Omni Bridgeway Limited Annual Report 2019

FY2019 Annual Report · Omni Bridgeway Limited

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Annual Report 2019

IMF Bentham Limited

IMF Bentham Limited
provides dispute resolution
finance and strategic
know-how to corporations,
individual claimants and their
professional advisers to help
them resolve their disputes
fairly and expediently.

We pioneered modern-day dispute resolution
finance in Australia, listing on the ASX in 2001,
and took the business to the world. We now have
offices across Australia, Asia, Canada, the UK
and the US, and manage a global investment
portfolio with an Estimated Portfolio Value (EPV)*
of approximately A$9.5 billion.

Our highly experienced team members are specialists
in law and finance and help deliver outcomes to
funded claimants that they could not achieve alone.

As one of the most respected brands in the industry,
we are passionate about what we do.

See Glossary of Terms

Contents

Highlights ....................................................................... 2
Track Record of Success ............................................... 3
Chairman’s and Managing Director’s Report .................. 4
Directors’ Report .......................................................... 53
Auditor’s Independence Declaration ............................ 80
Statement of Comprehensive Income .......................... 81
Statement of Financial Position .................................... 82
Statement of Cash Flows ............................................. 83
Statement of Changes in Equity ................................... 84
Notes to the Financial Statements ................................ 85

A. RESULTS FOR THE YEAR

Note 1: Segment information .................................... 90
Note 2: Revenue ....................................................... 94
Note 3: Net (loss)/gain on derecognition

of intangibles assets ..................................... 94
Note 4: Other Income .............................................. 95
Note 5: Expenses ..................................................... 95
Income tax ................................................... 97
Note 6:
Note 7: Earnings per share ....................................... 99
Note 8: Dividends paid and proposed .................... 101
Note 9: Statement of cash flows reconciliation ....... 102

B. INTANGIBLE ASSETS

103

Note 10: Intangible assets ........................................ 103

C. CAPITAL STRUCTURE

105

Note 11: Financial risk management ......................... 105
Note 12: Cash and cash equivalents ........................ 109
Note 13: Debt securities ........................................... 109
Note 14: Contributed equity.......................................111
Note 15: Retained earnings and reserves ................. 112

D. WORKING CAPITAL, OTHER ASSETS
AND OTHER LIABILITIES

113

Note 16: Litigation contracts and other receivables . 113
Note 17: Contract costs............................................ 114
Note 18: Other assets ............................................... 114
Note 19: Plant and equipment .................................. 114
Note 20: Trade and other payables ........................... 116
Note 21: Provisions ................................................... 116
Note 22: Commitments and contingencies ............... 117

E. THE GROUP, MANAGEMENT AND
RELATED PARTIES

119

Note 23: Key management personnel....................... 119
Note 24: Share-based payment plan ........................ 119
Note 25: Parent entity information ........................... 121
Note 26: Material partly-owned subsidiaries ............ 123
Note 28: Auditor’s remuneration ............................... 126
Note 29: Events after the reporting date ................... 126
Directors’ Declaration ................................................. 127
Independent Auditor’s Report .................................... 128
Shareholder Information ............................................. 135
Corporate Information ................................................ 138
Glossary of Terms ..................................................... 139

OverviewFinancial Report Shareholder Information Directors’ Report IMF Bentham Limited Annual Report 2019
Highlights

Cash up 41%
to $226.5m
With significant cash reserves,
we are growing the business,
financing large investments
and are a formidable ally
(or opponent) in litigation.

5
.
6
2
2

2
.
0
6
1

5
.
2
4
1

9
.
4
4
1

1
.
0
3
1

Investments up
33% to $427.0m
We have tripled the
number of investments
and increased the
average size of
investments. This
cements our position as
one of the world’s largest
and strongest funders.

0
.
7
2
4

3
.
1
2
3

0
9
1

5
4
1

9
9

2015 2016 2017 2018 2019

Cash
($ Million)

Investments
($ Million)

Net assets up
40% to $515.5m
Through increased cash
and increased investments,
we have increased net
assets. We are more
financially robust than ever.

5
1
5

8
.
7
6
3

4
.
1
0
2

3
.
6
0
2

9
.
5
8
1

Portfolio value up
68% to $9,456m*
Our increased portfolio
represents the potential
for proceed generation
in future years.

6
5
4

9
6
8
,
5

6
9
0
,
4

8
3
4
,
3

2
0
0
,
2

2015 2016 2017 2018 2019

Net Assets
($ Million)

Portfolio
($ Million)

Portfolio value from 2017 includes conditionally funded investments and investments approved for funding by the Investment Committee,
but not yet funded.

Track Record
of Success

171

Delivering
results for
over 18 years

$2.39 billion
total
recoveries

2.6 years
average investment
length

$1.49 billion
returns for funded
claimants

83
active
investments

89%
success
rate

192
investments funded
to completion

1.3x
return on
invested capital

Wins/settlements

Losses

Portfolio diversity
increased*
Our diversified portfolio mitigates risk
and leverages market opportunities.

<1%

22%

40%

Portfolio more
geographically dispersed*
Through geographical spread, we are more
resilient to jurisdictional dynamics.

11%

32%

Asia
Australia
Canada
United States
EMEA

41%

Appeal
Arbitration
Commercial
Insolvency
Law Firm
Group
Other IP
Patent
Whistleblower

13%

EPV by Investment Type
(%)

EPV by Geography
(%)

Portfolio value from 2017 includes conditionally funded investments and investments approved for funding by the Investment Committee,
but not yet funded.

OverviewFinancial Report Shareholder Information Directors’ Report IMF Bentham Limited Annual Report 2019Chairman’s
and Managing
Director’s Report

Introduction
This year our progress has been transformational
and IMF Bentham is almost unrecognisable from the
organisation it was four years ago. We are committed
to our long-range strategy of diversification across our
business and we accept the impact this has on our
current International Financial Reporting Standards (IFRS)
results. We anticipate our future IFRS results will reflect
the investment made in our strategy when our investment
process completes its full cycle and meaningful
completions are achieved.

We set in place an ambitious five-year strategic plan in
July 2015 which involved redesigning the fundamentals
of our business. This included diversifying our capital,

geography and investments with the over-arching
objective of de-risking our business and building an
enterprise that is future-fit for a dynamic world. In FY19
we continued our achievements in each area and we
are well ahead of our self-imposed schedule to become
one of the world’s leading dispute resolution finance
providers.

We are delighted to report that during the year we
significantly grew and diversified our Investment Portfolio,
increased our Funds Under Management including
launching new Funds, completed numerous capital
management strategies and expanded our global
footprint. These achievements are consistent with our
accelerated approach to a risk-adjusted investment
strategy. We expand upon each of these below.

Increased jurisdictional coverage

Australia, USA, UK

Australia, USA,
Canada, Asia, EMEA

1 July 2015

30 June 2019

Increased investments1

Increased EPV

$2.0 billion

$9.5 billion

Increased team

100+

Funds management

–

5 Funds (~$2 billion)

FY19 Results

Profit and Loss
Our financial results this year continue to reflect that we
have been implementing our transformational strategy
to position our business for long-term performance. We
have now largely concluded the transitional phase and
expect to see more stabilised earnings moving forward.

We reported a net loss in our P&L this year as income
was impacted by litigation results and an investment in
our costs in line with our geographic and Fund expansion.
FY19 results were also impacted by delayed completions
for a number of investments (including Wivenhoe and

Westgem). Investments representing nine percent of our
estimated portfolio value at 30 June 2018 were completed
during this year. This is a lower figure than anticipated
but is also a function of the exponential increase in the
number of investments in recent years and the stage of
our strategic plan implementation which is yet to mature
into significant completions.

The results are equally reflective of an industry-wide
phenomenon. The legal industry is reporting slower
resolution rates in a number of jurisdictions due to the
increased complexity of disputes2 and a propensity
for legal decision makers to increase spending on
litigation and protract negotiations and/or proceed

1.
2.

Includes investments approved by the Investment Committee, funded and conditionally funded
The BTI Consulting Group, BTI Litigation Outlook 2019: Changes, Trends and Opportunities for Law Firms, p 7

to trial. Whether influenced by insurers, administrative or
other commercial factors, this shift in litigious strategy
impacts all parties involved in dispute resolution. Dispute
management approaches can and do change over
time, subject to market forces. As we have previously
noted, these factors are beyond our control, but we do
not expect the current dynamics to endure beyond the
medium term.

This year our results were also impacted by the loss of
two US-funded cases (including a bilateral treaty claim
against Uruguay) and one in Canada. These investments
were in our fund structures, so whilst the entire losses
flow through our consolidated accounts the cash
impact is minimal.

At the end of FY19 the claim we funded against Ashley
Services Group Ltd settled (and is included in our FY19
results) and actions against Murray Goulburn Co-
operative Co Limited/MG Responsible Entity Limited,
Sirtex Medical Limited and Forge Group Limited were
successfully settled with financial returns from those
investments to be accounted for in our FY20 results
(assuming court approval and satisfaction of any other
conditions). After the close of FY19, the claim against
two respondents in a confidential Australian matter
settled, and the shareholder class action against UGL
settled in principle. There was also a settlement in

principle in a confidential US bankruptcy investment and
a settlement in a confidential US appeal funding. Results
will be recorded in FY20.

This year we grew our team by 28 employees to 101
employees as at 30 June 2019, with important senior
appointments in each jurisdiction. This increased our
employee benefits expense.

Our IFRS results contrast with our cash results this
financial year, which reflect a cash operating profit of
$6.4 million (excluding non-cash items, and adding
back capitalised expenses for the period).

Balance Sheet
We have grown and diversified our investment
portfolio significantly throughout FY18 and FY19 and
acknowledged that it would take time for our P&L to
reflect the benefits of this strategy. Based on an average
realised investment gestation of 2.6 years from initial
commitment of funds to final resolution and return on
investment, coupled with any market dynamics which
may extend that lifespan, we anticipate completions
from FY20 onwards. As noted above, completions
have commenced already.

Our net assets are $515.5 million representing
an increase of more than 40% (14% increase before
non-controlling interests).

Cash v IFRS Results

Cash inflows from operating activities

2019
$'000

2018
$'000

Proceeds from litigation funding - settlements, fees and reimbursements

43,179

94,893

Cash outflows from operating activities
Payments to suppliers and employees

Income tax received/(paid)

Net interest paid

Cash operating profit

Less:

(35,625)

3,459

(4,630)

6,383

(44,316)

(13,231)

(6,078)

31,268

Net impact of classification of litigation intangible related cashflows to Investing Activities

116,851

106,999

Net Fund establishment costs

Share based payments, depreciation & other non-cash items

Unrealised foreign exchange gain

Net change in assets & liabilities

Net (loss)

344

7,837

(3,535)

(78,966)

42,531

(36,148)

–

5,964

(4,311)

(69,537)

39,115

(7,847)

OverviewFinancial Report Shareholder Information Directors’ Report IMF Bentham Limited Annual Report 2019Chairman’s
and Managing
Director’s Report
continued

Investment Portfolio

Portfolio overview
As part of our diversification strategy, we have grown
our overall global investment portfolio as well as varying
the types, sizes and geographic orbit of the investments
within the portfolio. Our global investment portfolio
is now larger and more diverse than ever before. As
at 30 June 2019 our global portfolio3 comprised 83
active investments, including investments in portfolios
of cases (which we count as single investments) and
11 investments approved on a conditional basis.

Our investments (40 US and 54 RoW4) total $480 million
in capital commitments. This year we set a target to
commit $172 million, a 17% increase in capital and
have exceeded that target by 30% (with funded and
conditionally funded investments).

We are seeing increasing demand for large scale
investments and this year committed to our two largest
individual Fund investments to date, a US$20 million
portfolio of cartel cases and an US$18 million
investment into a single pre-judgment case. We
anticipate our average investment size (currently
A$2.4 million) will materially increase in future.

We are also pursuing new investment types in the
corporate sector, in which we finance litigation disputes
for companies (and their advisers) who have the
financial means to pursue their disputes but elect to
use our dispute resolution finance as a capital and
risk management strategy. Over the past 24 months
we have been developing this business line and now
identify 20% of our current portfolio (18 investments)
as emanating from corporate clients.

Almost 20% of our portfolio is financing claims
for corporates

Corporate clients
by claim value (USD)

Canada
$344m

Asia
$425m

Australia
$12m

EMEA
$15m

USA
$1.55bn

Corporate clients
by number of investments

Asia
6

Canada
3

USA
7

Australia
1

EMEA
1

Funding applications
With changes in regulatory environments and the
increasing acceptance of third-party finance for capital
and risk management, there is growing demand for
dispute resolution finance around the world. We have
expanded our teams and our business development
activities to capitalise on this and have leveraged our
strong reputation to become a funder of choice in this
growth industry. This is reflected in the increased number
of funding applications we are receiving.

Since the beginning of FY16 we have recorded a 118%
increase in the number of new funding applications

globally, with notable increases in the growth markets
of Asia, Canada and the EMEA. In FY19 we received
974 new funding applications globally, of which 93
were progressed to the Investment Committee for
consideration, and 36 were ultimately funded (including
conditional and unconditional funding).

We also have an extremely attractive pipeline with an
additional 55 matters in the underwriting phase of our
investment cycle, where we consider the investment
against the criteria we have established in our
investment management system.

This includes all investments which are owned, managed or advised upon by a member of the IMF Bentham Group

3.
4. Rest of World

Funding Applications (number of applications)

900

800

700

600

500

400

300

200

100

446

264

170

FY15

669

309

301

FY16

827

371

345

104

FY17

866

356

302

127

FY18

974

440

201

119

130

FY19

Consolidated

Australia

USA

Canada

Asia

EMEA

Quality Control
Our rigorous investment filtering remains unchanged
and we continue to convert approximately 5% from initial
application to ultimate investment. Notwithstanding the
expansion of our geographic footprint, we do not expect
that our conversion rate will alter. We intend to remain
rigorous in our case selection, to maintain our success

rate, manage the costs of our insurance and returns
to our shareholders and to the investors in our Funds.

Deploying capital expediently is tempting and can be
relatively straightforward, but selectively screening
investments to build a quality portfolio and supporting
each investment with on the ground expertise, requires
discipline and know-how.

974 applications/enquiries

93 Investment
Committee meetings

55 new investments
assessed by IC

37 new investments

Investment Funnel FY19

Estimated Portfolio Value
During FY15 we committed, or agreed to commit,
$54 million. Fast forward to FY19 and we committed, or
agreed to commit, $223.6 million, reflecting a compound
annual growth rate (CAGR) of 43%.

We have now grown our EPV, as defined in our quarterly
portfolio announcements, from $2.0 billion in 2015 to $9.5
billion in 2019 (including IC approved and conditionally
funded investments)5. This represents a CAGR of 48%.

The average duration of our completed investments has
remained consistent since FY15 at approximately 2.6
years and, on this basis, we would expect all current
investments are likely to resolve in the next 3 years.

This includes all investments owned, managed or advised upon by
a member of the IMF Bentham Group.

Estimated Portfolio Value (EPV) growth change
(2015-2019)

10000

8000

6000

4000

2000

2015

2016

2017

2018

2019

Balance Sheet

Fund 1

Funds 2&3

Fund 4

OverviewFinancial Report Shareholder Information Directors’ Report IMF Bentham Limited Annual Report 2019Chairman’s
and Managing
Director’s Report
continued

Fund Management
One of our critical strategies for expanding and de-risking
our business involves diversifying our sources of financial
capital and investment vehicles and transitioning from
balance sheet investing to managing fund structures.
At the end of FY15, 100% of our investments were made
from our own balance sheet. Today, our investments are
spread between our direct, 100% owned balance sheet
and fund structures, in line with our capital diversification
goals. No new investments have been made via our
balance sheet since we launched Funds 2 & 3 in 2017
and only 25% of our investments (by number) remain
on our balance sheet, which is in ‘run-off’ mode. The
remainder of investments sit within fund structures.

