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Nicholas Financial Inc.Annual Report 2017
IMF BENTHAM LIMITED
Contents
IMF Bentham Limited is a
leading global litigation funding
company with an unparalleled
record of success achieved
over 16 years since listing
on the Australian Securities
Exchange in 2001.
IMF operates globally from
11 offices in Australia, USA,
Canada and Singapore,
providing funding to plaintiffs,
law firms and corporations
for legal disputes.
Our highly experienced team
of investment managers
ensures the strongest cases
receive funding and support
to facilitate their successful
resolution.
1
2
3
11
35
36
37
38
39
40
75
76
81
90
93
Highlights
IMF’s Track Record of Success
Chairman’s and Managing Director’s Report
Directors’ Report
Auditor’s Independence Declaration
Statement of Comprehensive Income
Statement of Financial Position
Statement of Cash Flow
Statement of Changes in Equity
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report
Corporate Governance Statement
Shareholder Information
Corporate Information
ABN 45 067 298 088
Highlights
REVIEW OF OPERATIONS
Excluding withdrawals
INVESTMENTS
($ Million)
9
.
0
9
1
6
.
5
4
1
6
.
8
9
5
.
9
9
.
1
6
8
5
.
2
4
1
9
.
4
4
1
.
1
0
3
1
CASH
($ Million)
6
.
5
0
1
0
.
8
6
TOTAL DIVIDEND
(cents/share)
0
.
0
1
0
.
0
1
5
.
7
0
7
.
0
.
5
2013 2014 2015 2016 2017
2013 2014 2015 2016 2017
2013 2014 2015 2016 2017
$25.7Million
Profit before tax
$113 Million
Gross income from
litigation funding
NET ASSETS
($ Million)
3
.
6
0
2
4
.
1
0
2
.
1
1
9
1
9
.
5
8
1
5
.
5
2
1
PORTFOLIO
($ Million)
2
8
7
,
3
8
3
4
,
3
7
6
0
,
2
2
0
0
,
2
5
3
6
,
1
2013 2014 2015 2016 2017
2013 2014 2015 2016 2017
1
REVIEW OF OPERATIONS
IMF’s Track Record of Success
$2.1 billion
Total recoveries
133
SETTLEMENTS
SETTLEMENTS
91%
Success
Rate
WON
LOST
The Funding Track
Record does not include
withdrawn cases.
$1.3 billion
Returns for funded
claimants
14
15
2.6 years
Average case
length
1.6X
Return on
Invested Capital
162
Number of cases
funded to completion
2
IMF BENTHAM LIMITED
2017 Annual Report
Chairman’s and Managing
Director’s Report
REVIEW OF OPERATIONS
The 2017 financial year was a productive year for the IMF Bentham
Group. Some good case completions delivered positive financial
results and significant progress has been made on our five-year
business plan which commenced in FY2016. In particular, we continue
to reduce risk by increasing the number of our case investments as
well as diversifying the geography and type of our investments.
Simultaneously we are also reducing risk and increasing returns through
more sophisticated capital management. If we can maintain this course,
there exists real potential for strong profitable growth in the years ahead.
Financial Results
The financial results for the year ended 30 June 2017 reflect a year of stability as well as consolidation of the gains from
the previous year.
Income for the year was derived from several partial completions and 11 full completions, including two large completions
that book-ended the year, being Rivercity in the first half, and a confidential Hong Kong matter in the second half. These
results represent the second highest gross income in our history and whilst pleasing for shareholders and the company,
continue to highlight the concentration risk that will remain until our transition is completed.
Return on assets has decreased from 6.7% in 2016 to 4.2% for 2017, but shows a 110.0% increase over the 2015 metric
of 2.0%. Return on equity comparisons tell a similar story with a fall from 10.8% in 2016 to 7.6% in the current year, but
demonstrate a 153.0% increase on 2015 from 3.0%.
We set a target for the year to fund 54 new matters with a total capital commitment of $107 million. During the year,
we committed to fund 26 new matters and committed additional funding for 6 existing matters for a total capital
commitment of $78 million.
New Cases Funded and Additional Funding (number of cases)
35
30
25
20
15
10
5
0
21
17
4
2015
30
18
12
2016
Financial Year
32
19
13
2017
Consolidated
Australia
US + Fund
3
REVIEW OF OPERATIONS
Chairman and Managing
Director’s Report
(continued)
Capital Commitments (AUD millions)
80
70
60
50
40
30
20
10
0
55
37
18
2015
81
67
14
2016
78
41
37
2017
Financial Year
Consolidated
Australia
US + Fund
In FY17 we had anticipated an increase in the number of smaller size matters we would fund, largely in
Australia, involving insolvency related matters. However, we did not achieve that outcome, which reflects
both a limited number of opportunities compared to what we had expected, and a failure to secure those
fewer opportunities that were available. We have taken steps to address this, both in terms of the structure
of our product offering, and in our staffing.
In addition, the Investment Committees conditionally approved seven matters with capital commitments
totalling $28 million. In aggregate, in FY17 we sourced and committed to, unconditionally and conditionally,
39 matters with total capital commitments of $106 million. These are new records for the group, both in
terms of number of matters and capital commitments, and reflect the successful execution of strategy to
diversify our book of investments.
In relation to these additional matters that were conditionally approved, we note that we do not control
when a matter will be funded, as conditions for approval, such as bookbuild on multi-party matters or third-
party approvals for entering into a litigation funding agreement, are to some extent beyond our control. We
also note that a number of these conditionally approved matters have now become unconditional, and will
be reflected in the FY18 results.
We now have 65 active matters in Australia, the US, Canada and Asia with a total estimated portfolio value
of $3.8 billion, both of which are significant increases from last year. This has translated to an increase in the
value of our investments (in the form of intangible assets) from $146 million at 30 June 2016 to $191 million
at 30 June 2017, being a 31% increase year-on-year.
4
IMF BENTHAM LIMITED
2017 Annual Report
Our pipeline for potential new investments is the strongest ever in the history of IMF. The graph below depicts the pipeline
at 30 June 2017, of the 163 matters across all jurisdictions:
Case Pipeline (number of cases)
60
50
40
30
20
10
0
59
53
23
3
3
12
2
4
0
4
0
0
Australia
USA
Canada
Asia
Country
Due Diligence
Term Sheet
IC Approved
It should be noted that term sheets have not been widely used in Australia to date, compared to their prevalence
in other jurisdictions. As new product offerings are introduced, the use of term sheets will be assessed.
With the strength of the pipeline and infrastructure in all jurisdictions, we aim to achieve new records in FY18 for the
number of matters funded, and capital committed. We have set ourselves a target of 64 matters funded and capital
commitments of $138 million.
In summary, our investment into diversification is reflected in the actual results achieved to date, and is expected
to be reflected in income in the coming years as cases complete.
Strategy
In 2015 we undertook a strategic review to identify an approach to stabilise income and mitigate idiosyncratic risk,
being the risk associated with the binary outcome of an individual investment, and liquidity risk. That review resulted
in a five-year business plan, which was implemented at the start of the 2016 financial year. The business plan
identified that, given the duration of our investments, there would be a three-year transition phase, and the effect
of this strategy would not be fully reflected at least until FY19.
We are now two years through this process and whilst we continue to execute on this strategy, we remain exposed
to idiosyncratic risk associated with two large investments in Wivenhoe and Westgem. These matters are expected
to complete in FY18 and FY19, respectively.
The basic theme of our business plan is diversification by geography, as well as the number and types of cases.
Operational Diversification
We have initiated several steps to diversify risks at an operational level, starting with an expansion of our geographic
footprint. The purpose of this expansion was to mitigate concentration risk associated with operating from only one
or two jurisdictions, providing us with exposure to different regulatory regimes, courts, and legal systems.
5
REVIEW OF OPERATIONS REVIEW OF OPERATIONS
Chairman and Managing
Director’s Report
(continued)
We opened offices in San Francisco in May 2015, Toronto in January 2016, Houston in February 2017 and Singapore in April
2017, and now operate from 11 offices around the world. These new offices have provided greater exposure to the new
jurisdictions of Canada and Asia, and to further markets in the US. This has improved sourcing of potential investment
opportunities, as reflected below:
Funding Applications (number of applications)
900
800
700
600
500
400
300
200
100
0
446
264
170
12
2015
669
309
301
59
2016
Financial Year
827
371
345
104
7
2017
Consolidated
Australia
US + Fund
Canada
Asia
In addition to expanding our footprint, we have sought to identify different opportunities for funding within each of
those relevant jurisdictions. We have developed and rolled out, in various jurisdictions, funding products associated
with insolvency, family law, corporate funding, whistleblower and law firm contingent fee portfolio funding.
Portfolio Amount by Case Type
Committed Budget Amount by Case Type
6%
2%
6%
1%
27%
13%
11%
5%
2%
5%
1%
27%
Multi Party: $1,027m
Insolvency: $289m
Commercial: $996m
Patent: $397m
Law Firm: $502m
Appeal: $34m
14%
Multi Party: $65m
Insolvency: $20m
Commercial: $68m
Patent: $20m
Law Firm: $34m
Appeal: $2m
8%
Arbitration: $232m
8%
9%
Arbitration: $12m
Other IP: $72m
Whistleblower: $234m
Other IP: $54m
Whistleblower: $12m
26%
29%
6
IMF BENTHAM LIMITED
2017 Annual Report
To support our growth plans we
have invested in our operational
infrastructure, increasing headcount
in all areas of the business from 42 at
30 June 2015 to 63 at the close of the
2017 financial year. We have invested
in staff ahead of the growth curve
expanding our investment manager
cohort, and our finance and legal
teams in order to support our plans.
We have also enhanced our client
liaison group and IT development
teams who now provide us with a
comparative difference not only in
Australia, but also internationally.
During the year, our client group
and IT development teams were
instrumental in developing and
launching our MyIMF portal,
enabling clients access to case data,
correspondence and claim details
on a real-time basis. Clients can now
monitor the progress of their various
claims directly via the portal.
We have also taken steps to enhance
our corporate governance through
the regeneration of our Board and
executive teams, reducing the number
of Executive Directors, and increasing
the proportion of non-Executive
Directors. We have appointed a
new Chairman, Managing Director,
Company Secretary, Chief Financial
Officer, and Chief Investment Officer
for the US.
Thank you to Alden Halse
and welcome to Karen Phin
It is with an enormous amount of
appreciation that we advise that
Alden Halse, who has served as a
Board member, and former Chairman
of the company, is retiring from the
Board after 17 years of service. Alden
was our inaugural Chairman, has
provided service on all committees
and has chaired the Audit Committee
throughout his tenure. We thank
Alden for his service and contribution.
We look forward to welcoming a new
Board member, Karen Phin, whose
appointment is planned for August
2017. Karen will then retire at the
AGM to be formally considered for
appointment by the shareholders.
Investment Committees
We have taken steps to enhance
our Investment Committee process
to address the substantial increase
in the volume of cases under
consideration. We have created three
committees, split by investment
size and jurisdiction, although there
remains a number of common
threads between the committees to
ensure a consistent application of risk
management. We have also added
external resources to our committees
in the form of two former judges,
Judge Vaughan R. Walker and Mr
John Sulan QC, both of whom are an
important part of risk management
and enhance the quality of our
decision making.
Judge Walker served as a United
States District Judge for the Northern
District of California from 1990 to
2011 and was Chief Judge from 2004
to 2011. Judge Walker is a member
of the two Investment Committees
which consider US matters for
funding.
John Sulan QC served as a Justice of
the Supreme Court of South Australia
from 2003 until 2016 and in the
District Court from 1997 to 2003.
John Sulan serves on our Investment
Committee to consider large
investment opportunities in non-US
jurisdictions.
Capital Diversification
To facilitate growth and meet working
capital needs in a low completion
environment, we accessed the
bond market in April 2016 and
April 2017 to raise, in aggregate,
$72 million in the form of a fixed-
interest note that matures in June
2020. This debt instrument has
provided us with the opportunity to
raise capital to fund growth without
having to access the equity market
in a dilutive capital raise. We have
reached our maximum appetite
for debt at this stage, and do not
anticipate further debt issues at
this time.
One of the most significant
developments for IMF in the past
few years has been the launch of our
first fund, Bentham Fund No 1 for US
investments, in February 2017. This
Fund is a critical capital management
initiative as it reduces risk and
increases returns to shareholders.
The IMF Group and affiliated entities
of Fortress Credit Advisers LLC have
committed up to US$200 million to
this Fund, which provides IMF with the
benefits of leveraging our portfolio
of investments with non-recourse
capital, whilst potentially delivering
similar returns to those that can be
achieved from a direct investment
from our own balance sheet.
The Fund is developing well with
8 new matters funded and further
funding provided for 1 existing
Bentham Capital investment with
total commitments of US$17.25
million at 30 June 2017. There has
been some criticism that the average
investment size into this Fund is too
small, and that we should be pursing
larger investment opportunities.
It is important to note that:
a.
IMF, like all funders, is a deal taker,
such that when we are presented
with an investment opportunity
that meets our commercial
and legal criteria, we will fund
it, notwithstanding that the
investment size may be smaller
than our average; and
b. our intention is to create
a diversified portfolio of
investments by both claim
size and type, so that we avoid
concentration risk. To focus
exclusively on large investments,
simply because we have access to
capital through this Fund, ignores
the benefits that a systemic
approach delivers.
7
REVIEW OF OPERATIONS REVIEW OF OPERATIONS
Chairman and Managing
Director’s Report
(continued)
Balance Sheet Risks
We have sought to diversify risk in relation to our balance sheet via operational and capital diversification strategies.
These are reflected in several outcomes including a greater than 20% increase in the number of matters we are
currently funding, as summarised below:
Investments in Portfolio (number of investments)
70
60
50
40
30
20
10
0
2015
2016
Financial Year
2017
Australia and Asia
US and Canada
Total
This is also reflected in the increase
in the level of our investments, which
has increased from $100 million in
2015 to $191 million in 2017. These
investments are measured at cost,
representing direct expenses and
capitalised costs that are required
to be recognised by the accounting
standards. Our capitalisation rate has
decreased over time partly because
of the increase in the proportion
of US investments that require less
management time, and now represent
17% of the intangibles balance. We
do not include unrealised gains in our
assets, which are highly subjective to
measure given the binary nature of
litigation outcomes.
In addition, we have taken steps to
mitigate the risks associated with our
two largest investments, Wivenhoe
and Westgem, through a combination
of co-funding and adverse cost
insurance.
New Initiatives for FY18
We have implemented several
initiatives to support our strategy
to diversify, including the roll out
of new product offerings and
the enhancement of operational
efficiencies with the launch of
electronic sign-up for multi-party
actions. In FY18 we intend to explore
the launch of our second fund that
will be coupled with a world first
adverse cost insurance program. We
will also explore further geographic
expansion into Europe following the
expiry of our restraint period in mid-
July 2017 which arose from the sale
of our joint venture interest there.
We have added to our product range
with the launch of new product
offerings in relation to insolvency
related funding and corporate
funding.
In Australia we have experienced a
high level of competition for funding
for insolvency matters, both from
funders and legal service providers,
who are willing to operate on a “no
win, no fee” basis, with the insolvency
practitioner absorbing the adverse
cost risk. As such, it has been
necessary to identify an alternative
approach, which has evolved from
a recent change in the law, to
acquire legal claims from insolvency
practitioners, who can now dispose
of legal claims, both on behalf of the
company, and their personal capacity.
We are uniquely placed, with the
relevant experience, relationships
and balance sheet to implement this
approach. This product offering will
see IMF purchasing the legal claims,
for a part payment and a part success
fee, which should result in a greater
return to IMF than we have previously
been able to achieve from the
traditional funding model.
8
IMF BENTHAM LIMITED
2017 Annual Report
REVIEW OF OPERATIONS
At the time of writing we are working
on our second fund for investments
in all jurisdictions other than the US.
Like the fund for US investments, this
fund is intended to reduce risk and
enhance returns to shareholders. This
second fund will provide capital for
matters in jurisdictions where there
is adverse cost risk, which has been
one of the significant impediments
to structuring investments in a fund,
given the need to retain funds to meet
adverse costs, which in turn results
in significant capital inefficiencies.
To address this, for the past
15 months we have been working
with our insurance brokers on
the development of a world first
portfolio policy for adverse costs.
We understand that IMF is unique
in its capacity to obtain this cover,
and is a result of the quality of our
procedures and processes, and our
success rate over a 16-year period.
The availability of this cover will
enable us to fully deploy the fund,
and thereby potentially achieve the
full economic benefit of this structure.
IMF plans to launch this fund in FY18.
Finally, the restraint period following
the sale of our joint venture interest
in Europe expired in mid-July 2017.
Following the expiry of this restraint
period we will be able to fund matters
in Europe. We are presently exploring
the various options available to us to
resume funding in this jurisdiction,
including opportunistic investments,
re-establishing a “greenfield” office
or acquisition.
In summary, this past year has been
a period of further consolidation of
the strategy implemented in FY16,
which is now translating into real
outcomes. These outcomes are the
result of an enormous effort by the
entire IMF staff, and we take this
opportunity, on behalf of the Board,
to thank them all for their efforts. We
remain confident in our strategy and
our people to complete the strategic
transition that underpins our plans
for growth and risk management. We
believe we have the right strategy
and the right talent to create strong
profitable growth in the years ahead
in an industry that is still in its infancy
in some of the biggest markets in
the world.
Andrew Saker
Managing Director and CEO
Michael Kay
Non-Executive Chairman
In relation to corporate funding, we
have traditionally focussed on the
insolvent or impecunious plaintiff to
provide litigation funding. However,
these traditional users of our funding
represent a small proportion of the
total market. We have launched a
product to fund solvent and financial
plaintiffs which should expand our
potential market. This product is
available in all of the jurisdictions in
which we operate. The benefits for
these plaintiffs include the ability to
free up cashflow to use for needs
other than funding litigation, to
mitigate adverse cost risk, and to
reduce management time associated
with managing the litigation.
We are excited about the
launch of these offerings,
and whilst we expect they
will take some time to gain
traction, we see these as
significant opportunities
for the future.
We have made a significant
investment, over a number of
years, into the development of our
Client Group and IT Development
teams. These teams provide
IMF with a unique comparative
advantage, as we are one of the only
funders in the world to have the
infrastructure to manage multi-party
matters internally. Our teams have
successfully managed multi-party
actions that involve several thousand
group members. As the next step
in the evolution of our multi-party
capacity, we will launch an electronic
sign-up of group members, which will
expedite the process for registration,
and further improve our efficiency.
The Client Group and IT Development
teams have been instrumental in
the development of this capacity.
9
FINANCIAL REPORT
Financial Report
The directors of IMF Bentham Limited
(“IMF” or “the Company” or “the Parent”)
submit their report for the year ended 30 June 2017.
Directors’ Report
Auditor’s Independence Declaration
Statement of Comprehensive Income
Statement of Financial Position
Statement of Cash Flow
Statement of Changes in Equity
Notes to the Financial Statements
Note 1: Corporate information
Note 2: Summary of significant accounting policies
Note 3: Financial risk management objective and policies
Note 4: Significant accounting judgments, estimates and assumptions
Note 5: Segment information
Note 6: Revenue
Note 7: Other income
Note 8: Expenses
Note 9: Income tax
Note 10: Dividends paid and proposed
Note 11: Earnings per share
Note 12: Current assets – cash and cash equivalents
Note 13: Trade and other receivables
Note 14: Current assets – other assets
Note 15: Non-current assets – plant and equipment
Note 16: Intangible assets
Note 17: Current liabilities – trade and other payables
Note 18: Current and non-current liabilities – provisions
Note 19: Non-current liabilities – debt securities
Note 20: Contributed equity
Note 21: Retained earnings and reserves
Note 22: Statement of cash flows reconciliation
Note 23: Related party disclosure
Note 24: Key management personnel
Note 25: Share-based payments
Note 26: Commitments and contingencies
Note 27: Economic dependency
Note 28: Events after the reporting date
Note 29: Auditor’s remuneration
Note 30: Parent entity information
Note 31: Material partly-owned subsidiaries
Note 32: Discontinued operations
Directors’ Declaration
Independent Auditor’s Report
Corporate Governance Statement
Shareholder Information
Corporate Information
11
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90
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10
IMF BENTHAM LIMITED 2017 Annual Report Directors’ Report
The directors of IMF Bentham Limited (“IMF” or “the
Company” or “the Parent”) submit their report for the year
ended 30 June 2017.
