment portfolio report for $20,000,000 in the quarter ended 30 September 2014.
It was removed in the quarter ended 31 December 2014.
Other matters include due diligence expenses for cases not funded, cases lost during the year and provisions for adverse
costs. The provisions for adverse costs have been calculated based upon management’s best estimate.
The Group has finalised 175 (2014: 159) investments since listing, with an average investment period of 2.4 years
(2014: 2.4 years). The Group has generated a return on every dollar invested of 1.58 times (excluding overheads)
(2014: 1.73 times). IMF has a target to complete cases within 2.5 years and to generate a return on every dollar
invested of 2 times (excluding overheads).
The investment portfolio as at 30 June 2015 has a mixture of both mature and new investments, with 29% of the
investment portfolio expected to finalise over the next 12 months (2014: 34%). 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 inside and outside of Australia.
10
IMF BENTHAM LIMITED Operating and financial review (continued)
IMF’s share price closed at $1.72 per share on 30 June 2015 (2014: $1.84). IMF entered the ASX top 300 companies
on 20 March 2009, when its share price was $1.15. During the financial year IMF has underperformed the ASX300
on an annualised basis from 1 August 2012 to 1 August 2015. However, it has outperformed the ASX Small Ordinaries
during that period as detailed below:
Annualised return with dividends reinvested
Annualised return without dividends reinvested
This share price analysis is shown graphically below:
IMF, ASX300 AND SMALL ORDINARIES
Annualised Return 1 August 2012 – 1 August 2015
IMF Share
Price
ASX300
AXKO
Small Ords
AXSO
12.71%
5.04%
14.81%
9.86%
3.22%
-0.03%
15.00%
12.00%
9.00%
6.00%
3.00%
0.00%
s
n
r
u
t
e
R
d
e
s
i
l
a
u
n
n
A
-2.00%
IMF
ASX300
Small Ordinaries
Annualised Return with
Dividend Reinvestment
Annualised Return without
Dividend Reinvestment
12.71%
14.81%
3.22%
5.04%
9.86%
-0.03%
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 2015 of $19,380,770 (2014: increase of $37,644,737). Operating activities used $22,929,221
of net cash outflows (2014: net cash outflow of $8,779,105), whilst investing activities generated $54,036,073 of net
cash inflows (2014: net cash outflow of $18,195,957), and financing activities used $11,726,082 of net cash outflows
(2014: net cash inflow of $64,619,799) principally as a result of the dividends paid during the year.
11
ANNUAL REPORT 2015
2015 DIRECTORS’ REPORT
(continued)
Operating and financial review (continued)
Asset and capital structure
Cash and short term deposits
Total debt1
Net debt2
Total equity
Gearing Ratio2
Interest Cover3
Working Capital Ratio
2015
$
2014
$
Change
%
130,107,653
105,576,733
(48,206,421)
(47,758,026)
81,901,232
57,818,707
185,899,905
191,131,272
nil
n/a
5.6:1
nil
n/a
8.5:1
23%
1%
42%
-3%
n/a
n/a
-34%
1.
Total debt is $50,000,000 relating to the Bentham IMF Bonds. Transaction costs of $2,326,739 are being written-back to the
carrying value of the bonds over their life. (See Note 19)
2. Net debt is positive as cash and short term deposits are greater than debt.
3.
The application of AASB 123 Borrowing Costs has resulted in the capitalisation of interest associated with the Bentham IMF
Bonds as the Company’s intangible assets are qualifying assets.
During April 2014, the Company issued 500,000 Bentham IMF Bonds at $100 each. The interest is paid to
bondholders quarterly at a variable rate based on the Bank Bill Rate plus a fixed margin of 4.20% per annum.
The Bonds will mature on 30 June 2019.
Profile of debts
The profile of the Group’s debt finance is as follows:
Non-current
Bonds1
Total debt
2015
$
2014
$
Change
$
(48,206,421)
(47,758,026)
(48,206,421)
(47,758,026)
1%
1%
1.
Total debt is $50,000,000 relating to the Bentham IMF Bonds. Transaction costs of $2,326,739 are being written-back to the
carrying value of the bonds over their life. (See Note 19)
Shares issued during the year
On 3 October 2014 the Company issued 1,210,688 shares under its Dividend Reinvestment Plan at $1.96 per share.
On 10 April 2015 the Company issued 1,180,014 shares under its Dividend Reinvestment Plan at $2.12 per share.
Capital expenditure
There has been an increase in capital expenditure during the year ended 30 June 2015 to $406,022 from $170,941
in the year ended 30 June 2014. The capital expenditure in 2015 mainly related to the fit-out of the New York and
Los Angeles offices.
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 13 years of operation
IMF has lost only ten cases out of 175 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. The Group also insures a portion of its adverse costs order exposure.
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.
In addition, IMF constantly monitors proposed legislative, regulatory, judicial and policy changes that may affect
litigation funding in the markets in which it operates.
12
IMF BENTHAM LIMITED Competition, however, is increasing and is expected to
increase further in the coming years with new entrants
coming into the Australian market and new entrants
in overseas markets. Litigation funding is considered
non-cyclical or uncorrelated to underlying economic
conditions.
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.
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. wilful breach of duty; or
b. 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 was $158,153
during the current financial year (2014: $142,061).
Indemnification of auditors
To the extent permitted by law, the Company has
agreed to indemnify its auditors, EY, as part of the
terms of its audit engagement against claims by third
parties arising from the audit (for an unspecified
amount). No payment has been made to indemnify
EY during or since the financial year.
Operating and financial review (continued)
In Australia, the Productivity Commission has released
its report on Access to Justice. It recommended that
Australian lawyers should be permitted to charge
contingency fees, with an associated liability for
adverse costs, and that litigation funders be subject
to financial services regulation. The Company has
long supported regulation of litigation funders in
Australia and will seek to engage constructively with
regulators in the design of any regulatory regime.
The Group is not aware of any other material
regulatory developments in the other markets
in which it operates.
Pro bono
As IMF has become an integral part of the litigation
landscape in Australia it is important that it
participates in the honourable tradition of those
involved in litigation giving free support for worthy
public causes. IMF has a pro bono program under
which it makes time and funds available for such
causes. Support provided by IMF includes donations
to Austlii (Australian Legal Information Institute) and
financial assistance to PIAC (Public Interest Advocacy
Centre) and some of PIAC’s clients.
Significant changes in the state of affairs
Total equity decreased 3% to $185,899,905 from
$191,131,272 during 2015. This was mainly as a result
of the payment of dividends being greater than profit
generated (last year’s unrecognised final dividend and
the interim dividend for 2015). There have been no
significant changes in the Company’s state of affairs
during this reporting period other than as is disclosed
in this report.
Significant events after reporting date
Intangible Assets
There were no significant financial events after the
reporting date.
Likely developments and expected results
Approximately 29% of the investment portfolio as at
30 June 2015 is expected to mature over the next
12 months. Accordingly, the Directors consider that the
Company is likely to generate a profit in this period.
IMF expects demand for its funding to continue in
Australia, particularly as we are the leading funder in
this market. The establishment of our subsidiary in
the United States of America has resulted in increased
funding opportunities, and the joint venture in Europe
should also result in increased funding opportunities
in this jurisdiction.
13
ANNUAL REPORT 2015 2015 DIRECTORS’ REPORT
(continued)
Remuneration report (Audited)
Dear Shareholder,
On behalf of the Board and as Chairman of the
Remuneration Committee, I am pleased to present
IMF’s 2015 Remuneration Report.
No bonuses were awarded to employees in 2015 other
than in accordance with contractual obligations to US
employees. The profitable US operations resulted in a
total US bonus pool of US$1,024,360.
Prior to and at our 2014 Annual General Meeting,
some remuneration-related concerns were expressed
by shareholders and proxy advisors. These concerns
centred on IMF’s variable remuneration structure,
including the discretionary bonus payments made for
the 2014 financial year, and the lack of any long-term
incentive arrangements.
We heard this message and after a review and
consultation implemented a remuneration structure
that is more transparent for our shareholders and
employees.
This report includes the new variable remuneration
framework for the 2016 financial year onwards.
During the year the Committee engaged
PricewaterhouseCoopers as an external remuneration
consultant to assist with a review of our variable
remuneration framework. We recognised the
importance of developing a new structure that was
better aligned with market practice and shareholder
expectations, as well as IMF’s key business drivers.
The review was principally focussed on two aspects.
Firstly, modifying the short term incentive plan
(“STIP”) to limit the use of discretion going forward,
moving to a more specific and metrics based structure,
thus delivering a more transparent system. Secondly,
consideration of a long term incentive plan (“LTIP”)
component for our new Managing Director and other
management executives as a reward mechanism to
drive shareholder value and to incentivise achievement
of IMF’s business strategy over the longer term.
The review considered a number of business
challenges faced by IMF, including:
– IMF’s unpredictable earnings given its investment
in large, complex litigation; and
– The different maturity levels of IMF’s business
operations across various regions.
We also engaged with a number of proxy advisors to
obtain feedback on proposals recommended by the
Board for a revised variable remuneration framework
for the 2016 financial year. This consultative approach
aimed to ensure that best practice in corporate
governance was a key consideration in the review and
redesign of the variable pay structure.
The Board is pleased to announce that IMF will be
introducing a new executive variable remuneration
structure for the 2016 financial year. The variable
remuneration framework for executives will comprise
two components:
1. A revised STIP that provides for an annual cash
payment, subject to the achievement of 4 key
financial and non-financial performance objectives,
measured at the Group, regional and individual
levels.
2. A new equity-based LTIP that provides for the
annual grant of performance rights to executives.
Vesting of awards is contingent on performance
against two metrics, Relative Total Shareholder
Return (TSR) and Compound Annual Growth Rate
in Funds Deployed (CAGR), both measured over
a three-year period.
The above variable remuneration framework will
apply to the whole IMF Group and will replace the
contractual arrangements currently in place with US
employees.
Under these remuneration arrangements, a substantial
portion of remuneration is ‘at-risk’ and linked to both
short-term and long-term performance. This will
ensure that executives are only rewarded for delivering
sustained Group performance, notwithstanding the
nature of IMF’s business.
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.
14
IMF BENTHAM LIMITED – Employees will be awarded 20% (or 7% of the
employees’ salary) of the STIP opportunity if they
achieve their non-financial objectives (which are set
individually).
– Target 1 attracts an additional outperformance
stretch payment if growth in global net profit before
tax (before bonus) exceeds 5%. This additional
award is up to 10% of the employees’ salary if
growth in global net profit before tax (before
bonus) exceeds 15%. If growth in global net profit
before tax (before bonus) lies between 5% and 15%,
the outperformance stretch is calculated on a pro-
rated straight line basis.
LTIP
The new LTIP for executives will complement the
STIP as a form of ‘at-risk’ remuneration tied to long-
term performance. The LTIP will encourage equity
ownership and give participants the opportunity
to be rewarded for shareholder value creation.
Key features of the LTIP include:
– Only management executives will be eligible
to participate in the LTIP. This will generally be
investment managers and above.
– Awards will be granted annually as performance
rights over IMF ordinary shares. Initial grants for the
2016 financial year are expected to occur shortly
after the IMF 2015 Annual General Meeting.
– The LTIP opportunity will be expressed as a
percentage of TFR.
– Awards will vest subject to performance against
two metrics over a three-year period, which are
provided equal weighting:
1. Relative TSR; and
2. CAGR of Funds Deployed.
Remuneration report (Audited) (continued)
Future variable remuneration arrangements
– 2016 financial year
The key terms of the STIP and LTIP have been
recommended by the Company’s remuneration
consultants PricewaterhouseCoopers as detailed
below and are to be implemented from 1 July 2015.
STIP
The purpose of STIP is to provide an annual ‘at-risk’
incentive to participants linked to the achievement
of specific financial and non-financial performance
objectives.
Key features of the STIP include:
– All employees will be eligible to participate in the
STIP, which will be delivered as an annual cash
payment.
– Each participant will have a STIP opportunity
expressed as a percentage of his/her total fixed
remuneration (TFR).
– At the beginning of the financial year financial and
non-financial performance objectives will be set.
– As financial objectives underpin IMF’s profitability
as a driver of shareholder value, three set financial
objectives have been determined which will be
assessed at the Group and regional levels. These
objectives will be set out in the annual report.
– Stretch targets may be set for one or more of
the financial targets where the Board believes
these additional targets will provide additional
shareholder returns.
– The non-financial objectives will be specific to the
individual.
– At the end of the financial year, actual performance
will be assessed against the pre-set financial and
non-financial performance objectives set at the
beginning of the year.
The STIP metrics set for the 2016 financial year are
as follows:
– The STIP has been set at 35% of TFR.
– Three financial targets have been set, as follows:
– Target 1 – 30% of the STIP opportunity (or 10.5%
of the employees’ salary) will be awarded to
employees if the Group achieves 5% growth
in global net profit before tax (before bonus);
– Target 2 – 30 % of the STIP opportunity (or 10.5%
of the employees’ salary) will be awarded if the
employees’ region achieves 5% growth in net
profit before tax (before bonus);
– Target 3 – 20% of the STIP opportunity (or 7%
of the employees’ salary) will be awarded if the
Group achieves 5% growth in the total claim
value of the investment portfolio.
15
ANNUAL REPORT 2015 2015 DIRECTORS’ REPORT
(continued)
Remuneration report (Audited) (continued)
The LTIP metrics set for the 2016 financial year are
as follows:
– The LTIP opportunity has been set at 65% of TFR.