We have significantly increased our funding capacity
with the launch of our fund structures, particularly the
most recent Funds 4 and 5, and we now have close to
$2 billion in Funds Under Management, making us one
of the largest specialised dispute resolution financiers
in the world.

Our strategy is to remain a meaningful minority investor
in each of our Funds to harness investment returns as
an equity participant, with management revenue from
returns on third party capital.

Fund 1 (US investments)
When we launched our first US Fund (Fund 1) in February
2017, it had an initial capacity of US$133.3 million and
we anticipated a life span of several years. However, we
exceeded investment targets and increased the Fund
capacity to US$166.7 million in February 2018.

There has been significant growth in the market’s appetite
for dispute resolution finance and our expanded US
investment team has been maximising this opportunity.
As at 30 June 2019 the Fund is fully drawn. It has
committed 96.2% of available capacity, with a total of
US$153.4 million in investments of which US$125.6 million
has already been deployed. The exclusivity period for
Fund 1 expired in April 2019, allowing us to commit new
investments from our next US Fund (Fund 4) where those
investments exceed Fund 1’s mandate or capacity.

Fund 1

Fund 1– EPV by Investment Type (%)

US$6.4m

US$6.9m

Deployed

Fund 1
96.2% Committed

Start Date – 10 Feb 2018

Fund Size – US$166.7m

Investments Committed – US$153.4m

Investments Deployed – US$125.6m

Committed (fully funded, IC approved,
conditionally funded)

Remaining for Investment

Other Costs

Commercial
Law Firm
Patent

Whistleblower
Appeal
Other IP

Funds 2 & 3 upsized (Rest of World investments)
We have experienced strong market demand for
investment funding across all our jurisdictions. Since
FY15 we have recorded a 93% increase in funding
applications outside the US. While dispute resolution
finance is becoming mainstream, increased demand has
also followed regulatory changes in some jurisdictions.
Demand is particularly strong in Asia and Canada where
dispute resolution finance is relatively new and we are
establishing a market and a leading presence.

In response to market appetite, and thanks to the
efforts of our talented Investment Managers who source
investment opportunities, our two funding vehicles for
non-US investments approached their capacity ahead
of schedule this year. Funds 2 & 3 (collectively known
as ‘RoW Funds’) were originally launched in October
2017 with $150 million to fund cases across Australia,
Asia, Canada and EMEA. In January 2019 we increased
their capacity to $180 million to meet market demand.
As at 30 June 2019, $150.9 million was committed
to investments in Funds 2 & 3, representing 93.3% of
the upsized capacity of the Funds. Accordingly, we
progressed to our next capital raising for RoW this
year - Fund 5.

Funds 2 & 3

$17.0m

$12.1m

Deployed

Funds 2 & 3
93.3% Committed

Start Date – 03 Oct 2017

Fund Size – $180m

Investments Committed – $150.9m

Investments Deployed – $30.2m

Committed (fully funded, IC approved,
conditionally funded)

Remaining for Investment

Other Costs

Funds 2 & 3 – EPV by Investment Type (%)

Funds 2 & 3 – Total EPV by Geography (%)

Multi Party
Arbitration
Insolvency
Commercial Law

Law Firm
Patent
Appeal

Australia
Canada
Asia

OverviewFinancial Report Shareholder Information Directors’ Report IMF Bentham Limited Annual Report 2019Chairman’s
and Managing
Director’s Report
continued

Fund 4 launched (US investments)
Our second US Fund (Fund 4) was launched in November
2018, only 21 months after launching Fund 1 and only
nine months after upsizing Fund 1. Since FY15 we have
experienced a 159% increase in qualified applications
for funding in the US and greater interest in larger deals.
Fund 4 positions us to meet market demand and also
commit to larger individual investments.

Fund 4 was launched with an initial size of US$500 million
and the potential with fund investor consent to increase
the Fund to US$1 billion following investment of the
initial capital.

We commenced making investments in Fund 4 in April
2019 with the end of Fund 1’s exclusivity. As at 30 June
2019 Fund 4 has already committed US$38 million,
including our two largest individual investments to
date (as those commitments exceeded the individual
investment caps imposed in Fund 1). Fund 4 has already
deployed US$18 million.

The majority of capital for Fund 4 was committed by
external investors, reflecting strong investor confidence in
our business. Our investors in Funds 2 & 3 demonstrated
their faith in our model by returning to invest in Fund 4,
along with a prominent new US university endowment
fund. These investors provided the entirety of the external
capital, which means that investor management issues
should be minimised.

Fund 4 has elevated concentration caps to meet new
market demands for larger investments. It also has a
reduced cost of capital to allow for more competitive
pricing for new investments. Fund 4 is an example of the
continued evolution of our business model and, together
with Fund 5 below, constitutes our ‘second generation’
Funds as they have a different economic structure to
Funds 1, 2 & 3 (our ‘first-generation’ Funds). Fund 4’s
architecture reduces risk as IMF Bentham’s returns are
pro-rata alongside investors and also generates timely
management fees (and performance fees, subject to
requisite returns).

Fund 4

Deployed

Fund 4
8.0% Committed

Start Date – 01 Apr 2019

Fund Size – US$500m

Investments Committed – US$38m

Investments Deployed – US$18m

US$462m

Committed (fully funded, IC approved,
conditionally funded)
Remaining for Investment

Fund 5 launched (Rest of World investments)
In preparation for Funds 2 & 3 reaching full capacity, we
successfully launched our latest RoW Fund (Fund 5) in
June 2019, with an initial capacity of US$500 million and
the potential with fund investor consent to increase the
Fund to US$1 billion following investment of the initial
capital.

Fund 5 was launched only twenty months after launching
Funds 2 & 3 and only five months since upsizing those
initial RoW Funds. When we launched Funds 2 & 3 in
October 2017 we anticipated a life span of several years,
but we have exceeded all investment targets due to the
expanding market for dispute resolution finance and our
expanding global investment team who are harnessing
market opportunities.

Fund 5 is our latest ‘second generation’ Fund and
represents a more optimal model of returns, in line with
the structure of Fund 4 above.

As at 30 June 2019, Fund 5 had not commenced activity.

Strategic Capital Management

Equity raised
During the year we raised $76.1 million (excluding costs)
in new equity from retail and institutional shareholders.
The equity raising attracted strong interest from existing
and new investors and enables IMF Bentham to meet
some of its commitments to the new Funds 4 and 5 as
well as to pursue strategic growth initiatives, including
expanding existing and new operations.

Bond restructured
In an exercise of prudent financial management, this year
we restructured our listed bonds by moving to increase
our debt ceiling from $150 million to $300 million and
extending its maturity date to December 2022 with an

option to extend further to December 2023. Even though
the bonds now allow for an increase debt ceiling, until the
notes are restructured or refinanced, IMF remains with
a $150 million ceiling. Our business and our industry are
both in their growth phase and this is not the time to be
cash constrained. It is precisely the time to accelerate our
activities and build our business operations to increase
market share and cement a global leadership position.

Notes refinancing
In addition to the above, we have debt in the form of
secured notes which are due to mature on 30 June 2020.
We are in the process of considering restructuring these
notes to achieve similar objectives as those achieved with
our bond restructuring.

IMF Bentham is
almost unrecognisable
from the organisation
it was four years ago.

Hugh McLernon
EXECUTIVE DIRECTOR

OverviewFinancial Report Shareholder Information Directors’ Report IMF Bentham Limited Annual Report 2019Chairman’s
and Managing
Director’s Report
continued

Geographic Expansion
We have continued to grow our business organically by expanding our teams in each jurisdiction including Australia, Asia,
Canada, the US and EMEA. This year our team grew to 101 people. Our key team members are profiled on our website.

Geographic expansion is one of the most challenging, yet most important, strategies for our business. Today’s disputes
involve multi-national and multi-lingual parties facing multi-jurisdictional issues and cross-border recoveries. A global team
is essential to identifying investment opportunities and servicing these client needs. And a global investment portfolio is
more immune to changes in domestic political, economic, social, technological, regulatory and environmental landscapes
and more resilient to competition. Spreading our footprint across jurisdictions helps us build a higher value investment
portfolio that is more resilient to market forces.

Toronto

Montreal

San Francisco
Los Angeles

New York

Houston

110

100

London

101

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015 2016 2017 2018

2019

Hong Kong

Singapore

Brisbane

Perth

Sydney

Adelaide

Melbourne

On the other side of the equation, professional services
firms are promoting practitioners who demonstrate
innovation for their clients and their firms and many are
talking to us about alternative finance options for clients
and for firm liquidity. This year we entered into the largest
single law firm portfolio finance arrangement in our history
(US$20 million) and developed finance options for many
corporates and law firms to consider in their dispute
management arsenal.

The global legal services market is estimated to have
grown 5.3% in 2018 to reach a value of $951.39 billion
and is estimated to reach $1,191.7 billion in 20236.
Litigation represents approximately 40% of legal
spend and the plaintiff portion relevant to our business
constitutes a sizeable addressable market. If defence
funding is added (i.e. in the context of mixed portfolio
funding), along with latent claims that may not have been
progressed due to lack of funds, the potential market for
our product is galvanising for us. And of course, these
estimates only reflect likely legal costs. They do not reveal
the claim value of the underlying litigation assets.

Although it can take time to shift behaviour, especially in
conservative industries, we are diligent in explaining our
offering to the market and perceptions are changing. We
are building relationships with companies across industry
sectors who are considering using dispute resolution
finance to defray legal expenses and mitigate risks.
This trend is expected to continue as more companies
discover the benefits of non-recourse finance for
dispute resolution.

Focus Areas
In a number of our jurisdictions our team has extensive
expertise funding multi-party actions for claimants
who would otherwise have no access to justice. It is
an important role in the community and a valuable part
of our investment portfolio and we have earned a solid
reputation for our work in this field. However, group
actions represent only 21% (by number) of our global
portfolio. Most of our business is outside this domain
and involves financing commercial claims and recoveries
for parties across many areas of law and industry
sectors. Whether providing dispute resolution finance for
insolvency-related claims (our heritage) or a high-tech
start-up, our offering has numerous applications.

We have cross-jurisdictional focus groups who deliver
specialised expertise, global coordination and operational
efficiencies to our funded clients. By sharing client
relationships and know-how, the group formation also
mitigates risk for our business. Below are just some
of our areas of focus.

General dispute resolution finance for corporates
Opportunities exist to finance commercial disputes
of all types, across all industries. There are numerous
signals that the corporate market is ripe for innovation
in its capital and risk management methods and we
are able to assist.

Empirical studies reveal consistent themes across
commerce: in-house corporate legal departments
are increasingly in-sourcing legal work and they must
continually achieve more with constrained resources.
When they do out-source, they are venturing beyond
prestige providers in the pursuit of value, exploring
alternative legal service providers (ALSPs), and forming
hybrid project teams with best-of-class individuals from
multiple suppliers. Corporate counsel are seeking ways
to turn their legal departments into revenue centres
and deliver strategic value to their companies. Some
innovators have already interrogated their dormant legal
claims and claims management protocols. In these
organisations recovery programs have netted hundreds
of millions of dollars in revenue. Embarking on such
programs with the aid of our finance and due diligence
capabilities is appealing to companies who are actively
exploring bespoke solutions with us.

MarketLine Industry Profile, January 2019, Global Legal Services,
Reference 0199-0423, p 7-8

OverviewFinancial Report Shareholder Information Directors’ Report IMF Bentham Limited Annual Report 2019Our Asia team became pioneers of insolvency funding
in Singapore when, in September 2018, the High Court
of Singapore endorsed our funding arrangement to
finance investigations and potential claims against
directors and auditors of the failed Trikomsel entities.
This major corporate collapse cost Singaporean retail
investors hundreds of millions of dollars and this was
the first insolvency matter in Singapore to be funded
by a commercial third-party funder.

In Canada, we are conditionally funding an action by
an insolvent debtor, Bluberi Gaming Technologies,
against its main creditor for alleged predatory lending.
When approving our funding, the insolvency court
observed “litigation funding is now the only avenue that
can potentially allow for any meaningful recovery for
the creditors”. The funding approval is now the subject
of an application to the Supreme Court of Canada. If
the application is granted, the case will represent the
first opportunity for Canada’s highest court to consider
litigation funding in insolvency (or indeed in any context),
thus emphasising our pioneer status in that jurisdiction.

Chairman’s
and Managing
Director’s Report
continued

Insolvency and bankruptcy
Our significant experience providing insolvency dispute
resolution finance dates back to our first cases in
Australia almost twenty years ago. Today, our global
insolvency team spans six countries and helps insolvency
practitioners, creditors and other stakeholders involved
in commercial disputes around the world.

In 2018 there was an upward trend in business
insolvencies globally, particularly large business
insolvencies, and notably in Asia and Western Europe.
In England and Wales, an estimated total of 17,4397
companies entered insolvency in 2018, an increase on
the prior year. In 2019, business failures are expected to
rise in most countries for the third consecutive year as
global financing conditions tighten. Key affected industries
are likely to include retail, oil and gas, healthcare and
medical (North America), construction (Asia), and retail,
agri-food, services and construction (Western Europe).

The volume of large corporate bankruptcies in the US
and Canada remains below historical levels but most
experts believe this trend will reverse in 2019 and
beyond. A combination of higher interest rates, softening
business spending and a potential trade war with China,
the world’s second largest economy, will impact the
broader economy. In the US, bankruptcy and insolvency
work accounts for 3.4 – 4.5% of legal industry revenue,
translating to A$16.03 billion annually8.

Orchard Reports & IRN Research, UK Legal Services Market 2019:
Market Trends Report, p 58; ONS Insolvency Statistics
O’Connor, C, February 2019, IBISWorld Industry Report 54111, Law
Firms in the US, IBISWorld 2019, p 14 and Thomson Reuters Peer
Monitor & Georgetown Law, 2019 Report on the State of the Legal
Market, p 5

Litigation funding is an important
part of the insolvency industry.
Even if financially-strapped
companies can muster the cash
to pay lawyers, experts and other
litigation costs, stakeholders
want to see critical resources put
toward turnaround efforts, not
dispute resolution. For creditors
burned by an improper, ill-fated
transaction, or who have been the
victim of fraud, dispute resolution
finance may be the only viable
path toward recovery.

Ken Epstein
INVESTMENT MANAGER,
LEGAL COUNSEL AND SENIOR
BANKRUPTCY AND INSOLVENCY
PRACTITIONER

OverviewFinancial Report Shareholder Information Directors’ Report IMF Bentham Limited Annual Report 2019Chairman’s
and Managing
Director’s Report
continued

International arbitration
International arbitration has become the preferred form
of dispute resolution for many cross-border commercial
disputes. It offers multi-national parties neutrality,
confidentiality, specialist decision-makers, finality and
enforceability. As a result, international arbitration has
experienced significant growth over the past decade
and leading arbitration centres have recorded increasing
commercial caseloads. Similarly, the International
Centre for Settlement of Investment Disputes (ICSID)
reported more investor state arbitrations in 2018 than
in any previous year, reflecting a continuing growth in
treaty arbitrations.

However, international arbitration can be complex and
expensive. Costs of international arbitration continue
to rise and many consider the legal fees and related
costs to be among its worst features. Arbitration parties
and counsel are seeking innovative ways to finance
their matters and legal regimes around the world have
responded by relaxing or enacting regulations to allow
dispute resolution finance. Arbitration funding has
now become an integral part of the future of the global
arbitration market.

Our company is well-poised to capitalise on this growth
opportunity, with seasoned international dispute
resolution team members located in the key jurisdictions
for arbitration. Our international arbitration team has
funded matters in various regions around the world.
In Asia, where Asia-based companies and Asia-related
transactions are increasingly sources of international
disputes, we are funding one of the first international
commercial arbitration cases to be funded in Singapore.
We have since approved funding for several more.
On the other side of the globe, our US team has funded
international disputes and sees international arbitration
as an important area of growth for our business.