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)
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 a non-executive director of RAC Insurance Pty Limited;
– is a non-executive director of Quintis Limited;
– is chairman and non-executive director of Lovisa Holdings
Limited; and
– is chairman and executive director of ApplyDirect Limited.
Mr Kay is a member of the audit and risk committee,
remuneration committee, corporate governance
committee and nomination committee.
During the past three years he has not served as a director
of any listed company other than IMF Bentham Limited,
Quintis Limited, Lovisa Holdings Limited, ApplyDirect
Limited and McMillan Shakespeare Ltd.
Andrew Saker
Mr Saker was a partner at Ferrier Hodgson, a leading
provider of corporate recovery, insolvency management
and restructuring services throughout Australia and Asia
for 16 years.
Mr Saker is a member of the nomination committee.
During the past three years he has not served as a director
of any other listed company.
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.
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.
Alden Halse
(Non-Executive Director)
Alden Halse is an associate member of the Institute of
Chartered Accountants and the Australian Institute of
Company Directors. Previously Mr Halse 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:
(Managing Director and Chief Executive Officer)
– is a past president and current councillor of the Royal
Andrew Saker was appointed Managing Director and
CEO on 5 January 2015. Mr 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.
Automobile Club of WA (Inc);
– is a non-executive chairman of RACWA Holdings Pty Ltd;
and
– is non-executive chairman of RAC Insurance Pty Limited,
Western Australia’s largest home and motor insurer.
11
FINANCIAL REPORT FINANCIAL REPORT
Directors(cid:519) (cid:53)eport
(continued)
Mr Halse was appointed to the board as a non-executive
director in December 2001 and is chair 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 other listed company.
Michael Bowen
(Non-Executive Director)
Michael Bowen graduated from the University of Western
Australia with Bachelors of Law, Jurisprudence and
Commerce. He has been admitted as a barrister and
solicitor of the Supreme Court of Western Australia and
is a Certified Practicing Accountant of CPA Australia.
Mr Bowen is a partner of the law firm DLA Piper
practicing primarily corporate, commercial and securities
law with an emphasis on mergers, acquisitions, capital
raisings and resources.
Mr Bowen was appointed to the board as a non-
executive director in December 2001 and is chair of the
remuneration committee and a member of the corporate
governance committee, audit and risk committee and
nomination committee.
Mr Bowen is also a non-executive director of Trek Metals
Limited. During the past three years he has not served as
a director of any listed company other than IMF Bentham
Limited and Trek Metals Limited.
(cid:58)endy McCarthy
(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 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 stepped down after eight years as chair of headspace,
the National Youth Mental Health Foundation.
12
IMF BENTHAM LIMITED
2017 Annual Report
Ms McCarthy currently chairs Circus Oz and is the deputy-
chair 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(cid:519)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 was appointed to the board as a non-
executive director in December 2013 and is chair of the
corporate governance committee and a member of the
audit and risk committee, remuneration committee and
nomination committee.
During the past three years she has not served as a
director of any other listed company.
Julia Yetsenga
(cid:11)(cid:38)hief (cid:41)inancial (cid:50)(cid:605)cer(cid:12)
Julia Yetsenga has been a member of Chartered
Accountants Australia and New Zealand for over 25 years.
She holds a Bachelor of Economics from the Australian
National University and a graduate diploma in Applied
Finance and Investment from FINSIA. She has a wealth
of experience in senior finance roles for private and AS(cid:59)
listed companies both in Australia and overseas.
Jeremy Sambrook
(General Counsel and Company Secretary)
Jeremy Sambrook is an experienced corporate lawyer
having practised in the United Kingdom, Hong Kong and
the Channel Islands before moving to Australia. He holds
a Bachelor of Laws degree from the University of Bristol,
United Kingdom, and has a broad based in-house legal and
private practice background.
Following seven years working at a leading London law
firm, Mr Sambrook moved to one of Europe(cid:519)s largest
international hedge fund managers as Corporate Legal
Counsel with responsibility for a wide variety of corporate
group projects, becoming a partner in 2010 and going on
to manage the off-shore head office prior to moving with
family to Australia in 2013. Immediately prior to joining IMF,
Mr Sambrook was a Special Counsel in the Corporate team
at DLA Piper Australia in Perth.
FINANCIAL REPORT
Interests in shares, bonds and performance rights of the Company
As at the date of this report, the interests of the directors in shares, IMF Bentham Bonds, Fixed Rate Notes and share
performance rights of the Company were:
Michael Kay
Andrew Saker
Hugh McLernon
Michael Bowen
Alden Halse
Wendy McCarthy
Total
(cid:49)umber of
ordinary
shares
(cid:49)umber of
IMF Bentham
Bonds
(cid:49)umber of
Fixed (cid:53)ate
Notes
(cid:49)umber of
performance
rights
307,692
158,317
5,299,045
977,234
879,780
–
7,622,068
–
–
7,500
1,500
750
–
9,750
–
100
–
–
–
–
–
1,018,167
960,292
–
–
–
100
1,978,459
Further details of the interests of the directors in the shares, bonds and performance rights of the Company as at the date
of this report are set out in the Remuneration Report included within the Directors’ Report.
Dividends
The directors have today declared a final fully franked dividend of 4.0 cents per share for the 2017 financial year totalling
$6.882m. The record date for this dividend is 26 September 2017 and the payment date will be 20 October 2017.
Shareholders are able to elect to participate in the dividend reinvestment plan in relation to this dividend.
On 23 February 2017 the directors declared a fully franked interim dividend of 3.0 cents per share totalling $5.136m. The
record date for this dividend was 28 March 2017 and the payment date was 21 April 2017. Shareholders were able to elect
to participate in the dividend reinvestment plan in relation to this dividend.
On 23 August 2016, the directors declared a final fully franked dividend of 7.5 cents per share for the 2016 financial year
totaling $12.709m. The record date for this dividend was 27 September 2016 and the payment date was 21 October 2016.
Shareholders were able to elect to participate in the dividend reinvestment plan in relation to this dividend.
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
12 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, Security Finance LLC,
Bentham IMF Holdings 1 LLC, Bentham IMF 1 LLC, Security Finance 1 LLC, Bentham IMF Capital Limited, Lien Finance
Canada Limited and IMF Bentham Pte Limited (“the Group” or “consolidated entity”).
13
FINANCIAL REPORT
Directors(cid:519) (cid:53)eport
(continued)
Operating and financial review
(cid:49)ature 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 funding agreements
with claimants or law firms 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 from the recovery amount and, depending on the
jurisdiction, may also be reimbursed the costs it has
paid during the course of the funded litigation. The fee
is structured as either a multiple of funds provided or a
percentage of the settlement or judgment proceeds and
may 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 the world. Originating in Australia in 2001, the
Group expanded into the USA opening an office in New
York in 2012. Since that time, offices have been opened
in Los Angeles in 2014 and San Francisco in 2015, followed
by the newest addition in Houston in early 2017.
The Group has continued to expand its geographic
footprint with the opening of an office in Toronto, Canada
in January 2016 and in 2017 IMF established a presence
in Singapore following the introduction of legislation
permitting litigation funding for international arbitration.
IMF has also funded three cases in Hong Kong, two of
which have now completed.
The Group has funded this expansion by retaining
earnings and issuing shares and bonds. During the year
the Group issued Secured Fixed Rate Corporate Notes
raising $40.000m. These notes form a single series
together with the existing Notes issued in the prior
financial year which raised $32.000m. The interest rate
payable to Noteholders is 7.4% per annum paid half yearly
and the Notes are due to mature on 30 June 2020.
On 30 June 2016 the Group concluded the sale of its
interest in the joint venture established to investigate,
manage and fund litigation in Europe. The Group has
been restrained from undertaking certain activities
in certain areas of Europe for 12 months following
the date of termination, which period expired in July
2017. The Group is exploring options in relation to re-
entering this market.
In February 2017, the Group launched its first fund,
Bentham Fund No 1 for US investments. The Group
and affiliated entities of Fortress Credit Advisers LLC
have committed up to US$200.000m to this Fund to be
deployed on US cases over a three year period. Benefits
to IMF include diversification of risk through a larger
investment portfolio while leveraging this portfolio with
non-recourse capital and freeing up IMF capital for
redeployment into other jurisdictions.
In any given year the Group(cid:519)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 are 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 also creates diversification
across jurisdictions.
The Group discloses the material cases it funds to the AS(cid:59)
as those cases are funded. The Group also provides, on
a quarterly basis, an estimated portfolio value of those
cases in the portfolio. The estimated portfolio value is
IMF’s current best estimate of the claim’s recoverable
amount (or remaining recoverable amount if there has
been partial recovery). It considers, where appropriate,
the perceived capacity of the defendant to meet the
claim. It is not necessarily the same as the amount being
claimed by the funded claimants in the case and it is also
not the estimated return to the Group from the case if it is
successful. IMF also provides case updates on its website:
www.imf.com.au/cases.
14
IMF BENTHAM LIMITED
2017 Annual Report
FINANCIAL REPORT
Operating and financial review (continued)
Investment portfolio report at 30 June 2017
During the financial year, the Group restructured the presentation of its quarterly case investment portfolio and now
reports on its US and Canadian cases on the basis of committed and deployed capital. This is due to the fact that in
North America, IMF generally makes capped capital investments and usually earns revenues by reference to a multiple
of investment. In Australia and Asia, investments are generally uncapped and revenues are usually based on a percentage
of proceeds so IMF considers that the estimated portfolio value remains the appropriate reporting methodology for
funded cases in these jurisdictions.
Consolidated
Global
Estimated portfolio value
<$50m
$50m – $100m
>$100m
Total portfolio
(cid:53)egional
Australia and Asia
Estimated portfolio value
Claims <$50m
Claims >$50m
Total portfolio
US, US Fund and Canada
Invested capital
US and Canada cases
US Fund cases
Total
(cid:53)emaining commitment to be deployed
US and Canada cases
US Fund cases
Total
Total commitments
(cid:49)umber of
cases
(cid:40)stimated
portfolio value
$m
Percentage
of total
estimated
portfolio value
43
11
11
65
1,011
731
2,040
3,782
27%
19%
54%
100%
(cid:49)umber of
cases
(cid:40)stimated
portfolio value
$m
Percentage
of total
estimated
portfolio value
18
8
26
(cid:49)umber of
cases
31
8
39
31
8
39
39
346
1,263
1,609
22%
78%
100%
Capital
value
$m
Percentage
of total
estimated
capital value
86
11
97
22
11
33
130
89%
11%
100%
66%
34%
100%
15
FINANCIAL REPORT
Directors(cid:519) (cid:53)eport
(continued)
Operating and financial review (continued)
The estimated portfolio value of IMF’s cases increased 10% in the year to 30 June 2017 from $3.438b to $3.782b. IMF
commenced 26 new cases during the year and extended funding on a further 6 cases, which have a maximum claim value
at 30 June 2017 of $1.114b (2016: 27 new cases and extended funding on a further 3 cases which had an estimated portfolio
value of $1.417b).
During the financial year, IMF concluded 11 matters (2016: 12). All were settled and there were no losses (2016: 5) and one
withdrawal (2016: one withdrawal). Three matters are currently on appeal (2016: 3).
While the Group has implemented a risk mitigation and diversification strategy by expanding geographically and diversifying
its product offering across jurisdictions, case updates to its two largest investments are below.
The trial in the class action concerning Wivenhoe Dam has been delayed to now start on 4 December 2017 and following
the court break over Christmas and January will resume on 12 February 2018. The Representative has been given leave to
rely on further evidence and to further amend its statement of claim. There is a participation agreement between IMF and
the co-funder to share equally the costs (including any adverse costs) of, and to share any return from, this claim.
The Westgem matter is set for trial commencing in March 2018. Interlocutory proceedings (including a further mediation)
are likely in the period before the trial commences.
The Group(cid:519)s US operations (Bentham) funded 13 matters (2016: 15) in the US during the reporting period, including 8 cases
in the US Fund. Bentham has now funded a total of 53 cases since being established in August 2011. In line with the increase
in matters funded, Bentham’s contribution to the estimated portfolio value of IMF’s investment portfolio has increased by
over 32% to $2.173b (2016: $1.642b) over the year. This now represents 58% (2016: 48%) of IMF(cid:519)s investment portfolio.
Two US cases were resolved during the year, none of which were losses (2016: 4 losses). There are currently three cases
in the US on appeal. Income was also received in relation to 9 matters (2016: 5 matters) involving funding law firms across
a portfolio of cases. Gross income generated from these cases was $1.043m (2016: $21.219m).
The US business now has 15 staff, including 6 investment managers and 5 legal counsel. The investment managers are all
former senior litigation attorneys, each of between 15 to 25 years(cid:519) 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 inhibits
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, arbitration and qui tam cases across a variety of
different jurisdictions. Bentham has also now provided funding to 9 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 we consider there remain good prospects for the future growth of our
US business.
(cid:40)mployees
At 30 June 2017, IMF employed 63 permanent staff (full time equivalents), including the two executive directors, providing
investigative, computer, accounting and management expertise (2016: 56 full time equivalent permanent staff).
Operating results for the financial year
The following summary of operating results reflects the Group(cid:519)s performance for the year ended 30 June 2017:
Shareholder (cid:53)eturns
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Return on assets (NPAT/average assets)
Return on equity (NPAT(cid:18)average equity)
Net debt(cid:18)equity ratio % (cid:13)
2017
9.04
8.68
4.2%
7.6%
nil
2016
12.38
12.38
6.7%
10.8%
nil
(cid:13) Net debt (cash and short term deposits less total debt) is positive as cash and short term deposits are greater than total debt.
16
IMF BENTHAM LIMITED
2017 Annual Report
FINANCIAL REPORT
Operating and financial review (continued)
Nine matters (2016: eight) generated income greater than $0.500m during 2017, underpinning the Group(cid:519)s profitability and
shareholder returns. The following summarises cases finalised during 2017:
Date commenced
(cid:47)itigation contract
matter name
Completed in the current financial year:
9 April 2011
River City
9 January 2015
Confidential Hong Kong Matter
19 December 2012 Confidential settlement
25 October 2016
Confidential settlement
2 December 2015
USA Case 030
23 June 2015
USA Case 023
4 May 2009
Confidential settlement
5 November 2012
Confidential settlement
31 May 2016
Confidential settlement
Other - 2 matters
Further recoveries on completed matters
Further recoveries on continuing matters
Other1
Claim value
in latest
investment
portfolio prior
to matter
finalisation
Total litigation
contract
expenses
(including
capitalised
overheads)
Total
litigation
contract
income
(cid:49)et gain(cid:18)
(loss) on
disposal of
intangible
asset
(cid:7)(cid:519)000
(cid:7)(cid:519)000
(cid:7)(cid:519)000
(cid:7)(cid:519)000
250,000
82,000
86,000
24,000
19,638
14,608
5,700
5,000
5,000
1,580
40,128
31,193
19,668
4,128
2,871
1,495
2,957
2,708
745
436
163
6,571
266
(11,470)
(9,260)
(16,361)
(1,830)
(1,762)
(639)
(1,474)
(1,270)
(145)
(159)
(21)
(6,441)
(8,398)
113,329
(59,230)
28,658
21,933
3,307
2,298
1,109
856
1,483
1,438
600
277
142
130
(8,132)
54,099
1. Other matters include due diligence expenses for cases not funded.
The Group has finalised 162 (2016: 151) investments since listing, excluding withdrawals, with an average investment period
of 2.6 years (2016: 2.6 years). The Group has generated a return on every dollar invested of 1.55 times (excluding overheads)
(2016: 1.60 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 2017 has a mixture of both mature and new investments, with 31% of the investment
portfolio expected to finalise over the next 12 months (2016: 21%). IMF is focused on replacing and growing the investment
portfolio within its conservative investment protocols.
17
FINANCIAL REPORT
Directors(cid:519) (cid:53)eport
(continued)
Operating and financial review (continued)
IMF(cid:519)s share price closed at $1.89 per share on 30 June 2017 (2016: $1.53). IMF entered the AS(cid:59) top 300 companies
on 20 March 2009, when its share price was $1.15. Since entering the index, IMF has outperformed the AS(cid:59) Small
Ordinaries Index on an annualised basis from 30 June 2011 to 30 June 2017 as detailed below:
IMF, ASX300 AND SMALL ORDINARIES
Annualised Return 30 June 2011 – 30 June 2017
s
n
r
u
t
e
R
d
e
s
i
l
a
u
n
n
A
9.00%
8.00%
7.00%
6.00%
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
IMF Share Price
ASX300 AXKO
ASX Small Ordinaries AXSO
Annualised (cid:53)eturn with
Dividend (cid:53)einvestment
7.34%
8.28%
1.97%
(cid:47)i(cid:84)uidity 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 2017 of $4.384m (2016: increase of $10.241m). Operating activities used $50.880m of net cash outflows
(2016: net cash outflow of $34.916m), whilst cash flows from investing activities were $22.219m (2016: $20.612m), and
financing activities raised $33.045m (2016: $24.545m) principally as a result of the Fixed Rate Note capital raise.
18
IMF BENTHAM LIMITED
2017 Annual Report
FINANCIAL REPORT
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
2017
(cid:7)(cid:519)000
144,891
(119,469)
25,422
206,253
nil
n/a
4.2:1
2016
(cid:7)(cid:519)000
Change
%
142,529
(79,504)
63,025
201,388
nil
n/a
4.8:1
2%
50%
(60%)
2%
n/a
n/a
(13%)
1.
Total debt is $122.000m. $50.000m relates to the IMF Bentham Bonds issued in April 2014, while during the financial year, the Company
issued Fixed Rate Notes to the value of $40.000m to form a single series with $32.000m issued in the prior financial year. Transaction
costs of $3.595m 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 total debt.
3.
The application of AASB 123 Borrowing Costs has resulted in the capitalisation of interest associated with the IMF Bentham Bonds
and the Fixed Rate Notes as the Company(cid:519)s intangible assets are qualifying assets.
It is the Group(cid:519)s policy to maintain significant cash reserves to ensure sufficient liquidity to fund operating activities and
to meet all funding obligations.
In April 2017, the Company issued 40,000 Fixed Rate Notes with a face value of $1,000 each raising $40.000m to form a
single series with the Notes issued in the prior financial year. In April 2016, the Company issued 32,000 Fixed Rate Notes
with a face value of $1,000 each, raising $32.000m.
Interest of 7.4% per annum is payable to Noteholders half yearly. The Fixed Rate Notes are due to mature on 30 June 2020
and are secured by a security interest over all present and after-acquired property of IMF. IMF has an early redemption
option on these Notes at 30 June 2019.