– The two performance metrics have been set and the
performance rights, or a portion thereof, will vest in
three years if:
– Target 1 – TSR measurements will comprise 50%
of the LTIP opportunity:
– TSR must be positive overall between the
issuance of the performance rights and the
vesting date.
– The Company’s TSR will then be compared
to a peer group, which will include ASX-listed
entities in the Diversified Financials Industry
Group, which are between 50% and 200% of
IMF’s market capitalisation.
The STIP and LTIP will be implemented with effect
from 1 July 2015, will apply to all of the Group’s
employees and the contractual obligations to US
employees will cease to apply.
The Board is confident that the new variable
remuneration framework will support the execution of
IMF’s business strategies, drive creation of shareholder
wealth, as well as attract, motivate and retain key
talent. PricewaterhouseCoopers and the Remuneration
Committee are satisfied that the advice received
concerning the new arrangements was free from
undue influence from the key management personnel
to whom the new arrangements will apply.
Yours faithfully
– The TSR component will vest in accordance
with the following vesting schedule:
Michael Bowen
Chairman of the Remuneration Committee
TSR Percentile Ranking
Percentage Vesting
Less than the 50th
percentile
Equal to the 50th
percentile
Between the 50th
and 75th percentile
Equal to the 75th
percentile or above
Nil vesting
50% vesting
Between 50% and
100% vesting, determined
on a straight-line basis
100% vesting
– Target 2 – The Group will measure the CAGR
which will comprise 50% of the LTIP opportunity:
– The CAGR component will vest in accordance
with the following schedule:
Funds Deployed CAGR
Percentage vesting
Below 5% CAGR
At 5% CAGR
Nil vesting
50% vesting
Between 5% CAGR
and 7% CAGR
Between 50% and
100% vesting, determined
on a straight-line basis
7% CAGR and above
100% vesting
16
IMF BENTHAM LIMITED 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.
During the year PricewaterhouseCoopers were
engaged as consultants in relation to restructuring the
Company’s remuneration. A new STIP and LTIP has
been recommended to be implemented from 1 July
2015. This new STIP and LTIP is detailed at pages 15–16
and will be recommended to shareholders at the next
annual general meeting. PricewaterhouseCoopers and
the Remuneration Committee are satisfied that the
advice received concerning the new arrangements
was free from undue influence from the KMP to
whom the new arrangements will apply.
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.
Remuneration report (Audited) (continued)
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 (“KMP”)
are:
(i) Directors
Andrew Saker
Hugh McLernon
Michael Bowen
Managing Director and Chief
Executive Officer from
5 January 2015
Managing Director to 5 January
2015, Executive Director from
6 January 2015
Non-Executive Director to
4 January 2015, Chairman from
5 January 2015 to 30 June 2015,
Non- Executive Director from
1 July 2015
Alden Halse
Non-Executive Director
Wendy McCarthy
Non-Executive Director
Robert Ferguson
Non-Executive Chairman to
5 January 2015
John Walker
Executive Director to 17 June 2015
and no longer considered a KMP
from that date
Clive Bowman
Executive Director – Director of
Operations to 5 January 2015
(ii) Executives
Clive Bowman
Diane Jones
Charlie Gollow
Chief Executive – Australia and
Asia from 5 January 2015
Chief Operating Officer, Chief
Financial Officer and Company
Secretary
Managing Director, Bentham
Capital LLC
There were no other changes to IMF’s key
management personnel after the reporting date and
before the financial report was authorised for issue.
17
ANNUAL REPORT 2015 2015 DIRECTORS’ REPORT
(continued)
Remuneration report (Audited) (continued)
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
$276,774 (including superannuation), as disclosed
in the following tables. At the 2013 Annual General
Meeting shareholders approved payments up to
$500,000 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;
– link rewards with the internal strategic goals
of the Company; and
– ensure total compensation is competitive by
market standards.
Structure
It is the Remuneration Committee’s policy that
employment contracts are entered into with all KMP.
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.
18
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 for the
executive to achieve the Group’s operational targets
and such that the cost to the Group is reasonable in
the circumstances.
Structure – 2015 and 2014
The short term executive incentive plan in place for
2015 and 2014 was designed and implemented with
the assistance of external remuneration consultants,
Mastertek Pty Limited, in 2007. It has been replaced
by the new STIP and LTIP set out at pages 15–16.
No amount was awarded under this plan in 2015 as
pre-determined hurdles were not met. In 2014 the
pre-determined benchmarks were also not met.
However, in 2014 the Remuneration Committee took
the following factors into account in its deliberations
in determining whether it should utilise an unallocated
portion of prior years’ incentive pools to create a 2014
pool totalling $3,000,500:
i. Between 2012 and 2014 the investment portfolio
grew 68% from $1.2B to over $2.0B;
ii. The Group’s operations in the USA were
consolidated to enable growth opportunities
from this market to be pursued;
iii. The Group established a presence in the
European market;
iv. The Group implemented the approved capital
strategy during the 2014 year to underpin future
growth;
v. For the first time since the establishment of the
STI in 2007 there was no bonus pool generated
by the benchmarks for two years in a row, yet
there was a sizable unallocated portion of prior
years’ incentive pools not distributed; and
vi. The employment environment in Australia and
overseas.
The 2014 bonus was accrued in the 2014 financial year
and was paid during the 2015 financial year. Details of
allocations made under the STIP to Key Management
Personnel are set out in Table 1 on page 20.
The Group had contractual benchmarks for US
employees which were met in the 2015 financial
year. These contractual benchmarks generated
a US bonus pool of $1,332,385 (USD$1,024,360)
(2014: nil). Details of allocations made under the STIP
to Key Management Personnel are set out in Table 1
on page 20.
IMF BENTHAM LIMITED Remuneration report (Audited) (continued)
Group performance
The objectives and philosophy of the Remuneration Committee are based upon aligning the performance of the
Group’s employees with increasing shareholders’ wealth. The graph on page 11 shows the performance of the
Group as measured by its share price and compared to other shares listed on the ASX.
The following is a summary of the Group’s earnings per share (shown as cents per share) over the last five years:
IMF share price at 30 June
Earnings per share (cents per share)
Diluted earnings per share (cents per share)
Executive Employment Contracts
a. Andrew Saker, Managing Director and CEO:
2011
1.54
18.56
17.32
2012
1.46
34.87
29.84
2013
1.76
11.21
9.78
2014
1.84
6.56
6.56
2015
1.72
3.78
3.78
– 5 year contract commenced 5 January 2015;
– gross salary package of $1,200,000 pa plus super:
– salary may be reviewed by the Board from time to time; and
– notice period by the employee is 6 months and 12 months’ notice by the Company.
b. Hugh McLernon, Managing Director:
– new rolling 12 month contract commenced 1 July 2007;
– gross salary package of $1,150,000 pa including super;
– salary to be reviewed annually. The 2015 review has yet to be completed (2014: 11% increase); and
– notice period is 12 months.
c. John Walker, resigned:
– new rolling 12 month contract commenced 1 July 2007;
– gross salary package of $925,000 pa including super; and
– notice period is 12 months.
d. Clive Bowman, Chief Executive – Australia and Asia:
– new rolling 12 month contract commenced 1 July 2012;
– gross salary package of $925,000 pa including super;
– salary to be reviewed annually. The 2015 review has yet to be completed (2014: 11% increase); and
– notice period is 12 months.
e. Diane Jones, Chief Operating Officer, Chief Financial Officer and Company Secretary:
– contract commenced 5 June 2006;
– gross salary package of $475,000 pa including super;
– contract to be reviewed annually with minimum CPI increases. The 2015 review has yet to be completed
(2014: 11% increase); and
– notice period is 3 months.
f. Charlie Gollow, Managing Director of Bentham Capital LLC:
– contract commenced 22 April 2003;
– gross salary package of $575,000 pa including super;
– contract to be reviewed annually with minimum CPI increases. The 2015 review has yet to be completed
(2014: 20% increase); and
– notice period by the employee is 3 months and 6 months’ notice by the Company.
19
ANNUAL REPORT 2015 2015 DIRECTORS’ REPORT
(continued)
Remuneration report (Audited) (continued)
(a) Remuneration of Key Management Personnel
Table 1: Remuneration for the year ended 30 June 2015
Short-term
Salary &
Fees
2015
Bonus
Accrued1
Post
Employment
Super
2015
Long-term
Benefits4
Total1,2
Performance
Related
2014
Bonus
Paid2
2015
Unpaid
Bonus1
2015
Directors
Robert Ferguson
60,981
Andrew Saker
800,000
1,131,216
906,216
63,927
70,000
63,927
906,216
Hugh McLernon
John Walker
Alden Halse
Michael Bowen
Wendy McCarthy
Executives
Clive Bowman
Charlie Gollow
Diane Jones
Total
556,216
377,203
456,216
–
–
–
–
–
–
–
–
–
5,793
12,522
18,784
18,784
6,073
–
6,073
–
–
66,774
812,522
13,379
1,163,379
11,432
936,432
–
–
–
70,000
70,000
70,000
18,784
18,784
18,784
13,619
938,619
7,001
959,204
10,474
485,474
0%
–
–
0% 390,000
0% 390,000
0%
0%
0%
–
–
–
0% 390,000
–
–
–
–
–
–
–
–
39%
0%
177,000
377,203
177,000
–
5,014,915
377,203
124,381
55,905 5,572,404
7% 1,524,000
377,203
Table 2: Remuneration for the year ended 30 June 2014
Short-term
Salary &
Fees
2014
Bonus
Accrued2
Post
Employment
Super
2014
Long-term
Benefits4
Total2
Performance
Related
2013
Bonus
Paid
2014
Unpaid
Bonus2
2014
Directors
Robert Ferguson
109,840
–
Hugh McLernon
1,022,225
390,000
John Walker
Alden Halse
Michael Bowen
Clive Bowman
814,225
390,000
64,073
70,000
–
–
814,225
390,000
Wendy McCarthy
32,776
–
10,160
17,775
17,775
5,927
–
17,775
3,032
–
120,000
45,130 1,475,130
34,320 1,256,320
–
–
70,000
70,000
37,219
1,259,219
–
35,808
Executives
Charlie Gollow
460,625
177,000
Diane Jones
408,625
177,000
17,775
17,775
28,375
683,775
17,662
621,062
Total
3,796,614 1,524,000
107,994
162,706 5,591,314
0%
26%
31%
0%
0%
31%
0%
26%
28%
27%
–
–
–
–
–
–
–
–
–
–
390,000
390,000
–
–
390,000
–
177,000
177,000
– 1,524,000
1. The 2015 Bonus has been accrued for the US business only and will be paid in the 2016 financial year.
2. The 2014 Bonus accrued was paid in the 2015 financial year.
3.
Total Key Management Personnel remuneration recognised in the Statement of Comprehensive Income. The insurance
premium for directors and officers was $158,153 in the current period (2014: $142,061). This insurance has not been allocated
to specific individuals as the Directors do not believe there is a reasonable basis for allocation.
4. Long Service Leave accrued during the period.
20
IMF BENTHAM LIMITED Remuneration report (Audited) (continued)
(b) Compensation and remuneration options
No options were granted to Key Management Personnel in 2015 or 2014. No options expired in 2015 or 2014.
(c) Shareholdings of Key Management Personnel
Balance
01-Jul-14
Received as
remuneration
Options
exercised
Net change
other1
Balance
30-Jun-15
Directors
Andrew Saker
Robert Ferguson
Hugh McLernon
John Walker2
Alden Halse
Michael Bowen
Wendy McCarthy
Executives
Clive Bowman
Charlie Gollow
Diane Jones
Total
Directors
Robert Ferguson
Hugh McLernon
John Walker
Alden Halse
Michael Bowen
Clive Bowman
Wendy McCarthy
Executives
Charlie Gollow
Diane Jones
Total
–
1,853,000
7,755,991
4,958,292
879,780
845,098
–
1,013,941
467,058
38,764
17,811,924
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(1,853,000)
–
–
–
7,755,991
(4,958,292)
–
42,029
–
–
7,058
1,927
–
879,780
887,127
–
1,013,941
474,116
40,691
(6,760,278)
11,051,646
Balance
01-Jul-13
Received as
remuneration
Options
exercised
Net change
other1
Balance
30-Jun-14
1,853,000
7,738,346
4,958,292
876,251
813,751
1,013,941
–
460,000
20,000
17,733,581
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
17,645
–
3,529
31,347
–
–
1,853,000
7,755,991
4,958,292
879,780
845,098
1,013,941
–
7,058
18,764
78,343
467,058
38,764
17,811,924
1.
The net changes relate to shares obtained through either the conversion of the convertible notes, or the share purchase plan,
or the dividend reinvestment plan, or sold on market.
2.
John Walker resigned as a director on 17 June 2015 and is not considered a KMP from that date.
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.
(d) Loans to Key Management Personnel
There have been no loans provided to Key Management Personnel in 2015 (2014: nil).
(e) Transactions with Key Management Personnel
During the year the Group obtained legal advice from Hardy Bowen, a legal firm associated with Michael Bowen,
totalling $117,404 (2014: $356,371). The legal advice was obtained at normal market prices. Refer to Note 23 for
details. (Please note Hardy Bowen merged with DLA Piper on 1 July 2015).