In the commercial space, complicated
joint venture relationships, complex
transactions in the energy space, and
cross-border transactions relating
to licensing of intellectual property
often lead to expensive arbitrations
with sizeable damages claims.
In the investor-state context, an
investor may have lost everything
of commercial value when a
government suspends or takes over
a project. We act as vital partners
bridging the gap between holding
a claim that could yield significant
recoveries and pursuing it in an
arbitral forum.

Dana MacGrath
INVESTMENT MANAGER,
LEGAL COUNSEL AND SENIOR
ARBITRATION PRACTITIONER

Intellectual property
Intellectual property (IP) litigation is one of the fastest
growing litigation practice areas, both in terms of the
number of cases and their complexity9. Where IP is
essential to a company’s business model, significant
litigation spending is often required to protect IP
assets, monetise portfolios and guard against
infringing competition.

We see significant potential to fund IP cases such
as those involving patent, trademark and copyright
infringement, as well as trade secrets misappropriation
on behalf of businesses, educational institutions and
other creators of IP. We also see growing opportunities
to provide funding to law firms directly in some of
our jurisdictions for their portfolios of client IP claims.
Industries such as life sciences, chemicals and
manufacturing present particularly strong fields of play.

IP cases are often extremely
valuable, but it can take a
long time and substantial
resources to unlock their
value and achieve recoveries.
Such cases are therefore
particularly suitable
for funding. With our
geographical footprint, we
are poised to help claimants
implement global strategies
for successful enforcement
of their IP.

Sarah Tsou
INVESTMENT MANAGER, LEGAL
COUNSEL AND SENIOR INTELLECTUAL
PROPERTY PRACTITIONER

The BTI Consulting Group, BTI Litigation Outlook 2019:
Changes, Trends and Opportunities for Law Firms, p 6

OverviewFinancial Report Shareholder Information Directors’ Report IMF Bentham Limited Annual Report 2019Chairman’s
and Managing
Director’s Report
continued

Updates from around the world

Asia

The dispute resolution finance industry
continues to develop in Asia and we are
experiencing significant growth in the
demand for our product and service.

We were one of the first international dispute resolution
funders to establish permanent offices in Hong Kong and
Singapore (the region’s primary international disputes
hubs) and have committed the most permanent presence
in Asia relative to competitors. Having Investment
Managers on the ground means we can identify
potential investments and respond quickly to business
opportunities across the region. This includes reaching
beyond Singapore and Hong Kong to other jurisdictions
where our team is also active including China, India,
Japan, South Korea, Malaysia, Indonesia, Thailand, the
Philippines and Vietnam. In many of these jurisdictions
we find ourselves making, not taking, a market.

Regulatory environment
Singapore and Hong Kong have actively embraced third-
party funding in arbitration and insolvency to increase
their competitiveness as leading centres for international
dispute resolution.

Singapore now expressly permits third-party funding of
international arbitration (and related court proceedings)
and commercial litigation related to insolvency
proceedings. Policy-makers may broaden the categories
of permitted commercial dispute resolution funding. In
the meantime, Singapore courts appear willing (where
appropriate) to develop the common law where legislation
is not in place.

In Hong Kong, a new framework permitting the funding
of international arbitration came into operation on
1 February 2019 and we are already receiving funding
enquiries. The regime includes new legislation (enacted
June 2017)10 and a detailed Code of Practice released
by the Department of Justice in December 201811.
The permission of third-party funding for arbitration
is an exception to Hong Kong’s general prohibition of
maintenance and champerty (which remains a tort and
criminal offence despite its almost complete abolition
in other common law jurisdictions).

10. Arbitration and Mediation Legislation (Third Party Funding)

(Amendment) Ordinance 2017

11. Hong Kong Department of Justice, Code of Practice for Third Party

Funding of Arbitration, 7 December 2018

12. MarketLine Industry Profile, January 2019, Legal Services in Asia

Pacific, Reference 0200-0423, 2019, p 7-8

13. Citigroup Global Markets Inc, 21 February 2011, Global Growth
Generators: Moving beyond ‘Emerging Markets’ and ‘BRIC’

One of our Investment Managers, Cheng-Yee Khong,
is a member of the Hong Kong International Arbitration
Centre (HKIAC) Task Force on Third Party Funding which
provided comments on the draft Code of Practice during
the public consultation period.

Hong Kong courts have also validated third-party funding
for insolvency proceedings and there are no regulatory
changes to this regime. Commercial litigation unrelated
to insolvency proceedings remains heavily restricted in
Hong Kong.

Beyond Singapore and Hong Kong, the majority of
our remaining Asian markets are civil law jurisdictions
where maintenance and champerty do not exist and,
for the most part, litigation funding is neither expressly
permitted or restricted.

Competition
Our Asia-based team is larger than any other funder
offering and has the greatest depth of local expertise in
international arbitration and litigation. We remain the only
international dispute funder with full service investment
assessment and management capabilities on the ground
in Asia. Our competitors in this region tend to fly in or
rely on referrals from international law firms.

Addressable market
Our team pursues opportunities across Asia which is
the fastest growing economic region in the world. The
collective growth of the region is forecast to accelerate to
a CAGR of 6.7% for the five-year period 2018-2023, aided
by liberalisation in many Asian countries12.

Asia is also the largest continental economy by both GDP
(nominal) and purchasing power parity. According to
Citigroup, nine of the eleven Global Growth Generating
countries (sources of growth potential and profitable
commercial investment opportunities) came from Asia,
including China, India, Vietnam, Indonesia and the
Philippines13. Significant investment opportunities give
rise to high-value commercial cross-border disputes and,
in turn, potential demand for dispute resolution finance.

It is difficult to accurately estimate the size of the potential
market for dispute resolution finance in Asia. Asia is not
one homogenous legal market, but a composite of legal
systems, languages and customs. In addition, information
regarding some litigation and dispute resolution activity
is not readily available and some jurisdictions have
restrictions on the types of disputes where funding
can be applied.

Two years into our Asia
expansion we are seeing
continued exponential growth
in applications and funded
cases. The international nature
of business in Asia means we
often collaborate with our
colleagues across the IMF
Bentham network, leveraging
our capabilities in North
America, Europe and Australia
to provide our funded parties
with unmatched jurisdictional
and sector expertise. Our talented
Asia team has doubled in size
and we anticipate further
growth as we push into
more markets across the
region. The potential
here is enormous
and IMF Bentham
is leading the charge.

Tom Glasgow
CHIEF INVESTMENT OFFICER
ASIA

OverviewFinancial Report Shareholder Information Directors’ Report IMF Bentham Limited Annual Report 2019Chairman’s
and Managing
Director’s Report
continued

As arbitration funding forms the bulk of our current activity
in Asia, statistics from the leading arbitral institutions in
the region provide some insight into the addressable
market for international commercial arbitration. We
estimate the total claim value of the combined 2018 new
case load of the Hong Kong International Arbitration
Centre (HKIAC), Singapore International Arbitration Centre
(SIAC) and International Chamber of Commerce (ICC)
(Asia-related cases) at A$24.25 billion across a total of
1004 cases14. Importantly, this only represents a small
fraction of the international commercial arbitration market
in Asia as it does not include ad hoc arbitration or other
institutions handling Asia related cases.

Investment treaty arbitration also represents a significant
market for dispute resolution finance. Recent studies
estimate the average claim size in investor-state
arbitration at US$719,334,00015. We estimate the total
claim value for investment treaty arbitration in Asia is at
least US$10 billion (A$14.23 billion). Again, this does not
include ad hoc or other institutional arbitration which may
be required under some investment treaties.

Jurisdictions in Asia connected with recent
funded cases and funding applications

We estimate the total addressable market for dispute
resolution finance associated with the combined case
load above to be approximately A$3.85 billion.

“ We and the client chose IMF Bentham
for one of the first third-party funded
arbitrations in Singapore based not only
on the competitive financial terms being
offered, but due to their knowledge and
experience in international arbitration,
which counsel can benefit from to
optimise the case presentation.”

Mark Mangan
PARTNER, DECHERT LLP

KAZAKHSTAN

KYRGYZSTAN

PAKISTAN

INDIA

JAPAN

NORTH
KOREA

SOUTH
KOREA

TAIWAN

PHILIPPINES

CHINA

HONG
KONG

VIETNAM

LAOS

THAILAND

CAMBODIA

SRI LANKA

MALAYSIA

MALDIVES

SINGAPORE

INDONESIA

TIMOR-LESTE

14. Approximate figures derived from publicly-released statistics provided by the institutions, applying the relevant average foreign

exchange rate on 30 June 2019.

15. Allen & Overy, 14 December 2017, Investment Treaty Arbitration: cost, duration and size of claims all show steady increase

I was honoured to
contribute to Hong
Kong’s Code of Practice
for arbitration funding,
which enables businesses
to benefit from Hong
Kong’s leading arbitration
services, regardless of
where they are located.

Cheng-Yee Khong
ASSOCIATE INVESTMENT MANAGER
AND SENIOR ARBITRATION
PRACTITIONER

OverviewFinancial Report Shareholder Information Directors’ Report IMF Bentham Limited Annual Report 2019Chairman’s
and Managing
Director’s Report
continued

Australia

Since pioneering the modern-day dispute
resolution finance industry in Australia
18 years ago, we are honoured to retain
the leading market position here despite
increased competition.

The last few years have seen an increase in multi-party
(class action) proceedings in the Australian market and
competition to finance these, particularly shareholder
(securities) actions. There is an increased likelihood
of competing class actions (where separate law firms,
each with a different litigation funder, begin proceedings
against the same defendant for the same or similar sets
of claims). The courts and parties have been developing
ways to deal with the changing landscape including: the
court choosing one funder/lawyer group over others;
ordering one funded proceeding to continue as an open
class and a separate action to continue as a closed
class; and requiring cooperation between the lawyer
and funder teams.

Regulatory environment
On 24 January 2019, the Australian Law Reform
Commission (ALRC) released its Report resulting
from its federal Inquiry into Class Action Proceedings
and Third-Party Litigation Funders. The Report made
recommendations relating to case management
for class actions, settlement approval, regulation of
litigation funders, solicitors’ fees and conflicts of interest,
regulatory redress and continuous disclosure obligations.
We contributed to the Inquiry, alongside industry
participants. We expect further consultation before any
legislation is considered but timing is unclear. It is also
possible that when the Report is re-visited, some issues
may have been clarified by the High Court or Full Federal
Court in the meantime.

Last year the Victorian Law Reform Commission (VLRC)
also undertook an Inquiry into Litigation Funding and
Group Proceedings. Following the publication of the
VLRC’s final Report in June 2018, there do not appear
to have been any significant developments. This may be
partly due to the political landscape and the subsequent
ALRC Report.

In February 2019, the Royal Commission into Misconduct
in the Banking, Superannuation and Financial Services
Industry (known as the Banking Royal Commission)
released its final Report. Although not directed to
our industry, the Commission uncovered evidence of
corporate misconduct which may impact our business
in two ways: additional class actions may arise and there
will be tightened corporate governance requirements
affecting all businesses trading in Australia. We consider
both to be positives.

Competition
In the last few years, the number of funders active in
the Australian market has increased although not all are
necessarily in the areas we fund or would compete to
fund larger claims.

Addressable market
Australia’s legal services market in 2018-19 is estimated
at $20.8 billion and is forecast to grow at an annualised
rate of 2.0% over the next five years to reach $22.9
billion in 2023-2416. Regulatory changes and the Banking
Royal Commission have contributed to demand for
legal services.

Approximately 20% of the legal services market is
attributed to dispute resolution and it is reportedly the
largest growth practice area17. Based on these figures
we estimate a potential annual plaintiff legal spend of
$2.08 billion. However, this does not include additional
disputes which are either managed in-house or not
being progressed. There are also opportunities to fund
defence costs as part of a portfolio that includes plaintiff-
side/affirmative claims (e.g. in mixed portfolio financing
for corporates), so the total addressable market for our
funding is potentially larger than the above estimates.
As the industry penetration rate for funders is estimated
to be low in the Australian market, the potential for
growth is encouraging.

Total Estimated Addressable Market
for Australia

$20.8bn

$2.08bn

$4.16bn

Total Estimated Annual Market Legal Spend

Estimated Litigation Portion of Total Legal Spend

Estimated Total Addressable Market as % of Total Legal Spend

16. Do, K, February 2019. IBISWorld Industry Report M6931

‘Legal Services in Australia’, IBISWorld, p 5

17. Thomson Reuters & Melbourne Law School, 2018 ‘Australia:

State of the Legal Market’, p 5

“ IMF stands above its competitors
in sophistication, ease to work with
and competence.”

John Dalzell
PARTNER, DENTONS

The Australian business is
in an excellent position for
ongoing success in the next
phase of development in the
rapidly evolving market.
One of our priorities is to
assist corporate clients
with their cost and risk
mitigation strategies.

Tania Sulan
CHIEF INVESTMENT OFFICER
AUSTRALIA

OverviewFinancial Report Shareholder Information Directors’ Report IMF Bentham Limited Annual Report 2019Chairman’s
and Managing
Director’s Report
continued

Canada

Our Canadian business commenced
operations in 2016 and has since made
significant headway in introducing dispute
resolution finance to the Canadian market.

In the short period we have been operating in Canada we
have established our brand as the pioneer in the market,
we have seen increasing demand for a range of funding
products and we are well placed for further growth and
geographic expansion.

Regulatory environment
The province of Ontario has class actions legislation
which is nearly 25 years old and the government is now
reviewing the regime. Class actions throughout Canada
have grown in number, size and complexity and the
Law Commission of Ontario has recently completed
a comprehensive assessment of users’ experience
to develop recommendations to update the regime.
Although third-party funding is only a minor component
of the review, we were grateful for the opportunity to
contribute as part of the public consultation process.
In the Law Commission’s final report, many of the
recommendations applicable to third party funding
correspond with our best practices for funding class
actions. We expect the government of Ontario will
carefully consider the report and are hopeful any
legislative changes would foster responsible funding
practices, be commercially sensible and sophisticated
and promote access to justice.

In the province of British Columbia, the International
Commercial Arbitration Act was modernised in May
2018. The amendments express confirmation that the
recognition or enforcement of international arbitral
awards cannot be challenged on “public policy” grounds
simply because a third-party litigation funder was
involved. These amendments in British Columbia signal
a recognition of the role that third-party funding has as a
commercial practice in international dispute resolution.

We are also contributing to the developing jurisprudence
on funding acceptance in the Canadian context. We
have sought court approval for our funding agreements
for a number of our cases, including a class action, an
insolvency case and a Federal Court patent action and
there are now six reported decisions on our Canadian
funding arrangements.

18. British Columbia Law Institute, October 2017, Study Paper

on Financing Litigation

19. Ismailanji, M, July 2018, IBISWorld Industry Report 54111CA,

Law Firms in Canada, IBISWorld, p 5

The October 2017 Study Paper on Financing Litigation18
by the British Columbia Law Institute, which examined the
traditional and alternative methods litigants use to pay for
litigation, also continues to generate interest in the legal
and funding community.

Competition
In Canada we enjoyed a first-mover advantage and,
having demonstrated a viable market, the competition is
arriving. One global competitor opened an office in early
2019 and others are testing the market on a fly-in-fly-out
basis. Some (US) hedge funds and (UK) brokers are also
exploring the Canadian market.

Addressable market
In addition to its diversified domestic economy, Canada’s
abundant natural resources invite international investment
and trade, which in turn drives demand for legal services,
including dispute resolution. Corporate profit is expected
to increase and, when profits are strong, companies are
often more inclined to pursue their legal claims.

The Canadian legal services market has undergone
growth and is estimated at $27.7 billion in 2018-19. The
market is projected to grow at an annualised 3.0% over
the next five years to reach $32.16 billion in 202319.