In April 2014, the Company issued 500,000 IMF Bentham 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 4.2% per annum. The Bonds are due to mature on
30 June 2019 and are secured by a security interest over all present and after-acquired property of IMF.
Profile of debts
The profile of the Group(cid:519)s debt finance is as follows:
Non-current
(cid:581)IMF Bentham Bonds
(cid:581)Fixed Rate Notes
Total debt1
2017
(cid:7)(cid:519)000
2016
(cid:7)(cid:519)000
Change
%
(49,104)
(70,365)
(119,469)
(48,656)
(30,848)
(79,504)
1%
128%
50%
1.
Total debt is $122.000m. $50.000m relates to the IMF Bentham Bonds issued in April 2014, while $82.000m relates to the Fixed Rate
Notes of which $40.000m were issued in April 2017 and $32.000m were issued in the prior financial year. Transaction costs of $3.595m
are being written- back to the carrying value of the bonds over their life. (See Note 19)
Shares issued during the year
On 21 April 2017, the Company issued 855,956 shares at $1.7398 per share and on 21 October 2016, the Company issued
1,734,555 shares at 1.7546 per share under its Dividend Reinvestment Plan.
19
FINANCIAL REPORT
Directors(cid:519) (cid:53)eport
(continued)
Operating and financial review (continued)
Capital expenditure
There has been a slight decrease in capital expenditure
during the year ended 30 June 2017 to $0.979m from
$1.109m in the year ended 30 June 2016. The capital
expenditure in 2017 relates primarily to the fit-outs
of the Sydney and New York offices.
(cid:53)isk 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 its 16 years of operation IMF
has lost only 15 cases out of 162 matters funded and
completed (excluding withdrawals). The Company has an
investment protocol in relation to case selection and a
rigorous due diligence process which ensures that only
cases with a very good chance of success are accepted
for funding. The Group also insures a portion of its
adverse costs order exposure and enters into co-funding
arrangements when appropriate.
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(cid:519)s
business, as 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.
The Victorian Law Reform Commission is reviewing issues
around access to justice in respect of litigation funding and
class actions. The review is in the consultation phase and
IMF is currently involved in this process and will provide
a written submission in September 2017. At the present
time, it is too early to be definitive as to whether or not
any legislation will be proposed or adopted as a result
of the review that will affect IMF(cid:519)s operations in Victoria.
In September 2015, IMF responded to a letter from
the United States Senate Committee on the Judiciary
seeking information in relation to third party litigation
financing. IMF is not aware of any further developments
since that letter was issued. State based legislation in
the area of litigation funding remains a risk factor for IMF
to monitor. While a number of legislative initiatives have
focused on consumer-related actions, there remains
potential for these to have a non-material impact on IMF’s
US operations.
The position relating to third party litigation funding in
Singapore and Hong Kong has continued to develop over
the past twelve months. In Singapore, a law was passed
in January 2017 abolishing the torts of maintenance
and champerty and permitting third party funding of
international arbitration. In Hong Kong, amendments to
the Arbitration Ordinance were passed in June 2017 and
will come into effect later in 2017. These developments
will continue to provide opportunities for the Group
to expand its business in Asia.
IMF, like all businesses, faces the risk of damage to its
reputation, name or brand which could materialise
from various sources. The Group aspires to maintain
an excellent reputation for strong risk management
discipline, a client-centric approach and an ability to
be flexible and innovative. The Group recognises the
serious consequences of any adverse publicity or
damage to reputation, whatever the underlying cause.
We have various policies and practices to mitigate
reputational risk, including strong values that are
regularly and proactively reinforced. Strategic and
reputational risk is mitigated as much as possible through
detailed processes and governance involving escalation
procedures from investment managers to management
and from management to the board, and from regular,
clear communication with shareholders, clients and all
stakeholders. Whilst seeking to clearly differentiate itself in
the industry, IMF may suffer indirect reputational damage
from the actions of other participants that draw criticism
of the industry more broadly.
The Company has considered its exposure to economic,
environmental and social responsibility risks and further
detail of this assessment and the mitigations in place
is included in the Directors’ Report. The Company has
determined that it does not, at this time, have a material
exposure to environmental or social sustainability risks
but will continue to monitor this position.
Corporate Social (cid:53)esponsibility
As IMF has become an integral part of the litigation
landscape in Australia, the Group believes it is important
that it should support initiatives which make a positive
contribution to the operation and effectiveness of the
civil litigation process. IMF has a policy to provide funds
to support initiatives which are relevant to IMF’s funding
business and role within the civil justice system and which
offer a symbiotic benefit to IMF. An example of recent
initiatives are the IMF Bentham Class Actions Research
Initiative in conjunction with the University of NSW and
in the US, IMF(cid:519)s support for the Civil Justice Research
Institute at the University of California.
20
IMF BENTHAM LIMITED
2017 Annual Report
Significant changes in the state of affairs
Environmental regulation and performance
Total equity increased 2% to $206.253m from $201.388m
at 30 June 2016. 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.
The consolidated entity’s operations are not presently
subject to significant environmental regulation under the
laws of the Commonwealth and the States.
Significant events after reporting date
There have been no significant events after reporting date.
Likely developments and expected results
Approximately 31% of the investment portfolio at 30 June
2017 is estimated to complete over the next 12 months.
Accordingly, should these cases complete on favourable
terms, the directors consider that the Company is likely to
generate a profit in this period. The estimated completion
period is IMF’s current best estimate of the period in
which the case may be finalised. The case may finalise
earlier or later than the identified period for various
reasons. Completion means finalisation of the litigation by
either settlement, judgment or arbitrator determination,
for or against the funded client. It may not follow that
the financial result will be accounted for in the year of
finalisation. Completion period estimates are prepared
at case inception and reviewed and updated where
necessary on a quarterly basis.
IMF expects demand for its funding to continue in
Australia, particularly as we are the leading funder in
this market. The establishment of our subsidiaries in the
United States, Canada and Singapore has resulted in
increased funding opportunities. Competition, however,
is increasing and is expected to increase further in the
coming years with new entrants coming into all markets in
which IMF operates. Litigation funding is considered non-
cyclical or uncorrelated to underlying economic conditions.
Share options
Unissued shares
As at the date of this report there were 11,177,055 share
performance rights 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,
amongst others:
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 $449,700 during the
current financial year (2016: $223,000).
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.
21
FINANCIAL REPORT FINANCIAL REPORT
Directors(cid:519) (cid:53)eport
(continued)
Dear Shareholder,
On behalf of the Board and as Chairman of the Remuneration Committee, I am pleased to present IMF’s 2017
Remuneration Report.
IMF implemented a new variable remuneration framework which first applied in the 2016 financial year. The framework
is designed to align executive reward and shareholder value and to incentivise achievement of IMF’s business strategy
over both the shorter and longer terms. The variable remuneration framework applies to the whole group and was
developed to reflect industry standards and to ensure that executives are appropriately rewarded for delivering
sustained group performance.
The remuneration structure now provides for a material portion of ‘at-risk’ remuneration linked to both short-term and
long-term performance. Levels of fixed remuneration of IMF(cid:519)s senior employees are reflective of the private practice
professional services market within which the company competes for talent. Investment managers are invariably at
or around the partner level prior to joining IMF. IMF has structured its executive remuneration framework so that it
is market competitive and complementary to the reward strategy of the organisation in order to attract and retain
high calibre executives.
The variable remuneration framework for Key Management Personnel (“KMP”) consists of two components:
– A Short Term Incentive Plan (“STIP”) that provides for an annual cash payment, subject to the achievement of four key
financial and non-financial performance objectives, measured at the group, regional and individual levels. The target STIP
payment is 35% of any employee’s Total Fixed Remuneration (“TFR”), with the potential to earn a further 10% as stretch
performance if further group performance targets are achieved.
– An equity-based long term incentive plan (“LTIP”) that provides for the annual grant of performance rights to KMP. Vesting
of awards is contingent on performance against two metrics, positive Relative Total Shareholder Return (“TSR”) and
Compound Annual Growth Rate (“CAGR”) in the intangible asset balance (“Funds Deployed”), both measured over a three-
year period.
IMF has achieved sound financial results for 2017 and delivered several key initiatives to support shareholder value.
While net profit after tax was slightly less than for the 2016 financial year, IMF has achieved a 10% growth in its
investment portfolio since 2016, a 20% growth in the number of currently funded investments and a 31% growth in
intangible assets indicating promising potential for the future. Further details of the relevant performance objectives
are included in the following report.
The LTIP for KMP, set at 65% of TFR, is designed to complement the STIP as a form of ‘at-risk’ remuneration tied to long-
term performance for key contributors to the business. The LTIP directly aligns shareholders’ and participants’ interests
and also serves as a mechanism to retain senior executives. The performance rights will vest at the end of a three year
vesting period if the performance conditions have been achieved.
The Board is confident that IMF(cid:519)s remuneration policies support the Group(cid:519)s financial and strategic goals and
we are committed to transparency and an ongoing dialogue with shareholders on executive remuneration.
On behalf of the Board, I invite you to review the full report and thank you for your continued interest.
Yours faithfully
Michael Bowen
Chairman of the Remuneration Committee
22
IMF BENTHAM LIMITED
2017 Annual Report
Remuneration report (Audited)
This Remuneration Report outlines the director and KMP
remuneration arrangements of the Group in accordance
with the requirements of the Corporations Act 2001 and
its Regulations. For the purposes of this report, KMP of
the Group are defined as those persons having authority
and responsibility for planning, directing and controlling
the major activities of the Group, directly or indirectly,
including any director (whether executive or otherwise) of
the Company.
Key management personnel
Details of IMF’s Key Management Personnel are:
(i) Directors
Michael Kay
Andrew Saker
Chairman and Non-Executive
Director
Managing Director and Chief
Executive Officer
Hugh McLernon
Executive Director
Michael Bowen
Non-Executive Director
Alden Halse
Non-Executive Director
Wendy McCarthy
Non-Executive Director
(ii) Executives
Clive Bowman
Chief Executive – Australia and Asia
Charlie Gollow
Chief Executive – USA
There were no changes to IMF’s Key Management
Personnel after the reporting date and before the financial
report was authorised for issue.
Remuneration Committee
The Remuneration Committee of the board of directors of
the Company is responsible for determining and reviewing
remuneration arrangements for the board and KMP.
The Remuneration Committee assesses the
appropriateness of the nature and amount of the
emoluments of the directors and KMP 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 KMP.
Remuneration philosophy
The performance of the Company is heavily dependent
upon the quality of its directors and KMP. 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 recognising that the majority
of investment professionals are most comparable
to partners in private practice professional services
businesses; 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 KMP
remuneration is separate and distinct. In 2015, the
Committee engaged PricewaterhouseCoopers as an
external remuneration consultant to assist with a review of
our variable remuneration structure. The STIP and LTIP are
the product of that review and are reflective of industry
standards.
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 $495,000 (including
superannuation), as disclosed in the following tables. At
the 2015 Annual General Meeting shareholders approved
payments up to $700,000 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.
23
FINANCIAL REPORT FINANCIAL REPORT
Directors(cid:519) (cid:53)eport
(continued)
(cid:53)emuneration report (Audited) (continued)
Key features of the STIP include:
Structure
It is the Remuneration Committee’s policy that
employment contracts are entered into with all Key
Management Personnel. Details of these contracts are
provided below (see Executive Employment Contracts).
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 group 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.
(cid:57)ariable remuneration
Objective
The objective of the variable compensation incentive is
to reward executives in a manner that aligns this element
of their compensation with the objectives and internal
key performance indicators of the Company. The total
potential incentive available is set at a level so as to
provide sufficient incentive to the executive to achieve the
operational targets and such that the cost to the Group is
reasonable in the circumstances.
Structure
Short Term Incentive Plan
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.
24
IMF BENTHAM LIMITED
2017 Annual Report
– All employees will be eligible to be considered by the
Remuneration Committee 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(cid:18)her total fixed remuneration.
– At the beginning of the financial year, financial and
non-financial performance objectives will be set.
– As financial objectives underpin IMF(cid:519)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 performance objectives
are listed below.
– 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 role
of 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 2017 financial year, which
are unchanged from the 2016 financial year, are:
– The target STIP payment 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(cid:519) 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.
– 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(cid:519) 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.
FINANCIAL REPORT
(cid:53)emuneration report (Audited) (continued)
(cid:47)ong Term Incentive Plan
The LTIP complements the STIP as a form of ‘at-risk’
remuneration tied to long-term performance. The
LTIP encourages equity ownership and directly aligns
shareholders’ and participants interests.
Key features of the LTIP include:
– Only key senior employees 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.
– 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.
2.
Relative TSR; and
CAGR of the Funds Deployed
The LTIP metrics set for the performance rights granted
during the 2017 financial year, which are unchanged from
the 2016 financial year, are as follows:
– The LTIP opportunity has been set at 65% of TFR
calculated on face value by reference to a volume
weighted average share price at the start of the
applicable period.
– 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 AS(cid:59)-listed entities
in the Diversified Financials industry group, which
are between 50% and 200% of IMF’s market
capitalisation.
– The TSR component will vest in accordance with
the following vesting schedule:
TS(cid:53) Percentile (cid:53)anking
Percentage (cid:57)esting
Less than the 50th percentile
Nil vesting
Equal to the 50th percentile
50% vesting
Between the 50th and
75th percentile
Between 50% and 100%,
determined on a
straight-line basis
Equal to the 75th percentile
or above
100% vesting
– Target 2 – The Group will measure the compound
annual growth rate of Funds Deployed which will
comprise 50% of the LTIP opportunity:
– CAGR of the Funds Deployed component will vest
in accordance with the following schedule:
Funds Deployed CAG(cid:53)
Percentage (cid:57)esting
Below 5% CAGR
At 5% CAGR
Between 5% CAGR
and 7% CAGR
Nil vesting
50% vesting
Between 50% and 100%,
determined on a
straight-line basis
7% CAGR and above
100% vesting
These performance conditions have been chosen to
ensure the remuneration of executives are aligned with
the Group’s strategy to increase the IMF portfolio, invest
in future income and potential earnings capacity, and
creation of shareholder wealth.
LTIP participants are prohibited from entering into any
transactions which seek to mitigate any economic risk
or exposure in relation to any performance rights.
25
FINANCIAL REPORT
Directors(cid:519) (cid:53)eport
(continued)
(cid:53)emuneration 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 value to shareholders. The graph on page 18 shows the performance of the Group as measured
by its share price and compared to other shares listed on the AS(cid:59).
The following is a summary of the Group(cid:519)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)
(cid:40)xecutive (cid:40)mployment Contracts
Andrew Saker, Managing Director and CEO:
2013
1.76
11.21
9.78
201(cid:23)
1.84
6.56
6.56
201(cid:24)
1.72
3.78
3.78
2016
1.53
12.38
12.38
2017
1.89
9.04
8.68
– 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;
– notice period by the employee is 6 months and 12 months’ notice by the Company; and
– no other termination payment arrangements apply other than the notice periods specified above.
Hugh McLernon, Executive Director:
– rolling 12 month contract commenced 1 July 2007;
– gross salary package of $1,150,000 pa including super;
– salary to be reviewed annually, with the 2017 review determining there should be a 0% increase in salary
(2016: 0% increase);
– notice period is 12 months; and
– no other termination payment arrangements apply other than the notice period specified above.
Clive Bowman, Chief Executive (cid:514) Australia and Asia:
– rolling 12 month contract commenced 1 July 2012;
– gross salary package of $925,000 pa including super;
– salary to be reviewed annually, with the 2017 review determining there should be a 0% increase in salary
(2016: 0% increase);
– notice period is 12 months; and
– no other termination payment arrangements apply other than the notice period specified above.
Charlie Gollow, Chief Executive(cid:514) USA:
– contract commenced 22 April 2003;
– gross salary package of $600,000 pa including super;
– salary to be reviewed annually, with the 2017 review determining there should be a 0% increase in salary
(2016: 0% increase);
– notice period by the employee is 3 months and 6 months’ notice by the Company; and
– no other termination payment arrangements apply other than the notice periods specified above.
26
IMF BENTHAM LIMITED
2017 Annual Report
FINANCIAL REPORT
(cid:53)emuneration report (Audited) (continued)
(a) (cid:53)emuneration of Key Management Personnel
Table 1: Remuneration for the year ended 30 June 2017
Short-term benefits
Salary (cid:9)
fees
$
Cash
bonus
accrued1
$
Post-
employment
(cid:47)ong term
benefits
Share based
payments
Super-
annuation
$
(cid:47)ong
service
leave
$
Share
performance
rights
$
Termination
payments
$
Total
(cid:53)emuneration
$
Performance
related
%
2017
Directors
Michael Kay
205,384
–
Andrew Saker
1,200,000
170,746
Hugh McLernon
1,130,384
161,000
Michael Bowen
Alden Halse
Wendy McCarthy
88,373
82,192
82,192
–
–
–
19,616
19,616
19,616
1,627
7,808
7,808
–
7,460
17,211
–
389,517
367,375
–
–
–
–
–
–
Executives
Clive Bowman
905,384
129,500
Charlie Gollow
580,384
78,000
19,616
19,616
15,771
291,152
9,952
188,855
Total
4,274,293
539,246
115,323
50,394
1,236,899
1. The 2017 bonus has been accrued and will be paid in the 2018 financial year.
–
–
–
–
–
–
–
–
–
225,000
1,787,339
1,695,586
90,000
90,000
90,000
1,361,423
876,807
6,216,155
0%
31%
31%
0%
0%
0%
31%
30%
27
FINANCIAL REPORT
Directors(cid:519) (cid:53)eport
(continued)
(cid:53)emuneration report (Audited) (continued)
Table 2: Remuneration for the year ended 30 June 2016
–
–
–
–
–
–
–
–
215,674
1,928,805
1,821,141
90,000
90,000
90,000
1,375,682
833,654
556,462
0%
36%
36%
0%
0%
0%
32%
26%
0%
Short-term benefits
Salary (cid:9)
fees
$
Cash
bonus
accrued2
$
Post-
employment
(cid:47)ong term
benefits
Share based
payments
Super-
annuation
$
(cid:47)ong
service
leave
$
Share
performance
rights
$
Termination
payments
$
Total
(cid:53)emuneration
$
Performance
related
%
2016
Directors
Michael Kay3
197,122
–
18,552
–
–
Andrew Saker
1,200,000
548,689
19,308
19,620
Hugh McLernon
1,130,692
517,500
19,308
20,479
141,188
133,162
Michael Bowen
Alden Halse
Wendy McCarthy
90,000
82,192
82,192
–
–
–
–
7,808
7,808
–
–
–
–
–
–
Executives
Clive Bowman
905,692
400,063
19,308
16,365
579,650
196,500
19,308
15,977
34,254
22,219
Charlie Gollow
Diane Jones4
336,059
–
14,481
5,854
–
200,068
Total
4,603,599 1,662,752
125,881
78,295
330,823
200,068
7,001,418
2. The 2016 bonus has been accrued and will be paid in the 2017 financial year.
3. Michael Kay was appointed as Non-Executive Chairman 1 July 2015.
4.
Diane Jones resigned from her positions of Company Secretary, Chief Financial Officer and Chief Operating Officer on 30 November
2015 and is not considered a KMP from that date. She ceased employment on 28 February 2016.
28
IMF BENTHAM LIMITED
2017 Annual Report
FINANCIAL REPORT
(cid:53)emuneration report (Audited) (continued)
The following table outlines the proportion of maximum STIP earned by KMP in the 2017 financial year.
Andrew Saker
Hugh McLernon
Clive Bowman
Charlie Gollow
Maximum
STIP
opportunity
((cid:8) of TF(cid:53))
(cid:8) of
maximum
earned
45%
45%
45%
45%
31%
31%
31%
29%
The proportion of STIP forfeited is derived by subtracting the actual % of the maximum received from 100%, and was 70%
on average for the current financial year.