– End of remuneration report –
21
ANNUAL REPORT 2015 2015 DIRECTORS’ REPORT
(continued)
Directors’ meetings
Committee membership
As at the date of this report, the Company had an Audit and Risk Committee, a Remuneration Committee,
a Nomination Committee and a Corporate Governance Committee. Directors acting on committees of the
Board during the year were as follows:
Audit & Risk Committee
Remuneration Committee
Nomination Committee
Corporate Governance Committee
A Halse (Chair)
M Bowen (Chair)
A Halse (Chair)
M Bowen (Chair)
M Bowen
W McCarthy5
R Ferguson2
A Halse
W McCarthy5
R Ferguson2
M Bowen
W McCarthy6
A Saker1
R Ferguson2
A Halse
W McCarthy7
C Bowman4
On 13 August 2014 the Board determined that the Company should form a Corporate Governance Committee.
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:
Meetings Attended:
M Bowen
A J Halse
W McCarthy
H McLernon
A Saker1
R Ferguson2
C Bowman3
J F Walker4
Board
Meetings
Audit & Risk
Committee
Remuneration
Committee
Nomination
Committee
Corporate
Governance
Committee
7
7
7
6
7
5
4
4
5
2
2
2
1
–
–
1
–
–
6
6
6
5
–
–
1
–
–
4
4
4
4
–
4
–
–
–
2
2
2
–
–
–
–
2
–
1. A Saker was appointed as a director on 5 January 2015 and appointed to the Nomination Committee on the same date.
2. R Ferguson resigned as a director on 5 January 2015.
3. C Bowman resigned as a director on 5 January 2015.
4. J Walker resigned as a director on 17 June 2015.
5. W McCarthy was appointed to the Audit and Risk Committee and the Remuneration Committee on 14 November 2014.
6. W McCarthy was appointed to the Nomination Committee on 5 January 2015.
7. W McCarthy was appointed to the Corporate Governance Committee on 18 February 2015.
Rounding
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.
22
IMF BENTHAM LIMITED
Directors’ meetings (continued)
Auditor’s Independence Declaration
EY, the Company’s auditors, have provided a written declaration to the Directors in relation to its audit of the
Financial Report for the year ended 30 June 2015. This Independence Declaration can be found at page 24.
On 26 June 2013 the Board approved the extension of the Lead Audit Partner rotation period from five years to
seven years in accordance with section 324DAB of the Corporations Act 2001 and the Corporations Legislation
Amendment (Audit Enhancement) Act 2012.
The reasons why the Board approved the extension included:
– Mr Meyerowitz, the Lead Audit Partner, has a detailed understanding of the Group’s business and strategies, its
systems and controls. This knowledge is considered to be invaluable to the Board at this point in time.
– The existing independence and service metrics in place with EY and Mr Meyerowitz are sufficient to ensure that
auditor independence would not be diminished in any way by such an extension.
– Mr Meyerowitz will continue to abide by the independence guidance provided in APES 110 ‘Code of Ethics for
Professional Accountants’ as issued by the Accounting Professional and Ethical Standards Board and EY’s own
independence requirements.
– The threats of self-interest and familiarity have been mitigated as EY appointed a new Engagement Quality
Review Partner.
– The Board of Directors are of the view that Mr Meyerowitz’s continued involvement with the Group as the Lead
Audit Partner will not in any way diminish the audit quality provided to the Group.
Non-audit services
The Directors are satisfied that the provision of non-audit services by EY to the Group 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 $121,556 (2014: $129,448).
Corporate governance
The Company has an extensive Corporate Governance Manual which includes a compliance program, Conflicts
Management Policy, 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 68 of this Annual Report.
Signed in accordance with a resolution of the Directors.
Michael Bowen
Chairman (At 30 June 2015)
Andrew Saker
Managing Director
Sydney 19 August 2015
23
ANNUAL REPORT 2015 AUDITOR’S INDEPENDENCE DECLARATION
24
IMF BENTHAM LIMITED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2015
Revenue
Other income
Total Income
Finance costs
Depreciation expense
Employee benefits expense
Corporate and office expense
Other expenses
Share of loss in joint venture
Profit Before Income Tax
Income tax expense
Net Profit for the Year
Other Comprehensive Income
Note
6
7
8(a)
8(b)
8(c)
8(d)
8(e)
31
9
Consolidated
2015
$
2014
$
12,460,365
2,605,949
14,589,353
25,296,909
27,049,718
27,902,858
(530,286)
(1,123,392)
(228,016)
(222,654)
(10,157,815)
(6,623,530)
(3,549,940)
(2,731,735)
(1,143,022)
(939,735)
(2,275,726)
(653,721)
9,164,913
15,608,091
(2,860,701)
(5,739,741)
6,304,212
9,868,350
Items that may be subsequently reclassified to profit and loss:
Movement in foreign currency translation reserve
Other comprehensive income for the year, net of tax
Total Comprehensive Income for the Year
21(b)
190,503
190,503
–
–
6,494,715
9,868,350
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
3.78
3.78
6.56
6.56
The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
25
ANNUAL REPORT 2015 STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2015
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
Intangible assets
Investment held in joint venture
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
Debt securities
Other liabilities
Deferred income tax liabilities
Total Non-Current Liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Retained earnings
TOTAL EQUITY
Consolidated
2015
$
2014
$
Note
12
13
14
13
15
16
31
130,107,653
105,576,733
11,800,632
60,375,749
321,434
251,581
142,229,719 166,204,063
38,097,946
14,353,414
748,718
570,712
99,483,702
98,636,050
652,308
1,153,499
138,982,674
114,713,675
281,212,393
280,917,738
17
10,000,669
7,928,101
1,750,048
4,705,516
18
13,800,165
6,905,435
74,555
74,555
25,625,437
19,613,607
18
19
672,145
539,882
48,206,421
47,758,026
55,917
130,469
9
20,752,568
21,744,482
69,687,051
70,172,859
95,312,488
89,786,466
185,899,905
191,131,272
20
116,921,688
112,050,208
21(b)
21(a)
7,426,439
7,235,936
61,551,778
71,845,128
185,899,905
191,131,272
The above Statement of Financial Position should be read in conjunction with the accompanying notes.
26
IMF BENTHAM LIMITED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2015
Cash flows from operating activities
Payments to suppliers and employees
Interest income
Interest paid
Income tax paid
Consolidated
2015
$
2014
$
Note
(15,806,867)
(6,751,012)
3,157,627
2,394,525
(3,243,000)
(2,920,477)
(7,036,981)
(1,502,141)
Net cash flows (used in) operating activities
22
(22,929,221)
(8,779,105)
Cash flows from investing activities
Proceeds from litigation funding - settlements, fees and reimbursements
103,359,091
42,191,361
Payments for litigation funding and capitalised suppliers and
employee costs
Purchase of plant and equipment
Loans made to joint venture
Investment in joint venture
Net cash flows from/(used in) investing activities
Cash flows from financing activities
Proceeds from issue of shares
Cost of issuing shares
Bonds proceeds
Cost of issuing bonds
Payments for redemption of convertible notes
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
Cash and cash equivalents at end of year
(49,198,579) (57,084,733)
(406,022)
(170,941)
1,289,532
(1,324,424)
(1,007,949)
(1,807,220)
54,036,073 (18,195,957)
–
–
42,031,791
(1,198,499)
– 50,000,000
–
–
(2,326,739)
(11,180,756)
(11,726,082) (12,705,998)
(11,726,082) 64,619,799
19,380,770 37,644,737
5,150,150
(52,288)
105,576,733 67,984,284
12
130,107,653 105,576,733
The above Statement of Cash Flows should be read in conjunction with the accompanying notes.
27
ANNUAL REPORT 2015 STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2015
Option
premium
reserve
$
Foreign
currency
translation
reserve
$
Convertible
notes
reserve
$
Issued
capital
$
Retained
earnings
$
Total
$
112,050,208
3,403,720
–
–
–
–
–
–
–
–
190,503
–
3,832,216
71,845,128
191,131,272
–
–
–
6,304,212
6,304,212
–
–
190,503
–
112,050,208
3,403,720
190,503
3,832,216 78,149,340 197,625,987
CONSOLIDATED
As at 1 July 2014
Profit for the year
Movement in foreign currency
translation reserve
Other comprehensive income
Total Comprehensive Income
for the Year
Equity Transactions:
Dividend paid
–
–
Shares issued under the Dividend
Reinvestment Plan
4,871,480
–
–
–
–
–
–
(16,597,562) (16,597,562)
–
4,871,480
As at 30 June 2015
116,921,688
3,403,720
190,503
3,832,216
61,551,778 185,899,905
As at 1 July 2013
Profit for the year
Other comprehensive income
Total Comprehensive Income
for the Year
Equity Transactions:
Dividend paid
41,912,195
3,403,720
–
–
–
–
41,912,195
3,403,720
Proceeds from shares issued
42,031,791
Transaction costs associated
with share issue
(1,198,499)
Shares issued under the Dividend
Reinvestment Plan
1,673,477
Convertible notes converted
27,631,244
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,832,216 76,356,253 125,504,384
–
–
9,868,350
9,868,350
–
–
3,832,216 86,224,603 135,372,734
– (14,379,475) (14,379,475)
–
–
–
–
–
–
–
–
42,031,791
(1,198,499)
1,673,477
27,631,244
3,832,216
71,845,128
191,131,272
As at 30 June 2014
112,050,208
3,403,720
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
28
IMF BENTHAM LIMITED NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015
Note 1: Corporate information
The financial report of IMF Bentham Limited (IMF, the Company or the Parent) for the year ended 30 June 2015
and its subsidiaries (the Group or consolidated entity) was authorised for issue in accordance with a resolution of
the Directors on 19 August 2015.
IMF Bentham Limited (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.
The financial report is presented in Australian dollars, being the functional currency of the Parent.
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 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 1 July 2014, including:
Reference
Title
AASB 2012-3
Amendments to Australian Accounting Standards - Offsetting Financial Assets and
Financial Liabilities
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.
Interpretation 21
Levies
This Interpretation confirms that a liability to pay a levy is only recognised when the
activity that triggers the payment occurs. Applying the going concern assumption does
not create a constructive obligation.
AASB 2013-3
Amendments to AASB 136 – Recoverable Amount Disclosures for Non-Financial Assets
AASB 2013-3 amends the disclosure requirements in AASB 136 Impairment of Assets.
The amendments include the requirement to disclose additional information about the
fair value measurement when the recoverable amount of impaired assets is based on fair
value less costs of disposal.
AASB 1031
Materiality
The revised AASB 1031 is an interim standard that cross-references to other Standards
and the Framework (issued December 2013) that contain guidance on materiality.
AASB 1031 will be withdrawn when references to AASB 1031 in all Standards and
Interpretations have been removed.
AASB 2014-1 Part C issued in June 2014 makes amendments to eight Australian
Accounting Standards to delete their references to AASB 1031. The amendments are
effective from 1 July 2014*.
29
ANNUAL REPORT 2015 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015 (continued)
Note 2: Summary of significant accounting policies (continued)
Reference
Title
AASB 2013-9
Amendments to Australian Accounting Standards – Conceptual Framework, Materiality
and Financial Instruments
The Standard contains three main parts and makes amendments to a number Standards
and Interpretations.
Part A of AASB 2013-9 makes consequential amendments arising from the issuance of
AASB CF 2013-1.
Part B makes amendments to particular Australian Accounting Standards to delete
references to AASB 1031 and also makes minor editorial amendments to various other
standards.
AASB 2014-1
Part A -Annual
Improvements
2010–2012 Cycle
AASB 2014-1 Part A: This standard sets out amendments to Australian Accounting
Standards arising from the issuance by the International Accounting Standards Board
(IASB) of International Financial Reporting Standards (IFRSs) Annual Improvements to
IFRSs 2010–2012 Cycle and Annual Improvements to IFRSs 2011–2013 Cycle.
Annual Improvements to IFRSs 2010–2012 Cycle addresses the following items:
– AASB 2 - Clarifies the definition of ‘vesting conditions’ and ‘market condition’ and
introduces the definition of ‘performance condition’ and ‘service condition’.
– AASB 3 - Clarifies the classification requirements for contingent consideration in a
business combination by removing all references to AASB 137.
– AASB 8 - Requires entities to disclose factors used to identify the entity’s reportable
segments when operating segments have been aggregated. An entity is also required to
provide a reconciliation of total reportable segments’ asset to the entity’s total assets.
– AASB 116 & AASB 138 - Clarifies that the determination of accumulated depreciation
does not depend on the selection of the valuation technique and that it is calculated as
the difference between the gross and net carrying amounts.
AASB 124 - Defines a management entity providing KMP services as a related party of
the reporting entity. The amendments added an exemption from the detailed disclosure
requirements in paragraph 17 of AASB 124 for KMP services provided by a management
entity. Payments made to a management entity in respect of KMP services should be
separately disclosed.
AASB 2014-1 Part A
-Annual Improvements
2011–2013 Cycle
Annual Improvements to IFRSs 2011–2013 Cycle addresses the following items:
– AASB13 - Clarifies that the portfolio exception in paragraph 52 of AASB 13 applies to all
contracts within the scope of AASB 139 or AASB 9, regardless of whether they meet the
definitions of financial assets or financial liabilities as defined in AASB 132.
AASB 140 - Clarifies that judgment is needed to determine whether an acquisition of
investment property is solely the acquisition of an investment property or whether it is
the acquisition of a group of assets or a business combination in the scope of AASB 3 that
includes an investment property. That judgment is based on guidance in AASB 3.