Total Estimated Addressable Market
for Canada

$27.7bn

$1.9bn

$3.8bn

Total Estimated Annual Market Legal Spend

Estimated Litigation Portion of Total Legal Spend

Estimated Total Addressable Market as % of Total Legal Spend

Approximately $3.76 billion20 is currently spent annually
on litigation, suggesting a likely plaintiff pool of $1.9 billion.
However, these figures only reflect legal work outsourced
to external legal providers. As observed in other markets,
corporations in Canada increasingly rely on in-house
counsel. Furthermore, some companies are not pursuing
meritorious claims. Both these scenarios suggest there
is potential application for funding which is difficult to
quantify. In addition, defence funding would increase
the market potential. These considerations point to
an addressable market that is potentially larger than
available empirical research implies.

“ Many of our clients focus on creative fee
solutions, and Bentham’s presence in
the Canadian market is of enormous
value. They are collaborative and have
substantive knowledge and expertise.”

Jennifer Teskey
PARTNER, NORTON ROSE FULBRIGHT CANADA LLP

Interest in Bentham
IMF continues
to accelerate in
Canada. Thanks to
our hard-working
and top calibre
team we are on a
fantastic footing
to succeed
alongside
our clients.

Paul Rand
CHIEF INVESTMENT OFFICER
CANADA

20. Ibid, p 14

OverviewFinancial Report Shareholder Information Directors’ Report IMF Bentham Limited Annual Report 2019Chairman’s
and Managing
Director’s Report
continued

EMEA

This year IMF Bentham officially launched
its subsidiary, IMF EMEA, and opened a new
office in London on 1 November 2018.

IMF EMEA provides finance and strategic services for
disputes across the UK, continental Europe, the Middle
East and Africa. Given the investment opportunities
across these diverse markets, we continue to explore
opportunities for strategic partnerships as well as
organic growth.

Regulatory environment
The regulatory environment differs across the jurisdictions
covered by the EMEA umbrella.

In the UK, funders can be held liable to pay adverse
costs. The ‘Arkin cap’21 has previously limited that
exposure to the amount of a funder’s investment.
However, in April 2019, a High Court ruling22 determined
the Arkin cap did not automatically apply in all cases,
which potentially exposes funders to a higher degree
of adverse costs exposure. This decision may impact
funders’ risk assessments when determining whether
to invest in English claims. However, the judgment also
indicates that the English courts are increasingly prepared
to accept intervention by commercial funders who are
rigorously managing costs. Funding in the UK is otherwise
self-regulated and there is a voluntary code of conduct
promulgated by the Association of Litigation Funders.

In continental Europe, most countries are civil law
jurisdictions and maintenance and champerty restrictions
do not apply. Third-party finance is largely permitted and
its acceptance is growing in many European countries.
Since continental Europe encompasses many diverse
nations, we will not attempt to cover here the regulatory
environment in each jurisdiction.

In the Middle East and Africa there is particular market
demand for arbitration and debt recovery, and the
regulatory environment is allowing third party funding
of such disputes to grow. Some recent legislative
developments in the Middle East, such as a new federal
arbitration law in the United Arab Emirates and a new
Bankruptcy Law in Saudi Arabia, are likely to result in
the region attracting more dispute resolution work and
a growing demand for our services.

21. Arkin v Borchard Lines Ltd & Others [2005] EWCA Civ 655
22. Davey v Money & Anor [2019] EWHC 997 (Ch)
23. Association of Litigation Funders, England & Wales, www.

associationoflitigationfunders.com

24. http://worldpopulationreview.com/countries/emea-countries

Competition
There are at least 10 established funders headquartered
in the UK23 and the funding market has become highly
competitive with the inclusion of contingency law firms
and other business models. Although continental Europe
currently has less competition than the UK, funders are
increasingly exploring opportunities there.

Anecdotally we also see overseas funders participating
in the Middle East, alongside small local funders (whose
limited financial capacity excludes them from our
competitive orbit).

Addressable market
Given the expanse and diversity of the countries
harboured under the EMEA umbrella, it is difficult to
accurately assess the addressable market on a regional
basis. It is estimated that the region contains over two
billion people across 116 nations speaking around 2,000
different languages24. Our strategy is focused on achieving
sustainable growth in the most developed common law
and civil law legal services markets, whilst evaluating
opportunities in other non-core markets on a case
by case basis.

Total Estimated Addressable Market
for United Kingdom

$58.5bn

$7.7bn

$15.4bn

Total Estimated Annual Market Legal Spend

Estimated Litigation Portion of Total Legal Spend

Estimated Total Addressable Market as % of Total Legal Spend

Growing IMF’s newest
office across this diverse
region is exciting. We
combine our international
brand with local
knowledge, and we bring
skills to the table alongside
our capital. We are
growing by listening
and responding to our
customers’ needs, whether
they are individuals, law
firms, SMEs or multi-
national corporates.

Oliver Gayner
HEAD OF EMEA

OverviewFinancial Report Shareholder Information Directors’ Report IMF Bentham Limited Annual Report 2019Chairman’s
and Managing
Director’s Report
continued

The European legal services market, including the UK,
reportedly grew by 3% in 2018 to reach $240.9 billion25.
By 2023, the European legal services market is forecast
to have grown a further 13.8% to reach $274 billion26.

The European market is largely driven by the UK,
Germany and France which are all primarily dominated
by large, international law firms27. In 2018, the German
legal services market alone was valued at an estimated
$36.6 billion28 and the French legal market was valued at
$42.8 billion29. The UK legal market is the second largest
in the world, after the US, with an estimated value of
$58.5 billion in 2018-1930. Industry revenue is forecast to
rise at a compound annual rate of 1.9% to $64.27 billion
by 202431.

Contributing factors include anticipated growth in the
number of businesses operating in the UK, increased
M&A activity and property transactions, and demand
for legal services associated with navigating Brexit32.
A great deal of dispute resolution work in the UK involves
international businesses, cross-border investments
and trade33. London is a major global financial centre and
many international disputes involve parties transacting
in the UK or seeking resolution through the UK legal
system34. Approximately 26.3%35 of the legal market
is attributed to areas of law relevant to our business,
representing a sizeable opportunity for our products
and services.

The legal services market in the Middle East36 is
estimated at $9.53 billion37 annually, representing 1%
of the global market. In the Middle East, the proliferation
of arbitration centres38, supported by courts applying
common law, has led to growing acceptance of
arbitrations seated in the region. Cases typically relate
to infrastructure construction disputes involving parties
from Europe and Asia and recoveries claims on behalf
of the global financial services sector.

The Middle East
attracts many of the
world’s leading multi-
national corporations
and presents a market
that is ideally suited to
our dispute resolution
finance product and
service.

Nathan Landis
INVESTMENT MANAGER

BERMUDA

CAYMAN
ISLANDS

25. MarketLine Industry Profile, January 2019, Legal Services in Europe, Reference 0201-0423, p 2
26. Ibid, p 2
27. MarketLine Industry Profile, January 2019, Global Legal Services, Reference 0199-0423, p 7
28. MarketLine Industry Profile, January 2019, Legal Services in Germany, Reference 0165-0423, p 2
29. MarketLine Industry Profile, January 2019, Legal Services in France, Reference 0164-0423, p 2
30. Shamsuddin, Y, February 2019, IBISWorld Industry Report M69.100 Legal Activities in the UK, p 5
31. Ibid, p 5
32. Ibid, p 9
33. IRN Research & Orchard Reports, February 2019, (9th Annual) UK Legal Services Market 2019:

Market Trends Report, p 56

34. Ibid, p 59
35. Shamsuddin, Y, February 2019, IBISWorld Industry Report M69.100 Legal Activities in the UK, p 14
36. Middle East comprises Egypt, Israel, Saudi Arabia, and United Arab Emirates, MarketLine Industry

Profile, January 2019, Global Legal Services, Reference 0199-0423, p 7

37. MarketLine Industry Profile, January 2019, Global Legal Services, Reference 0199-0423, p 11
38. Abu Dhabi, Qatar, Dubai

SWEDEN

NORWAY

DENMARK

IRELAND

NETHERLANDS

UNITED

KINGDOM

GERMANY

BELGIUM

POLAND

CHANNEL

ISLANDS

CZECH

REPUBLIC

AUSTRIA

FRANCE

SWITZERLAND

ROMANIA

SERBIA

SPAIN

PORTUGAL

ITALY

ALBANIA

GREECE

TURKEY

GEORGIA

AZERBAIJAN

CYPRUS

LEBANON

ISRAEL

IRAQ

IRAN

KUWAIT

LIBYA

EGYPT

SAUDI

ARABIA

BAHRAIN

QATAR

UNITED ARAB

EMIRATES

OMAN

NIGERIA

CAMEROON

SUDAN

ETHIOPIA

SOMALIA

KENYA

TANZANIA

LESOTHO

SOUTH

AFRICA

Jurisdictions in EMEA connected with recent funded cases and funding applications

SWEDEN

NORWAY

DENMARK

IRELAND

NETHERLANDS

UNITED
KINGDOM

GERMANY

POLAND

BELGIUM

CHANNEL
ISLANDS

FRANCE

CZECH
REPUBLIC

AUSTRIA

SWITZERLAND

ROMANIA

SERBIA

BERMUDA

CAYMAN

ISLANDS

SPAIN

PORTUGAL

ITALY

ALBANIA

GREECE

TURKEY

GEORGIA

AZERBAIJAN

CYPRUS

LEBANON

ISRAEL

IRAQ

IRAN

KUWAIT

LIBYA

EGYPT

SAUDI
ARABIA

BAHRAIN

QATAR

UNITED ARAB
EMIRATES

OMAN

NIGERIA

CAMEROON

SUDAN

ETHIOPIA

SOMALIA

KENYA

TANZANIA

LESOTHO

SOUTH
AFRICA

OverviewFinancial Report Shareholder Information Directors’ Report IMF Bentham Limited Annual Report 2019At the State level, most reform proposals relate to
consumer funding regulation, a distinctly different area
of litigation finance than the commercial funding area in
which we operate. Nevertheless, we monitor all proposals
for their potential to tangentially impact commercial
litigation funding. There are no current proposals in our
key markets of New York, California and Texas which
present a material concern to our business model.

Competition
In the US, the market continues to grow. Although the
combined major and minor players could number around
100, we compete with a few dedicated, global funders for
investment mandates. We witness funders come and go
due to unsustainable investment choices and insufficient
resources to compete.

“ What I found with Bentham is that they
really were interested to get to know the
case, to get to know the parties... The
people with whom we dealt had practiced
this kind of law, so they understood how
it works. It was not like trying to explain
to a bank what the loan was for. They
understood perfectly well.”

Howard Brownstein
THE BROWNSTEIN CORPORATION PRESIDENT,
TRUSTEE AND INDEPENDENT CORPORATE BOARD MEMBER

Chairman’s
and Managing
Director’s Report
continued

USA

Our US operations commenced in 2011
and, since then, have expanded rapidly
and continue to grow and strengthen
in an increasingly competitive and
sophisticated market.

During this time we have helped to educate the market
and shape the evolution of the dispute resolution finance
industry from its infancy to what it is today. We are one of
the only funders offering a multi-office regional approach,
with Investment Managers on the ground in our main US
jurisdictions, including New York, Houston, Los Angeles
and San Francisco.

We continue to build strong relationships across the legal
industry and are now a preferred funder for many leading
law firms. Within the US, we have active relationships with
95% of the ‘AmLaw 100’ firms and in the past two years,
71% of those firms have approached or met with our US
team to discuss funding opportunities.

Regulatory environment
Commercial litigation funding in the US has progressed
beyond market formation and is now widely recognised
and accepted. Regulatory reform at the federal level
has now moved to focus on the mandatory disclosure
of funding, as opposed to the legality of funding. There
is proposed federal legislation seeking mandatory
disclosure of funding agreements in class actions and
multi-district litigation (MDLs) and we have joined industry
peers in advocating against this legislation as well as
proposed changes to the Federal Civil Rules concerning
mandatory disclosure. In our view, funded claimants
deserve protection from abusive and expensive discovery
and privilege must continue to extend to third-party
funders.

These proposals for mandatory disclosure have been led
by the US Chamber of Commerce, whose constituency
comprises some of the most powerful corporate entities
in the US and the world. The Chamber continues to lobby
government and, although the Federal Rules Committee
is considering the proposal, any developments are likely
to be some time away from being concluded.

Our expanding US team
includes experts with
significant expertise
in specialist areas of
law. This makes all
the difference when
developing bespoke
finance solutions
and strategies
for successful
resolution.

Allison Chock
CHIEF INVESTMENT OFFICER
US

OverviewFinancial Report Shareholder Information Directors’ Report IMF Bentham Limited Annual Report 2019Chairman’s
and Managing
Director’s Report
continued

Addressable market
Calculations of the addressable market in each of our
jurisdictions requires subjective interpretation, and the US
market is no different. There is consensus across sources
that the US legal services market is the largest in the
world, accounting for almost half of global legal revenue
in 2018, with most of the largest global firms located in
the US39. The US legal market is estimated at $471.5
billion revenue annually and industry revenue is projected
to increase at an annualised rate of 1.0% over the next
five years to reach $495.97 billion in 202440. Contributing
factors include the overall performance of the domestic
economy, a growing global economy fuelling cross-
border transactions, increasing investor confidence,
an influx of new laws and regulations in the US, and
a stricter regulatory environment, both domestically
and internationally.

Prolonged positive economic conditions are unlikely to
prevail but our business model thrives in both strong
and weak economies. Increasing corporate profits and
confidence can generate an uptick in corporate litigation,
as companies are more inclined to pursue their claims
when corporate profits are strong. Conversely, economic
downturns result in business failures, increasing disputes
and an inability for companies to self-fund their claims.
We are well-positioned to capitalise on either situation.

Approximately 36% ($169.7 billion) of the legal market
is attributed to commercial litigation. This single, largest
practice area reported growth in 201841 and momentum
is accelerating. In our 2018 Annual Report, we cited that
US spending on litigation was expected to grow 5.1% in
2018. According to some sources, the number of litigation
matters for large organisations increased by 9.5% in
2018, and is expected to grow another 6% in 201942.
Large companies increased their spending on litigation
by 8.6% from 2017 to 2018, and this is expected to
increase a further 4% in 201943. This means an additional
US$2.5 billion dollars will be added to the legal market in
2019. Virtually every segment of litigation is expected to
grow in 201944.

As in other jurisdictions, corporations in the US are
increasingly in-sourcing their legal work. The imperative
to achieve more with less will likely have a flow-on effect
on demand for our capital and our ‘skills plus capital’
business model.

Total Estimated Addressable Market
for United States

$471.5bn

$84.87bn

$169.7bn

Total Estimated Annual Market Legal Spend

Estimated Litigation Portion of Total Legal Spend

Estimated Total Addressable Market as % of Total Legal Spend

39. MarketLine Industry Profile, January 2019, Global Legal Services, Reference 0199-0423, p 8
40. O’Connor, C, February 2019, IBISWorld Industry Report 54111, Law Firms in the US, IBISWorld 2019, p 5
41. 2019 Report on the State of the Legal Market, Thomson Reuters Peer Monitor & Georgetown Law, p 5
42. BTI Litigation Outlook 2019, Changes, Trends and Opportunities for Law Firms, BTI Consulting Group, p 3
43. Ibid, p 3
44. Ibid, p 5

The culture here is
very open-minded,
respectful of people’s
opinions and
backgrounds.

Tina Young
CHIEF OF STAFF
US

OverviewFinancial Report Shareholder Information Directors’ Report IMF Bentham Limited Annual Report 2019Chairman’s
and Managing
Director’s Report
continued

Competitive Landscape
Lured by the potential for profitable returns, the global
funding market is growing. There are now a large number
of litigation funding entities active in our geographic
markets. Consequently, the aggregate funds available and
number of funded cases have also grown significantly.