(b) Share performance rights awarded, vested and lapsed during the year
Tranche 1
Performance
rights
awarded
during the
year
(cid:49)umber
Fair value
of Tranche 1
Performance
Rights at
award
date1
$
Tranche 2
Performance
rights
awarded
during the
year
(cid:49)umber
Fair value
of Tranche 2
Performance
Rights at
award
date1
$
Total
Performance
rights
awarded
during the
financial
year
(cid:49)umber
(cid:57)alue of
Performance
rights
granted
during the
year
$
Award
date
(cid:57)esting
date
(cid:40)xpiry
date
–
–
–
–
–
–
–
–
–
271,794
1.188
271,793
1.553
543,587 18 Nov 2016 30 June 2019
1 July 2031
744,987
2017
Directors
Michael Kay
Andrew Saker
Hugh McLernon
256,344
1.188
256,344
1.553
512,688 18 Nov 2016 30 June 2019
1 July 2031
702,639
Michael Bowen
Alden Halse
Wendy McCarthy
Executives
Clive Bowman
Charlie Gollow
Total
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
206,190
1.188
206,190
1.553
412,380 18 Nov 2016 30 June 2019
1 July 2031
565,167
133,745
1.188
133,745
1.553
267,490 18 Nov 2016 30 June 2019
1 July 2031
366,595
868,073
868,072
1,736,145
2,379,388
1.
The fair value of performance rights is determined at the time of grant as prescribed in AASB 2. For details on the valuation of
performance rights, including models and assumptions used, refer to Note 25.
29
FINANCIAL REPORT
Directors(cid:519) (cid:53)eport
(continued)
(cid:53)emuneration report (Audited) (continued)
Tranche 1
Performance
rights
awarded
during the
year
(cid:49)umber
Fair value
of Tranche 1
Performance
rights
at award
date1
$
Tranche 2
Performance
rights
awarded
during the
year
(cid:49)umber
Fair value
of Tranche 2
Performance
rights
at award
date1
$
Total
Performance
rights
awarded
during the
financial
year
(cid:49)umber
(cid:57)alue of
Performance
rights
granted
during the
year
$
Award
date
(cid:57)esting
date
(cid:40)xpiry
date
2016
Directors
Michael Kay
–
Andrew Saker
237,290
Hugh McLernon
223,802
Michael Bowen
Alden Halse
Wendy McCarthy
–
–
–
Executives
Clive Bowman
Charlie Gollow
Diane Jones2
Total
180,015
116,766
–
757,873
–
0.575
0.575
–
–
–
0.333
0.333
–
–
237,290
223,802
–
–
–
180,015
116,766
–
757,873
–
1.210
1.210
–
–
–
0.999
0.999
–
–
–
–
–
–
474,580 20 Nov 2015 30 June 2018
1 July 2030
423,563
447,604 20 Nov 2015 30 June 2018
1 July 2030
399,487
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
360,030 24 Feb 2016 30 June 2018
1 July 2030
239,780
233,532 24 Feb 2016 30 June 2018
1 July 2030
155,532
–
–
–
–
–
1,515,746
1,218,362
1.
There have been no alterations to the terms and conditions of the performance rights awarded as remuneration since their
award date.
2. Diane Jones ceased employment on 28 February 2016. She was not eligible for the LTIP in the 2016 year.
30
IMF BENTHAM LIMITED
2017 Annual Report
FINANCIAL REPORT
(cid:53)emuneration report (Audited) (continued)
(c) Share performance rights holdings of Key Management Personnel
Performance rights holdings of KMP
2017
Directors
Michael Kay
Andrew Saker
Hugh McLernon
Michael Bowen
Alden Halse
Wendy McCarthy
Executives
Clive Bowman
Charlie Gollow
Total
2016
Directors
Michael Kay
Andrew Saker
Hugh McLernon
Michael Bowen
Alden Halse
Wendy McCarthy
Executives
Clive Bowman
Charlie Gollow
Diane Jones1
Total
Balance
1 July 2016
(cid:49)umber
Granted as
remuneration
(cid:49)umber
Performance
rights
exercised
(cid:49)umber
Balance
30 June 2017
(cid:49)umber
(cid:40)xercisable
(cid:49)umber
Not
exercisable
(cid:49)umber
–
474,580
447,604
–
543,587
512,688
–
–
–
–
–
–
360,030
233,532
412,380
267,490
1,515,746
1,736,145
–
–
–
–
–
–
–
–
–
–
1,018,167
960,292
–
–
–
772,410
501,022
3,251,891
–
–
–
–
–
–
–
–
–
–
1,018,167
960,292
–
–
–
772,410
501,022
3,251,891
Balance
1 July 201(cid:24)
(cid:49)umber
Granted as
remuneration
(cid:49)umber
Performance
rights
exercised
(cid:49)umber
Balance
30 June 2016
(cid:49)umber
(cid:40)xercisable
(cid:49)umber
Not
exercisable
(cid:49)umber
–
–
–
–
–
–
–
–
–
–
–
474,580
447,604
–
–
–
360,030
233,532
–
1,515,746
–
–
–
–
–
–
–
–
–
–
–
474,580
447,604
–
–
–
360,030
233,532
–
1,515,746
–
–
–
–
–
–
–
–
–
–
–
474,580
447,604
–
–
–
360,030
233,532
–
1,515,746
1.
Diane Jones resigned from her positions of Company Secretary, Chief Financial Officer and Chief Operating Officer on 30 November
2015 and is not considered a KMP from that date. She ceased employment on 28 February 2016.
31
FINANCIAL REPORT
Directors(cid:519) (cid:53)eport
(continued)
(cid:53)emuneration report (Audited) (continued)
(d) Shareholdings of Key Management Personnel
2017
Directors
Michael Kay
Andrew Saker
Hugh McLernon
Michael Bowen
Alden Halse
Wendy McCarthy
Executives
Clive Bowman
Charlie Gollow
Total
2016
Directors
Michael Kay
Andrew Saker
Hugh McLernon
Michael Bowen
Alden Halse
Wendy McCarthy
Executives
Clive Bowman
Charlie Gollow
Diane Jones2
Total
Balance
1 July 2016
(cid:53)eceived as
remuneration
Share
performance
rights exercised
(cid:49)et change
other1
Balance
30 June 2017
307,692
149,254
7,299,045
921,289
879,780
–
–
1,013,941
467,058
11,038,059
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9,063
307,692
158,317
(2,000,000)
5,299,045
55,945
–
–
977,234
879,780
–
(923,941)
–
90,000
467,058
(2,858,933)
8,179,126
Balance
1 July 201(cid:24)
(cid:53)eceived as
remuneration
Share
performance
rights exercised
(cid:49)et change
other1
Balance
30 June 2016
–
–
7,755,991
887,127
879,780
–
1,013,941
467,058
40,691
11,044,588
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
307,692
149,254
(456,946)
34,162
–
–
–
–
(40,691)
(6,529)
307,692
149,254
7,299,045
921,289
879,780
–
1,013,941
467,058
–
11,038,059
1. Net changes relate to shares obtained or sold on market.
2.
Diane Jones resigned from her positions of Company Secretary, Chief Financial Officer and Chief Operating Officer on 30 November
2015 and is not considered to be a KMP from that date. She ceased employment on 28 February 2016.
All equity transactions with KMP other than those arising from the exercise of share performance rights have been entered
into under terms and conditions no more favourable than those the Group would have adopted if dealing at arm’s length.
(e) (cid:47)oans to Key Management Personnel
There have been no loans provided to Key Management Personnel in 2017 (2016: nil).
(f) Transactions with Key Management Personnel
During the year the Group obtained legal advice from DLA Piper, a legal firm associated with Michael Bowen, totalling
$160,797 (2016: $229,071). The legal advice was obtained at normal market prices. Refer to Note 23 for details.
– End of remuneration report –
32
IMF BENTHAM LIMITED
2017 Annual Report
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)
W McCarthy (Chair)
M Bowen
M Kay
W McCarthy
A Halse
M Kay
W McCarthy
A Saker
M Bowen
M Kay
W McCarthy
A Halse
M Bowen
M Kay
The number of meetings of directors held during the period under review and the number of meetings attended by each
director were as follows:
Board
Meetings
Audit & Risk
Committee
Remuneration
Committee
Nomination
Committee
Corporate
Governance
Committee
Total number of meetings held:
Meetings Attended:
M Kay
A Saker
H McLernon
A Halse
M Bowen
W McCarthy
8
8
8
7
7
8
7
2
2
–
–
2
2
1
5
5
–
–
4
5
5
2
2
2
–
2
2
2
Rounding
The amounts contained in this report have been rounded to the nearest $1,000 (where rounding is applicable) under the
option available to the Company under ASIC Corporations Instrument 2016/191. The Company is an entity to which the
Instrument applies.
1
1
–
–
1
1
1
33
FINANCIAL REPORT
FINANCIAL REPORT
Directors(cid:519) (cid:53)eport
(continued)
Auditor(cid:519)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 2017. This Independence Declaration can be found at page 35.
(cid:49)on-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 $149,000 (2016: $210,000).
Corporate governance
The Company has an extensive Corporate Governance Manual which enables 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 81
of this Annual Report.
Signed in accordance with a resolution of the directors.
Michael Kay
Chairman
Sydney 24 August 2017
Andrew Saker
Managing Director
34
IMF BENTHAM LIMITED
2017 Annual Report
Auditor(cid:519)s Independence Declaration
FINANCIAL REPORT
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
Auditor’s Independence Declaration to the Directors of IMF Bentham
Limited
As lead auditor for the audit of IMF Bentham Limited for the financial year ended 30 June 2017, I declare
to the best of my knowledge and belief, there have been:
a) no contraventions of the auditor independence requirements of the Corporations Act 2001 in
relation to the audit; and
b) no contraventions of any applicable code of professional conduct in relation to the audit.
This declaration is in respect of IMF Bentham Limited and the entities it controlled during the financial
year.
Ernst & Young
Robert A Kirkby
Partner
24 August 2017
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
RK:JH:IMF:026
35
FINANCIAL REPORT
Statement of Comprehensive Income
For the year ended 30 June 2017
Continuing Operations
Revenue
Other income
Total Income
Finance costs
Depreciation expense
Employee benefits expense
Corporate and office expense
Other expenses
Profit Before Income Tax from Continuing Operations
Income tax expense
(cid:49)et Profit from Continuing Operations
Discontinued Operations
Profit/(loss) after tax from discontinued operations
Profit for the year
Other Comprehensive Income
Note
6
7
8(a)
8(b)
8(c)
8(d)
8(e)
9
32
Items that may be subsequently reclassified to profit and loss:
Movement in foreign currency translation reserve
21(b)
Other comprehensive income net of tax
Total Comprehensive Income for the Year
Attributable to(cid:29)
Equity holders of the parent
Non-controlling interests
(cid:40)arnings per share attributable to the ordinary e(cid:84)uity holders of the Company (cents per share)
Basic profit (cents per share)
Diluted profit (cents per share)
(cid:40)arnings per share attributable to continuing operations (cents per share)
Basic profit (cents per share)
Diluted profit (cents per share)
11
11
11
11
The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.
Consolidated
2017
(cid:7)(cid:519)000
2016
(cid:7)(cid:519)000
2,985
54,123
57,108
90
591
20,968
8,624
1,099
25,736
10,296
15,440
–
15,440
3,448
52,971
56,419
596
451
20,784
7,212
1,361
26,015
5,255
20,760
160
20,920
(4,932)
(4,932)
10,508
97
97
21,017
10,508
21,017
–
–
9.04
8.68
9.04
8.68
12.38
12.38
12.29
12.29
36
IMF BENTHAM LIMITED
2017 Annual Report
Statement of Financial Position
As at 30 June 2017
ASS(cid:40)TS
Current Assets
Cash and cash equivalents
Trade and other receivables
Other assets
Total Current Assets
(cid:49)on-Current Assets
Trade and other receivables
Plant and equipment
Intangible assets
Other assets
Deferred tax assets
Total (cid:49)on-Current Assets
TOTA(cid:47) ASS(cid:40)TS
(cid:47)IABI(cid:47)ITI(cid:40)S
Current (cid:47)iabilities
Trade and other payables
Income tax payable
Provisions
Other liabilities
Total Current (cid:47)iabilities
(cid:49)on-Current (cid:47)iabilities
Provisions
Debt securities
Deferred income tax liabilities
Total (cid:49)on-Current (cid:47)iabilities
TOTA(cid:47) (cid:47)IABI(cid:47)ITI(cid:40)S
(cid:49)(cid:40)T ASS(cid:40)TS
EQUITY
Contributed equity
Reserves
Retained earnings
(cid:40)(cid:84)uity attributable to e(cid:84)uity holders of the parent
Non-controlling interests
TOTAL EQUITY
FINANCIAL REPORT
Consolidated
2017
(cid:7)(cid:519)000
2016
(cid:7)(cid:519)000
Note
12
13
14
13
15
16
9
17
18
18
19
9
144,891
142,529
45,205
1,260
47,723
739
191,356
190,991
1,580
1,700
1,484
1,406
190,876
145,634
388
6,037
200,581
391,937
–
1,722
150,246
341,237
22,141
4,341
18,672
531
45,685
240
119,469
20,290
139,999
185,684
15,250
5,073
19,238
56
39,617
297
79,504
20,431
100,232
139,849
206,253
201,388
20
21(b)
21(a)
123,654
8,554
71,679
119,122
8,182
74,084
203,887
201,388
31
2,366
–
206,253
201,388
The above Statement of Financial Position should be read in conjunction with the accompanying notes.
37
FINANCIAL REPORT
Statement of Cash Flow
For the year ended 30 June 2017
Consolidated
2017
(cid:7)(cid:519)000
2016
(cid:7)(cid:519)000
Note
(35,136)
(27,760)
2,742
(6,919)
(11,567)
(50,880)
1,901
(3,752)
(5,305)
(34,916)
116,256
108,423
(91,449)
(82,605)
(979)
(1,109)
(9)
–
5,850
(7,450)
22,219
(13,311)
40,400
(1,253)
7,209
33,045
4,384
(2,022)
–
(1,765)
(2,332)
–
20,612
(6,187)
32,000
(1,268)
–
24,545
10,241
2,180
142,529
144,891
130,108
142,529
12
Cash flows from operating activities
Payments to suppliers and employees
Interest income
Interest paid
Income tax paid
(cid:49)et cash flows (used in) operating activities
22
Cash flows from investing activities
Proceeds from litigation funding - settlements, fees and reimbursements
Payments for litigation funding and capitalised suppliers and employee costs
Purchase of plant and equipment
Loans made to third party
Loans (made to)/recovered from joint venture
Investment in joint venture
US fund establishment costs
(cid:49)et cash flows from investing activities
Cash flows from financing activities
Dividends paid
Notes proceeds
Cost of issuing notes
Cash inflows from non-controlling interests
(cid:49)et cash flows 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 e(cid:84)uivalents at end of year
The above Statement of Cash Flows should be read in conjunction with the accompanying notes.
38
IMF BENTHAM LIMITED
2017 Annual Report
Statement of Changes in (cid:40)(cid:84)uity
For the year ended 30 June 2017
FINANCIAL REPORT
Share
based
payments
reserve
(cid:7)(cid:519)000
Foreign
currency
translation
reserve
(cid:7)(cid:519)000
Issued
capital
(cid:7)(cid:519)000
Option
premium
reserve
(cid:7)(cid:519)000
Convertible
notes
reserve
(cid:7)(cid:519)000
(cid:53)etained
earnings
(cid:7)(cid:519)000
(cid:49)on-
controlling
interest
(cid:7)(cid:519)000
Total
(cid:7)(cid:519)000
Total
equity
(cid:7)(cid:519)000
CO(cid:49)SO(cid:47)IDAT(cid:40)D
3,404
3,832
74,084
201,388
–
15,440
15,440
–
–
201,388
15,440
As at 1 July 2016
119,122
Profit for the year
Other
comprehensive
income
Total
Comprehensive
Income for the
Year
Equity
Transactions(cid:29)
Dividend paid
Share based
payments
Shares issued
under the Dividend
Reinvestment Plan
Contributions from
non-controlling
interests
Transaction costs
- disposal of non-
controlling interest
–
–
–
–
–
4,532
–
–
658
–
288
–
–
(4,932)
–
(4,932)
–
5,304
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
As at 1 July 201(cid:24)
116,921
Profit for the year
Other
comprehensive
income
Total
Comprehensive
Income for the
Year
Equity
Transactions(cid:29)
Dividend paid
Share based
payments
–
–
–
–
–
Shares issued
under the Dividend
Reinvestment Plan
2,201
As at 30 June 2016
119,122
–
–
–
–
–
658
–
658
–
97
–
–
–
–
–
–
–
–
–
–
–
–
(4,932)
–
(4,932)
–
15,440
10,508
–
10,508
–
–
–
–
–
(17,845)
(17,845)
–
(17,845)
–
5,304
–
5,304
–
4,532
–
4,532
–
–
–
7,209
7,209
–
(4,843)
(4,843)
191
3,404
3,832
61,552
185,900
–
20,920
20,920
–
–
97
–
–
–
185,900
20,920
97
–
20,920
21,017
–
21,017
–
–
–
(8,388)
(8,388)
–
658
–
2,201
–
–
–
–
(8,388)
658
2,201
201,388
39
The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.
288
3,404
3,832
74,084
201,388
As at 30 June 2017
123,654
5,962
(4,644)
3,404
3,832
71,679
203,887
2,366
206,253
FINANCIAL REPORT
(cid:49)otes to the Financial Statements
For the year ended 30 June 2017
(cid:49)ote 1(cid:29) Corporate information
The financial report of IMF Bentham Limited (“IMF”, ”the
Company” or “the Parent”) for the year ended 30 June 2017
and its subsidiaries (the Group or consolidated entity) was
authorised for issue in accordance with a resolution of the
directors on 24 August 2017.
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 (AS(cid:59) code: IMF).
(cid:49)ote 2(cid:29) 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,
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 $1,000 (where rounding is
applicable) under the option available to the Company
under ASIC Corporate Instrument 2016/191.
b. Compliance with IF(cid:53)S
The financial report complies with Australian Accounting
Standards and International Financial Reporting Standards
(“IFRS”), as issued by the International Accounting
Standards Board.
c. (cid:49)ew accounting standards and interpretations
The accounting policies adopted are consistent with those
of the previous financial year.
The following accounting standards relevant to the
Company and/or the Group have been issued but are not
yet effective and have not been applied in these financial
statements.
AASB 9 Financial Instruments (‘AASB 9’)
The AASB issued the final version of AASB 9 in December
2014. When operative, this standard will replace AASB 139
Financial Instruments: Recognition and Measurement.
AASB 9 addresses recognition and measurement
requirements for financial assets and financial liabilities,
impairment requirements that introduce an expected
credit loss impairment model and general hedge
accounting requirements which more closely align with risk
management activities undertaken when hedging financial
and non-financial risks. AASB 9 is not mandatorily effective
for the Group until 1 July 2018. The Group is in the process
of assessing the impact of AASB 9 and is not yet able to
reasonably estimate the impact on its financial statements.
AASB 15 Revenue from Contracts with Customers (‘AASB 15’)
The AASB issued AASB 15 in October 2015. The standard
is not mandatorily effective for the Group until 1 July 2018.
AASB 15 contains new requirements for the recognition of
revenue and additional disclosures about revenue. AASB
138 Intangible Assets has been amended to ensure that for
reporting periods beginning on or after 1 January 2018,
the derecognition of intangible assets are subject to the
principles of AASB 15. It is expected that this standard
will not materially change the revenue recognition of the
Group, except where cases have become under appeal.