The adoption of the new and amended standards and interpretations effective as of 1 July 2014 resulted in changes
to presentation and disclosures, but had no material impact on the financial position or financial performance of
the Group.
30
IMF BENTHAM LIMITED Note 2: Summary of significant accounting policies (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 2015
are outlined in the table below. The impact of the new standards and interpretations issued but not yet effective
has not been assessed.
Application
date of
standard*
Application
date for
Group*
1 January
2018
1 July
2018
Reference
Summary
AASB 9
Financial
Instruments
AASB 9 (December 2014) is a new Principal standard which replaces
AASB 139. This new Principal version supersedes AASB 9 issued in
December 2009 (as amended) and AASB 9 (issued in December
2010) and includes a model for classification and measurement,
a single, forward-looking ‘expected loss’ impairment model and a
substantially-reformed approach to hedge accounting.
AASB 9 is effective for annual periods beginning on or after 1
January 2018. However, the Standard is available for early application.
The own credit changes can be early applied in isolation without
otherwise changing the accounting for financial instruments.
The final version of AASB 9 introduces a new expected-loss
impairment model that will require more timely recognition of
expected credit losses. Specifically, the new Standard requires entities
to account for expected credit losses from when financial instruments
are first recognised and to recognise full lifetime expected losses on a
more timely basis.
Amendments to AASB 9 (December 2009 & 2010 editions and AASB
2013-9) issued in December 2013 included the new hedge accounting
requirements, including changes to hedge effectiveness testing,
treatment of hedging costs, risk components that can be hedged and
disclosures.
AASB 9 includes requirements for a simpler 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 inconsistency
that would arise from measuring assets or liabilities, or recognising
the gains and losses on them, on different bases.
31
ANNUAL REPORT 2015 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015 (continued)
Note 2: Summary of significant accounting policies (continued)
Reference
Summary
Application
date of
standard*
Application
date for
Group*
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
AASB 9 also removes the volatility in profit or loss that was caused
by changes in the credit risk of liabilities elected to be measured at
fair value. This change in accounting means that gains caused by the
deterioration of an entity’s own credit risk on such liabilities are no
longer recognised in profit or loss.
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, AASB 2010-10 and AASB 2014-1 – Part E.
AASB 2014-7 incorporates the consequential amendments arising
from the issuance of AASB 9 in Dec 2014.
AASB 2014-8 limits the application of the existing versions of AASB
9 (AASB 9 (December 2009) and AASB 9 (December 2010)) from 1
February 2015 and applies to annual reporting periods beginning on
after 1 January 2015.
AASB 2014-3
Amendments
to Australian
Accounting
Standards –
Accounting for
Acquisitions of
Interests in Joint
Operations
[AASB 1 & AASB 11]
AASB 2014-4
Clarification
of Acceptable
Methods of
Depreciation and
Amortisation
(Amendments
to AASB 116 and
AASB 138)
AASB 2014-3 amends AASB 11 to provide guidance on the accounting
for acquisitions of interests in joint operations in which the activity
constitutes a business. The amendments require:
1 January
2016
1 July
2016
a. the acquirer of an interest in a joint operation in which the
activity constitutes a business, as defined in AASB 3 Business
Combinations, to apply all of the principles on business
combinations accounting in AASB 3 and other Australian
Accounting Standards except for those principles that conflict with
the guidance in AASB 11; and
b. the acquirer to disclose the information required by AASB 3 and
other Australian Accounting Standards for business combinations.
This Standard also makes an editorial correction to AASB 11
AASB 116 and AASB 138 both establish the principle for the basis
of depreciation and amortisation as being the expected pattern of
consumption of the future economic benefits of an asset.
1 January
2016
1 July
2016
The IASB has clarified that the use of revenue-based methods to
calculate the depreciation of an asset is not appropriate because
revenue generated by an activity that includes the use of an asset
generally reflects factors other than the consumption of the
economic benefits embodied in the asset.
The amendment also clarified that revenue is generally presumed
to be an inappropriate basis for measuring the consumption of the
economic benefits embodied in an intangible asset. This presumption,
however, can be rebutted in certain limited circumstances.
32
IMF BENTHAM LIMITED Note 2: Summary of significant accounting policies (continued)
Reference
Summary
AASB 15
Revenue from
Contracts with
Customers
AASB 2014-9
Amendments
to Australian
Accounting
Standards –
Equity Method in
Separate Financial
Statements
AASB 2014-10
Amendments
to Australian
Accounting
Standards – Sale
or Contribution of
Assets between
an Investor and its
Associate or Joint
Venture
In May 2014, the IASB issued IFRS 15 Revenue from Contracts with
Customers, which replaces IAS 11 Construction Contracts, IAS 18
Revenue and related Interpretations (IFRIC 13 Customer Loyalty
Programmes, IFRIC 15 Agreements for the Construction of Real Estate,
IFRIC 18 Transfers of Assets from Customers and
SIC-31 Revenue—Barter Transactions Involving
Advertising Services).
The core principle of IFRS 15 is that an entity recognises revenue to
depict the transfer of promised goods or services to customers in an
amount that reflects the consideration to which the entity expects
to be entitled in exchange for those goods or services. An entity
recognises revenue in accordance with that core principle by applying
the following steps:
a. Step 1: Identify the contract(s) with a customer
b. Step 2: Identify the performance obligations in the contract
c. Step 3: Determine the transaction price
d. Step 4: Allocate the transaction price to the performance
obligations in the contract
e. Step 5: Recognise revenue when (or as) the entity satisfies a
performance obligation
Early application of this standard is permitted.
AASB 2014-5 incorporates the consequential amendments to a
number Australian Accounting Standards (including Interpretations)
arising from the issuance of AASB 15. Under the standard, these
variable amounts are estimated and included in the transaction price
using either the expected value approach or the most likely amount
approach, whichever best predicts the consideration to which the
entity is entitled.
AASB 2014-9 amends AASB 127 Separate Financial Statements, and
consequentially amends AASB 1
First-time Adoption of Australian Accounting Standards and AASB 128
Investments in Associates and Joint Ventures, to allow entities to use
the equity method of accounting for investments in subsidiaries, joint
ventures and associates in their separate financial statements.
AASB 2014-9 also makes editorial corrections to AASB 127.
AASB 2014-9 applies to annual reporting periods beginning on or
after 1 January 2016. Early adoption permitted.
AASB 2014-10 amends AASB 10 Consolidated Financial Statements
and AASB 128 to address an inconsistency between the requirements
in AASB 10 and those in AASB 128 (August 2011), in dealing with the
sale or contribution of assets between an investor and its associate or
joint venture. The amendments require:
a. a full gain or loss to be recognised when a transaction involves a
business (whether it is housed in a subsidiary or not); and
b. a partial gain or loss to be recognised when a transaction involves
assets that do not constitute a business, even if these assets are
housed in a subsidiary.
AASB 2014-10 also makes an editorial correction to AASB 10.
AASB 2014-10 applies to annual reporting periods beginning on
or after 1 January 2016. Early adoption permitted.
Application
date of
standard*
Application
date for
Group*
1 January
2017
1 July
2017
1 January
2016
1 July
2016
1 January
2016
1 July
2016
33
ANNUAL REPORT 2015 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015 (continued)
Note 2: Summary of significant accounting policies (continued)
Reference
Summary
Application
date of
standard*
Application
date for
Group*
The subjects of the principal amendments to the Standards are set
out below:
1 January
2016
1 July
2016
AASB 5 Non-current Assets Held for Sale and Discontinued
Operations:
– Changes in methods of disposal – where an entity reclassifies
an asset (or disposal group) directly from being held for
distribution to being held for sale (or vice versa), an entity shall
not follow the guidance in paragraphs 27–29 to account for
this change.
AASB 7 Financial Instruments: Disclosures:
– Servicing contracts - clarifies how an entity should apply the
guidance in paragraph 42C of AASB 7 to a servicing contract to
decide whether a servicing contract is ‘continuing involvement’
for the purposes of applying the disclosure requirements in
paragraphs 42E–42H of AASB 7.
– Applicability of the amendments to AASB 7 to condensed
interim financial statements - clarify that the additional
disclosure required by the amendments to AASB 7 Disclosure–
Offsetting Financial Assets and Financial Liabilities is not
specifically required for all interim periods. However, the
additional disclosure is required to be given in condensed
interim financial statements that are prepared in accordance
with AASB 134 Interim Financial Reporting when its inclusion
would be required by the requirements of AASB 134.
AASB 119 Employee Benefits:
– Discount rate: regional market issue - clarifies that the high
quality corporate bonds used to estimate the discount rate for
post-employment benefit obligations should be denominated
in the same currency as the liability. Further it clarifies that the
depth of the market for high quality corporate bonds should
be assessed at the currency level.
AASB 134 Interim Financial Reporting:
– Disclosure of information ‘elsewhere in the interim financial
report’ -amends AASB 134 to clarify the meaning of disclosure
of information ‘elsewhere in the interim financial report’ and
to require the inclusion of a cross-reference from the interim
financial statements to the location of this information.
The Standard makes amendments to AASB 101 Presentation of
Financial Statements arising from the IASB’s Disclosure Initiative
project. The amendments are designed to further encourage
companies to apply professional judgment in determining what
information to disclose in the financial statements. For example,
the amendments make clear that materiality applies to the whole of
financial statements and that the inclusion of immaterial information
can inhibit the usefulness of financial disclosures. The amendments
also clarify that companies should use professional judgment in
determining where and in what order information is presented in
the financial disclosures.
1 January
2016
1 July
2016
AASB 2015-1
Amendments
to Australian
Accounting
Standards – Annual
Improvements
to Australian
Accounting
Standards 2012–
2014 Cycle
AASB 2015-2
Amendments
to Australian
Accounting
Standards –
Disclosure Initiative:
Amendments to
AASB 101
34
IMF BENTHAM LIMITED Note 2: Summary of significant accounting policies (continued)
Reference
Summary
Application
date of
standard*
Application
date for
Group*
The Standard completes the AASB’s project to remove Australian
guidance on materiality from Australian Accounting Standards.
1 July
2015
1 July
2015
The amendment aligns the relief available in AASB 10 Consolidated
Financial Statements and AASB 128 Investments in Associates and
Joint Ventures in respect of the financial reporting requirements for
Australian groups with a foreign parent
1 July
2015
1 July
2015
This makes amendments to AASB 10, AASB 12 Disclosure of Interests
in Other Entities and AASB 128 arising from the IASB’s narrow scope
amendments associated with Investment Entities.
1 July
2015
1 July
2015
This Standard makes amendments to AASB 124 Related Party
Disclosures to extend the scope of that Standard to include not-for-
profit public sector entities.
1 July
2016
1 July
2016
AASB 2015-3
Amendments
to Australian
Accounting
Standards
arising from
the Withdrawal
of AASB 1031
Materiality
AASB 2015-4
Amendments
to Australian
Accounting
Standards –
Financial Reporting
Requirements for
Australian Groups
with a Foreign
Parent
AASB 2015-5
Amendments
to Australian
Accounting
Standards –
Investment Entities:
Applying the
Consolidation
Exception
AASB 2015-6
Amendments
to Australian
Accounting
Standards –
Extending Related
Party Disclosures
to Not-for-Profit
Public Sector
Entities [AASB 10,
AASB 124 & AASB
1049]
* Designates the beginning of the applicable annual reporting period unless otherwise stated.
35
ANNUAL REPORT 2015 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015 (continued)
Note 2: Summary of significant accounting policies (continued)
d. Basis of consolidation
The consolidated financial statements comprise the
financial statements of IMF Bentham Limited (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. Control is achieved when the
Group is exposed, or has rights, to variable returns from
its involvement with the investee and has the ability to
affect those returns through its power over the investee.
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.
e. Foreign currency
The Group’s consolidated financial statements are
presented in Australian dollars, which is also the
Parent’s functional currency. For each entity, the
Group determines the functional currency and items
included in the financial statements of each entity
are measured using that functional currency. The
Group uses the direct method of consolidation and on
disposal of a foreign operation, the gain or loss that is
reclassified to profit or loss reflects the amount that
arises from using this method.
Transactions and balances
Transactions in foreign currencies are initially recorded
by the Group’s entities at their respective functional
currency spot rates at the date the transaction first
qualifies for recognition. Monetary assets and liabilities
denominated in foreign currencies are translated at
the functional currency spot rates of exchange at the
reporting date.
Differences arising on settlement or translation of
monetary items are recognised in profit or loss with
the exception of monetary items that are designated
as part of the hedge of the Group’s net investment
of a foreign operation. These are recognised in other
comprehensive income until the net investment is
disposed of, at which time, the cumulative amount
is reclassified to profit or loss. Tax charges and
credits attributable to exchange differences on
those monetary items are also recorded in other
comprehensive income.
Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated
using the exchange rates at the dates of the initial
transactions. Non-monetary items measured at fair
value in a foreign currency are translated using the
exchange rates at the date when the fair value is
determined. The gain or loss arising on translation of
non-monetary items measured at fair value is treated
in line with the recognition of gain or loss on change
36
in fair value of the item (i.e., translation differences
on items whose fair value gain or loss is recognised in
other comprehensive income or profit or loss are also
recognised in other comprehensive income or profit or
loss, respectively).