Funding entities today range from publicly-listed, global
companies like ours to a plethora of domestic, private
entities or other investors in litigation such as hedge
funds, private equity firms, family offices, ad hoc investors
and contingency law firms utilising a variety of funding
strategies.

For us, being a third-party dispute resolution financier is
about much more than collecting and deploying capital,
and more nuanced than the private equity model of
involvement.
– Significant Capital

We have significant capital to finance large single
disputes and portfolios, all the way through trial if
required. This is essential to being a viable competitor
in today’s funding arena.

We have grown our Funds Under Management to
approximately A$1.9 billion this year, giving us one of
the largest war chests in the global funding industry.
Claimants, law firms, judicial bodies and opposing
parties all know that we are good for the money.
Our capital reserves bring comfort and confidence
to our funded clients and their legal advisers and
engender respect amongst our legal opponents.
Furthermore, our funds are predominantly managed
off-balance sheet, minimising the financial exposure
of our business.

– Strategic insights and project management
Our model is based on the proposition of bringing
value to each investment by way of strategic case
insights and, in many jurisdictions, assistance with
project execution. Not only does this help safeguard
our investments, but, importantly, it helps maximise
returns for funded parties.

Deploying cash with limited involvement may suit
the recourse-lending model of the finance sector,
but dispute funding is a specialised field traversing
finance and law. Deploying funds without ensuring
each dispute has a winning strategy would be flawed
underwriting, in our opinion. Good litigation strategy
and execution can mean the difference between
winning big or losing everything.

– Investment wisdom

Few (if any) competitors can claim an 89% success
rate over 18 years. Even fewer can demonstrate
average returns of 63% to their funded parties over
such duration. We have achieved these results
because our Investment Managers who identify
and recommend investments, and our Investment
Committee who vet each recommendation, have
hundreds of years of cumulative wisdom in law,
finance and business. These former judges,
attorneys, and business leaders are at the heart
of our investment savvy, and their expertise cannot
be replicated. Without equivalent expertise, funders
seeking to participate in this market are bound to
make calamitous mistakes and are unlikely to survive.

– Global footprint

Successful dispute investing today requires a
global footprint. Not only are disputes increasingly
international in nature (with multi-national parties,
geographically dispersed assets and international
laws), but geographic diversification is also an
essential element to a de-risked total investment
portfolio.

Our talent is dispersed across 14 locations in six
countries. Our Investment Managers, leadership and
support teams are permanently deployed throughout
the globe to identify quality investments and guide
them to fruition. We are neither remote nor fly-in-fly-
out transients.

We coordinate across our global network to identify
market trends, share learnings, insights and tools,
achieve efficiencies and harness opportunities
together. We have regular forums to cohere us
in our common goal.

When all is considered, there are very few market
participants left in our competitive realm.

Nevertheless, we are never complacent or arrogant. We
continuously scan our competitive landscape, analyse
the operations of industry participants, deconstruct their
strategies, calibrate and recalibrate our own strategy
where needed.

We focus forward through our
own windscreen, but keep a
watchful eye on our rear and
side mirrors to determine if
competitive adjustments are
required in response to the
actions of others.

Andrew Saker
MANAGING DIRECTOR AND
CHIEF EXECUTIVE OFFICER

OverviewFinancial Report Shareholder Information Directors’ Report IMF Bentham Limited Annual Report 2019Chairman’s
and Managing
Director’s Report
continued

Awards
We are always grateful to receive external endorsement that what we do matters and is noticed. We are honoured by
market acknowledgement of our skills and have been recognised for our excellence in numerous reputable sources.
Thank you to our peers and clients for your recognition. Below is just a sample of recent acknowledgment.

They act not just as a
funder, but also add their
own expertise in complex
litigation.

LEGAL PROFESSIONAL INTERVIEWED
BY CHAMBERS AND PARTNERS45

100 Leading Legal Consultants
and Strategists:

2018 and 2019 Andrew Saker and
Allison Chock recognised as leaders

2016 and 2017 Allison Chock and
Charlie Gollow recognised as leaders

2019 Chambers and Partners:
the only funder to receive Band 1
ranking across APAC (Australia and
Asia) and one of only two funders to
receive Band 1 ranking in the US

2018 Chambers and Partners:
received Band 1 ranking in the US

2018 The Recorder: ranked number 1
‘Law Firm Funding Provider’

2017 The Recorder: recognised in
‘Best of 2017’ list for ‘Best Litigation
Funding Provider’ and ‘Best Law Firm
Funding Provider’

2019 Leaders League:
ranked ‘excellent’ for litigation
and arbitration funding in the
UK and US

2019 FT Innovative Lawyers Awards:
Asia Pacific highly commended
funding of SIAC arbitration with leading
international law firm

2018 Canadian Lawyer Readers’
Choice Award: as a top litigation
funder

2017 Corporate LiveWire
Innovation & Excellence Awards:
Noah Wortman awarded ‘Excellence
in Class Action Services award’

2018 and 2019 ALM’s Best
of The Recorder and Best of
The Connecticut Law Tribune:
number 1 litigation funding
provider46

2017 Corporate Counsel:
recognised as one of the Nation’s
Best Commercial Litigation Funding
Providers in ‘Best of 2017’ list

2019 The National Law Journal:
Recognised in ‘Best of 2019’
list for ‘Law Firm Funding
provider’ category

2019 Legal Times:
number 1 Commercial
Litigation Funding Provider

45. Independent global ranking agency, benchmarking legal industry participants since 1990. Now covering 185 jurisdictions.
46. ALM (formerly American Lawyer Media) is a media company and provider of specialised business news and information,

whose focus includes the legal sector.

Risk Management
Some of the risks our business faces are common
to many enterprises today, and some are particular
to our industry. We employ strategies for identifying,
quantifying and mitigating each.

Portfolio concentration
The most obvious risk in our industry is the potential to
lose a case and be exposed to adverse costs in ‘loser
pays’ jurisdictions. We have numerous strategies to
attenuate this exposure.

Firstly, we temper the exposure to any one investment
by consciously diversifying our portfolio. This involves
varying the types of cases in which we invest, the
jurisdictions in which we operate and expanding the
size of our total global portfolio.

Secondly, we now finance our investments through
a series of funding vehicles in which IMF Bentham is
a minority investor to minimise exposure on our own
balance sheet.

Existing Portfolio –
geographic and size diversification

t
n
e
m

t
i

m
m
o
C

t
n
e
m
t
s
e
v
n

Investments*

Australia

Canada

Asia

United States

EMEA

* Excluding Wivenhoe and Westgem

Thirdly, and perhaps most significantly, we choose
very carefully which disputes we will invest in. It takes
significant expertise and experience to assess the risks
associated with disputes, determine which risks are
acceptable, forecast likely risk-adjusted returns, and then
navigate the exposures competently. Fortunately, we are
home to some of the industry’s most experienced and
talented decision-makers whose collective wisdom has
produced an 89% success rate across 192 cases over
18 years.

And finally, for those investments that require specific
cover, we engage leading insurance and other
advisers to help quantify the risk and develop bespoke
coverage solutions.

Although our investments in Wivenhoe and Westgem
present a concentration issue in our portfolio, we expect
both cases to complete in FY20, unless appealed.
We also acknowledge that both investments reflect a
prior approach of investing on our own balance sheet
- a model which has since been addressed by our
capital diversification strategy.

Competition
There is always the potential for a competitor’s actions
to impact our business. For example, a competitor can
impact the reputation of the whole industry through their
conduct or attempt to gain market share through pricing
or other strategies.

We respond to competitive threat with a differentiated
brand, innovative strategy, strong vertical and horizontal
relationships throughout the market, and agile business
operations.

There are significant barriers to entry in our industry.
Success requires significant capital reserves to build a
large and diverse portfolio, a global footprint to source
and service the best investments, a culture and reputation
that attracts and retains the best talent, a trusted brand
to win the best mandates, inimitable corporate know-
how, and an innovative business model. This combination
takes time and skill to cultivate, nurture and protect
- and many new entrants fail to gain a foothold or
achieve sustainability.

So, although there may be many apparent contenders
and some will engage in price competition to gain market
entry, few remain in the industry over time and, without a
sustained track record, the market does not trust them
with funding opportunities.

Regulatory reform
We live in a world of continuous disruption. For all
businesses, change is almost ever-present. Our industry
is still in its growth phase and regulatory reform and
common law developments are inevitable. Reforms
are taking place in several of our key markets, and
we expect more in future.

Remaining abreast of developments affecting our
industry and our business is not only essential to
meeting our obligations as a publicly-listed entity,
but also to upholding our company values. We seek
to contribute to developments where appropriate and
lead improvements where possible.

OverviewFinancial Report Shareholder Information Directors’ Report IMF Bentham Limited Annual Report 2019
Chairman’s
and Managing
Director’s Report
continued

In many jurisdictions, the regulatory categorisation
of dispute resolution finance has not been directly
addressed by the applicable legislature. As the global
industry grows, this is likely to change, and a number
of markets may see regulatory and legislative bodies
addressing these issues either in the manner adopted
by Australia (which provides a conditional exemption to
the panoply of legal requirements for financial products)
or through other avenues. IMF Bentham continues
to monitor the position and contribute to applicable
regulatory consultations and adapt as required to
comply with any resulting regulatory changes.

In February 2019 Australia amended its whistleblower
legislation (effective 1 July 2019)47. These amendments
to the Corporations Act create a consolidated and
expanded whistleblower protection regime that will
apply to most businesses in the corporate, financial and
credit sectors. Although we have until 1 January 2020
to implement a compliant whistleblowing policy in our
business, we are prudently updating our existing policies
and procedures now to ensure compliance.

Australia is also presently strengthening its foreign
bribery compliance and enforcement framework and we
anticipate the passage of new legislation48 later in 2019.
The proposed legislative reform recognises Australia’s
need for a tighter anti-foreign bribery approach to bring
Australia into line with international standards (including
the transformative schemes in the US and UK). The
legislation encourages a corporate culture of integrity and
compliance by requiring companies to self-report foreign
bribery offences and by imposing strict liability offences
for failing to prevent foreign bribery. The Australian
Government has issued self-reporting guidelines
for corporations.

IMF Bentham conducted the annual review of its Conflict
Management Policy in accordance with ASIC Regulatory
Guide 248. This guidance provides that litigation funders
are required to conduct reviews and maintain written
procedures identifying and managing conflicts of interest.
The review determined that IMF Bentham has robust
arrangements in place to identify and assess divergent
interests and conflicts, and to respond as needed. The
conflicts management policy is suited to the nature, scale
and complexity of the litigation schemes funded.

The Modern Slavery Act 2018 came into effect in Australia
on 1 January 2019 and targets modern slavery and
human trafficking in supply chains. Activities such as IT
procurement (e.g. outsourcing information technology
functions to low-cost countries), e-waste disposal, and

47. Treasury Laws Amendment (Enhancing Whistleblower

Protection) Act 2019

48. Crimes Legislation Amendment (Combatting Corporate

Crime) Bill 2017

facilities management (such as cleaning and building
maintenance undertaken by underpaid workers), all give
rise to the risk of modern slavery. Consistent with the
culture and values of our business, we support closing
the governance gap inherent in global supply chains and
increasing transparency. Companies above a threshold
level that carry on business in Australia will be required to
release a Modern Slavery Statement at the end of FY20.

Privacy and spam legislation also applies in many of the
jurisdictions where we operate and this year we reviewed
our compliance for our EMEA, Asia and Australian
operations to ensure we meet compliance obligations.

Our US operations (Bentham Capital Management, LLC)
are registered as an Investment Adviser in the US and
accordingly our people are subject to the rules of the
Securities and Exchange Commission (SEC) regarding
insider trading, the treatment of material non-public
information, receipt of gifts and entertainment, political
contributions, record keeping, e-mail retention, marketing
activities, investor communications, and more. The
impact of SEC rules on our business is managed under
a comprehensive compliance program. Our US-based
people and key members of our leadership team
complete quarterly attestations regarding compliance
and we will undergo an SEC audit as a standard
procedure in future.

Key-person dependency
Our company is home to some of the founders and
global leaders of the third-party dispute resolution finance
industry. Their highly valuable tacit knowledge has helped
us achieve our track record of success over 18 years.
We are tremendously grateful for, and respectful of,
their contribution.

However, a well-managed company is never dependent
upon the performance of one or a few individuals. It is
essential to business continuity and future performance
that no one person has sole custody of some critical
institutional knowledge, creativity, reputation, relationships
or experience that makes him or her indispensable.

Fortunately, in our business today it is the collective
wisdom, experience, industry relationships, reputations
and know-how that sustain and propel us and protect us
from individual departures. But size alone is not enough.
Culture and operational strategies are also important to
building organisational resilience.

We foster a culture that maximises employee
engagement and intrinsic rewards - both critical
factors in building loyalty and reducing ‘flight risk’. We
encourage passion and commitment, and we endorse
contribution and achievement through extrinsic rewards
including competitive compensation and attractive Short
Term and Long Term Incentive Plans (STIP and LTIP).

We provide our people with ongoing development
opportunities including training, coaching and mentoring
and undertake cross-training and succession planning
to enable our people to develop and perform some of
the responsibilities of others.

We have knowledge management methodologies to
document and share critical institutional knowledge within
our organisation and we deliberately share responsibility
for industry relationships across our team.

And finally, we protect confidential and competitive
information via IT security measures and employment
contracts which include robust clauses for non-compete,
confidentiality and IP protection.

OverviewFinancial Report Shareholder Information Directors’ Report IMF Bentham Limited Annual Report 2019Chairman’s
and Managing
Director’s Report
continued

Privacy and data security
The way companies acquire and use personal data is
under ever-increasing scrutiny. In Australia, the mandatory
breach notification regime introduced in February 2018
is making businesses more publicly accountable for data
breaches. Across Asia the data protection landscape
has been rapidly changing for the last few years as new
regulations come into force.

In the EU, the General Data Protection Regulation (GDPR)
commenced in May 2018 and a proposed ePrivacy
Regulation is due to be released later in 2019. The GDPR
introduced new obligations for collecting, keeping and
using data. Its extraterritorial reach applies to businesses
established in the EU as well as those whose activities
reach people located in the EU.

To meet our obligations under this regime, we reviewed
compliance for our EMEA, Asia and Australian operations
this year including checking our standard contracts,
updating our Privacy Policies, internal procedures
and our consent requirements.

Our business captures limited amounts of personal
data and information from clients, so our obligations
under privacy and data protection regulations are less
extensive than for many other organisations. In addition
to scrutinising the collection and usage of personal data,
regulations also require us to safeguard the storage of
any data. We cover this below.

Robert Riggio
IT SUPPORT ENGINEER

Cyber-security
Cyber-attacks, in their many forms, are increasing for
today’s businesses. Fortune Global 500 companies
recently reported a 944% increase, on average, in the
number of attacks49. However, there is no correlation
between an organisation’s size and its vulnerability
and all businesses must remain vigilant.

Today’s attacks commonly use social engineering to
target employees, customers, suppliers and other
stakeholders in countless ways and across new digital
channels. Attackers often impersonate trusted senders
to entice victims to open malicious attachments,
download malware, click unsafe links, divulge confidential
information, share sensitive files, release funds, and more.

Protecting any business from such threats involves
constantly monitoring who is being targeted, how
they are being targeted and having swift responses
as well as proactive strategies. We employ a variety of
people-centric cybersecurity tactics, including regular
training and simulated attacks for all our people to
identify those who are particularly vulnerable and to
customise preventative measures. We enlist all our
people throughout our global company as the first line
of defence in protecting our data and commercially
sensitive know-how.