AASB 15 may disallow the recognition of revenue where
cases are under appeal due to the more prescriptive
requirements within the standard for recognition of
revenue. Refer to Note 13 for details of revenue receivable
at 30 June 2017 where cases are still under appeal. The
Group is still to assess and decide on the applicable
transition approach on adoption of AASB 15.
AASB 16 Leases (‘AASB 16’)
The AASB issued the final version of AASB 16 in February
2016. The standard is not mandatorily effective for the
Group until 1 July 2019. AASB 16 requires a lessee to
recognise a right-of- use asset representing its right
to use the underlying leased asset and a lease liability
representing its obligation to make lease payments. AASB
16 substantially carries forward the lessor accounting
requirements in AASB 117 Leases. The Group is in
the process of assessing the impact of AASB 16 and
is not yet able to reasonably estimate the impact on
its financial statements.
40
IMF BENTHAM LIMITED
2017 Annual Report
Note 2: Summary of significant accounting policies (continued)
AASB 2016-5 Amendments to Australian Accounting
Standards – Classification and Measurement of Share-based
Payment Transactions
This Standard amends AASB 2 Share-based Payment,
clarifying how to account for certain types of share-based
payment transactions. It is not mandatorily effective for
the Group until 1 July 2018. The amendments provide
requirements on the accounting for:
– The effects of vesting and non-vesting conditions on the
measurement of cash-settled share-based payments
– Share-based payment transactions with a net settlement
feature for withholding tax obligations
– A modification to the terms and conditions of a share-
based payment that changes the classification of the
transaction from cash-settled to equity-settled.
The Group is in the process of assessing the impact of the
amendments and is not yet able to reasonably estimate
the impact on its financial statements.
d. Basis of consolidation
The consolidated financial statements comprise the
financial statements of IMF Bentham Limited (IMF, the
Company or Parent) and its subsidiaries (“the Group”)
as at 30 June 2017. 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.
A change in the ownership interest of a subsidiary, without
a loss of control, is accounted for as an equity transaction.
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 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.
41
FINANCIAL REPORT FINANCIAL REPORT
(cid:49)otes to the Financial Statements
For the year ended 30 June 2017 (continued)
(cid:49)ote 2(cid:29) Summary of significant accounting policies (continued)
f. Cash and cash e(cid:84)uivalents
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 0-90 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.
(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 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.
i. Plant and e(cid:84)uipment
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 4 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.
42
IMF BENTHAM LIMITED
2017 Annual Report
Note 2: Summary of significant accounting policies (continued)
Capitalised leased assets are depreciated over the shorter
of the estimated useful life of the asset and the lease
term if there is no reasonable certainty that the Group
will obtain ownership by the end of the lease term.
Operating lease payments are recognised as an expense
in the 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 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 life of 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 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.
43
FINANCIAL REPORT FINANCIAL REPORT
(cid:49)otes to the Financial Statements
For the year ended 30 June 2017 (continued)
(cid:49)ote 2(cid:29) Summary of significant accounting policies (continued)
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(cid:519)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 benefits
(i) Wages, salaries, annual leave and sick leave
Provision is made for employee benefits accumulated as
a result of employees rendering services up to the end
of the reporting period. These benefits include wages,
salaries, annual leave, long service leave and bonuses.
Liabilities in respect of employees’ services rendered that
are not expected to be wholly settled within one year after
the end of the periods in which the employees render the
related services are recognised as long-term employee
benefits. These liabilities are measured at the present
value of the estimated future cash outflow to be made to
the employees using the projected unit credit method.
Liabilities expected to be wholly settled within one year
after the end of the period in which the employees render
the related services are classified as short-term benefits
and are measured at the amount due to be paid.
(ii) Long service leave
Long service leave is measured at the present value of
benefits accumulated up to the end of the reporting
period. The liability is discounted using an appropriate
discount rate. Management requires judgement to
determine key assumptions used in the calculation
including future increases in salaries and wages, future
on-costs rates and future settlement dates of employees’
departures.
(iii) Bonuses
Under the IMF Short-Term Incentive Plan, eligible
participants have the opportunity to receive an annual
cash bonus, subject to performance against clearly defined
and measurable financial and non-financial objectives.
o. Share-based payment transactions
(i) Equity-settled transactions
The Company’s LTIP awards share performance rights
to key senior employees. The cost of equity-settled
transactions with employees 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 Monte Carlo and Binomial Model depending on
the type of LTIP.
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 share
based payment reserve, over the period in which the
performance and(cid:18)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).
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(cid:519)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.
44
IMF BENTHAM LIMITED
2017 Annual Report
Note 2: Summary of significant accounting policies (continued)
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. 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.
q. 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.
r. 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.
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.
45
FINANCIAL REPORT FINANCIAL REPORT
(cid:49)otes to the Financial Statements
For the year ended 30 June 2017 (continued)
(cid:49)ote 2(cid:29) Summary of significant accounting policies (continued)
t. 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.
u. Investment in (cid:77)oint 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.
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
(cid:518)Share of profit of a joint venture(cid:519) in the Statement of
Comprehensive Income.
Deferred tax assets and deferred tax liabilities are offset
only if a legally enforceable right exists to set off current
tax assets against current tax liabilities and the deferred
tax assets and liabilities relate to the same taxable entity
and the same taxation authority.
IMF and its 100% Australian owned subsidiary have formed
a tax consolidated group with effect from 1 July 2002. IMF
is the head 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.
s. (cid:40)arnings 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.
46
IMF BENTHAM LIMITED
2017 Annual Report
FINANCIAL REPORT
(cid:49)ote 3(cid:29) Financial risk management ob(cid:77)ective and policies
The Group(cid:519)s principal financial instruments comprise cash and short-term deposits, receivables, payables, bonds and fixed
rate notes.
The Group manages its exposure to key financial risks, including interest rate risk and currency risk in accordance with
the Group(cid:519)s financial risk management policy. The objective of the policy is to support the delivery of the Group(cid:519)s financial
targets whilst protecting its future financial security.
The main risks arising from the Group(cid:519)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.
(cid:53)isk 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 2017, the Group has a $50,000,000 variable rate bond debt outstanding.
These IMF Bentham Bonds require that the Group make a quarterly coupon payment 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
IMF Bentham Bonds
(cid:49)et exposure
Consolidated
2017
(cid:7)(cid:519)000
2016
(cid:7)(cid:519)000
144,891
142,529
(49,104)
95,787
(48,656)
93,873
The Group regularly analyses its interest rate exposure. Within this analysis consideration is given to expected interest
rate movements and the Group(cid:519)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 2017, if interest rates had moved, as illustrated in the following table, with all other variables held constant, post-
tax profit and equity would have been affected as follows:
Judgment of reasonably possible movements:
(cid:14)0.25% (25 basis points) (2016: (cid:14)0.25%)
-0.25% (25 basis points) (2016: -0.25%)
Post Tax Profit
(cid:43)igher(cid:18)((cid:47)ower)
Equity
(cid:43)igher(cid:18)((cid:47)ower)
2017
(cid:7)(cid:519)000
168
(168)
2016
(cid:7)(cid:519)000
235
(235)
2017
(cid:7)(cid:519)000
168
(168)
2016
(cid:7)(cid:519)000
235
(235)
47
FINANCIAL REPORT
(cid:49)otes to the Financial Statements
For the year ended 30 June 2017 (continued)
(cid:49)ote 3(cid:29) Financial risk management ob(cid:77)ective 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(cid:519)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 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 2017, a
significant portion of the Group(cid:519)s receivables were not under any such security. However, the Group(cid:519)s continual monitoring
of the defendants(cid:519) 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(cid:519)s expected
financial commitments in a timely and cost effective manner.
Management continually reviews the Group(cid:519)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 IMF Bentham Bonds and Fixed Rate Notes, are current and payable within 30 days.
The maturity profile of the Group(cid:519)s financial liabilities based on contractual maturity on an undiscounted basis are:
(cid:31) 6 months
(cid:7)(cid:519)000
6-12 months
(cid:7)(cid:519)000
1-(cid:24) years
(cid:7)(cid:519)000
(cid:33)(cid:24) years
(cid:7)(cid:519)000
Total
(cid:7)(cid:519)000
2017
Financial (cid:47)iabilities
Trade and other payables
Bonds and Notes
Bonds and Notes interest
2016
Financial (cid:47)iabilities
Trade and other payables
Bonds and Notes
Bonds and Notes interest
22,141
–
4,202
26,343
15,250
–
2,722
17,972
–
–
4,202
4,202
–
–
2,722
2,722
–
122,000
13,733
135,733
–
82,000
13,257
95,257
–
–
–
–
–
–
–
–
22,141
122,000
22,137
166,278
15,250
82,000
18,701
115,951
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 IMF Bentham Bonds and Fixed
Rate Notes. The IMF Bentham Bonds fair value has been determined using the quoted market price at 30 June 2017, and the
Fixed Rate Notes fair value has been determined using the price from Austraclear.
Under AASB 13 the fair value measurements used for the Bonds and Notes are both level 1 on the fair value hierarchy.
At 30 June 2017:
IMF Bentham Bonds
Fixed Rate Notes
48
IMF BENTHAM LIMITED
2017 Annual Report
Carrying
Value
(cid:7)(cid:519)000
49,104
70,365
Principal
(cid:7)(cid:519)000
Fair Value
(cid:7)(cid:519)000
50,000
72,000
52,000
73,620
FINANCIAL REPORT
(cid:49)ote 3(cid:29) Financial risk management ob(cid:77)ective 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 entity has intercompany receivables from its subsidiaries 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.
2017
Financial Assets
Cash and cash equivalents
Trade and other receivables1
Total assets
Financial (cid:47)iabilities
Trade Payables
Total liabilities
2016
Financial Assets
Cash and cash equivalents
Trade and other receivables1
Total assets
Financial (cid:47)iabilities
Payables
Total liabilities
USD
(cid:7)(cid:519)000
GBP
(cid:7)(cid:519)000
34,727
20,020
54,747
2,842
2,842
USD
(cid:7)(cid:519)000
25,124
46,898
72,022
2,700
2,700
24
2
26
6
6
GBP
(cid:7)(cid:519)000
960
–
960
–
–
Euro
(cid:7)(cid:519)000
3,660
–
3,660
–
–
Euro
(cid:7)(cid:519)000
2,510
4,010
6,520
–
–
SGD
(cid:7)(cid:519)000
CAD
(cid:7)(cid:519)000
HKD
(cid:7)(cid:519)000
68
44
112
–
–
SGD
(cid:7)(cid:519)000
–
–
–
–
–
2,967
716
3,683
99
99
CAD
(cid:7)(cid:519)000
67
1,039
1,106
34
34
1,977
48,612
50,589
15,840
15,840
HKD
(cid:7)(cid:519)000
28,343
–
28,343
–
–
1.
Trade and other receivables balance includes the intercompany loan balance with Bentham Holdings Inc. and Bentham IMF Capital
Limited and 2016 also includes the receivable from the sale of the Group’s interest in Bentham Ventures B.V.
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 loans of $23,370,000 (2016: $61,792,000). The sensitivity is based on management(cid:519)s
estimate of reasonably possible changes over the financial year.
2017
2016
Impact on profit or loss before tax (A(cid:7)(cid:519)000)
USD
GBP
+10%
-10%
+10%
-10%
(6,763)
6,763
(9,335)
9,335
(3)
3
(173)
173
Euro
(545)
545
(973)
973
SGD
10
(10)
–
–
CAD
(359)
359
(111)
111
HKD
(580)
580
(492)
492
49
FINANCIAL REPORT
(cid:49)otes to the Financial Statements
For the year ended 30 June 2017 (continued)
(cid:49)ote (cid:23)(cid:29) Significant accounting (cid:77)udgments, estimates and assumptions
The preparation of the Group(cid:519)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.
Significant accounting (cid:77)udgments, estimates
and assumptions
Taxation
The Group(cid:519)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(cid:519)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 in 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.
50
IMF BENTHAM LIMITED
2017 Annual Report
Intangible Assets - Litigation Contracts In Progress
Litigation Contracts in Progress is recognised by the Group
as an intangible asset in the financial statements as the
Group does not have an unconditional right to receive
cash. Rather, it provides the entity with a right to a share
of litigation proceeds which may be in the form of cash or
other non-financial assets.
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).
Share Based Payments
Estimating fair value for share-based payment transactions
requires determination of the most appropriate valuation
model, which depends on the terms and conditions of the
grant. This estimate also requires determination of the most
appropriate inputs to the valuation model including the
expected life of the share performance right, volatility and
dividend yield and making assumptions about them. For the
measurement of the fair value of equity-settled transactions
with employees at the grant date, the Group uses the
Monte-Carlo simulation model for Tranche 1 grants, and
the binomial model for Tranche 2 grants. The assumptions
and models used for estimating fair value for share-based
payment transactions are disclosed in Note 25.
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.
FINANCIAL REPORT
(cid:49)ote (cid:23)(cid:29) Significant accounting (cid:77)udgments, estimates and assumptions (continued)
Provision for adverse costs
The Group raises a provision for adverse costs when it has lost a matter which it has funded. When a matter is lost and an
appeal is lodged, the Group raises a provision. 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.
(cid:49)ote (cid:24)(cid:29) 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, the United States of America, Canada and Singapore.
Aside from the locations listed above, the Group continues to investigate other markets and has identified the following
markets as being favourable to litigation funding: Hong Kong, New (cid:61)ealand and Europe.
Interest received from National Australia Bank Ltd of $886,943 (2016: $1,210,000), Bankwest of $904,591 (2016: $682,000),
and Westpac Banking Group Ltd was $890,051 (2016: nil) contributed more than 99% of the Group(cid:519)s bank interest revenue
(2016: 99%).
Other income can be represented geographically as follows:
Australia
United States
Canada
Singapore
Total other income
Non-Current assets, excluding financial assets, can be represented geographically as follows:
Australia
United States
Canada
Singapore
(cid:49)et exposure
(cid:49)ote 6(cid:29) (cid:53)evenue
(cid:53)evenue
Bank interest received and accrued
Fees from Joint Venture
Unrealised foreign exchange gain
Consolidated
2017
(cid:7)(cid:519)000
53,173
1,043
(93)
–
2016
(cid:7)(cid:519)000
45,870
7,101
–
–
54,123
52,971
Consolidated
2017
(cid:7)(cid:519)000
94,744
102,535
1,334
–
2016
(cid:7)(cid:519)000
87,130
61,625
7
–
198,613
148,762
Consolidated
2017
(cid:7)(cid:519)000
2016
(cid:7)(cid:519)000
2,684
–
301
2,985
1,894
347
1,207
3,448
51
FINANCIAL REPORT
(cid:49)otes to the Financial Statements
For the year ended 30 June 2017 (continued)
(cid:49)ote 7(cid:29) Other income
Other income
Litigation contracts - settlements and judgments
Litigation contracts - expenses
Litigation contracts - written-down1
Net gain on derecognition of intangible assets
Loss on derecognition of intangible assets/receivables as a result of losing
a matter or appeal2
Other income
Consolidated
2017
(cid:7)(cid:519)000
2016
(cid:7)(cid:519)000
113,329
(51,073)
(2,924)
59,332
99,797
(22,540)
(11,389)
65,868
(5,233)
(12,923)
24
54,123
26
52,971
1.
2.
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(cid:519)s required rate of return.
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 it being lost.
(cid:49)ote (cid:27)(cid:29) (cid:40)xpenses
(a) Finance costs
Borrowing cost amortisation
Other finance charges
(b) Depreciation expense
Depreciation expense
(c) Employee benefits expense
Wages and salaries
Superannuation expense
Directors' fees
Payroll tax
Share based payments
Long service leave provision
52
IMF BENTHAM LIMITED
2017 Annual Report
Consolidated
2017
(cid:7)(cid:519)000
2016
(cid:7)(cid:519)000
–
90
90
540
56
596
591
451
15,200
18,035
1,123
431
1,324
2,775
115
562
467
1,412
492
(184)
20,968
20,784
(cid:49)ote (cid:27)(cid:29) (cid:40)xpenses (continued)
(d) Corporate and office expense
Insurance expense
Network expense
Marketing expense
Occupancy expense
Professional fees expense
Recruitment expense
Telephone expense
Travel expense
(e) Other expenses
AS(cid:59) listing fees
General expenses
Postage, printing and stationery
Repairs and maintenance
Share registry costs
Software supplies
(cid:49)ote (cid:28)(cid:29) Income tax
Consolidated statement of profit (cid:9) loss
The major components of income tax expense are:
Current income tax
(cid:581)Current income tax charge
(cid:581)Adjustment in respect of current income tax expense of previous year
(cid:581)Current year losses moved to deferred tax asset
(cid:581)Income tax attributable to a discontinued operation
Deferred tax
(cid:581)Relating to origination and reversal of temporary differences
(cid:581)Other
(cid:581)Use of prior year losses not previously recognised
(cid:581)Current year losses moved to deferred tax asset
(cid:581)Adjustment in respect of deferred tax of previous year
Income tax expense reported in the statement of profit & loss
FINANCIAL REPORT
Consolidated
2017
(cid:7)(cid:519)000
2016
(cid:7)(cid:519)000
1,070
597
1,378
1,370
2,651
432
130
996
8,624
94
367
485
20
111
22
1,588
154
1,766
908
1,480
442
137
737
7,212
87
702
387
30
129
26
1,099
1,361
Consolidated
2017
(cid:7)(cid:519)000
2016
(cid:7)(cid:519)000
5,505
1,990
3,270
–
1,369
265
7,786
731
–
(1,267)
1,081
(5)
–
(1,671)
(3,270)
1,167
10,296
–
(1,400)
5,255
53
FINANCIAL REPORT
(cid:49)otes to the Financial Statements
For the year ended 30 June 2017 (continued)
(cid:49)ote (cid:28)(cid:29) Income tax (continued)
Accounting profit before income tax from continuing operations
Profit/(loss) before tax from a discontinued operation
Accounting profit before tax
At the Group(cid:10)s statutory income tax rate of 30% (2016: 30%)
(cid:581)Adjustment in respect of income and deferred tax of previous years
(cid:581)Expenditure not allowable for income tax purposes
(cid:581)Non-assessable income
(cid:581)Foreign tax rate adjustment
(cid:581)State income tax
(cid:581)Foreign exchange impact on tax expense
(cid:581)Relating to deferred tax asset not recognised previously
(cid:581)Use of prior year losses not previously recognised
(cid:581)Other
Income tax expense reported in the Statement of Comprehensive Income
Consolidated
2017
(cid:7)(cid:519)000
25,736
–
25,736
7,720
3,157
1,588
(754)
(63)
(1,095)
–
(482)
–
225
10,296
2016
(cid:7)(cid:519)000
26,015
1,427
27,442
8,233
(669)
821
–
(219)
(328)
361
–
(1,671)
(6)
5,255
Income tax attributable to a discontinued operation
–
1,267
54
IMF BENTHAM LIMITED
2017 Annual Report
FINANCIAL REPORT
(cid:49)ote (cid:28)(cid:29) Income tax (continued)
Deferred income tax
Deferred income tax at 30 June relates to the following:
CONSOLIDATED
Deferred tax liabilities
(cid:581)Intangibles
(cid:581)Accrued interest (cid:9) unrealised foreign exchange differences
Gross deferred tax liabilities
Deferred tax assets
(cid:581)Accruals and provisions(cid:18)bond raising costs
(cid:581)Share based payments
(cid:581)Expenditure deductible for income tax over time
Gross deferred tax assets
Net deferred tax liabilities
Foreign deferred tax assets
(cid:581)Accruals and provisions
(cid:581)Intercompany loans
(cid:581)Expenditure deductible for income tax over time
(cid:581) Deferred tax assets - Foreign net operating losses -
federal and state
Deferred tax assets
Statement of Financial
Position
Statement of
Comprehensive Income
2017
(cid:7)(cid:519)000
2016
(cid:7)(cid:519)000
2017
(cid:7)(cid:519)000
2016
(cid:7)(cid:519)000
29,411
134
29,545
5,527
2,818
910
9,255
25,769
149
25,918
5,460
–
27
5,487
20,290
20,431
79
568
1,475
3,915
6,037
–
–
–
1,722
1,722
(3,642)
15
(3,627)
68
1,347
(249)
1,166
79
568
–
2,192
2,839
(2,390)
1,509
(881)
1,209
–
(6)
1,203
–
–
–
1,722
1,722
Unrecognised temporary differences and tax losses
At 30 June 2017 the Group had no (2016: nil) unrecognised temporary differences and tax losses.