Group companies
On consolidation, the assets and liabilities of foreign
operations are translated into Australian dollars at
the rate of exchange prevailing at the reporting date
and their statements of profit or loss are translated
at exchange rates prevailing at the dates of the
transactions. The exchange differences arising on
translation for consolidation purposes are recognised
in other comprehensive income. On disposal
of a foreign operation, the component of other
comprehensive income relating to that particular
foreign operation is recognised in profit or loss.
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 and
subsequently remeasured at amortised cost using the
effective interest rate method, 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.
IMF BENTHAM LIMITED Note 2: Summary of significant accounting policies (continued)
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.
(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 profit or loss 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 profit or loss 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 in other comprehensive
income 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 profit or loss.
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 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 profit or loss 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
profit or loss.
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 profit or loss 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
37
ANNUAL REPORT 2015 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015 (continued)
Note 2: Summary of significant accounting policies (continued)
economic benefit flowing from the Litigation Contracts
In Progress. Accordingly, Litigation Contracts In
Progress meet 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 profit
or loss 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 Group on the appeal are expensed as incurred.
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
38
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 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 profit or loss 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
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 accumulated sick
leave expected to be wholly 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-
accumulated sick leave are recognised when the leave is
taken and are measured at the rates paid or payable.
IMF BENTHAM LIMITED Note 2: Summary of significant accounting policies (continued)
(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.
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 the option
premium reserve, 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 profit or loss 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 profit or loss 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 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.
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 profit or loss if they are not
closely related to the host contract.
39
ANNUAL REPORT 2015 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015 (continued)
Note 2: Summary of significant accounting policies (continued)
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.
(iii) Fees
Revenue is recognised when the Group’s right to
receive the fee 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
reporting date.
Deferred income tax is provided on all temporary
differences at the Statement of Financial Position
reporting date between the tax bases of assets and
liabilities and their carrying amounts for financial
reporting purposes.
40
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:
– 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
other comprehensive income are recognised in equity
and not in profit or loss.
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 BENTHAM LIMITED Note 2: Summary of significant accounting policies (continued)
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.
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 associated
with dilutive potential ordinary shares that have
been recognised; and
– other non-discretionary changes in revenue or
expenses during the period that would result from
dilution of potential ordinary shares, divided by the
weighted average number of shares and dilutive
shares, adjusted for any bonus element.
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.
v. Investment in joint venture
A joint venture is a type of joint arrangement whereby
the parties that have joint control of the arrangement
have rights to the net assets of the joint venture. Joint
control is the contractually agreed sharing of control
of an arrangement, which exists only when decisions
about the relevant activities require unanimous
consent of the parties sharing control.
The Group’s investment in its joint venture is
accounted for using the equity method. Under the
equity method, the investment in a joint venture is
initially recognised at cost. The carrying amount of
the investment is adjusted to recognise changes in
the Group’s share of net assets of the joint venture
since the acquisition date. Goodwill relating to the
joint venture is included in the carrying amount of the
investment and is neither amortised nor individually
tested for impairment.
The Statement of Comprehensive Income reflects the
Group’s share of the results of operations of the joint
venture. Any change in other comprehensive income
of those investees is presented as part of the Group’s
other comprehensive income. In addition, when there
has been a change recognised directly in the equity of
the joint venture, the Group recognises its share of any
changes, when applicable, in the statement of changes
in equity. Unrealised gains and losses resulting from
transactions between the Group and the joint venture
are eliminated to the extent of the interest in the joint
venture.
The aggregate of the Group’s share of profit or loss of
a joint venture is shown on the face of the Statement
of Comprehensive Income outside operating profit and
represents profit or loss after tax.
After application of the equity method, the Group
determines whether it is necessary to recognise an
impairment loss on its investment in its joint venture.
At each reporting date, the Group determines whether
there is objective evidence that the investment in the
joint venture is impaired. If there is such evidence, the
Group calculates the amount of impairment as the
difference between the recoverable amount of the
joint venture and its carrying value, then recognises
the loss in the ‘Share of profit of a joint venture’ in the
Statement of Comprehensive Income.
41
ANNUAL REPORT 2015 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015 (continued)
Note 3: Financial risk management objective and policies
The Group’s principal financial instruments comprise cash and short-term deposits, receivables and payables
and bonds.
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 and 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. In addition, as at 30 June 2015, the Group has a $50,000,000 variable rate bond debt
outstanding. This bond requires that the Group make a quarterly coupon payment that is based on the Bank Bill
Rate plus a fixed margin of 4.20% per annum.
At reporting date the Group had the following financial instruments exposed to Australian variable interest rate risk:
Financial instruments
Cash and cash equivalents
Bonds
Net exposure
2015
$
2014
$
130,107,653 105,576,733
(48,206,421) (47,758,026)
81,901,232
57,818,707
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 available, 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.
At 30 June 2015, 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:
+0.5% (500 basis points) (2014: +0.35%)
409,507
202,366
409,507
202,366
-0.2% (200 basis points) (2014: -0.14%)
(163,802)
(80,946)
(163,802)
(80,946)
Post Tax Profit
Higher/(Lower)
Equity
Higher/(Lower)
2015
$
2014
$
2015
$
2014
$
42
IMF BENTHAM LIMITED Note 3: Financial risk management objective and policies (continued)
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 2015, 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, except the Bentham IMF Bonds, 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:
< 6 months
$
6-12 months
$
1-5 years
$
>5 years
$
Total
$
2015
Financial Liabilities
Trade and other payables
Bonds
Bonds interest
2014
Financial Liabilities
Trade and other payables
Bonds
Bonds interest
10,000,669
–
–
–
– 50,000,000
1,585,000
1,585,000
9,750,000
11,585,669
1,585,000
59,750,000
7,928,101
–
–
–
– 50,000,000
1,718,750
1,718,750
13,750,000
9,646,851
1,718,750
63,750,000
–
10,000,669
– 50,000,000
–
–
12,920,000
72,920,669
–
7,928,101
– 50,000,000
–
–
17,187,500
75,115,601
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 Bonds. The
Bonds have a carrying value of $50,000,000 (excluding the transaction costs) and a fair value of $52,125,000 at
30 June 2015. The fair value has been determined using the quoted market price at 30 June 2015. Under AASB 13
the fair value measurement used is level 1 on the fair value hierarchy.
43
ANNUAL REPORT 2015 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015 (continued)
Note 3: Financial risk management objective and policies (continued)
Foreign currency risk
The Group operates internationally and is exposed to foreign exchange risk arising from various currency
exposures, primarily with respect to the US dollar. Foreign exchange risk arises from commercial transactions and
recognised assets and liabilities denominated in a currency that is not the entity’s functional currency. The risk is
measured using sensitivity analysis and cash flow forecasting. The Group is also exposed to foreign exchange risk
arising from the translation of its foreign operations. The Group’s investments in its subsidiaries are not hedged
as those currency positions are considered to be long term in nature. In addition, the Parent has an intercompany
receivable from its subsidiary denominated in Australian Dollars which is eliminated on consolidation. The gains or
losses on re-measurement of this intercompany receivable from US Dollars to Australian Dollars are not eliminated
on consolidation as the loan is not considered to be part of the net investment in the subsidiary.
2015
Financial Assets
Cash and cash equivalents
Trade and other receivables1
Total assets
Financial Liabilities
Payables
Total liabilities
2014
Financial Assets
Cash and cash equivalents
Trade and other receivables1
Total assets
Financial Liabilities
Payables
Total liabilities
USD
GBP
Euro
ZAR
25,678,583
3,544,381
1,322,355
13,990,487
16,504,028
–
–
–
42,182,611
3,544,381
1,322,355
13,990,487
2,605,869
2,605,869
–
–
–
–
–
–
USD
GBP
Euro
ZAR
6,905,234
1,852,982
673,671
26,559
22,137,782
–
–
143,419,403
29,043,016
1,852,982
673,671
143,445,962
1,151,407
1,151,407
–
–
–
–
–
–
1. The trade and other receivables balance includes the inter-company loan balance with Bentham denominated in AUD.
Sensitivity
The following table summarises the sensitivity of financial instruments held at balance date to movement in the
exchange rate of the AUD to the listed currencies with all other variables held constant excluding the impact of the
foreign exchange movement on the inter-company loan of $17,954,850 (2014: $22,982,326). The sensitivity is based
on management’s estimate of reasonably possible changes over the financial year.
Impact on profit or loss before tax
USD
GBP
Euro
ZAR
+10%
-10%
(5,147,747)
(725,564)
(192,595)
(145,795)
5,147,747
725,564
192,595
145,795
+10% (2,960,893)
(335,018)
(97,549)
(1,479,740)
-10% 2,960,893
335,018
97,549
1,479,740
2015
2014
44
IMF BENTHAM LIMITED Note 4: Significant accounting judgments, estimates and assumptions
(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 16).
(ii) Significant accounting estimates and
assumptions
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 16.
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.
Provision for adverse costs
The Group raises a provision for adverse costs when
it has lost a matter which it has funded. 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.
The preparation of the Group’s consolidated
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
have been made as well as the following key estimates
and assumptions that have the most significant impact
on the financial statements. 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
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.
45
ANNUAL REPORT 2015 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015 (continued)
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 also owns
50% of a joint venture operating in Europe (primarily the Netherlands and United Kingdom).
The Group continues to investigate other markets and has identified the following markets outside of Australia,
the United States and Europe as being favourable to litigation funding: Hong Kong, Singapore, Canada and
New Zealand.
Interest received from National Australia Bank Ltd of $1,829,508 (2014: $1,798,931), Bankwest of $765,141
(2014: $129,657), and Westpac Banking Group Ltd of $378,805 (2014: $443,754) contributed more than 99%
of the Group’s bank interest revenue (2014: 99%).
Other income can be represented geographically as follows:
Australia
United States
Total other income
Consolidated
2015
$
2014
$
(3,900,980)
25,153,181
18,490,333
143,728
14,589,353 25,296,909
Non-current assets, excluding trade receivables and financial assets, can be represented geographically as follows:
Consolidated
2015
$
2014
$
79,244,267 81,036,580
21,640,461
19,323,681
100,884,728 100,360,261
Consolidated
2015
$
2014
$
2,982,074
2,375,879
729,216
8,749,075
251,670
(21,600)
12,460,365
2,605,949
Australia
United States
Net exposure
Note 6: Revenue
Revenue
Bank interest received and accrued
Fees from Joint Venture
Unrealised foreign exchange gain/(loss)
46
IMF BENTHAM LIMITED Note 7: Other income
Other income
Litigation contracts in progress - settlements and judgments
Litigation contracts in progress - expenses
Litigation contracts in progress - written-down1
Net gain on derecognition of intangible assets
Net loss on receivable measured at amortised cost & foreign exchange gains/(losses)
Loss on derecognition of receivable as a result of losing an appeal2
Other income
Consolidated
2015
$
2014
$
75,907,640
92,345,205
(48,519,259) (30,640,594)
(3,910,343)
(624,420)
43,201,526
41,356,703
–
(684,273)
(28,635,458)
(15,402,670)
23,285
27,149
14,589,353
25,296,909
1.
Included in this balance are costs related to the Group’s initial assessment of the case and cases not pursued by the Group
due to the cases not meeting the Group’s required rate of return.
2. Included in this balance are costs related to cases lost by the Group. Further, it includes any adverse costs provision raised
when a litigation contract in progress has been written-off due to the funded litigation being lost.
Note 8: Expenses
(a) Finance costs
Loss on remeasurement for early redemption of convertible notes
Bond costs
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
Consolidated
2015
$
2014
$
–
(941,880)
(478,285)
(52,001)
(111,368)
(70,144)
(530,286)
(1,123,392)
(228,016)
(222,654)
(8,491,045)
(5,220,937)
(501,375)
(363,800)
(275,960)
(286,285)
(806,141)
(469,850)
(83,294)
(282,658)
(10,157,815)
(6,623,530)
(471,072)
(296,751)
(125,370)
(137,799)
(796,794)
(546,666)
(266,855)
(84,339)
(672,704)
(728,486)
(585,256)
(286,102)
(126,994)
(102,798)
(504,895)
(548,794)
(3,549,940)
(2,731,735)
47
ANNUAL REPORT 2015
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015 (continued)
Note 8: Expenses (continued)
(e) Other expenses
ASX listing fees
General expenses
Postage, printing and stationery
Repairs and maintenance
Share registry costs
Software supplies
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
Use of prior year losses not previously recognised
Adjustment in respect of deferred income tax of previous year
Income tax expense reported in the Statement of Comprehensive Income
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
At the Group’s statutory income tax rate of 30% (2014: 30%)
Adjustment in respect of income and deferred tax of previous years
Expenditure not allowable for income tax purposes
Foreign tax rate adjustment
State income tax
Foreign exchange impact on tax expense
Use of prior year losses not previously recognised
Deferred tax assets not recognised
Other
Income tax expense reported in the Statement of Comprehensive Income
48
Consolidated
2015
$
2014
$
(113,429)
(158,816)
(646,996)
(326,432)
(174,080)
(147,628)
(44,612)
(16,823)
(149,713)
(267,752)
(14,192)
(22,284)
(1,143,022)
(939,735)
Consolidated
2015
$
2014
$
5,410,922
7,499,699
85,694
248,320
(583,492)
(1,763,667)
(193,740)
(62,395)
(1,843,399)
–
(15,284)
(182,216)
2,860,701
5,739,741
9,164,913 15,608,091
2,749,474
4,682,427
70,410
66,105
655,429
460,370
690,556
350,978
(1,843,365)
–
–
–
–
–
–
797,462
(273,151)
193,747
2,860,701
5,739,741
IMF BENTHAM LIMITED
Note 9: Income tax (continued)
Deferred income tax
Deferred income tax at 30 June relates to the following:
CONSOLIDATED
Deferred income tax liabilities
Intangibles
Convertible notes
Accrued interest and unrealised foreign
exchange differences
Receivables
Statement of Financial
Position
Statement of
Comprehensive Income
2015
$
2014
$
2015
$
2014
$
23,378,974
24,071,707
(692,733)
(292,681)
–
–
–
(427,754)
1,657,517
(834,410)
2,491,926
(834,410)
–
–
–
325,687
Gross deferred income tax liabilities
25,036,491
23,237,297
1,799,193
(1,229,158)
Deferred income tax assets
Depreciable assets
279
–
(279)
73,066
Accruals and provisions/bond raising costs
4,250,309
1,448,376
(2,801,933)
(810,490)
Expenditure deductible for income tax over time
33,335
44,439
11,105
(41,696)
Gross deferred income tax assets
4,283,923
1,492,815
(2,791,107)
(779,120)
Net deferred income tax liabilities
20,752,568 21,744,482
Unrecognised temporary differences and tax losses
At 30 June 2015 the Group had no other unrecognised temporary differences and tax losses (2014: $797,462).