We also recognise that the targets, motives and
objectives of attackers constantly change, are not
always apparent and can even sometimes be random
and opportunistic. Accordingly, we supplement our
social engineering strategies with significant investment
in security hardware, software, systems and policies
to prevent attacks and detect new attack tools,
methodologies and targets - and learn from them.

In December 2018 we completed a significant, periodic
upgrade of all hardware and software in our off-site
primary data centre to ensure all systems remain state-of-
the-art. We regularly submit to external IT security audits
and continuously adjust our IT approaches. Being nimble
is an important element of being safe.

IT risks are ever-present for all businesses today and
we remain vigilant throughout our business at all times.

Brand and reputation
We have carefully built and nurtured our brand for nearly
twenty years, establishing our reputation for successful
outcomes, strategic insights, fairness and integrity.
So naturally, we are very protective of our brand and
very cautious not to knowingly do anything that may
cause it harm.

As dispute resolution financiers, we see the aftermath of
corporate brand degradation and reputational damage
on a frequent basis and we plan to never be in that
position ourselves.

We know how easily a brand can be tarnished by internal
or external forces. Damage can occur overnight from a
single, cataclysmic event, or be gradual and insidious.
Parties who seek to do harm can sabotage or undermine
a brand with intentional misinformation and in-house
resources can cause erosion by unwittingly acting, or
failing to act, in accordance with brand values.

We take numerous steps to protect our brand from
internal factors. We restrict those who are authorised to
speak on behalf of the company, ensure employment
contracts and policies forbid certain conduct and
communicate expectations during on-boarding and
ongoing education programs. Thankfully, our people
are highly educated, sophisticated professionals who
understand their enduring role as brand ambassadors.

We are also pragmatic enough to realise that even the
most robust precautions cannot prevent some events.
We are never immune to external attack or an accidental
omission or transgression by one of our own. Should this
occur, we would endeavour to be swift and successful in
our response and repair.

We would also hope that our past, exemplary
conduct would stand us in good stead to weather
any temporary storm. As an ASX-listed company,
we have communicated regularly and transparently
with the market for 18 years and have displayed our
trustworthiness and sensibility to the business media
as well as industry commentators and participants. We
have openly shared our position on key issues facing our
industry (regulation, case updates and the like) and will
continue to communicate honestly and exercise caution
when it comes to protecting our brand and reputation.

We thank you for your ongoing trust.

49. Proofpoint, Inc, Winter 2019, Protecting People: A Quarterly

Analysis of Highly Targeted Cyber Attacks, www.proofpoint.com

OverviewFinancial Report Shareholder Information Directors’ Report IMF Bentham Limited Annual Report 2019Chairman’s
and Managing
Director’s Report
continued

Governance
In February 2019 the ASX released the fourth edition
of the ASX Corporate Governance Council’s Corporate
Governance Principles and Recommendations. The
new Principles will take effect for IMF from the start
of FY21 and focus on organisations “acting lawfully,
ethically and responsibly”, including taking account
of a range of stakeholders beyond just shareholders.
These Principles complement recent legislative reforms
regarding whistleblowing, anti-bribery and corruption.

The Recommendations also address corporate
governance practices, including articulating values and
reporting on material breaches of a company’s policies
and Code of Conduct.

The new Principles introduce the concept of reputation
and stipulate that companies must consider the society
and environment within which they operate as well
as their commercial imperatives. This is a significant
development, reflective of the findings of the Banking
Royal Commission mentioned earlier in this Report.

Being listed on the ASX and a
registered investment adviser
with the SEC involves significant
compliance. Our legal and risk
function has evolved to meet the
needs of the business and will
continue to do so.

Jeremy Sambrook
GENERAL COUNSEL AND
COMPANY SECRETARY

Realised and unrealised gains
Our investments in litigation assets are recognised
as intangible assets in our financial statements. This
means our investments are recorded at cost (less any
impairment) as funds are outlaid on each investment.
They do not include movements in the embedded value
of the assets. At the conclusion of each investment
(i.e. when a case resolves), the intangible asset is
de-recognised and is offset by the proceeds (in the
case of a successful resolution) from the investment,
resulting in a profit or loss on our original investment.

Some third-party dispute resolution funders adopt
accounting practices that allow for fair value adjustments
of the life of a litigation investment. This results in
unrealised gains and losses being recognised in the profit
and loss statement and associate movements in the
carrying value of the investment in the balance sheet.

Funds management
Only a few years ago, IMF Bentham invested in litigation
assets directly from its own balance sheet and accounted
principally to shareholders and funded claimants. Today,
our business is a fund manager and investment adviser
with duties to a broader stakeholder community whose
investors include an endowment fund from one of the
world’s leading prestige tertiary institutions. Our investors
entrust us with significant funds to manage and we are
now regulated by the SEC as a registered investment
adviser. Our obligations are extensive and we take
them very seriously.

Compliance and risk
management are embedded
in our culture. Our people
ask questions, continually
educate themselves, take
ownership of their decisions
and actions, and act
with integrity.

Chris Young
CORPORATE COUNSEL AND
US CHIEF COMPLIANCE OFFICER

OverviewFinancial Report Shareholder Information Directors’ Report IMF Bentham Limited Annual Report 2019Chairman’s
and Managing
Director’s Report
continued

Our people – how we make a difference
There are more funders in the market than when we
started our business, but our people are still our point
of difference. From our Board of Directors through to
our support teams, we continue to recruit and retain the
best in the industry, and we now have more than 100
specialists around the globe and a very high retention
rate. As a testament to our business, highly talented
people choose IMF Bentham and stay with us.

We provide skills as well as capital, with talented
Investment Managers assigned to safeguard our
investments, monitor costs and, most importantly,
support clients and counsel as they progress each
case. Many Investment Managers joining us from private
practice are attracted by the opportunity to draw on
a range of skills to lead game-changing investments
and be involved from due diligence to resolution.

Our people grasp the wider impact of their work and they
are inspired by it. They are also attracted to working for
an agile business with a global impact.

Across our organisation, our people have all previously
built successful careers and developed commercial
acumen as in-house corporate counsel, barristers,
business leaders, financiers, company directors and
technical experts across a range of sectors.

Attracting the best, and then rewarding and recognising
their performance, goes beyond our competitive
remuneration scheme and incentive plans.

One of the hallmarks of an IMF
investment is the rigour of the
due diligence and review process.
By the time a case reaches the
Investment Committee it has
already been thoroughly vetted
by an Investment Manager.
We then examine it from all
angles before deciding to fund
and our decision has to be
unanimous. I enjoy drawing
on my experience to bring my
perspective to the process.

The Honourable John Sulan QC
FORMER JUSTICE OF THE SUPREME COURT OF
SOUTH AUSTRALIA, INVESTMENT COMMITTEE

No two cases are the same.
I enjoy the challenge of adapting
our system and processes to get
the right information to support
the investment managers
and lawyers.

Amanda Kodnik
CLIENT LIAISON TEAM LEADER

Our people are knowledge workers in a global
organisation, operating across multiple time zones.
As we increasingly fund matters in multiple jurisdictions,
it is essential for teams to have the infrastructure
and technology to support them, to ensure they
are connected wherever they are in the world.
Equally, it is vital for teams to be supported in their health,
safety and wellbeing. Staff are encouraged to make
wellness a priority and are supported to do so. We also
have policies in place to support a safe work environment
for our employees, contractors and visitors.

Our leadership are a bright, hard-working, dedicated
team committed to the course.

All investment mandates require the approval of our
Investment Committee, a group of our most senior
and seasoned executives, and former members of the
judiciary and legal profession. Wise investing requires
longevity, and because people stay with us for the long-
term, we retain the expertise and relationships which
make us stand out from the rest.

We continue to be supported by an actively engaged
Board who draw on their international experience,
expertise and relationships to guide the ship.

Supporting the IMF Bentham business
All the work of the investment and leadership teams is
bolstered by dedicated experts in marketing, finance,
client service and IT, who constantly strive to bring
best practice to what they do. Our Client Liaison
team based in Perth manages the administration of
all class member claims in our multiparty actions.
This involves signing up thousands of clients,
looking after their claim files and keeping them
updated on case progress. In the last year,
the team has worked with our developers
to introduce an online registration process
and can field hundreds of queries a day
through a dedicated 1800 telephone
number and email address. Together
with our IT Development team, the
Client Liaison team constantly
adapts our proprietary Online Client
Administration (OCA) database to
provide the right mix of information
to our Investment Managers and
the external lawyers representing
the class members to manage the
case as efficiently as possible. In
the last year, the two teams have
collaborated to refine the myIMF
online portal.

OverviewFinancial Report Shareholder Information Directors’ Report IMF Bentham Limited Annual Report 2019Chairman’s
and Managing
Director’s Report
continued

Attracting and retaining people
with a wide variety of perspectives
and life experiences helps us make
better choices as a business.

Nickolas Tzoulas
ASSOCIATE INVESTMENT MANAGER
AND LEGAL COUNSEL

Diversity and inclusion
A diverse team, led inclusively, is an engaged team,
bringing better outcomes for business and market share.

The Workplace Gender Equality Act 2012 mandates
annual reporting by organisations employing 100 or
more people in Australia. While our own team of 101 is
employed in six countries around the world, we recognise
the importance of being transparent. IMF Bentham stands
out in what have been traditionally male-dominated law
and finance industries for having women throughout the
ranks - including at the Board, senior management and
investment management levels. This year we are even
closer to gender equality, with women occupying nine
of our management and leadership positions:
– Two Board members
– Two Chief Investment Officers

(of our largest markets)
– Two Chief Marketing Officers
– Chief of Staff
– Global Fund Financial Manager
– Head of Client Liaison team

Women also represent:
– 37% of our Investment Managers and Legal

Counsel worldwide

– 50% of our Investment Managers and Legal

Counsel in the US

– 50% of the lawyers in our corporate in-house

legal team

We are aware gender pay gaps persist in some
workplaces and actively moderate our own remuneration
approach to deliver equitable compensation for
comparable roles and performance. This applies from
our most junior to the most senior appointments.

Recognising that diversity goes beyond gender, we value
the contribution of people with differences in background,
experience and perspectives. Our people hail from all
corners of the globe, including North America, South
Africa, Europe, Asia, Australia and New Zealand, and
speak 16 languages, from Afrikaans, Arabic and Bangla
to Mandarin, Spanish and Tamil.

We continue to recruit and promote on merit, and aspire
to lead a culture of innovation, collaboration and creativity,
all of which are the hallmarks of inclusivity.

Examples of our impact
Dispute resolution finance assists individuals, commercial
enterprises or other groups and entities. When that
finance is accompanied by the strategic know-how
of dedicated Investment Managers, the impact can
be significant.

Below are case studies and perspectives of some who
have been assisted by our product and service. Their
positive feedback and their success is our intrinsic
reward. It demonstrates that what we do matters and
matters greatly. And this ability to make a positive
difference inspires us every day.

Our finance is helping a Canadian engineering
company pursue a claim against major US
pipeline and gas processing companies
We are financing JL Energy Transportation Inc’s
(JETI) claim against the Alliance Pipeline, originally a
conglomerate of 22 of North America’s largest energy
companies, and now owned by three of the largest
energy players in North America. JETI invented and
patented technology for transporting enriched natural gas
via high-pressure pipeline from Canada to the lucrative
US market and licensed it to the Alliance Pipeline. A
dispute arose when this technology was allegedly used
outside the scope of the licences, without authorisation
or financial compensation.

“ We remain appreciative to have Bentham
on board to successfully defend our patent
and fund our continuing actions as their
significant due diligence, capital at risk,
and proven track record, validates our
confidence in our long-standing claims.”

John Lagadin
PRESIDENT, JETI

Our finance is helping an entertainment owner-
operator pursue a claim against a global
entertainment technology company
We are financing a Lebanon-based movie theatre
developer and operator in its claim against a global
entertainment giant to pursue damages for more than
CAD$140.5 million. It is alleged that when the respondent
terminated contracts to build luxury projection theatres
in Doha, the opportunity was awarded to a competitor
who used the claimant’s confidential and proprietary
designs. The client chose our dispute resolution finance
solution instead of self-funding so it could prioritise
its own funds for the core business of developing
entertainment projects.

Our finance is helping forestry scheme investors
recover their retirement savings
We are funding claims against Australian Executor
Trustees (SA) Ltd (AET) in its capacity as trustee of the
SEAS Sapfor (Southern Australian Perpetual Forests)
scheme for negligence and breach of trust. AET is part
of the IOOF Group, one of Australia’s largest financial
services businesses. Many of the 4,500 investors in this
claim are elderly people who lost part of their retirement
savings when the scheme collapsed following a takeover
by the Gunns Group which subsequently became
insolvent. Without IMF Bentham’s funding, these investors
would not be able to access justice for their losses. The
Supreme Court of NSW heard the trial over eight days
from 1 July 2019 and judgment is now awaited.

Our finance recovered losses for investors
in a major Australian dairy food producer
We funded a class action against Australian dairy food
producer Murray Goulburn Co-operative Co Limited
(MG) and MG Responsible Entity Limited (MGRE) which
alleged MGRE distributed misleading statements and
breached Australian corporate disclosure rules. The
parties agreed to a $42 million settlement in June 2019
(subject to court approval and without any admission of
liability on the part of MG or MGRE) enabling investors to
recover a significant proportion of their investment losses.
The claimant group was made up of both retail and
institutional investors.

“ For the plaintiffs to recoup such a
significant proportion of their losses is
an excellent result when at one stage our
investments seemed lost. It is a tribute to
the initiative and efforts of our solicitors
and litigation funder.”

Rod Gibson
DIRECTOR, ENDEAVOUR RIVER PTY LTD, LEAD APPLICANT

Our finance recovered losses for investors
in a training and labour hire firm
We funded an action on behalf of retail and institutional
investors against Ashley Services Group Ltd, a publicly-
listed Australian labour hire, training and recruitment
company. The investors claimed losses due to alleged
misleading statements and material omissions, and
breach of Australian corporate disclosure rules and
sought recoveries for their losses. A settlement of
$14.6 million was approved by the Federal Court
of Australia in June 2019 enabling investors to
recoup some of their losses, and proceeds are
to be distributed in the second half of 2019.

OverviewFinancial Report Shareholder Information Directors’ Report IMF Bentham Limited Annual Report 2019Chairman’s
and Managing
Director’s Report
continued

Corporate social responsibility
As we expand into new jurisdictions, we have a significant opportunity to make a social contribution. We have a track
record of financing cases that advance the public interest and enable people to assert their rights. We also support
initiatives to inform research, extend access to justice and opportunity, and develop the next generation of leaders.

Informing research and best practice

University of New South Wales, Sydney, Australia
In Australia, we continue our strategic alliance with the
University of New South Wales (UNSW) Class Action
Research Initiative, which explores and solves key issues
in class actions practice through academic research
and analysis. In FY19, we co-hosted a successful Class
Actions Conference with UNSW. The keynote address
was delivered by Sir Rupert Jackson, a former Lord
Justice of the Court of Appeal of England and Wales,
on the advantages of introducing costs management
and costs budgeting into class actions.

Monash University, Melbourne, Victoria, Australia
We continue to support substantial, independent
empirical research conducted by academics at Monash
University in Victoria, Australia. Research in FY19 has
focused on an empirical study of shareholder class
actions. The objective of the study is to ensure that law
makers, courts and the general community can rely
on accurate, comprehensive and current data about
shareholder class actions.

Civil Justice Research Initiative, University
of California, US
In the US we continue to support the Civil Justice
Research Initiative (CJRI). This think tank identifies and
produces highly credible, unbiased research on critical
issues concerning the civil justice system, to ensure
continued access to the courts. Allison Chock, Chief
Investment Officer - US, is a member of the CJRI’s
Advisory Board.