55
FINANCIAL REPORT
(cid:49)otes to the Financial Statements
For the year ended 30 June 2017 (continued)
(cid:49)ote 10(cid:29) Dividends paid and proposed
(a) Cash dividends on ordinary shares declared and paid
Final dividend for 2016: 7.5 cents per share (2015: 5.0 cents per share)
Interim dividend for 2017: 3.0 cents per share (2016: 0.0 cents per share)
Consolidated
2017
(cid:7)(cid:519)000
2016
(cid:7)(cid:519)000
12,709
5,136
17,845
8,388
–
8,388
(b) Proposed dividends for ordinary shares(cid:29)
Final dividend for 2017: 0.0 cents per share (2016: 7.5 cents per share)
6,882
12,709
On 24 August 2017, the directors declared a final fully franked dividend of 4.0 cents per share for the 2017 financial year,
totalling $6,881,863. The record date for this dividend is 26 September 2017 and the payment date will be 20 October 2017.
Shareholders are able to elect to participate in the dividend reinvestment plan in relation to this dividend.
On 24 February 2017 the Directors declared a fully franked interim dividend of 3.0 cents per share totalling $5,136,000. The
record date for this dividend was 27 March 2017 and the payment date was 21 April 2017. Shareholders were able to elect
to participate in the dividend reinvestment plan in relation to this dividend.
On 23 August 2016, the directors declared a final fully franked dividend of 7.5 cents per share for the 2016 financial year,
totalling $12,709,000. The record date for this dividend was 27 September 2016 and the payment date was on 21 October
2016. Shareholders were able to elect to participate in the dividend reinvestment plan in relation to this dividend. An interim
dividend was not declared for the half year ended 31 December 2015.
(c) Franking credit balance
The amount of franking credits for the subsequent financial year are:
– Franking account balance as at the end of the previous financial year at 30%
– Franking debits that arose from the payment of last year’s final dividend
– Franking debits that arose from the payment of current year’s interim dividend
– Franking credits that arose from the payment of income tax payable during the financial year
–
Franking credits that will arise from the (refund)/payment of income tax (receivable)/payable
as at the end of the financial year
–
Impact of franking debits that will arise from the payment of the final dividend
(d) Tax rates
The tax rate at which paid dividends have been franked is 30% (2016: 30%).
IMF Bentham (cid:47)imited
2017
(cid:7)(cid:519)000
2016
(cid:7)(cid:519)000
6,732
(5,447)
(2,201)
11,155
10,239
5,799
(2,949)
13,089
8,316
(3,595)
–
2,011
6,732
7,497
(5,447)
8,782
56
IMF BENTHAM LIMITED
2017 Annual Report
FINANCIAL REPORT
(cid:49)ote 11(cid:29) (cid:40)arnings 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.
During the year ended 30 June 2017, 6,365,969 performance rights (2016: 4,811,086) were granted as detailed in Note 25.
Upon meeting certain performance conditions over the three year performance period, the vesting of each right will result
in the issue of 1 ordinary share. The performance shares are considered dilutive to the extent performance hurdles are
met as at year end.
The following reflects the income and share data used in the basic earnings per share computation:
(a) (cid:40)arnings used in calculating earnings per share
Consolidated
2017
(cid:7)(cid:519)000
2016
(cid:7)(cid:519)000
For basic earnings per share
Total net profit attributable to ordinary equity holders of the Parent
15,440
20,920
For basic earnings per share
Total net profit attributable to continuing operations
15,440
20,760
Consolidated
2017
(cid:7)(cid:519)000
2016
(cid:7)(cid:519)000
(b) (cid:58)eighted average number of shares
Weighted average number of ordinary shares outstanding
Effect of dilution:
(cid:581)Performance rights1
Weighted average number of ordinary shares
(cid:49)umber (cid:7)(cid:519)000
2017
2016
170,818
168,988
6,993
–
177,811
168,988
1
Performance rights granted under the Long Term Incentive Plan are only included in dilutive earnings per ordinary share where the
performance hurdles are met as at year end.
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 2017 there were no options issued over shares in the Company (2016: nil).
(ii) Bonds and Notes
The bonds and notes are not considered to be dilutive.
57
FINANCIAL REPORT
(cid:49)otes to the Financial Statements
For the year ended 30 June 2017 (continued)
(cid:49)ote 12(cid:29) Current assets (cid:514) cash and cash e(cid:84)uivalents
For the purposes of the Statement of Financial Position and Statement of Cash Flows, cash and cash equivalents comprise
the following at 30 June:
Cash at bank
Short-term deposits
Consolidated
2017
(cid:7)(cid:519)000
2016
(cid:7)(cid:519)000
38,583
106,308
144,891
64,318
78,211
142,529
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 2017, all short term deposits are due to mature in less than 90 days from inception and earn interest
at the respective short-term deposit rates.
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 2017 guarantees of $1,059,000
were outstanding (2016: $526,000). The Group has a total guarantee facility limit of $1,433,000 (2016: $5,000,000) that is
secured by an offset arrangement with deposits of $1,633,000 (2016: $5,000,000).
(cid:49)ote 13(cid:29) Trade and other receivables
Current
Trade receivables1
Other receivables2
Receivable from sale of joint venture
(cid:49)on current
Trade receivables3
Consolidated
2017
(cid:7)(cid:519)000
2016
(cid:7)(cid:519)000
37,202
8,003
–
45,205
40,497
1,240
5,986
47,723
Consolidated
2017
(cid:7)(cid:519)000
2016
(cid:7)(cid:519)000
1,580
1,580
1,484
1,484
1.
2.
3.
Trade receivables are non-interest bearing and generally on 30-90 day terms. There is $2,870,000 included in current trade receivables
which is subject to appeal as at 30 June 2017 (2016: $nil).
Other receivables comprise interest receivable upon the maturity of the Group’s short term deposits (between 30 and 90 days),
Receivables from Co-Funders of Litigation Contracts in Progress, Short term loans and deposits receivable.
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.
58
IMF BENTHAM LIMITED
2017 Annual Report
FINANCIAL REPORT
(cid:49)ote 13(cid:29) Trade and other receivables (continued)
At 30 June 2017 and 30 June 2016 the non-current trade receivable was non-interest bearing and related to the Company’s
expected income from the Lehman matter.
At 30 June, the aging analysis of trade and other receivables is as follows:
2017 Consolidated
2016 Consolidated
0-30
days
(cid:7)(cid:519)000
38,923
38,602
31-(cid:28)0
days
(cid:7)(cid:519)000
396
3,814
(cid:28)1-1(cid:27)0
days
(cid:7)(cid:519)000
–
–
(cid:14)1(cid:27)0
days1
(cid:7)(cid:519)000
7,466
6,791
Total
(cid:7)(cid:519)000
46,785
49,207
(a) Fair value and credit risk
Due to the nature of these receivables, the carrying value of the current receivables approximates its fair value. The carrying
value of the non-current receivables is adjusted to reflect future cash flows and it is this adjusted carrying value that
approximates its 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(cid:519)s policy to transfer (on-sell) receivables.
(cid:49)ote 1(cid:23)(cid:29) Current assets (cid:514) other assets
Prepayments
Rental deposits
Lease incentive receivable
Consolidated
2017
(cid:7)(cid:519)000
670
661
(71)
1,260
2016
(cid:7)(cid:519)000
485
254
–
739
59
FINANCIAL REPORT
(cid:49)otes to the Financial Statements
For the year ended 30 June 2017 (continued)
(cid:49)ote 1(cid:24)(cid:29) (cid:49)on-current assets (cid:514) plant and e(cid:84)uipment
(cid:53)econciliation of carrying amounts at the beginning and end of the year
Cost
Accumulated depreciation
Net carrying amount
Cost
Balance as at 1 July 2015
Additions
Disposals
At 30 June 2016
Additions
Disposals
At 30 June 2017
Accumulated depreciation
Balance as at 1 July 2015
Depreciation charge for the year
Disposals
At 30 June 2016
Depreciation charge for the year
Disposals
At 30 June 2017
(cid:49)et book value
At 30 June 2017
At 30 June 2016
Consolidated
2017
(cid:7)(cid:519)000
2,895
(1,195)
1,700
2016
(cid:7)(cid:519)000
3,967
(2,561)
1,406
Consolidated
Plant and
e(cid:84)uipment
(cid:7)(cid:519)000
2,860
1,109
(2)
3,967
961
(2,033)
2,895
2,111
451
(1)
2,561
591
(1,957)
1,195
1,700
1,406
The useful life of the assets was estimated between 4 to 15 years for both 2017 and 2016.
Plant and Equipment of the Company is subject to a fixed charge to secure the Company(cid:519)s debt due to Bondholders.
See Note 19 for further details.
60
IMF BENTHAM LIMITED
2017 Annual Report
FINANCIAL REPORT
Consolidated
(cid:7)(cid:519)000
145,634
99,539
(51,073)
(3,224)
190,876
99,483
93,003
(35,463)
(11,389)
145,634
(cid:49)ote 16(cid:29) Intangible assets
(a) (cid:53)econciliation of carrying amounts at the beginning and end of the period
Year ended 30 June 2017
Balance as at 1 July 2016, net of accumulated amortisation and impairment
Additions
Disposals
Write-down of Litigation Contracts
At 30 June 2017, net of accumulated amortisation and impairment
Year ended 30 June 2016
Balance as at 1 July 2015, net of accumulated amortisation and impairment
Additions
Disposals
Write-down of Litigation Contracts
At 30 June 2016, net of accumulated amortisation and impairment
(b) Description of Group(cid:519)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 below. The capitalised wages
in 2017 equated to approximately 26.8% of the total salary costs (2016: 28.5%). The other internal capitalised expenses
equated to approximately 36.2% of related overhead costs (2016: 35.6%).
The Group has determined that Litigation Contracts In Progress meet the definition of qualifying assets and that 100% of
borrowing costs are eligible for capitalisation. The amount of borrowing costs capitalised during the year ended 30 June
2017 was $6,900,000 (2016: $3,700,000).
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
2017
(cid:7)(cid:519)000
2016
(cid:7)(cid:519)000
158,723
119,472
19,179
12,974
17,565
8,597
190,876
145,634
61
FINANCIAL REPORT
(cid:49)otes to the Financial Statements
For the year ended 30 June 2017 (continued)
(cid:49)ote 16(cid:29) Intangible assets (continued)
(c) (cid:58)rite 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(cid:519)s required rate of return.
(d) Impairment testing of intangible assets
The recoverable amount of each of the Litigation Contracts In Progress is determined based on a value in use calculation
using cash flow projections based on financial budgets approved by management.
The following describes each key assumption on which management has based its cash flow projections when determining
the value in use of Litigation Contracts In Progress:
– The estimated cost to complete a Litigation Contract In Progress is budgeted based on estimates provided by the external
legal advisors handling the litigation.
– The value to the Group of the Litigation Contracts In Progress, once completed, is estimated based on the expected
settlement or judgment amount of the litigation and the fees due to the Group under the litigation funding contract.
– The discount rate applied to the cash flow projections is based on the Group(cid:519)s weighted average cost of capital and other
factors relevant to the particular Litigation Contracts In Progress. The discount rate applied ranged between 9.0% and 10.5%
(2016: between 10.0% and 11.5%).
No impairment has been identified as a result of impairment testing performed.
(cid:49)ote 17(cid:29) Current liabilities (cid:514) trade and other payables
Trade payables1
Wage accruals
Interest accruals
Consolidated
2017
(cid:7)(cid:519)000
2016
(cid:7)(cid:519)000
20,335
13,981
1,057
749
461
808
22,141
15,250
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.
62
IMF BENTHAM LIMITED
2017 Annual Report
(cid:49)ote 1(cid:27)(cid:29) Current and non-current liabilities (cid:514) provisions
FINANCIAL REPORT
Consolidated
2017
(cid:7)(cid:519)000
2016
(cid:7)(cid:519)000
Current
Annual leave and long service leave
Adverse costs
Bonus
(cid:49)on-Current
Make good
Long service leave
(a) Movement in provisions
As at 1 July 2016
Arising during the year
Utilised
As at 30 June 2017
Current 2017
Non-current 2017
Current 2016
Non-current 2016
2,325
14,500
1,847
18,672
86
154
240
Adverse
costs
(cid:7)(cid:519)000
Annual leave
(cid:7)(cid:519)000
(cid:40)mployee
bonus(cid:18)STIP
(cid:7)(cid:519)000
(cid:47)ong service
leave
(cid:7)(cid:519)000
Make good
(cid:7)(cid:519)000
11,200
5,232
(1,932)
14,500
14,500
–
14,500
11,200
–
11,200
1,042
1,247
(1,024)
1,265
1,265
–
1,265
1,042
–
1,042
6,191
1,817
(6,161)
1,847
1,847
–
1,847
6,191
–
6,191
1,102
115
(3)
1,214
1,060
154
1,214
805
297
1,102
–
–
86
86
–
86
86
–
–
–
1,847
11,200
6,191
19,238
–
297
297
Total
(cid:7)(cid:519)000
19,535
8,411
(9,034)
18,912
18,672
240
18,912
19,238
297
19,535
(b) (cid:49)ature and timing of provisions
Adverse costs
During the financial year 2017 the Group raised a further provision of $4,932,000 for estimated adverse costs obligations.
The provision raised is the Group’s best estimate of the amount of adverse costs it will have to remit. The adverse costs
provision on Lynx recognised in 2016 was paid in the current year as the appeal to the High Court was unsuccessful.
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 Note 2 for the relevant accounting policy and discussion of significant estimations and assumptions applied in the
measurement of this provision.
Make Good
The make good provision relates to amounts recognised for make good requirements on operating leases of office space.
63
FINANCIAL REPORT
(cid:49)otes to the Financial Statements
For the year ended 30 June 2017 (continued)
(cid:49)ote 1(cid:28)(cid:29) (cid:49)on-current liabilities (cid:514) debt securities
IMF Bentham Bonds1
Fixed Rate Notes1
Consolidated
2017
(cid:7)(cid:519)000
49,104
70,365
119,469
2016
(cid:7)(cid:519)000
48,656
30,848
79,504
1.
Includes net carrying value of transaction costs and debt premium of $2,500,000.
On 18 April 2016, the Company issued 32,000 Fixed Rate Notes with a face value of $1,000 each (“Tranche 1 Notes”). The
interest rate payable to Noteholders is 7.40% per annum payable half yearly. The Fixed Rate Notes are due to mature on
30 June 2020 and are secured by a security interest over all present and after-acquired property of IMF. IMF has an early
redemption option on these Fixed Rate Notes on 30 June 2019. The issuer may redeem some or all of the Notes on the
optional redemption date by payment of 101 percent of the outstanding principal amount of each Note being redeemed
together with any accrued interest, if any, to, but excluding, the date of redemption. No fair value has been attributed to the
early redemption option.
On 6 April 2017, the Company issued 40,000 Fixed Rate Notes with a face value of $1,000 each (“Tranche 2 Notes”).
Tranche 2 Notes were consolidated and formed a single series with the existing Tranche 1 Notes. The terms and conditions
of the Tranche 2 Notes are identical to the conditions on Tranche 1 Notes.
The application of AASB 123 Borrowing Costs (revised 2007) has resulted in the capitalisation of $6,940,000 (2016:
$3,764,000) during the current financial year as part of the Litigation Contracts in Progress intangible assets which are
deemed to be qualifying assets post the application date of AASB 123 (revised) of 1 July 2009 (refer to Note 16).
The IMF Bentham Bonds issued in April 2014 have a variable rate of interest based on the Bank Bill rate plus a fixed margin
of 4.20% per annum, paid quarterly. The maturity date is 30 June 2019.
(cid:49)ote 20(cid:29) Contributed e(cid:84)uity
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 2015
Shares issued under the Dividend Reinvestment Plan
As at 30 June 2016
Shares issued under the Dividend Reinvestment Plan
As at 30 June 2017
Consolidated
2017
(cid:7)(cid:519)000
2016
(cid:7)(cid:519)000
123,654
119,122
(cid:49)umber
(cid:518)000
(cid:7)(cid:519)000
167,761
1,695
169,456
2,591
116,921
2,201
119,122
4,532
172,047
123,654
On 21 April 2017, the Company issued 855,956 shares at $1.7398 per share, and on 21 October 2016 the company issued
1,734,555 shares at $1.7546 per share under its Dividend Reinvestment Plan.
On 9 October 2015 the Company issued 1,695,093 shares under its Dividend Reinvestment Plan at $1.2984 per share.
64
IMF BENTHAM LIMITED
2017 Annual Report
FINANCIAL REPORT
(cid:49)ote 20(cid:29) Contributed e(cid:84)uity (continued)
(b) Share options
At 30 June 2017, there were 11,177,055 share performance rights over unissued ordinary shares (2016: 4,811,086).
(c) Capital management
Capital includes bonds, notes and equity attributable to the equity holders of the Parent. When managing capital,
management’s objective is to ensure the Group continues as a going concern as well as to maintain optimal returns to
shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that ensures the
lowest cost of capital available to the Group.
The earnings of the Group are lumpy and this is forecast to continue into the future. Management’s policy is to pay
dividends to shareholders from earnings where there is capital surplus to the needs of the business.
The Group is not subject to any externally imposed capital requirements. However, if the cash and receivables balances
of the Company fall below 75% of the Group financial indebtedness or retained earnings are less than $52.000 million, or
an event of default is subsisting under the IMF Bentham Bonds or Fixed Rate Notes, the Company is not permitted to pay
a dividend to ordinary shareholders (this calculation is to be undertaken both before and after the proposed dividend).
(cid:49)ote 21(cid:29) (cid:53)etained earnings and reserves
(a) Movements in retained earnings were as follows(cid:29)
Balance 1 July
Net profit for the year
Dividend paid
Balance 30 June
(b) Movements in reserves were as follows(cid:29)
At 1 July 2015
Movements in reserves during the period
At 30 June 2016
Movements in reserves during the period
At 30 June 2017
Consolidated
2017
(cid:7)(cid:519)000
74,084
15,440
(17,845)
71,679
2016
(cid:7)(cid:519)000
61,552
20,920
(8,388)
74,084
Other Reserves
Share based
payment
reserve
(cid:7)(cid:519)000
Foreign
currency
translation
reserve
(cid:7)(cid:519)000
Option
premium
reserve
(cid:7)(cid:519)000
Convertible
notes reserve
(cid:7)(cid:519)000
Total
reserves
(cid:7)(cid:519)000
–
658
658
5,304
5,962
191
97
288
(4,932)
(4,644)
3,404
3,832
–
–
3,404
3,832
–
–
3,404
3,832
7,427
755
8,182
372
8,554
(c) (cid:49)ature and purpose of reserves
(i) Share based payment reserve
The share based payments reserve is used to recognise the value of equity-settled share-based payments provided to
employees, including key management personnel as part of their remuneration. Refer to Note 25 for further details of this plan.