Note 10: Dividends paid and proposed
(a) Recognised amounts:
Declared and paid during the year
Dividends on ordinary shares
2015: 5.0 cents per share interim dividend
2014: 5.0 cents per share final dividend
(b) Unrecognised amounts:
Dividends on ordinary shares
2015: Final 5.0 cents per share unrecognised
2014: Final 5.0 cents per share unrecognised
Consolidated
2015
$
2014
$
8,329,049
8,219,005
8,268,513
6,160,470
16,597,562
14,379,475
8,388,049
–
–
8,268,513
8,388,049
8,268,513
49
ANNUAL REPORT 2015 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015 (continued)
Note 10: Dividends paid and proposed (continued)
On 19 August 2015, the Directors declared a final fully franked dividend of 5.0 cents per share for the 2015
financial year, totalling $8,388,049. The record date for this dividend is 25 September 2015 and the payment date
will be 9 October 2015. Shareholders are able to elect to participate in the dividend reinvestment plan in relation
to this dividend. On 10 February 2015 an interim fully franked dividend of 5.0 cents per share was declared in
respect of the 2015 financial year. The record date for this dividend was 16 March 2015 and the payment date
was 10 April 2015.
On 21 August 2014 the Directors declared a final fully franked dividend of 5.0 cents per share for the 2014 financial
year, totalling $8,268,513. The record date for this dividend was 19 September 2014 and the payment date was
3 October 2014. On 10 February 2014 an interim fully franked dividend of 5.0 cents per share was declared in
respect of the 2014 financial year. The record date for this dividend was 21 March 2014 and the payment date
was 4 April 2014.
(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
IMF Bentham Limited
2015
$
2014
$
13,097,349
11,507,612
(3,543,649)
(2,640,201)
– Franking debits that arose from the payment of current year’s interim dividend
(3,569,592)
(3,522,432)
Franking credits that arose from the payment of income tax payable during the
financial year
2,270,605
3,046,854
Franking credits that will arise from the (refund)/payment of income tax
(receivable)/payable as at the end of the financial year
–
–
60,859
4,705,516
8,315,572
13,097,349
(3,594,878) (3,543,649)
4,720,694
9,553,700
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% (2014: 30%).
Note 11: Earnings per share
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.
As at 30 June 2015 there are no instruments on issue (e.g. share options) that could potentially dilute basic earnings
per share in the future. Therefore no diluted earnings per share calculation has been undertaken.
The following reflects the income and share data used in the basic earnings per share computation:
(a) Earnings used in calculating earnings per share
Net profit attributable to ordinary equity holders of the Parent
6,304,212
9,868,350
(b) Weighted average number of shares
Number
2015
2014
Weighted average number of ordinary shares outstanding
166,866,960 150,387,689
Consolidated
2015
$
2014
$
50
IMF BENTHAM LIMITED Note 11: Earnings per share (continued)
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 2015 there were no options issued over shares in the Company (2014: nil).
Note 12: Current assets - cash and cash equivalents
Cash at bank
Short-term deposits
Consolidated
2015
$
2014
$
56,106,054
25,575,133
74,001,599 80,001,600
130,107,653 105,576,733
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 depending on the immediate cash requirements of the Group.
As at 30 June all short term deposits had less than 90 days to mature and earn interest at the respective short-
term deposit rates.
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
2015
$
2014
$
56,106,054
25,575,133
74,001,599 80,001,600
130,107,653 105,576,733
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
2015 guarantees of $1,309,333 were outstanding (2014: $1,682,108). The guarantees are secured by an offset
arrangement with a term deposit of $5,000,000 (2014: $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 $1,309,333 (2014: $1,682,108). The total of the bank guarantee
facilities is $5,000,000 (2014: $5,000,000). The guarantee facility is secured by an offset arrangement against
term deposits of $5,000,000 (2014: $5,000,000).
51
ANNUAL REPORT 2015 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015 (continued)
Note 13: Trade and other receivables
Current
Trade receivables1
Interest receivable2
Receivable from joint venture
Non current
Trade receivables3
Consolidated
2015
$
2014
$
11,441,380
58,374,813
359,252
534,806
-
1,466,130
11,800,632 60,375,749
Consolidated
2015
$
2014
$
38,097,946
14,353,414
38,097,946
14,353,414
1.
Trade receivables are non-interest bearing and generally on 30-90 day terms. There is nothing included in current trade
receivables which is subject to appeal (2014: $nil).
2.
Interest receivable is payable upon the maturity of the Group’s short term deposits (between 30 and 90 days).
3.
Non-current trade receivables occur either as a result of settlements with a repayment plan greater than
12 months or where a judgment is subject to appeal and the appeal is not expected to be heard within the next 12 months.
At 30 June 2015 non-current trade receivables are non-interest bearing and relate to the Company’s expected
income from the Lehman matter. As a result of discussions with the Liquidator of Lehman, the Company has taken
a conservative view and determined that it is unlikely that the Liquidator will pay a dividend from the Lehman
estate within the next 12 months.
At 30 June 2014 the non-current trade receivables was interest bearing and related to the Company’s expected
income from the National Potato matter, which was subsequently lost on appeal.
There is nothing included in non-current trade receivables at 30 June 2015 which is subject to appeal (2014:
$14,353,414).
At 30 June, the aging analysis of trade and other receivables is as follows:
2015 Consolidated
2014 Consolidated
0-30
days
$
11,800,632
22,277,803
31-90
days
$
–
–
91-180
days1
$
+180
days1
$
Total
$
– 38,097,946 49,898,578
– 52,451,360
74,729,163
1. These amounts are not due and therefore not impaired.
(a) Fair value and credit risk
Due to the nature of these receivables, the carrying value of the current receivables approximates their fair value.
The carrying value of the non-current receivables is adjusted to reflect future cashflows and it is this adjusted
carrying value that approximates their fair value. The maximum exposure to credit risk is the carrying value of
receivables. Collateral is not held as security, nor is it the Group’s policy to transfer (on-sell) receivables.
52
IMF BENTHAM LIMITED Note 14: Current assets - other assets
Prepayments
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 2013
Additions
Disposals
At 30 June 2014
Additions
Disposals
At 30 June 2015
Accumulated depreciation
Balance as at 1 July 2013
Depreciation charge for the year
Disposals
At 30 June 2014
Depreciation charge for the year
Disposals
At 30 June 2015
Net book value
At 30 June 2015
At 30 June 2014
Consolidated
2015
$
2014
$
321,434
251,581
321,434
251,581
Consolidated
2015
$
2014
$
2,859,801
2,453,779
(2,111,083)
(1,883,067)
748,718
570,712
Consolidated
Plant and
equipment
$
2,282,838
170,941
–
2,453,779
406,022
–
2,859,801
(1,660,413)
(222,654)
–
(1,883,067)
(228,016)
–
(2,111,083)
748,718
570,712
The useful life of the assets was estimated between 5 to 15 years for both 2014 and 2015.
Plant and equipment of the Company are subject to a fixed charge to secure the Company’s debt due to
Bondholders. See Note 19 for further details.
53
ANNUAL REPORT 2015
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015 (continued)
Note 16: Intangible assets
(a) Reconciliation of carrying amounts at the beginning and end of the period
Year ended 30 June 2014
Cost (gross carrying amount)
Additions
Disposals
Write-down of Litigation Contracts In Progress
At 30 June 2014, net of accumulated amortisation and impairment
Year ended 30 June 2015
Balance as at 1 July 2014, net of accumulated amortisation and impairment
Additions
Disposals
Write-down of Litigation Contracts In Progress
At 30 June 2015, net of accumulated amortisation and impairment
Consolidated
$
86,127,315
59,962,343
(33,467,880)
(13,985,728)
98,636,050
98,636,050
57,085,053
(55,612,981)
(624,420)
99,483,702
(b) Description of Group’s intangible assets
Intangible assets consist of Litigation Contracts In Progress. The carrying value of Litigation Contracts In Progress
includes the capitalisation of external costs of funding the litigation, such as solicitors’ fees, counsels’ fees and
experts’ fees, 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 16(e). The capitalised wages in 2015 equated to approximately 37% of the total salary costs (2014:
52%). The other internal capitalised expenses equated to approximately 20% of overhead costs (2014: 24%).
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
Consolidated
2015
$
2014
$
75,299,654
71,226,681
16,504,171
17,991,977
7,679,877
9,417,392
99,483,702 98,636,050
(c) Write off of intangible assets
The carrying amount of Litigation Contracts In Progress is written off when the case is lost by the Group or the
Group decides not to pursue cases that do not meet the Group’s required rate of return.
(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.
54
IMF BENTHAM LIMITED
Note 16: Intangible assets (continued)
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
and other factors relevant to the particular Litigation Contracts In Progress. The discount rate applied ranged
between 10.0% and 11.5% (2014: between 13.0% and 14.5%).
No impairment has been identified as a result of impairment testing performed.
(e) Capitalised borrowing costs
The Group has determined that Litigation Contracts In Progress meet the definition of qualifying assets. The
amount of borrowing costs capitalised during the year ended 30 June 2015 was $2,757,849 (2014: $3,415,014).
The rate used to determine the borrowing costs eligible for capitalisation was 6.77% for the bonds and 13.5%,
for the convertible notes, both rates representing the effective interest rate.
Note 17: Current liabilities - trade and other payables
Trade payables1
Wage accruals
Bond interest accrual
Consolidated
2015
$
2014
$
8,777,393
6,969,579
426,326
307,772
796,950
650,750
10,000,669
7,928,101
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 18: Current and non-current liabilities – provisions
Current
Annual leave and long service leave
Adverse costs1
Bonus
Non-Current
Long service leave
Consolidated
2015
$
2014
$
1,467,780
1,404,935
11,000,000
2,500,000
1,332,385
3,000,500
13,800,165
6,905,435
672,145
539,882
672,145
539,882
1.
During 2015 the Group raised a provision of $8,500,000 for estimated adverse costs obligations incurred in respect of the
National Potato matter and the Bank Fees matter. The Bank Fees decision is the subject of an appeal application to the High
Court and, if the appeal is successful, adverse costs will not be payable.
55
ANNUAL REPORT 2015
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015 (continued)
Note 18: Current and non-current liabilities – provisions (continued)
(a) Movement in provisions
As at 1 July 2014
Arising during the year
Utilised
As at 30 June 2015
Current 2015
Non-current 2015
Current 2014
Non-current 2014
Adverse
costs
$
Annual leave
$
Employee
bonus
$
Long service
leave
$
Total
$
2,500,000
741,722
3,000,500
1,203,095
7,445,317
8,500,000
889,063
1,332,385
90,249
10,811,697
–
(777,249) (3,000,500)
(6,955)
(3,784,704)
11,000,000
853,536
1,332,385
1,286,389
14,472,310
11,000,000
853,536
1,332,385
614,244
13,800,165
–
–
–
672,145
672,145
11,000,000
853,536
1,332,385
1,286,389
14,472,310
2,500,000
741,722
3,000,500
663,213
6,905,435
–
–
–
539,882
539,882
2,500,000
741,722
3,000,500
1,203,095
7,445,317
(b) Nature and timing of provisions
Adverse costs
During the 2015 financial year the Group raised a provision of $8,500,000 for its estimated adverse costs
obligations in respect of the National Potato matter and the Bank Fees matter. The Bank Fees matter is subject
to an appeal application to the High Court and, if the appeal is successful, adverse costs will not be payable.
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.
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.
Employee bonus
Refer to the Remuneration Report and Note 2 for the relevant accounting policy and discussion of significant
estimations and assumptions applied in the measurement of this provision.
Note 19: Non-current liabilities – debt securities
Bonds1
1.
Includes transaction costs of $2,326,739.
Consolidated
2015
$
2014
$
48,206,421
47,758,026
Bonds issued during the prior financial year
On 24 April 2014, the Company issued 500,000 Bentham IMF Bonds with a face value of $100 each. The interest
rate payable to Bondholders quarterly will be a variable rate based on the Bank Bill Rate plus a fixed margin of
4.20% per annum. The Bentham IMF Bonds will mature on 30 June 2019. The bonds are secured by a security
interest over all present and after-acquired property of IMF.