Mauritius Chamber of Commerce and Industry (MCCI)
Arbitration and Mediation Center (MARC) Court,
Mauritius
As a member of the MARC Court and chair of the Rules
Drafting Committee, Hong Kong-based Investment
Manager Cheng-Yee Khong was instrumental in
developing MARC’s innovative new Arbitration Rules,
which came into effect in May 2018. These Rules facilitate
swifter arbitrations, with greater transparency and
neutrality, while minimising time and costs. Cheng-Yee
also co-authored the MARC Guide to the Rules, which
was released in late 2018.

International Chamber of Commerce International
Court of Arbitration, China
In August 2018, Cheng-Yee Khong presented in a
three-day international arbitration training session for
Guangdong lawyers in Shenzhen, China. This was run
jointly by the International Chamber of Commerce (ICC),
Shenzhen Court of International Arbitration (SCIA), Moot
Alumni Association (MAA) and Guangdong Lawyers’
Association. The session and speakers’ interviews were
broadcast live and received over half a million hits on
social media by the second day.

Equality for women in law

ArbitralWomen
We support ArbitralWomen, an international non-
governmental organisation established to advance the
interests of women and promote female practitioners
in international dispute resolution. Dana MacGrath,
Investment Manager and Legal Counsel in our New York
office, is the current president of the Board of Directors.

Extending access to justice

Public Counsel, Los Angeles, California, US
We are an ongoing supporter of Public Counsel, the
largest pro bono law firm in the US. Public Counsel’s
activities are far-ranging and impact over 30,000
people every year, many of whom live at or below the
poverty level. Allison Chock is a member of the Board of
Directors.

Pro Bono Ontario, Toronto, Canada
Our team members in Canada volunteer their time as
pro bono counsel with Pro Bono Ontario, an organisation
which connects lawyers who want to donate their
services, with people who have legal needs but cannot
afford lawyers. In 2018, Pro Bono Ontario served nearly
29,000 Ontarians with nowhere else to turn, helping to
save the court system over CAD$5 million in costs in
the process.

Cases in the public interest
Our privileged position in the market means we can
promote access to justice for people and parties who
could not otherwise afford to make a claim. We support
local communities by financing cases which advance the
public interest including:
– redress for property and business damage due to

per- and poly-fluoroalkyl substances (PFAS) chemical
contamination of water supplies for three rural
communities in Australia

– representing more than 5,000 individuals and

businesses in a class action against dam operators
following the 2011 floods in the state of Queensland,
Australia

– representing owners, owners’ corporations and

leaseholders of buildings affected by combustible
polyethylene (PE) core cladding in claims against
the manufacturers.

Educating and supporting future generations
of legal practitioners

Queen’s University
Kingston, Ontario, Canada
Our team in Canada lectures to students completing
the Graduate Diploma in Legal Services Management.

Lawyers Feed the Hungry - a program of the Law
Society Foundation, Toronto, Ontario, Canada
Our team members in Canada provides financial support
and volunteers their time in support of Lawyers Feed
the Hungry, a program of the Law Society Foundation
that fights hunger year-round in eight cities across
the province.

Launched in Toronto in 1998, over the last 20 years
this important program has provided more than 60,000
hot and healthy meals annually. This is made possible
through the generosity of donors and the tireless
support of volunteers.

Osgoode Hall Law School, York University
Toronto, Ontario, Canada
We lecture to J.D. and LLM students in courses including
the Investor Protection Clinic.

The team also supports the University of Ottawa’s Career
Day for tomorrow’s legal leaders and makes an annual
donation to Pro Bono Students Canada, University
of Toronto.

OverviewFinancial Report Shareholder Information Directors’ Report IMF Bentham Limited Annual Report 2019

We want to be a company that
generates sustained success
through a clear and compelling
strategy, delivered in the context
of a strong ethical framework
that engenders the flourishing
of our staff and value for
our customers.

Michael Kay
NON-EXECUTIVE CHAIRMAN

Chairman’s
and Managing
Director’s Report
continued

Future Initiatives
Our FY20 is looking exciting (and busy!) and we
are energised by the path ahead of us.

Completions
We will focus on doing what we can to resolve some
of the major investments on our balance sheet. Both
Westgem and Wivenhoe have been long-running
disputes and we are keen to achieve completions for
both in the interests of funded claimants, and on behalf
of our shareholders.

We will also steward recent completions (Forge, Murray
Goulburn and Sirtex) through the usual court approval
process, which we expect to be finalised during
FY20. After the close of FY19, the claim against two
respondents in a confidential Australian matter settled,
and the shareholder class action against UGL settled in
principle. There was also a settlement in principle in a
confidential US bankruptcy investment and a settlement
in a confidential US appeal funding. Results will be
recorded in FY20.

Financing the corporate world
We have redoubled our efforts to engage with the broader
corporate market regarding the role of dispute resolution
finance in their suite of capital management tools. In
each of our jurisdictions we are fostering relationships in
commerce and actively pitching to more corporates and
developing bespoke solutions to address their capital
and risk management requirements.

Coordinating to pursue global fields of play
We are already well advanced in our engagement with
key markets in the areas of international arbitration,
insolvency funding and intellectual property. Our
specialist practitioners in these fields are working as
globally coordinated teams identifying opportunities
together and driving pursuits collaboratively.

Expanding our footprint
In FY20 we will be reviewing our global organisation
structure and streamlining operations for global
consistency and efficiency, as well as bonding our
expanding team around the world to our corporate
vision and culture. We will continue to grow our team
organically, with further expansion intended in the growth
markets of Asia, Canada and EMEA. These are all
significant undertakings.

Committing our new Funds to investments
Although it sounds self-evident in our business, our
main focus in FY20 will be to continue identifying quality
investments to grow the size and diversity of our global
investment portfolio. We now have sufficient capital
across our new Funds 4 and 5 to pursue more and
larger investment opportunities and compete fiercely for
mandates. And this is exactly what we will be doing.

We will continue to apply our expertise and experience
in multi-party actions in the Australian, Canadian
and European jurisdictions and focus on investment
opportunities in commercial litigation and international
arbitration across our wider geographic footprint.

Conclusion
It has been another big year for our company. Our team
has worked tirelessly on behalf of our claimants and our
shareholders and will continue to do so.

On behalf of the Board, we thank our shareholders for
their commitment to our business plan and faith in our
talented team. We also applaud our exceptional people
whose competency, enthusiasm and drive turn our goals
into reality. We now embark on the next exciting chapter
in the growth of our business and look forward to the
journey ahead. We are energised and excited by the
opportunities ahead.

Andrew Saker
Managing Director and Chief Executive Officer

Michael Kay
Non-Executive Chairman

OverviewFinancial Report Shareholder Information Directors’ Report IMF Bentham Limited Annual Report 2019Financial
Report

Directors’ Report .......................................................... 53
Auditor’s Independence Declaration ............................ 80
Statement of Comprehensive Income .......................... 81
Statement of Financial Position .................................... 82
Statement of Cash Flows ............................................. 83
Statement of Changes in Equity ................................... 84
Notes to the Financial Statements ................................ 85

A. RESULTS FOR THE YEAR

Note 1: Segment information .................................... 90
Note 2: Revenue ....................................................... 94
Note 3: Net (loss)/gain on derecognition

B. INTANGIBLE ASSETS

103

Note 10: Intangible assets ........................................ 103

C. CAPITAL STRUCTURE

105

D. WORKING CAPITAL, OTHER ASSETS
AND OTHER LIABILITIES

113

E. THE GROUP, MANAGEMENT AND
RELATED PARTIES

119

Directors’
Report

The directors of IMF Bentham Limited (“IMF” or “the Company” or “the Parent”) submit their report for the year ended
30 June 2019.

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 has been IMF Bentham’s Non-Executive
Chairman since 1 July 2015. He brings a wealth of
commercial experience, with a sound track record of
building successful businesses. Most recently he was Chief
Executive Officer and Managing Director of salary packaging
company McMillan Shakespeare Limited. He was previously
Chief Executive Officer of national insurer AAMI and before
that spent 12 years in private legal practice.

Mr Kay is Non-Executive Director of RAC Insurance Pty
Limited, and Chairman and Non-Executive Director of
City Chic Collective Limited. He retired as Chairman
and Non-Executive Director of Lovisa Holdings Limited
in October 2018, and as Chairman and Non-Executive
Director of ApplyDirect Limited in March 2019.

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 City Chic Collective Limited.

Mr Kay holds a Bachelor of Laws (University of Sydney,
Australia).

Andrew Saker
Managing Director and CEO
Andrew Saker was appointed Managing Director and Chief
Executive Officer on 5 January 2015. Since then, he has
led a transformational strategy of geographic expansion,
production diversification, and migrating IMF Bentham’s
business model from capital management to fund
management.

Mr Saker began his career at Ferrier Hodgson, a leading
provider of corporate recovery, insolvency management
and restructuring services throughout Australia and Asia.
Appointed partner in 1998, he went on to establish the
firm’s Indonesian practice in Jakarta. In his 26 years at
Ferrier Hodgson, he was involved in over 500 corporate
insolvencies and restructurings in Australia, Asia, North and
South America. He speaks regularly at industry conferences
and is frequently cited in the media and trade publications
regarding dispute financing, insolvency and restructuring.

During the past three years he has not served as a Director
of any listed company other than IMF Bentham Limited.

Mr Saker holds a Bachelor of Commerce in Accounting and
Finance (University of Western Australia). He is a Member of
the Institute of Chartered Accountants. Until his appointment
to IMF Bentham, he was an Official Liquidator of the
Supreme and Federal Courts.

IMF Bentham Limited Annual Report 2019OverviewDirectors’ ReportFinancial Report Shareholder Information Hugh McLernon
Executive Director
Hugh McLernon is one of the founders
and pioneers of the contemporary
dispute resolution funding industry. He
has been an Executive Director and
member of IMF Bentham’s Investment
Committee since 2001.

Mr McLernon is a lawyer by training.
In 1988, he retired after 20 years
of legal practice to commence the
litigation funding industry in Australia
through McLernon Group Limited. In
1990 he introduced the secondary life
insurance market into Australia through
the Capital Life Exchange. From 1996
to 2001, he was also the Managing
Director of the Hill Group of companies
which operates in the finance, mining,
property, insurance and general
investment arenas of Australia. In 2001,
Mr McLernon listed IMF Bentham
on the ASX. He was the inaugural
Managing Director from 2001 to 2004,
and then 2009 to 2015.

Previously, Mr McLernon worked as a
Crown Prosecutor and then barrister
at the independent bar, before joining
Clayton Utz for three years as a
litigation partner.

During the past three years he has
not served as a Director of any listed
company other than IMF Bentham
Limited.

Mr McLernon holds a Bachelor of
Laws degree (University of Western
Australia).

Michael Bowen
Non-Executive Director
Michael Bowen was a founding partner
of the Perth law firm Hardy Bowen
and became a partner of global law
firm DLA Piper in 2015. He practices
primarily corporate, commercial and
securities law with an emphasis on
mergers, acquisitions, capital raisings
and resources. Mr Bowen assists
the Managing Director on matters
concerning corporations law.

Mr Bowen was appointed to the
Board as a Non-Executive Director
in December 2001. He is Chair of the
Remuneration Committee, was Chair
of the Audit and Risk Committee until
4 April 2019 and is a member of the
Corporate Governance Committee and
Nomination Committee. Mr Bowen is
also a Non-Executive Director of Trek
Metals Limited (appointed 22 February
2017).

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.

Mr Bowen holds Bachelors of Law,
Jurisprudence and Commerce
(University of Western Australia). He
has been admitted as a barrister and
solicitor of the Supreme Court of
Western Australia since 1979, and is
also admitted as a solicitor of the High
Court of Australia. He is a Certified
Public Accountant and a member of
the Australian Society of Accountants.

Karen Phin
Non-Executive Director
Karen Phin has over 20 years’
experience analysing and advising
Australian listed companies in
the retail, banking, industrial and
natural resources sectors on capital
management, capital raisings and
mergers and acquisitions. Until 2014,
she was a Managing Director and
Head of Capital Advisory at Citigroup
in Australia and New Zealand. Prior
to joining Citigroup, she spent 12
months at ASIC as a Senior Specialist
in the Corporations group. From 1996
to 2009, Ms Phin was a Managing
Director at UBS AG, where she
established and led the Capital
Management Group.

Ms Phin is a member of IMF
Bentham’s Audit and Risk Committee,
Remuneration Committee, Nomination
Committee and current Chair of the
Corporate Governance Committee.
She has been a Non-Executive
Director of Magellan Financial Group
Limited since 2014 and a member
of the Takeovers Panel since 2015,
and a Non-Executive Director of ARB
Corporation Limited since June 2019.
During the past three years, she
has not served as a Director of any
company other than IMF Bentham,
Magellan Financial Group Limited
and ARB Corporation Limited.

Ms Phin holds a Bachelor of Arts and
Bachelor of Laws (Honours) (University
of Sydney, Australia) and is a graduate
of the Australian Institute of Company
Directors.

Directors’ ReportcontinuedWendy McCarthy AO FAICDLife
Non-Executive Director –
Retired 21 November 2018
Wendy McCarthy AO started her
career as a secondary school teacher.
She has since held many significant
leadership roles including as Deputy
Chair of the Australian Broadcasting
Corporation, Chancellor of the
University of Canberra and Chair of
Plan Australia. She is currently Deputy
Chair of Goodstart Early Learning,
Patron of the Sydney Women’s Fund
and Ambassador for 1 Million Women.

In 1989, Ms McCarthy was appointed
an Officer of the Order of Australia
and in 2003 received a Centenary
of Federation Medal for business
leadership.

Ms McCarthy was appointed to the
Board as a Non-Executive Director
in December 2013. Until retirement
from the Board on 21 November
2018, she was Chair of the Corporate
Governance Committee and
Nomination Committee, and a member
of the Audit and Risk Committee, and
Remuneration Committee. During the
past three years she has not served as
a Director of any other listed company.

Ms McCarthy holds a Bachelor of Arts
and Diploma of Education (University
of New England, Australia) and an
Honorary Doctorate (University of
South Australia). She is a Life Fellow
of the Australian Institute of Company
Directors.

Christine Feldmanis
Non-Executive Director –
Appointed 1 November 2018
Christine Feldmanis is a qualified
accountant, investment, governance
and risk management specialist with
over 30 years’ experience in the
finance and investment industry. She
was previously Managing Director
of an ASX-listed boutique funds
management incubator business and
Chief Finance Officer of the NSW
Treasury Corporation.

As a professional Non-Executive
Director and experienced Board
Committee Chair, Ms Feldmanis’
current Non-Executive Director roles
include Perpetual Equity Investment
Company Limited, FIIG Securities
Limited, Bell Asset Management
Limited and not-for-profit organisation,
Foodbank NSW.

Ms Feldmanis was appointed to the
Board as a Non-Executive Director
from November 2018 and Chair of the
Audit and Risk Committee from 4 April
2019.

During the past three years she has
not served as a Director of any listed
company other than IMF Bentham
Limited and Perpetual Equity
Investment Company Limited.

Ms Feldmanis holds a Bachelor
of Commerce (University of New
South Wales, Australia) and Master
of Applied Finance (Macquarie
University, Australia). She is a
Fellow of the Australian Institute of
Company Directors, Trustee Fellow
of the Association of Superannuation
Funds of Australia, Senior Fellow of
the Financial Services Institute of
Australasia and a Certified Practising
Accountant.

Directors’ ReportcontinuedIMF Bentham Limited Annual Report 2019OverviewDirectors’ ReportFinancial Report Shareholder Information Officers

Stuart Mitchell
Chief Financial Officer
Stuart Mitchell joined IMF Bentham
in November 2018. He was previously
Chief Financial Officer, Legal
Counsel and Company Secretary
for Ironbridge Capital, an Australian-
based investment and private equity
firm, providing funding for domestic
and international businesses. His role
encompassed financial management,
budgeting, modelling, reporting and
disclosure, governance, compliance,
risk assessment, accounting, taxation,
licensing and control issues of the
manager, funds and associated
structures across Asia Pacific,
the Caribbean and Europe.