(ii) Foreign currency translation reserve
This reserve is used to record differences on the translation of the assets and liabilities of overseas subsidiaries.
65
FINANCIAL REPORT
(cid:49)otes to the Financial Statements
For the year ended 30 June 2017 (continued)
(cid:49)ote 21(cid:29) (cid:53)etained earnings and reserves (continued)
(iii) 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. This reserve relates to the previous plan for options already vested.
(iv) Convertible note reserve
This reserve was used to record the equity portion on the convertible notes (issued on 13 December 2010), which were fully
redeemed by the Company during December 2013.
(cid:49)ote 22(cid:29) Statement of cash (cid:565)ows reconciliation
(a) (cid:53)econciliation of net profit after tax to net cash (cid:565)ows used in operations(cid:29)
Consolidated
2017
(cid:7)(cid:519)000
2016
(cid:7)(cid:519)000
15,440
20,920
(24,806)
(25,818)
591
2,775
(334)
–
–
80
159
(6,049)
(521)
451
492
211
2,670
518
–
–
692
(418)
(43,373)
(46,151)
6,891
(623)
(378)
(732)
5,175
5,063
(2,044)
3,323
(50,880)
(34,916)
(cid:49)et profit attributable to members of the Parent
Adjustments for:
Net impact of the reclassification of litigation intangibles related cashflows
to cashflows (from) investing activities
Depreciation
Share based payments
Unrealised foreign exchange gain
Share of loss in joint venture
Debt amortisation
Loss on disposal of fixed assets
Lease incentive adjustments
Changes in assets and liabilities
Decrease/(increase) in receivables
Decrease/(increase) in other current assets
Decrease/(increase) in intangibles
Increase/(decrease) in trade creditors and accruals
Increase/(decrease) in provisions
Increase/(decrease) in deferred tax assets and liabilities
Increase/(decrease) in current income tax liability
Net cash (used in) operating activities
(b) Disclosure of financing facilities
Refer to Note 12 and Note 19.
66
IMF BENTHAM LIMITED
2017 Annual Report
FINANCIAL REPORT
(cid:49)ote 23(cid:29) (cid:53)elated party disclosure
Transactions with director related entities
The following table provides the total amount of transactions that were entered into with related parties for the relevant
financial year.
Fee revenue from Joint Venture
Transactions with related parties1
Consolidated
2017
(cid:7)(cid:519)000
–
161
161
2016
(cid:7)(cid:519)000
347
229
576
1.
During the year the Group obtained legal advice from DLA Piper, a legal firm associated with director Michael Bowen. The legal advice
was obtained at normal market prices.
(cid:49)ote 2(cid:23)(cid:29) Key management personnel
(a) Details of Key Management Personnel
There were no changes to Key Management Personnel after the reporting date and before the date the financial report was
authorised for issue.
(b) Compensation of Key Management Personnel
Short-term employee benefits - salaries and wages
Short-term employee benefits - accrued and unpaid
Post-employment benefits
Long service leave accrued during the year
Share based payments
Termination payment
Consolidated
2017
(cid:7)(cid:519)000
4,274
540
115
50
1,237
–
6,216
2016
(cid:7)(cid:519)000
4,604
1,663
125
78
331
200
7,001
67
FINANCIAL REPORT
(cid:49)otes to the Financial Statements
For the year ended 30 June 2017 (continued)
(cid:49)ote 2(cid:24)(cid:29) Share-based payments
(cid:47)ong Term Incentive Plan
Under the LTIP, awards are made to executives and other key personnel who have an impact on the Group’s performance.
LTIP awards are delivered in the form of performance rights over shares which vest after a period of three years subject to
meeting performance measures. The Group uses relative TSR and CAGR of Funds Deployed as the performance measures.
For the portion of the LTIP subject to the relative TSR performance measure, the fair value of share performance rights
granted is estimated at the date of grant using a Monte-Carlo simulation model, taking into account the terms and
conditions upon which the share performance rights were granted. For the portion of the LTIP based on the achievement
of CAGR of Funds Deployed, the Binomial model is used.
6,365,969 share performance rights were issued during 2017 (2016: 4,811,086). Specific assumptions for all grants are below:
Valuation Date
5-day Volume Weighted Average Price at
commencement of measurement period
Expected volatility (%)
Dividend yield (%)
Risk-free rate (%)
Performance period
Model used
Tranche1 - relative TSR (value per right $)
Tranche 2 - CAGR (value per right$)
1(cid:27) (cid:49)ovember 2016
2(cid:23) February 2016
20 (cid:49)ovember 201(cid:24)
$1.46
25%
5.8%
1.86%
$1.67
32%
5.0%
1.77%
3 years ending 30 June 2019 3 years ending 30 June 2018 3 years ending 30 June 2018
Monte Carlo and Binomial
Monte Carlo and Binomial
Monte Carlo and Binomial
$0.575
$0.333
$1.188
$1.210
$0.999
$1.553
$1.67
28%
5.0%
2.10%
(cid:49)ote 26(cid:29) Commitments and contingencies
(a) Operating lease commitments (cid:514) 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) (cid:53)emuneration 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
2017
(cid:7)(cid:519)000
1,910
5,198
2,804
9,912
2016
(cid:7)(cid:519)000
1,198
1,230
–
2,428
Consolidated
2017
(cid:7)(cid:519)000
2016
(cid:7)(cid:519)000
4,390
–
4,390
7,305
–
7,305
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.
68
IMF BENTHAM LIMITED
2017 Annual Report
FINANCIAL REPORT
(cid:49)ote 26(cid:29) Commitments and contingencies (continued)
(c) Contingencies
As at 30 June 2017, the Group has three cases, under appeal (2016: three cases). The total income recognised by the Group
from the cases remaining on appeal in the current financial year is $2,870,000 (2016: nil). The total current and non-current
receivables as at 30 June 2017 relating to cases under appeal is $2,870,000 (2016: nil).
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.
At 30 June 2017 the total amount spent on currently funded matters by the Company where undertakings to pay adverse
costs have been provided was $70,309,000 (2016: $63,623,000). The potential adverse costs orders using the above
methodology would amount to $49,216,000 (2016: $44,536,000). The Company does not currently expect that any of
the matters will be unsuccessful. The Company maintains a large cash holding in the event that one or more matters are
unsuccessful and an adverse costs order is made which is not covered by its insurance arrangements.
On 30 June 2016, the Group sold its 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. Refer to Note 32 for further details of the
sale. As a result of the termination of the joint venture arrangements, IMF will no longer have an interest in the Tesco and
VW cases, but will remain as a joint and several guarantor for current clients’ exposure for the costs of the litigation and any
adverse costs exposure, to the extent not covered by applicable insurance, with IMF being indemnified by certain affiliates
of its former joint venture partner with respect to certain of these contingent liabilities.
(cid:49)ote 27(cid:29) (cid:40)conomic dependency
IMF Bentham Limited is not economically dependent on any other entity.
(cid:49)ote 2(cid:27)(cid:29) (cid:40)vents after the reporting date
On 24 August 2017, the directors declared a final fully franked dividend of 4.0 cents per share for the 2017 financial year,
totalling $6.882m. The record date for this dividend is 26 September 2017 and the payment date will be 20 October 2017.
Shareholders are able to elect to participate in the dividend reinvestment plan in relation to this dividend.
Other than the abovementioned matters, no other circumstances has arisen since 30 June 2017 that has significantly
affected, or may significantly affect the consolidated entities(cid:519) operations, the results of those operations, or the
consolidated entities state of affairs in the future financial years.
(cid:49)ote 2(cid:28)(cid:29) Auditor(cid:519)s remuneration
The auditor of IMF Bentham Limited 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
Other services in relation to the Parent and any other entity in the consolidated Group:
(cid:581)Tax compliance
(cid:581)Other
Consolidated
2017
(cid:7)(cid:519)000
2016
(cid:7)(cid:519)000
235
118
31
384
283
52
158
493
69
FINANCIAL REPORT
(cid:49)otes to the Financial Statements
For the year ended 30 June 2017 (continued)
(cid:49)ote 30(cid:29) Parent entity information
Information relating to IMF Bentham (cid:47)imited(cid:29)
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Issued capital
Retained earnings
Reserves
Total shareholders(cid:519) e(cid:84)uity
Profit or loss of the Parent
Total comprehensive income of the Parent
2017
(cid:7)(cid:519)000
2016
(cid:7)(cid:519)000
180,789
356,326
188,308
347,623
(39,897)
(34,666)
(178,501)
(143,678)
177,825
123,654
40,975
13,196
203,945
119,122
76,929
7,894
177,825
203,945
23,104
23,104
26,515
26,515
The Parent has not entered into any guarantees with any of its subsidiaries.
Details of the contingent liabilities of the Parent are contained in Note 26(c). The parent has 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). The parent has no contractual
commitments in relation to the subsidiaries.
Tax consolidation
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 (cid:47)imited
2017
(cid:7)(cid:519)000
2016
(cid:7)(cid:519)000
–
(374)
70
IMF BENTHAM LIMITED
2017 Annual Report
FINANCIAL REPORT
(cid:49)ote 30(cid:29) Parent entity information (continued)
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
Bentham IMF Holdings 1 LLC(1)
Bentham IMF 1 LLC(1)
Security Finance 1 LLC(1)
Bentham IMF Capital Limited
Lien Finance Canada Limited
IMF Bentham Pte. Limited(2)
Percentage owned
Country of
Incorporation
2017
%
2016
%
Australia
USA
USA
USA
USA
USA
USA
Canada
Canada
Singapore
100
100
100
100
100
50
50
100
100
100
100
100
100
100
–
–
–
100
100
–
1. These entities were incorporated 3 November 2016. 50% ownership became effective on 13 February 2017
2. This entity was incorporated on 8 March 2017
(cid:49)ote 31(cid:29) Material partly-owned subsidiaries
Financial information of subsidiaries that have material non-controlling interests is provided below:
(cid:49)on-controlling interest
Country of
Incorporation
2017
%
2016
%
Name
Proportion of equity interest held by non-controlling interests:
Bentham IMF 1 LLC(1)
Security Finance 1 LLC(1)
USA
USA
1. These entities were incorporated 3 November 2016. 50% ownership became effective on 13 February 2017.
Accumulated balances of material non-controlling interest(cid:29)
Bentham IMF 1 LLC
Security Finance 1 LLC
Transaction costs - disposal of non-controlling interest
Profit(cid:18)(loss) allocated to material non-controlling interest(cid:29)
Bentham IMF 1 LLC
Security Finance 1 LLC
50
50
2017
AUD
(cid:7)(cid:519)000
7,209
–
(4,843)
(2,366)
–
–
–
–
–
2016
AUD
(cid:7)(cid:519)000
–
–
–
–
–
–
–
71
FINANCIAL REPORT
(cid:49)otes to the Financial Statements
For the year ended 30 June 2017 (continued)
(cid:49)ote 31(cid:29) Material partly-owned subsidiaries (continued)
The summarised financial information of these subsidiaries is provided below. This information is based on amounts before
inter-company eliminations.
Bentham
IMF 1 (cid:47)(cid:47)C
(cid:7)(cid:519)000
Security
Finance 1
(cid:47)(cid:47)C
(cid:7)(cid:519)000
Summarised statement of financial position as at 30 June 2017
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Issued capital
Retained earnings
Reserves
Total shareholders(cid:519) e(cid:84)uity
Attributable to:
Equity Holders of the parent
Non-Controlling interest
Summarised statement of profit or loss for 2017
Revenue
Expenses
Total comprehensive income
Attributable to non-controlling interests
Dividends paid to non-controlling interests
Summarised Statement of Cash flows for year ended 30 June 2017
Operating
Financing
(cid:49)et increase in cash and cash e(cid:84)uivalents
5,561
15,893
1,439
1,439
14,454
14,417
122
(85)
14,454
7,245
7,209
155
34
121
–
–
(1,648)
7,209
5,561
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
On 3 November 2016 IMF established Bentham IMF 1 LLC and its subsidiary Security Finance 1 LLC (collectively “the Fund”).
The Fund has been part of the Group and consolidated into the results since this time as it was controlled by IMF.
On 10 February 2017, the Group undertook a transaction to dispose of a non-controlling interest in the Fund. At date of
disposal the change in equity of the Group was recorded as follows:
Change in e(cid:84)uity on disposal of non-controlling interest(cid:29)
Bentham IMF 1 LLC
Security Finance 1 LLC
Transaction costs - disposal of non-controlling interest
72
IMF BENTHAM LIMITED
2017 Annual Report
2017
AUD
(cid:7)(cid:519)000
–
–
(4,843)
(4,843)
2016
AUD
(cid:7)(cid:519)000
–
–
–
–
FINANCIAL REPORT
(cid:49)ote 31(cid:29) Material partly-owned subsidiaries (continued)
The Fund is comprised of Class A and B Stock. The non-controlling interest is comprised of Class B Stock. IMF retains control
and ownership of the Fund via its interest in Class A stock. The Class B Stock carries an entitlement to receive a capped
priority return on invested capital and a further preferred return on committed but undrawn capital. Upon satisfaction
of the Class B priority returns the Class A Stock held by IMF is entitled to a manager return. After satisfaction of the Priority
Return and the Manager Return residual net cash flows are to be distributed 85% to the Class A Stock and 15% to the
Class B Stock.
The Class B member has no right to redemption but may upon the occurrence of certain portfolio impairment levels step
into management of the Fund. Such step in will not alter the distribution rights of IMF(cid:519)s Class A Stock.
The non-controlling interest has committed to invest up to US$100.000 million in Class B Stock and IMF has committed to
invest US$33.300 million into the Fund. The Fund is likely to draw down this capital over a three-year period, with minimum
annual tranches applying. Such capital will be used to invest in US cases and matters. IMF will direct all US opportunities
to the Fund for three years or such shorter period as required to deploy the committed capital.
(cid:49)ote 32(cid:29) Discontinued operations
The Bentham Ventures B.V. joint venture was incorporated in March 2014 and on 30 June 2016, the Group announced the
sale of its 50% interest in Bentham Ventures B.V. for $5,986,000, with an effective date of 30 June 2016.
The Group had 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.
IMF recognised $nil profit before tax on the sale at 30 June 2017 (30 June 2016: $4,097,000). After deducting losses, and
tax, the profit from discontinued operations was $nil (2016: $160,000). The 2016 profit from discontinued operations is set
out below:
Sales consideration
Write off carrying value of investment
Share of loss in current period
FCTR adjustment brought forward
Derecognise loan owing from Bentham Ventures B.V.
Profit from discontinued operations
Tax payable
Profit from discontinued operations
2016
(cid:7)(cid:519)000
5,986
9
(2,670)
(191)
(1,707)
1,427
(1,267)
160
73
FINANCIAL REPORT
(cid:49)otes to the Financial Statements
For the year ended 30 June 2017 (continued)
(cid:49)ote 32(cid:29) Discontinued operations (continued)
The Group(cid:519)s interests in Bentham Ventures B.V., were 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:
Summarised Statement of Financial Position of Bentham (cid:57)entures B.(cid:57).
Current assets
Non-current assets
Current liabilities
Equity
Proportion of the Group’s ownership
Carrying amount of the investment
Summarised Statement of Profit or (cid:47)oss of Bentham (cid:57)entures B.(cid:57).
Corporate and office expense
Employee expense
Other expenses
(cid:47)oss before tax
Income tax expense
Loss for the year
Share of loss in (cid:77)oint venture entity
Other comprehensive income
Proportion of Group’s ownership
Group share of other comprehensive income
Summarised Statement of Cash Flows of Bentham (cid:57)entures B.(cid:57).
Operating
Investing
Financing
Net cash (outflow)/inflow
(cid:40)arnings per share attributable to the ordinary e(cid:84)uity holders of the company
Basic profit/(loss) for the year from discontinued operations (cents per share)
Diluted profit/(loss) for the year from discontinued operations (cents per share)
2017
(cid:7)(cid:519)000
–
–
–
–
0%
–
–
–
–
–
–
–
–
–
0%
–
2016
(cid:7)(cid:519)000
1,283
4,008
(5,273)
18
50%
9
2,358
2,252
695
5,305
34
5,339
2,670
–
0%
–
–
(9,728)
5,850
(6)
–
10,441
5,850
707
–
–
0.09
0.09
To calculate the EPS for discontinued operations, the weighted average number of ordinary shares for both the basic and
diluted EPS is as per Note 11. The following table provides the profit(cid:18)(loss) amount used:
2017
(cid:7)(cid:519)000
2016
(cid:7)(cid:519)000
Profit(cid:18)(loss) attributable to ordinary equity holders of the parent from discontinued operations
for the basic and diluted EPS calculations
–
160
74
IMF BENTHAM LIMITED
2017 Annual Report
Directors(cid:519) Declaration
FINANCIAL REPORT
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 2017 are in accordance
with the Corporations Act 2001, including:
i. giving a true and fair view of its financial position as at 30 June 2017 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.
d.
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable; and
this declaration has been made after receiving the declarations required to be made to the directors in accordance with
section 295A of the Corporations Act 2001 for the financial year ended 30 June 2017.
On behalf of the board
Michael Kay
Non-Executive Director
Sydney, 24 August 2017
Andrew Saker
Managing Director
75
FINANCIAL REPORT
Independent Auditor(cid:519)s (cid:53)eport
Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843
Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au
Independent auditor's report to the members of IMF Bentham Limited
Report on the audit of the financial report
Opinion
We have audited the financial report of IMF Bentham Limited (the Company) and its subsidiaries
(collectively the Group), which comprises the consolidated statement of financial position as at 30 June
2017, the consolidated statement of comprehensive income, the consolidated statement of changes in
equity and the consolidated statement of cash flows for the year then ended, notes to the financial
statements, including a summary of significant accounting policies, and the directors' declaration.
In our opinion, the accompanying financial report of the Group is in accordance with the Corporations Act
2001, including:
a)
b)
giving a true and fair view of the consolidated financial position of the Group as at 30 June 2017
and of its consolidated financial performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under
those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial
Report section of our report. We are independent of the Group in accordance with the auditor
independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting
Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (the
Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other
ethical responsibilities in accordance with the Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our
audit of the financial report of the current year. These matters were addressed in the context of our audit
of the financial report as a whole, and in forming our opinion thereon, but we do not provide a separate
opinion on these matters. For each matter below, our description of how our audit addressed the matter
is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s Responsibilities for the Audit of the
Financial Report section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of material
misstatement of the financial report. The results of our audit procedures, including the procedures
performed to address the matters below, provide the basis for our audit opinion on the accompanying
financial report.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
RK:JH:IMF:025
76
IMF BENTHAM LIMITED
2017 Annual Report
FINANCIAL REPORT
Impairment assessment of intan(cid:95)ib(cid:100)e assets
(cid:79)h(cid:113) si(cid:95)nifi(cid:91)ant
(cid:64)o(cid:111) our audit addressed the (cid:99)e(cid:113) audit matter
Litigation contracts in progress are recognised as intangible
assets and assessed for impairment by the Group using
updated cash flow forecasts.
The carrying value of litigation contracts are contingent on
future cash flows and there is a risk that if these cash flows
do not meet the Group’s expectations, or if significant
judgments such as the discount rates change, that the assets
will be impaired.
We focused on this area because it requires a high level of
judgment and changes in these assumptions might lead to a
significant change in the carrying values of the related
assets.
Refer to note 16 to the financial report for the amounts
recognised by the Group as at 30 June 2017 and related
disclosure.