The Company is required to pay the Bondholders interest payable quarterly in arrears, with the first interest quarter
being 30 June 2014. The application of AASB 123 Borrowing Costs (revised 2007) has resulted in the capitalisation
of $3,389,201 (2014: $650,750) 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 16).
56
IMF BENTHAM LIMITED
Note 20: Contributed equity
Contributed equity
Issued and fully paid ordinary shares
(a) Ordinary shares
Fully paid ordinary shares carry one vote per share and the right to dividends.
Movement in ordinary shares
As at 30 June 2013
Shares issued during the year (Placement and SPP)
Transaction costs associated with share issue
Convertible notes converted
Shares issued under the Dividend Reinvestment Plan
As at 30 June 2014
Shares issued under the Dividend Reinvestment Plan
As at 30 June 2015
Consolidated
2015
$
2014
$
116,921,688 112,050,208
Number
$
123,209,372
41,912,195
24,723,602
42,031,791
–
(1,198,499)
16,447,169
27,631,244
990,126
1,673,477
165,370,269
112,050,208
2,390,702
4,871,480
167,760,971
116,921,688
On 3 October 2014, the Company issued 1,210,688 shares at $1.96 per share, and on 10 April 2015 the Company
issued 1,180,014 shares at $2.12 under its Dividend Reinvestment Plan.
On 14 October 2013 the Company issued 18,481,406 shares to sophisticated and institutional investors at $1.70 per
share. On 1 November 2013 the Company issued 6,242,196 shares under its Share Purchase Plan at $1.70 per share.
Between 1 July 2013 and 18 December 2013 a total of 16,447,169 convertible notes were converted into shares at
$1.68 per share (see Note 20). On 4 April 2014 the Company issued 990,126 shares under its Dividend Reinvestment
Plan at $1.69 per share.
(b) Share options
At 30 June 2015, there were no unissued ordinary shares in respect of which options were outstanding (2014: nil).
(c) Capital management
Capital includes bonds 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 Company’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 the Company is that the business requires a cash balance of $100 million.
At 30 June 2015 the cash balance of the Group was above its preferred optimum level of $100 million.
The Group is not subject to any externally imposed capital requirements. However, if the cash and receivables
balances of the Group fall below 75% of the principal due to bondholders, the Group is not permitted to pay
a dividend to ordinary shareholders (this calculation is to be undertaken both before and after the proposed
dividend).
57
ANNUAL REPORT 2015 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015 (continued)
Note 21: 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 2013
At 30 June 2014
At 30 June 2015
Consolidated
2015
$
2014
$
71,845,128 76,356,253
6,304,212
9,868,350
(16,597,562) (14,379,475)
–
–
61,551,778
71,845,128
Option
premium
reserve
$
Foreign
currency
translation
reserve
$
Convertible
notes
reserve
$
Total
reserves
$
3,403,720
3,403,720
–
–
3,832,216
7,235,936
3,832,216
7,235,936
–
190,503
–
190,503
3,403,720
190,503
3,832,216
7,426,439
(c) Nature and purpose of reserves
(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 24 for further details of these payments.
(ii) Foreign currency translation reserve
This reserve is used to record differences on the translation of the assets and liabilities of overseas subsidiaries.
(iii) Convertible note reserve
This reserve is used to record the equity portion of the convertible notes.
58
IMF BENTHAM LIMITED Note 22: Statement of cash flows reconciliation
(a) Reconciliation of net profit after tax to net cash flows used in operations:
Net profit attributable to members of the Parent
Adjustments for:
Net impact of the reclassification of litigation intangibles related cashflows
to cashflows to/(from) investing activities
Depreciation
Convertible note accretion
Loss/(profit) on sale of shares
Unrealised foreign exchange (gain)/loss
Share of loss in joint venture
Bond amortisation
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
Increase/(Decrease) in non-current employee entitlements
Net cash (used in) operating activities
(b) Disclosure of financing facilities
Refer to Note 12 and Note 19.
Consolidated
2015
$
2014
$
6,304,212
9,868,350
(54,160,510)
14,893,372
228,016
222,654
–
–
2,487,502
3,833
(5,181,876)
52,287
2,275,726
653,721
–
448,396
84,765
(7,036)
22,996,699 (34,201,818)
(69,851)
(157,564)
(847,653) (12,508,735)
1,926,365
455,766
146,200
(360,820)
6,820,175
5,186,162
(991,914) (2,008,281)
(2,955,469)
6,245,881
132,263
310,856
(22,929,221)
(8,779,105)
59
ANNUAL REPORT 2015
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015 (continued)
Note 23: Related party disclosure
Transactions with director and related entities
The following table provides the total amount of transactions that were entered into with related parties for the
relevant financial year.
Fee revenue from Joint Venture
Transactions with related parties1
Consolidated
2015
$
2014
$
729,216
251,670
117,404
356,371
846,620
608,041
1.
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. (Please note Hardy Bowen merged with DLA Piper on 1 July 2015).
Note 24: 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 unpaid1
Post-employment benefits
Long service leave accrued during the year
Consolidated
2015
$
2014
$
5,014,915
3,796,614
377,203
1,524,000
124,381
107,994
55,905
162,706
5,572,404
5,591,314
1. As at 30 June 2014 bonuses had been declared to be payable over the following nine month period.
Note 25: 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 did 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 were no
cash settlement alternatives.
(c) Summaries of options
There are no options outstanding at 30 June 2015 or 30 June 2014.
60
IMF BENTHAM LIMITED Note 26: 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
Consolidated
2015
$
2014
$
1,131,236
983,985
1,677,504
2,309,360
–
–
2,808,740
3,293,345
Consolidated
2015
$
2014
$
7,076,451
5,257,348
–
–
7,076,451
5,257,348
Amounts disclosed as remuneration commitments also 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 2015, the Group has one case that is under appeal (2014: three cases). The total income recognised
by the Group from the cases remaining on appeal in the current financial year is $nil (2014: $14,353,414). The total
current and non-current receivables as at 30 June 2015 relating to cases under appeal is $nil (2014:$14,353,414).
In certain jurisdictions litigation funding agreements contain an undertaking from the Company to the client that
the Company will pay adverse costs awarded to the successful party in respect of costs incurred during the period
of funding, should the client’s litigation be unsuccessful. It is not possible to predict in which cases such an award
might be made or the quantum of such awards. In addition the Company has insurance arrangements which,
in some circumstances, will lessen the impact of such awards. In general terms an award of adverse costs to a
defendant will approximate 70% of the amount paid by the plaintiff to pursue the litigation (although in some cases
there may be more than one defendant).
Accordingly, an estimate of the total potential adverse costs exposure of the Group which has accumulated from
time to time may be made by assuming all cases are lost, that adverse costs equal 70% of the amount spent by the
plaintiff and that there is only one defendant per case.
As at 30 June 2015 the total amount spent by the Company where undertakings to pay adverse costs have been
provided was $49,719,663 (2014: $54,008,238). The potential adverse costs orders using the above methodology
would amount to $34,803,764 (2014: $37,805,767). The Company does not currently expect that any of the
matters will be unsuccessful. The Company maintains a large cash holding in the event one or more matters are
unsuccessful and an adverse costs order is made which is not covered by its insurance arrangements.
61
ANNUAL REPORT 2015 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015 (continued)
Note 27: Economic dependency
IMF is not economically dependent on any other entity.
Note 28: Events after the reporting date
There were no significant financial events after the reporting date.
Note 29: Auditor’s remuneration
The auditor of IMF is EY.
Amounts received or due and receivable by EY for:
An audit or review of the financial report of the Parent and any other entity in the Group
297,209
292,277
Other services in relation to the Parent and any other entity in the consolidated Group:
Consolidated
2015
$
2014
$
Tax compliance
Other
Note 30: Parent entity information
Information relating to IMF Bentham Limited:
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Issued capital
Retained earnings
Option premium reserve
Convertible note reserve
Total shareholders’ equity
Profit or loss of the Parent
Total comprehensive income of the Parent
The Parent has not entered into any guarantees with any of its subsidiaries.
87,038
129,448
34,518
–
418,765
421,725
2015
$
2014
$
138,273,403
165,093,474
270,569,640
275,313,909
(29,914,167)
(21,246,355)
(98,301,197)
(91,419,217)
172,268,443
183,894,692
116,921,688
112,050,208
48,082,712
64,608,548
3,403,720
3,403,720
3,832,216
3,832,216
172,240,336
183,894,692
71,723
12,528,756
71,723
12,528,756
Details of the contingent liabilities of the Parent are contained in Note 26(c). There are no contingent liabilities in
relation to the subsidiaries.
Details of the contractual commitments of the Parent are contained in Notes 26(a) and 26(b). There are no
contractual commitments in relation to the subsidiaries.
62
IMF BENTHAM LIMITED Note 30: 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 Bentham Limited
IMF Bentham Limited
2015
$
2014
$
(139,289)
(945)
The consolidated financial statements include the financial statements of IMF and the subsidiaries listed in the
following table:
Name
Financial Redress Pty Ltd
Bentham Holdings Inc
Bentham Capital LLC
Security Finance LLC
Country of
Incorporation
Australia
USA
USA
USA
Percentage owned
2015
%
100
100
100
100
2014
%
100
100
100
100
63
ANNUAL REPORT 2015 NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2015 (continued)
Note 31: Interest in a joint venture
The Group has a 50% interest in Bentham Ventures B.V. a jointly controlled entity principally involved in the funding
of litigation throughout Europe but primarily in the United Kingdom and the Netherlands. Bentham Ventures B.V. is
the parent entity of Bentham Europe Limited which is principally involved in marketing the funding services offered
by its parent and the investigation and monitoring of the litigation funded by its parent.
The Group’s interests in Bentham Ventures B.V. are accounted for using the equity method in the consolidated
financial statements. Summarised financial information of the joint venture, based on its Australian Accounting
Standards financial statements, and reconciliation with the carrying amount of the investment in the consolidated
financial statements are set out below:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Equity
Proportion of the Group's ownership
Carrying amount of the investment
Summarised statement of profit or loss of Bentham Ventures B.V.
Revenue
Other Income
Corporate and office expense
Employee expense
Other expenses
Loss before tax
Income tax expense
Loss for the year
Share of loss in joint venture entity
IMF Bentham Limited
2015
$
2014
$
2,891,263
4,813,167
155,059
5,833
(1,741,707) (2,512,003)
–
–
1,304,615
2,306,997
50%
50%
652,308
1,153,499
–
–
–
–
(1,979,292)
(913,915)
(1,924,505)
–
(442,059)
(393,528)
(4,345,856) (1,307,443)
(205,595)
–
(4,551,451) (1,307,443)
(2,275,726)
(653,721)
The Bentham Ventures B.V. joint venture was incorporated during March 2014.
The joint venture had no contingent liabilities and a total of $1,108,577 in commitments as at 30 June 2015
(2014: $51,228).
Other comprehensive income
Group’s share of other comprehensive income
Group’s share of other comprehensive income relating to Bentham Ventures B.V.
IMF Bentham Limited
2015
$
217,039
50%
108,530
2014
$
–
50%
–
64
IMF BENTHAM LIMITED DIRECTORS’ DECLARATION
In accordance with a resolution of the Directors of IMF Bentham Limited, we state that:
In the opinion of the Directors:
a. the financial statements and notes of IMF Bentham Limited for the financial year ended 30 June 2015 are in
accordance with the Corporations Act 2001, including:
i. giving a true and fair view of its financial position as at 30 June 2015 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 2015.
On behalf of the Board
Michael Bowen
Chairman (At 30 June 2015)
Andrew Saker
Managing Director
Sydney 19 August 2015
65
ANNUAL REPORT 2015 INDEPENDENT AUDITOR’S REPORT
66
IMF BENTHAM LIMITED INDEPENDENT AUDITOR’S REPORT
67
ANNUAL REPORT 2015 CORPORATE GOVERNANCE STATEMENT
The Board of Directors of IMF Bentham Limited (“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
1.1 A listed entity should disclose:
Comply Yes / No
(a) the respective roles and responsibilities of its board and management; and
(b) those matters expressly reserved to the board and those delegated to management.
1.2 A listed entity should:
(a)
undertake appropriate checks before appointing a person, or putting forward to
security holders a candidate for election, as a director; and
(b)
provide security holders with all material information in its possession relevant to a
decision on whether or not to elect or re-elect a director.
1.3 A listed entity should have a written agreement with each director and senior executive
setting out the terms of their appointment.
1.4 The company secretary of a listed entity should be accountable directly to the board,
through the chair, on all matters to do with the proper functioning of the board.
1.5 A listed entity should:
(a)
have a diversity policy which includes requirements for the board or a relevant
committee of the board to set measurable objectives for achieving gender diversity
and to assess annually both the objectives and the entity’s progress in achieving
them;
(b) disclose that policy or a summary of it; and
(c)
disclose as at the end of each reporting period the measurable objectives for
achieving gender diversity set by the board or a relevant committee of the board in
accordance with the entity’s diversity policy and its progress towards achieving them,
and either:
(1)
(2)
the respective proportions of men and women on the board, in senior executive
positions and across the whole organisation (including how the entity has
defined “senior executive” for these purposes); or
if the entity is a “relevant employer” under the Workplace Gender Equality
Act, the entity’s most recent “Gender Equality Indicators”, as defined in and
published under that Act.