We evaluated the Group’s assessment of the carrying value of
intangible assets. In obtaining sufficient audit evidence, we:
•
Examined the Group’s impairment calculations and tested
the reasonableness of key assumptions including cash flow
forecasts, estimated completion date and discount rates,
with the involvement of our valuation specialists;
• Completed sensitivity analyses to ascertain the impact of
reasonably possible changes to key assumptions on the
available headroom;
• Made inquiries about significant case matters with the Chief
Executives of Australia and the United States of America
and respective Case Investment Managers to obtain an
update on the litigation contracts in progress; and
• Considered the Group’s intention and ability to continue to
fund the relevant matters.
In(cid:91)ome re(cid:91)o(cid:95)nition
(cid:79)h(cid:113) si(cid:95)nifi(cid:91)ant
(cid:64)o(cid:111) our audit addressed the (cid:99)e(cid:113) audit matter
During the year ended 30 June 2017, a number of cases
were successfully resolved in the Group’s favour and a net
gain on de-recognition of intangible assets of $54.1 million
was recorded on the consolidated statement of
comprehensive income.
The Group’s accounting policies set out a number of strict
guidelines as to the manner in which income can be
recognised following outcomes on litigation matters funded
by the Group.
Given the magnitude and judgment involved in the timing of
income recognition, income recognition was a key audit
matter.
Refer to note 7 to the financial report for the amounts
recognised by the Group as at 30 June 2017 and related
disclosure.
We evaluated the Group’s assessment of case outcomes and
income recognised for the year. In obtaining sufficient audit
evidence, we:
•
•
Tested the timing of income recognition based on settlement
terms agreed with the counterparties including liquidators
where applicable, court rulings and inquiries with legal
representatives;
Examined a sample of settlement agreements; and
• Checked other income recognised to payments received.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
RK:JH:IMF:025
77
FINANCIAL REPORT
Independent Auditor(cid:519)s (cid:53)eport
(continued)
(cid:61)(cid:112)isten(cid:91)e and (cid:91)o(cid:100)(cid:100)e(cid:91)tabi(cid:100)it(cid:113) of trade re(cid:91)ei(cid:110)ab(cid:100)es
(cid:79)h(cid:113) si(cid:95)nifi(cid:91)ant
(cid:64)o(cid:111) our audit addressed the (cid:99)e(cid:113) audit matter
At 30 June 2017, the Group had trade receivables of $37.2
million which were significant to the Group. The collectability
of trade receivables is a key element of IMF’s working capital
management.
Given the magnitude and judgment involved in the
collectability assessment of trade receivables, existence and
collectability of trade receivables was a key audit matter.
Refer to note 13 to the financial report for the amounts
recognised by the Group as at 30 June 2017 and related
disclosure.
We evaluated the Group’s assessment of the carrying value of
trade receivables at 30 June 2017. In obtaining sufficient audit
evidence, we:
•
Tested a sample of key balances where no provision was
recognised to assess for indicators of impairment;
• Considered whether the amount recognised is appropriate
where trade receivables are not expected to be received
within the short term and performed recalculations where
appropriate; and
• Checked whether payments had been received since year
end, reviewed historical payment patterns and any
correspondence with counterparties including liquidators
where applicable.
(cid:72)ro(cid:110)ision for ad(cid:110)erse (cid:91)osts
(cid:79)h(cid:113) si(cid:95)nifi(cid:91)ant
(cid:64)o(cid:111) our audit addressed the (cid:99)e(cid:113) audit matter
The Group raises a provision for adverse costs when it has
lost a matter which it has funded. When a matter is lost and
an appeal is lodged, the Group raises a provision based on its
best estimate of the amount of adverse costs it will have to
remit were the appeal to be lost.
We focused on this area because it requires a high level of
judgment and changes in these assumptions might lead to a
significant change in the amount of adverse costs the Group
will have to pay.
Refer to Note 18 to the financial report for the amounts
recognised by the Group as at 30 June 2017 and related
disclosure.
We evaluated the Group’s assessment of the provision for adverse
costs. In obtaining sufficient audit evidence, we:
• Obtained the calculation of provision for adverse costs and
where possible, compared assumptions to external sources
including estimates provided by the Group’s legal counsel;
and
• Considered the consistency of the application of policy for
recognising provisions with the prior year. Specifically we
considered both the value of the prior years’ provision
utilised for payments of adverse costs during the current
year and the value of prior year provision amounts not
utilised and released.
Information other than the financial report and auditor’s report thereon
The directors are responsible for the other information. The other information comprises the information
included in the Company’s 2017 Annual Report, but does not include the financial report and our
auditor’s report thereon.
Our opinion on the financial report does not cover the other information and accordingly we do not
express any form of assurance conclusion thereon.
In connection with our audit of the financial report, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial report or
our knowledge obtained in the audit or otherwise appears to be materially misstated.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
RK:JH:IMF:025
78
IMF BENTHAM LIMITED
2017 Annual Report
FINANCIAL REPORT
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.
Responsibilities of the directors for the financial report
The directors of the Company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal control as the directors determine is necessary to enable the preparation of the financial
report that gives a true and fair view and is free from material misstatement, whether due to fraud or
error.
In preparing the financial report, the directors are responsible for assessing the Group’s ability to
continue as a going concern, disclosing, as applicable, matters relating to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the Group or to cease
operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial report
Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with the Australian Auditing Standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of this financial report.
As part of an audit in accordance with the Australian Auditing Standards, we exercise professional
judgment and maintain professional scepticism throughout the audit. We also:
•
•
•
•
•
Identify and assess the risks of material misstatement of the financial report, whether due to fraud
or error, design and perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the directors.
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the financial report or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Company to cease to
continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
disclosures, and whether the financial report represents the underlying transactions and events in a
manner that achieves fair presentation.
RK:JH:IMF:025
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
•
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express an opinion on the financial report. We are
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
We communicate with the directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
79
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should
not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
Report on the audit of the remuneration report
Opinion on the remuneration report
We have audited the Remuneration Report included in pages 23 to 32 of the directors' report for the year
ended 30 June 2017.
In our opinion, the Remuneration Report of IMF Bentham Limited for the year ended 30 June 2017,
complies with section 300A of the Corporations Act 2001.
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
RK:JH:IMF:025
FINANCIAL REPORT
Independent Auditor(cid:519)s (cid:53)eport
(continued)
•
•
•
•
•
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the financial report or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause the Company to cease to
continue as a going concern.
Evaluate the overall presentation, structure and content of the financial report, including the
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and,
disclosures, and whether the financial report represents the underlying transactions and events in a
based on the audit evidence obtained, whether a material uncertainty exists related to events or
based on the audit evidence obtained, whether a material uncertainty exists related to events or
manner that achieves fair presentation.
conditions that may cast significant doubt on the Company’s ability to continue as a going concern.
conditions that may cast significant doubt on the Company’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the financial report or, if such disclosures are inadequate, to
report to the related disclosures in the financial report or, if such disclosures are inadequate, to
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our
business activities within the Group to express an opinion on the financial report. We are
auditor’s report. However, future events or conditions may cause the Company to cease to
auditor’s report. However, future events or conditions may cause the Company to cease to
responsible for the direction, supervision and performance of the Group audit. We remain solely
continue as a going concern.
continue as a going concern.
responsible for our audit opinion.
•
•
We communicate with the directors regarding, among other matters, the planned scope and timing of the
Evaluate the overall presentation, structure and content of the financial report, including the
Evaluate the overall presentation, structure and content of the financial report, including the
audit and significant audit findings, including any significant deficiencies in internal control that we
disclosures, and whether the financial report represents the underlying transactions and events in a
disclosures, and whether the financial report represents the underlying transactions and events in a
identify during our audit.
manner that achieves fair presentation.
manner that achieves fair presentation.
We also provide the directors with a statement that we have complied with relevant ethical requirements
•
•
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
regarding independence, and to communicate with them all relationships and other matters that may
business activities within the Group to express an opinion on the financial report. We are
business activities within the Group to express an opinion on the financial report. We are
reasonably be thought to bear on our independence, and where applicable, related safeguards.
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for the direction, supervision and performance of the Group audit. We remain solely
responsible for our audit opinion.
responsible for our audit opinion.
From the matters communicated to the directors, we determine those matters that were of most
significance in the audit of the financial report of the current year and are therefore the key audit
We communicate with the directors regarding, among other matters, the planned scope and timing of the
We communicate with the directors regarding, among other matters, the planned scope and timing of the
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
audit and significant audit findings, including any significant deficiencies in internal control that we
audit and significant audit findings, including any significant deficiencies in internal control that we
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should
identify during our audit.
identify during our audit.
not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
We also provide the directors with a statement that we have complied with relevant ethical requirements
We also provide the directors with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may
regarding independence, and to communicate with them all relationships and other matters that may
Report on the audit of the remuneration report
reasonably be thought to bear on our independence, and where applicable, related safeguards.
reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated to the directors, we determine those matters that were of most
From the matters communicated to the directors, we determine those matters that were of most
Opinion on the remuneration report
significance in the audit of the financial report of the current year and are therefore the key audit
significance in the audit of the financial report of the current year and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
We have audited the Remuneration Report included in pages 23 to 32 of the directors' report for the year
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should
ended 30 June 2017.
not be communicated in our report because the adverse consequences of doing so would reasonably be
not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
expected to outweigh the public interest benefits of such communication.
In our opinion, the Remuneration Report of IMF Bentham Limited for the year ended 30 June 2017,
complies with section 300A of the Corporations Act 2001.
Report on the audit of the remuneration report
Report on the audit of the remuneration report
Responsibilities
Opinion on the remuneration report
Opinion on the remuneration report
The directors of the Company are responsible for the preparation and presentation of the Remuneration
We have audited the Remuneration Report included in pages 23 to 32 of the directors' report for the year
We have audited the Remuneration Report included in pages 23 to 32 of the directors' report for the year
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
ended 30 June 2017.
ended 30 June 2017.
opinion on the Remuneration Report, based on our audit conducted in accordance with Australian
Auditing Standards.
In our opinion, the Remuneration Report of IMF Bentham Limited for the year ended 30 June 2017,
In our opinion, the Remuneration Report of IMF Bentham Limited for the year ended 30 June 2017,
complies with section 300A of the Corporations Act 2001.
complies with section 300A of the Corporations Act 2001.
Ernst & Young
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
RK:JH:IMF:025
Robert A Kirkby
Partner
Perth
24 August 2017
A member firm of Ernst & Young Global Limited
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
Liability limited by a scheme approved under Professional Standards Legislation
RK:JH:IMF:025
RK:JH:IMF:025
80
IMF BENTHAM LIMITED
2017 Annual Report
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
RK:JH:IMF:025
Corporate Governance Statement
The Board of Directors of IMF Bentham Limited (“IMF” or “Company”) 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 (“ASX CG Guidance”) 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)
(b)
undertake appropriate checks before appointing a person, or putting forward to security
holders a candidate for election, as a director; and
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)
(b)
have and disclose a process for periodically evaluating the performance of the board,
its committees and individual directors; and
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)
(b)
have and disclose a process for periodically evaluating the performance of its senior
executives; and
disclose, in relation to each reporting period, whether a performance evaluation was
undertaken in the reporting period in accordance with that process.
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
N/A
Yes
Yes
Yes
Yes
81
FINANCIAL REPORT
FINANCIAL REPORT
Corporate Governance Statement
(continued)
(cid:53)ecommendation
Comply Yes(cid:18)(cid:49)o
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,
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
82
IMF BENTHAM LIMITED
2017 Annual Report
Yes
Yes
Yes
Yes
Yes
N/A
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Recommendation
(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
N/A
4.2 The board of a listed entity should, before it approves the entity’s financial statements for a
Yes
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.
4.3 A listed entity that has an AGM should ensure that its external auditor attends its AGM and 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.
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
N/A
Yes
Yes
N/A
Yes
83
FINANCIAL REPORT
FINANCIAL REPORT
Corporate Governance Statement
(continued)
(cid:53)ecommendation
Comply Yes(cid:18)(cid:49)o
7.4 A listed entity should disclose whether it has any material exposure to economic, environmental
Yes
and social sustainability risks and, if it does, how it manages or intends to manage those risks.
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
84
IMF BENTHAM LIMITED
2017 Annual Report
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 2017, 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 http://www.imf.com.
au/shareholders/corporate-governance.
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 operations 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 its responsibilities.
Whilst the Board at all times 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.
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
– appointing and monitoring the performance of Key
Management Personnel.
Structure of the Board
The skills, experience and expertise relevant to the
position of director of 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.
85
FINANCIAL REPORT FINANCIAL REPORT
Corporate Governance Statement
(continued)
Audit and (cid:53)isk Committee
The Board has 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 Audit and Risk Committee supports the Board in
establishing and maintaining a framework of internal
control and ethical standards.
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(cid:519)s
resources;
– compliance with applicable laws and regulations; and
– preparation of reliable published financial information.
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
In accordance with AS(cid:59) CG Guidance, the Board has
considered the independence of Michael Bowen and
Alden Halse. Both have been Directors of the Company
for more than 10 years and Michael Bowen is also a
partner at DLA Piper, a law firm who provides legal
services to the Company on certain engagements
(see Note 23 of the Financial Statements). The Board
has determined that these factors do not impact on
their independence because in the exercise of their
duties they demonstrate independent judgment and
objective assessment of matters before the Board.
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
Michael Bowen
Wendy McCarthy
Position
Non-Executive Chairman
Managing Director
Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
For additional details regarding Board appointments,
please refer to the Directors’ Report and the
Company(cid:519)s website.
86
IMF BENTHAM LIMITED
2017 Annual Report
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.
During the 2017 financial year, following the further
geographic expansion of the Group’s activities, under
the direction of the Board and with input from an
external consultant, Management undertook a review
of risk management and reporting procedures. The
implementation of any procedural updates is due to be
completed in the first half of the 2018 financial year.
The members of the Audit and Risk Committee during
the year were: Alden Halse (Chairman), Michael Bowen,
Wendy McCarthy and Michael Kay.
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.
E
x
G
p
l
e
o
r
b
i
e
a
l
n
c
e
hip
ers
d
a
e
L
60%
80%
100%
80%
60%
e
c
n
a
n
r
e
v
G o
Financial
Strategy/Risk
i n g
t
k e
r
M a
s
n
e
a
urc
m
u
o
H
s
e
R
L
e
g
a
l
Board Skills Matrix
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 2017 financial year, the
chairperson undertook a performance evaluation of
each director and key executive.
For details on director attendance at Board and Board
committee meetings during the year ended 30 June 2017,
refer to the Directors’ Report.
87
FINANCIAL REPORT
FINANCIAL REPORT
Corporate Governance Statement
(continued)
(cid:53)emuneration
It is the Company’s objective to provide maximum
stakeholder benefit from the retention of a high quality
executive Directors and key management personnel by
remunerating such individuals 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(cid:519) and officers(cid:519) remuneration to the Company(cid:519)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 Michael Kay.
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.
(cid:49)omination
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.
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 and practices
that promote the following:
– equal opportunities;
– attraction and retention of a diverse range of people;
– awareness of the differing needs of a diverse range
of employees;
– provision of flexible work arrangements; and
– promotion of a culture that is free from discrimination,
harassment and bullying.
In order to monitor the Company’s gender diversity, the
Board receives a report on an annual basis that provides
the female representation at all levels within the Group.
The 2017 report provides the following information (full
time equivalent):
– total female employees: 34 (2016: 30); total male
employees: 29 (2016: 26); total employees: 63 (2016: 56);
– total female investment managers: 10 (2016: 12);
total male investment managers: 16 (2016: 13); total
investment managers: 26 (2016: 25); and
– total female Key Management Personnel: Nil (2016: Nil);
total male Key Management Personnel: 4 (2016: 4); total
Key Management Personnel: 4 (2016: 4).
The Gender Equality Remuneration Review undertaken in
2016 by the Remuneration Committee demonstrated that
IMF’s remuneration was gender neutral and meritocratic.
It is proposed to undertake further periodic reviews.
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 8 new female employees
to the Company during the 2017 financial year and
the promotion of Ms Allison Chock to the role of Chief
Investment Officer for the United States.
The Nomination Committee will endeavour to improve the
gender diversity at Board level at any time nominations
are required to fill a Board position. In the 2017 financial
year the Corporate Governance Committee undertook
a review of IMF’s diversity policy as part of its regular
periodic review of IMF’s corporate governance policies
and procedures.
88
IMF BENTHAM LIMITED
2017 Annual Report
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.
In addition, the policy prohibits, subject to certain
exceptions, dealing in the Company’s securities 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.
Following the annual review of the Securities Trading
Policy, in 2017 the closed periods were extended in
respect of a specified group of persons, including
directors, the Company Secretary, General Counsel and
the Chief Financial Officer to include:
– 12.01am AEST on 1 July of each year until 10.00am
AEST on the ASX trading day after the day on which the
Company’s full-year results are released; and
– 12.01am AEDT on 1 January of each year until 10.00am
AEDT on the ASX trading day after the day on which the
Company’s half-year result are released.
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
Securities Trading Policy is available on 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 forms part of the
Company’s Corporate Governance Manual and is available
on 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 matters pertaining to
corporate governance or any other matter relating to the
Company, at their convenience.
This Corporate Governance Statement is provided as at
the date of the Director’s Report and has been approved
for issue by the Board.
As permitted by ASX Listing Rule 4.10.3, it is proposed that
in the 2018 annual report the URL for the page on the
IMF website where the Corporate Governance Statement
will be located will be provided in place of extracting the
Corporate Governance statement in the annual report.
89
FINANCIAL REPORT FINANCIAL REPORT
Shareholder Information
The information set out below is current as at 31 July 2017.
(a) Distribution of Shareholders
Ordinary Share Capital
172,046,575 fully paid ordinary shares are held by 5,643 individual shareholders. All issued ordinary shares carry one vote
per share and carry the right to dividends.
IMF Bentham Bonds
There are 500,000 bonds issued held by 427 individual bond holders. The IMF Bentham Bonds do not carry the right
to vote.
Options
There are no options issued over ordinary shares.
Share Performance Rights
11,177,055 share performance rights were issued to 32 rights holders.
Fixed Rate Notes
There are 72,000 Fixed Rate Notes.
Distribution of Securities
The number of shareholders by size of holding, in each class are as at 31 July 2017:
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
(cid:49)umber
Fully paid
ordinary
shares
1,108
1,925
1,042
1,466
544,841
5,525,402
7,769,872
38,249,782
102
119,956,678
Non-marketable Parcels
There were 315 holders of less than a marketable parcel of ordinary shares.
(b) Substantial Shareholders
The names of the substantial shareholders listed in the Company(cid:519)s register as at 31 July 2017 are:
5,643 172,046,575
427
(cid:49)umber
Bonds
383
37
3
3
1
117,058
76,110
24,480
171,514
110,838
500,000
(cid:49)umber of
ordinary
Shares
(cid:518)000
10,488
8,891
10,687
30,066
(cid:8) of
issued
capital
6.10
5.17
6.21
17.48
Shareholder
Celeste Funds Management Limited
Kabouter Management, LLC
Perpetual Investment Management
90
IMF BENTHAM LIMITED
2017 Annual Report
(c) 20 (cid:47)argest (cid:43)olders of (cid:52)uoted (cid:40)(cid:84)uity Securities as at 31 July 2017
Ordinary Shares
1. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
2.
J P MORGAN NOMINEES AUSTRALIA LIMITED
3. CITICORP NOMINEES PTY LIMITED
4. UBS NOMINEES PTY LTD
5. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA
6. BNP PARIBAS NOMS PTY LTD
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