1.6 A listed entity should:
(a)
have and disclose a process for periodically evaluating the performance of the board,
its committees and individual directors; and
(b)
disclose, in relation to each reporting period, whether a performance evaluation was
undertaken in the reporting period in accordance with that process.
1.7 A listed entity should:
(a)
have and disclose a process for periodically evaluating the performance of its senior
executives; and
(b)
disclose, in relation to each reporting period, whether a performance evaluation was
undertaken in the reporting period in accordance with that process.
2.1 The board of a listed entity should:
(a)
have a nomination committee which:
(1)
has at least three members, a majority of whom are independent directors; and
(2)
is chaired by an independent director,
68
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
N/A
Yes
Yes
Yes
Yes
Yes
Yes
IMF BENTHAM LIMITED
Recommendation
and disclose:
(3) the charter of the committee;
(4) the members of the committee; and
(5) as at the end of each reporting period, the number of times the committee met
throughout the period and the individual attendances of the members at those
meetings; or
(b)
if it does not have a nomination committee, disclose that fact and the processes it
employs to address board succession issues and to ensure that the board has the
appropriate balance of skills, knowledge, experience, independence and diversity to
enable it to discharge its duties and responsibilities effectively.
2.2 A listed entity should have and disclose a board skills matrix setting out the mix of skills
and diversity that the board currently has or is looking to achieve in its membership.
2.3 A listed entity should disclose:
(a) the names of the directors considered by the board to be independent directors;
(b)
if a director has an interest, position, association or relationship of the type described
but the board is of the opinion that it does not compromise the independence of the
director, the nature of the interest, position, association or relationship in question
and an explanation of why the board is of that opinion; and
(c) the length of service of each director.
2.4 A majority of the board of a listed entity should be independent directors.
2.5 The chair of the board of a listed entity should be an independent director and, in
particular, should not be the same person as the CEO of the entity.
2.6 A listed entity should have a program for inducting new directors and provide appropriate
professional development opportunities for directors to develop and maintain the skills
and knowledge needed to perform their role as directors effectively.
3.1 A listed entity should:
(a) have a code of conduct for its directors, senior executives and employees; and
(b) disclose that code or a summary of it.
4.1 The board of a listed entity should:
(a) have an audit committee which:
(1)
has at least three members, all of whom are non-executive directors and a
majority of whom are independent directors; and
(2)
is chaired by an independent director, who is not the chair of the board,
and disclose:
(3) the charter of the committee;
(4) the relevant qualifications and experience of the members of the committee; and
(5) in relation to each reporting period, the number of times the committee met
throughout the period and the individual attendances of the members at those
meetings; or
(b)
if it does not have an audit committee, disclose that fact and the processes it
employs that independently verify and safeguard the integrity of its corporate
reporting, including the processes for the appointment and removal of the external
auditor and the rotation of the audit engagement partner.
Comply Yes / No
Yes
Yes
Yes
N/A
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
N/A
69
ANNUAL REPORT 2015
CORPORATE GOVERNANCE STATEMENT
(continued)
Recommendation
4.2 The board of a listed entity should, before it approves the entity’s financial statements
for a financial period, receive from its CEO and CFO a declaration that, in their opinion,
the financial records of the entity have been properly maintained and that the financial
statements comply with the appropriate accounting standards and give a true and fair
view of the financial position and performance of the entity and that the opinion has been
formed on the basis of a sound system of risk management and internal control which is
operating effectively.
Comply Yes / No
Yes
4.3 A listed entity that has an AGM should ensure that its external auditor attends its AGM and
Yes
is available to answer questions from security holders relevant to the audit.
5.1 A listed entity should:
(a)
have a written policy for complying with its continuous disclosure obligations under
the Listing Rules; and
(b) disclose that policy or a summary of it.
6.1 A listed entity should provide information about itself and its governance to investors via
its website.
6.2 A listed entity should design and implement an investor relations program to facilitate
effective two-way communication with investors.
6.3 A listed entity should disclose the policies and processes it has in place to facilitate and
encourage participation at meetings of security holders.
6.4 A listed entity should give security holders the option to receive communications from,
and send communications to, the entity and its security registry electronically.
7.1 The board of a listed entity should:
(a) have a committee or committees to oversee risk, each of which:
(1) has at least three members, a majority of whom are independent directors; and
(2)
is chaired by an independent director,
and disclose:
(3) the charter of the committee;
(4) the members of the committee; and
(5) as at the end of each reporting period, the number of times the committee met
throughout the period and the individual attendances of the members at those
meetings; or
(b)
if it does not have a risk committee or committees that satisfy (a) above, disclose
that fact and the processes it employs for overseeing the entity’s risk management
framework.
7.2 The board or a committee of the board should:
(a)
review the entity’s risk management framework at least annually to satisfy itself that
it continues to be sound; and
(b)
disclose, in relation to each reporting period, whether such a review has taken place.
7.3 A listed entity should disclose:
(a)
if it has an internal audit function, how the function is structured and what role it
performs; or
(b)
if it does not have an internal audit function, that fact and the processes it employs
for evaluating and continually improving the effectiveness of its risk management
and internal control processes.
7.4 A listed entity should disclose whether it has any material exposure to economic,
environmental and social sustainability risks and, if it does, how it manages or intends to
manage those risks.
70
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
N/A
Yes
Yes
N/A
Yes
Yes
IMF BENTHAM LIMITED
Recommendation
Comply Yes / No
8.1 The board of a listed entity should:
(a) have a remuneration committee which:
(1) has at least three members, a majority of whom are independent directors; and
(2)
is chaired by an independent director,
and disclose:
(3) the charter of the committee;
(4) the members of the committee; and
(5) as at the end of each reporting period, the number of times the committee met
throughout the period and the individual attendances of the members at those
meetings; or
(b)
if it does not have a remuneration committee, disclose that fact and the processes
it employs for setting the level and composition of remuneration for directors and
senior executives and ensuring that such remuneration is appropriate and not
excessive.
8.2 A listed entity should separately disclose its policies and practices regarding the
remuneration of non-executive directors and the remuneration of executive directors and
other senior executives.
8.3 A listed entity which has an equity-based remuneration scheme should:
(a)
have a policy on whether participants are permitted to enter into transactions
(whether through the use of derivatives or otherwise) which limit the economic risk of
participating in the scheme; and
(b) disclose that policy or a summary of it.
Yes
Yes
Yes
Yes
Yes
N/A
Yes
Yes
Yes
71
ANNUAL REPORT 2015
CORPORATE GOVERNANCE STATEMENT
(continued)
The Board and management of the Company
understand and recognise the importance of
achieving good corporate governance across the
Group. Throughout the year ended 30 June 2015,
the Company adopted and carried out its corporate
governance practices in compliance with each of
the ASX Corporate Governance Council’s Corporate
Governance Principles and Recommendations.
This statement discusses various aspects of the
corporate governance policies and practices
adopted by the Company. For further information
on corporate governance policies and procedures
adopted by the Company please refer to our
website www.imfbenthamltd.com.
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 and risk;
– Remuneration;
– Nomination; and
– Corporate governance.
The roles and responsibilities of these committees are
discussed in this Corporate Governance Statement.
72
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.
Structure of the Board
The skills, experience and expertise relevant to the
position of director held by each director in office
at the date of the annual report is included in the
Directors’ Report. Directors of IMF are considered
to be independent when they are independent of
Management and free from any business or other
relationship that could materially interfere with,
or could reasonably be perceived to materially
interfere with, the exercise of their unfettered
and independent judgement.
The composition of the Board consists of two
executive directors and four independent non-
executive directors. The Board believes that the
majority of the individuals on the Board can, and do,
make independent judgments in the best interests
of the Group on all relevant issues.
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 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.
IMF BENTHAM LIMITED 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
Michael Kay
Alden Halse
Position
Non-Executive Chairman
Non-Executive Director
Michael Bowen
Non-Executive Director
Wendy McCarthy
Non-Executive Director
The position held by each director in office at the
date of this report is as follows:
Name
Michael Kay
Andrew Saker
Hugh McLernon
Alden Halse
Position
Non-Executive Chairman
Managing Director
Executive Director
Non-Executive Director
Michael Bowen
Non-Executive Director
Wendy McCarthy
Non-Executive Director
For additional details regarding Board appointments,
please refer to the Directors’ Report and the
Company’s website.
Audit and Risk Committee
The Board has established an Audit and Risk
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 and Risk 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 and Risk Committee
are non-executive directors.
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
controls.
To this end, comprehensive practices are in place
that are directed towards achieving the following
objectives:
– 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.
73
ANNUAL REPORT 2015 CORPORATE GOVERNANCE STATEMENT
(continued)
In order to ensure that the Board continues to
discharge its responsibilities in an appropriate manner,
the performance of directors is reviewed annually by
the chairperson. During the 2015 financial year, the
chairperson undertook a performance evaluation of
each director and key executive in accordance with
Company’s Corporate Governance Manual.
For details on director attendance at Board and Board
committee meetings during the year ended 30 June
2015, refer to the Directors’ Report.
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.
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 non-executive
directors. Members of the Remuneration Committee
throughout the year were: Michael Bowen (Chairman),
Alden Halse, Wendy McCarthy and Robert Ferguson
(resigned 5 January 2015).
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.
The members of the Audit and Risk Committee during
the year were: Alden Halse (Chairman), Michael Bowen,
Wendy McCarthy and Robert Ferguson (resigned
5 January 2015).
For details on the number of meetings of the
Audit and Risk Committee held during the year
and the attendees at those meetings, refer to the
Directors’ Report.
Managing Director and Chief Financial Officer
Certification
The Managing Director and the 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 controls 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 are assessed are aligned with the
financial and non-financial objectives of the Group,
as summarised in the diagram below.
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80%
100%
80%
60%
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Board Skills Matrix
74
IMF BENTHAM LIMITED
Nomination
The Company understands that the appointment and
reappointment of directors to the Board is critical
to the performance of the Company. In recognition
of this, the Board has established the Nomination
Committee to provide transparency, focus and
independent judgement to decisions regarding the
composition of the Board. Notably, during the year
ending 30 June 2015, the Nomination Committee
welcomed Andrew Saker as Chief Executive Officer
of the Company and its Managing Director.
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 female representation at all levels within
the Group. The 2015 report provides the following
information:
– total female employees: 19 (2014: 14); total
employees: 42 (2014: 32);
– total female investment managers: 4 (2014: 3); total
investment managers: 16 (2014: 13); and
– total female Key Management Personnel: 1 (2014: 1);
total Key Management Personnel: 5 (2014: 5).
The Board considers that progress is being made
towards achieving the Company’s objective to support
female representation at senior leadership and Board
levels, including by the welcoming of five new female
employees to the Company during the 2015 financial
year.
The Nomination Committee will endeavour to improve
the gender diversity at Board level at any time
nominations are required to fill a Board position.
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
except during defined closed periods, being:
– the four weeks prior to and the 24 hours after the
release of the Company’s half-yearly results;
– the four weeks prior to and the 24 hours after the
release of the Company’s preliminary final results;
– the four weeks prior to and the 24 hours after the
release of the Company’s final results; and
– the two weeks prior to and 24 hours after
the holding of the Annual General Meeting.
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.
Continuous Disclosure
The Company’s continuous disclosure policy includes
controls to ensure that the Company at all times
complies with the requirements of ASX and the
Corporations Act 2001 in relation to its continuous
disclosure obligations.
The continuous disclosure policy is contained within
the Company’s Corporate Governance Manual, which
can be obtained from the Company’s website.
Shareholder Communication
The Board of Directors aims to ensure that
shareholders are informed of all information necessary
to assess the performance of the Company and
its 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.
Shareholders are encouraged to ask questions of
their directors at the Annual General Meeting and
other shareholder meetings called by the Company
or to contact the Company Secretary to discuss their
Board, matters pertaining to corporate governance
or any other matter relating to the Company, at
their convenience.
75
ANNUAL REPORT 2015 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 31 July 2015.
(a) Distribution of Shareholders
Ordinary Share Capital
167,760,971 fully paid ordinary shares are held by 6,722 individual shareholders. All issued ordinary shares carry one
vote per share and carry the right to dividends.
Bonds
There are 500,000 bonds issued held by 273 individual bond holders.
Options
There are no options issued over ordinary shares.
The number of shareholders by size of holding, in each class, as at 31 July 2015 are:
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Fully paid
ordinary
shares
Number
1,166
592,713
2,532
7,320,634
1,328 9,924,930
1,585 38,886,025
111
111,036,669
Number
Bonds
228
34
3
8
–
83,991
65,831
24,480
325,698
–
6,722
167,760,971
273
500,000
(b) Substantial Shareholders
The names of the substantial shareholders listed in the Company’s register as at 31 July 2015 are:
Shareholder
Ellerston Capital Limited
Celeste Funds Management Limited
Number of
ordinary
Shares
8,770,756
8,436,985
% of
issued
capital
5.23%
5.03%
17,207,741
10.26%
76
IMF BENTHAM LIMITED (c) 20 Largest Holders of Quoted Equity Securities as at 31 July 2015
Ordinary Shares
1. J P MORGAN NOMINEES AUSTRALIA LIMITED
2. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
3. NATIONAL NOMINEES LIMITED
4. MCLERNON GROUP SUPERANNUATION PTY LTD
5. CITICORP NOMINEES PTY LIMITED
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