Mr Mitchell has over 20 years’
commercial experience in Australia
and the UK in the financial services
sector, including private equity, funds
management and venture capital.

Mr Mitchell holds a Bachelor of
Commerce (University of New South
Wales, Australia). He was admitted to
practise as a solicitor in New South
Wales and is a qualified Chartered
Company Secretary and Chartered
Accountant.

Jeremy Sambrook
General Counsel and
Company Secretary
Jeremy Sambrook is an experienced
corporate lawyer with a broad in-house
legal and private practice background,
having practised in the UK, Hong Kong,
the Channel Islands and Australia.
Immediately before joining IMF Bentham,
Mr Sambrook was a Special Counsel
in the Corporate team at DLA Piper
Australia in Perth, Australia.

Following seven years working at a
leading London law firm, Mr Sambrook
moved to one of Europe’s largest
international hedge fund managers
as Corporate Legal Counsel with
responsibility for a wide variety of
corporate group projects. He became a
partner in 2010 and went on to manage
the off-shore head office before moving
with his family to Australia in 2013.

Mr Sambrook was appointed as General
Counsel and Company Secretary in
January 2016.

Mr Sambrook holds a Bachelor of Laws
(University of Bristol, UK).

Directors’ Reportcontinued

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

Wendy McCarthy

Karen Phin

Christine Feldmanis

Total

Number of
ordinary
shares

Number of
IMF Bentham
Bonds

Number of
Fixed Rate
Notes

Number of
performance
rights

313,049

168,863

5,104,402

1,019,978

–

23,256

–

6,629,548

–

7,500

1,500

–

300

9,300

–

100

1,849,081

–

1,743,346

–

100

3,592,427

Further details of the interests of the Directors in the shares, bonds and options of the Company as at the date of this
report are set out in the Remuneration Report included within the Directors’ Report.

Dividends paid by IMF Bentham Limited

Declared
date

Record
date

Payment
date

Cents

Dividends paid in the year:

Interim for the year

On ordinary shares

Final for 2018, as recommended
in the 2018 financial report

On ordinary shares

n/a

nil

–

Where dividends are paid by IMF Bentham Limited, shareholders are able to elect to participate in the dividend
reinvestment plan in relation to these dividends.

The directors have determined they will consider, and where appropriate, implement, a regular semi-annual dividend which
reflects the cash position and performance 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,
may arrange underwriting to reduce the impact a particular dividend might otherwise have on cash.

In respect of the current financial year, the Directors have determined that no final dividend will be payable by IMF Bentham
Limited for the year ended 30 June 2019.

Directors’ ReportcontinuedIMF Bentham Limited Annual Report 2019OverviewDirectors’ ReportFinancial Report Shareholder Information Fund 1
In February 2017, the Group launched its first fund, Fund
1 for US investments. The Group and affiliated entities of
Fortress Credit Advisers LLC committed up to US$200.0
million to this Fund to be deployed on US cases over a
three year period. Fund 1 was initially sized at US$133.3
million with commitments of US$100.0 million from Fortress
and US$33.3 million from IMF. Fortress is entitled to a
capped priority return on invested capital and a further
preferred return on committed but undrawn capital, after
which IMF is entitled to a manager return. The residual net
cash flows received on investments are distributed 85% to
IMF and 15% to Fortress.

In February 2018, IMF sold the majority of its existing cases
funded by its US subsidiary into Fund 1, generating cash
for IMF of $61.3 million. At the same time, the Fund was
upsized from US$133.3 million to US$166.7 million. By
30 June 2019, the Fund’s exclusivity period had completed;
and it had committed 96.2% of available capacity as shown
graphically below. Future US investments will be made
by Fund 4.

US$6.4m

US$6.9m

Deployed

Fund 1
96.2% Committed

Start Date – 10 Feb 2018

Fund Size – US$166.7m

Investments Committed – US$153.4m

Investments Deployed – US$125.6m

Committed (fully funded, IC approved,
conditionally funded)

Remaining for Investment

Other Costs

Operating and financial review

Principal activities
The principal activities of the entities within the
consolidated group during the financial year were
(i) the investment into and the management of Funds
(or Fund-like structures) that are focused on investing
into litigation and dispute resolution matters globally and
(ii) the continued holding of direct investments into similar
litigation and dispute resolution matters. The Group (either
via the Funds or directly) invests by entering into funding
agreements with claimants or law firms to provide funding
and associated services. The Group does not provide legal
advice. The key business driver is to make investments into
litigation which ultimately result in a successful conclusion.
If the litigation is successful, the Group earns a fee from
the recovery amount. The fee may be structured as either
a multiple of the amount invested or as a percentage
of the settlement or judgment proceeds; and may be
in addition to or inclusive of the amount invested; or a
combination thereof. Generally, the multiple or percentage
changes over time and may be lower the earlier the
litigation is resolved. If the litigation is unsuccessful the
Group does not generate any income and will derecognise
its investment in the litigation for a loss in the profit and
loss account. In certain jurisdictions the litigation funding
agreement contains an undertaking to the client that the
Group will pay any adverse costs that may arise in respect
of the costs incurred by the defendant(s) in the funded
litigation during the period of funding. Additionally, fees
for managing and servicing in the Funds will provide an
ongoing regular revenue stream independent of litigation
investment returns.

Nature of operations
The Group undertakes new investing activities through
its Funds (or Fund-like structures) as outlined below.
The Group continues to hold and further invest directly
in existing investments that were initiated prior to the
origination of the Funds. The Group operates through
14 offices in six countries around the world. Originating
in Australia in 2001, the Group expanded into the USA,
opening an office in New York in 2011. Since that time,
IMF has also opened offices in Los Angeles in 2014,
San Francisco in 2015 and Houston in early 2017.

In January 2016, the Group expanded into Canada,
opening an office in Toronto followed by a presence
in Quebec in early 2018. The 2017 UK operations, with
a focus on the UK, Europe, Middle East and Africa were
supplemented in November 2018 with the creation of
a subsidiary and branch operations.

A Singapore branch was established early in 2017 following
the introduction of legislation permitting litigation funding
for international arbitration, and a Hong Kong office was
added in early 2018.

In 2017 the Group established its first-generation Funds
with external investor capital commitments.

Directors’ Reportcontinued

Operating and financial review (continued)

Funds 2 & 3 (RoW Funds)
In October 2017, the Group launched its second fund,
(collectively) Funds 2 & 3 which are mandated to
make non-US investments. These rest of world Funds’
investment partners include Partners Capital Phoenix
Fund II Limited, a fund managed by Partners Capital, and
a special purpose vehicle advised and managed by Amitell
Capital Pte Ltd, a Singapore based private investment firm.
The RoW Funds invest in litigation in jurisdictions outside
the USA. They commenced with combined investor
capital commitments of $150.0 million. On 31 January
2019, the capital commitment capacity increased by
20%, with an additional $30.0 million, taking the total to
$180.0 million. The external investors’ capital commitment
is for 80% with IMF funding 20%. The Funds’ economics
and waterfall profile for investors and IMF is similar to
Fund 1, except that (i) the preferred return is a slightly
different rate and (ii) the residual net cash flows received
on investments are distributed 80% to IMF and 20% to
the investment partners.

At 30 June 2019, the RoW Funds were committed to 93.3%
of available capacity as shown diagrammatically below:

During the 2019 financial year the Group established its
second generation Funds.

Fund 4
In November 2018, IMF successfully closed its fourth
Fund, which is the next US centric investment structure
established to follow on from the US investment activity
of Fund 1. It has capital commitments of US$500 million,
with the potential to increase to US$1.0 billion. 20% of
the capital is to be provided by IMF, 80% is from external
investors. The external investors include the investors in
the RoW Funds and funds managed by a US University
endowment fund.

IMF will periodically receive management, advisory,
administration and performance fees in relation to the Fund
from the external investors in the Fund.

IMF receives its investor return on its committed capital
pari passu with the external investors.

At 30 June 2019, the Fund has committed 8.0% of its
available capacity as shown graphically below.

$17.0m

$12.1m

Deployed

Funds 2 & 3
93.3% Committed

Start Date – 03 Oct 2017

Fund Size – $180m

Investments Committed – $150.9m

Investments Deployed – $30.2m

Committed (fully funded, IC approved,
conditionally funded)

Remaining for Investment

Other Costs

Deployed

Fund 4
8.0% Committed

Start Date – 01 Apr 2019

Fund Size – US$500m

Investments Committed – US$38m

Investments Deployed – US$18m

US$462m

Committed (fully funded, IC approved,
conditionally funded)
Remaining for Investment

Directors’ ReportcontinuedIMF Bentham Limited Annual Report 2019OverviewDirectors’ ReportFinancial Report Shareholder Information Operating and financial review (continued)
Fund 5
On 20 June 2019, IMF successfully launched its fifth Fund, Fund 5. This is a non-US centric investment structure
established to follow the rest of world investment activity of Funds 2 & 3. It has capital commitments of US$500 million,
with the potential to increase to US$1.0 billion. 20% of the capital is to be provided by IMF, and 80% is from external
investors which include the Fund 4 investors with the addition of Balmoral Wood.

IMF will periodically receive management, advisory, administration and performance fees in relation to the Fund.

IMF will receive its investor return on its committed capital pari passu with the external investors.

At 30 June 2019, this Fund had not yet commenced operations as there was capacity remaining in Funds 2 & 3.

In any given year the Group’s profitability is significantly dependent upon the outcome of funded investments resolved
in that year, however the successful completion of an investment and the timing of that completion is not ultimately within
the Group’s control. Legislative, regulatory, judicial and policy changes may have an impact on future profitability.

The Group endeavours to have a mix of cases it is funding at any one time. These can broadly be categorised as law
firm portfolios, patent and intellectual property claims, commercial, insolvency, corporate, arbitration claims, appeal
whistle-blower claims and group actions. The global expansion also creates diversification across jurisdictions.

Investment portfolio report at 30 June 2019

IMF balance sheet
Fund 1
Funds 2 & 3
Fund 4

EPV
$m

Number of
investments

Possible Completion EPV $m

FY2020

FY2021

FY2022

FY2023+

1,514.2
3,164.3
2,709.1
569.1

7,956.7

21
34
26
2

1,074.2
1,470.8
261.2
198.7

3,004.9

290.0
1,201.1
1,251.6
0.0

2,742.7

150.0
255.9
851.5
0.0

1,257.4

0.0
236.5
344.8
370.4

951.7

Diversification by funding source (%)

Diversification by litigation type (%)

IMF Balance Sheet
Fund 1

Funds 2 & 3
Fund 4

Commercial
Law Firm
Patent
Whistleblower
Appeal

Multi Party
Arbitration
Other IP
Insolvency

Directors’ Reportcontinued
USA
The Group’s US operations funded 8 new investments
(2018: 11) during the reporting period. Since entering the
USA in August 2011, a total of 72 investments have been
funded, with 40 current investments.

Ten US investments were resolved during the year
(2018: 7), three of which were losses (2018: 1), and none
were withdrawn (2018: 1). There is currently one case in
the US on appeal (2018: 1). Income was also received in
relation to five continuing investments (2018: 7) involving
funding law firms across a portfolio of investments. Gross
income generated from these investments during the
current financial year was $3.5 million (2018: $4 million).

The US investment business now has 23 staff (2018: 18)
including nine investment managers and six legal counsel.
The investment managers have similar credentials to the
wider IMF group.

Although uncertainty in US law concerning whether
funders’ communications are protected from disclosure
inhibits IMF’s usual transparency about the investments
it funds, we can say that the US portfolio now contains
a diverse group of litigation and arbitration investments.
These involve commercial, patent and multi-party cases
across a variety of different jurisdictions. There are ongoing
signs of growing competition in the US market, but market
knowledge of litigation funding remains at a relatively early
stage and so we consider there remain good prospects for
the future growth of our US business.

Employees
At 30 June 2019, IMF employed 101 permanent staff, 65
involved in the investment business of US and non-US and
36 (2018: 27) in various corporate, finance, client service,
information technology or support roles.

Operating and financial review (continued)
IMF commenced 26 new investments during the year and
extended funding on a further 17 investments. The 18 new
non-USA investments had a total Estimated Portfolio Value
at 30 June 2019 of $1.7 billion. The eight new investments
in the USA had an Estimated Portfolio Value of $1.0 billion
at 30 June 2019.

During the financial year, IMF concluded 18 investments
(2018: 16). 11 were settled (2018: 11), there were two
wins (2018: 0), four losses (2018: 2) and one withdrawal
(2018: 2). Two investments are currently on appeal
(2018: 2).

While the Group has implemented a risk mitigation and
diversification strategy by expanding its portfolio size,
geographical focus and diversifying its product offering
across jurisdictions, updates to its two largest residual
balance sheet investments are below.

The trial in the Wivenhoe Dam class action concerns
people who suffered loss in the Brisbane floods of
2011, who allege the increased flooding was caused
by the negligence of the dam operators. There is a
participation agreement between IMF and the co-funder
to share equally the costs (including any adverse costs)
of and any return from this claim. The trial commenced
on 4 December 2017 and has concluded with the
judgment being reserved.

The Westgem investment concerns a property developer
alleging improper conduct in relation to loans for a
property development by a bank. The trial commenced
in March 2018 and concluded in July 2018. Judgment
is reserved.

ROW
The Group’s operations, excluding the US, funded 18 new
investments (2018: 15) in the non-US jurisdictions during
the reporting period. Since 2001, there have been a total
of 204 funded investments, with 43 current investments
at year end.

8 non-US investments were resolved during the year
(2018: 9), one of which was a loss (2018: 1), and one
withdrawn (2018: 2). There is currently one case on
appeal (2018: 1). Gross income generated from these
investments during the current financial year was
$17.4 million (2018: $47.2 million).

The non-US investment business now employs 42 staff
(2018: 28) including investment managers and legal
counsel. The investment managers are all former senior
litigation attorneys, each with between 15 to 25 years’
legal experience. This enables significant case analysis to
be performed in-house, whilst providing great networks
to attract new business.

Directors’ ReportcontinuedIMF Bentham Limited Annual Report 2019OverviewDirectors’ ReportFinancial Report Shareholder Information Operating and financial review (continued)

Operating results for the financial year
The following summary of operating results reflects the Group’s performance for the year ended 30 June 2019:

Shareholder Returns

Basic (loss)/earnings per share (cents per share)

Diluted (loss)/earnings per share (cents per share)

Return on assets (NPAT/average assets)

Return on equity (NPAT/average equity)

Net debt/equity ratio %*

2019

2018

(25.00)

(5.8%)

(8.2%)

n/a

(6.40)

(1.7%)

(2.7%)

n/a

Net debt (cash and short term deposits less total debt) is positive as cash and short term deposits are greater than total debt.

A summary of the impact of investment completions and impairment on the profit and loss for FY2019 is below:

Date
commenced

Estimated
portfolio
value

Total
litigation
contract
income

Total
litigation
contract
expenses

Net gain/
(loss) on
derecognition
of intangible
asset

Total
overhead

$ ‘000

$ '000

Direct balance sheet

402770

402709

402792

402479

401053

403209

403187

USA 0451

Other4

22 December 2015

28 June 2016

6 April 2016

29 September 2016

6 August 2009

22 February 2017

18 May 2017

15 December 2016

14,500

11,000

7,750

3,000

1,500

2,400

2,231

–

7,481

2,954

2,208

1,940

1,175

1,152

–

197

Total direct balance sheet investments

42,381

17,107

(2,727)

(1,338)

(1,508)

(298)

(272)

(203)

(836)

(1,308)

(9,998)

Funds 2 & 3

Fund 2/3 001

Further recoveries on
completed investments

Other4

Total Funds 2 & 3

18 October 2017

13,100

–

(981)

–

13,100

329

–

329

–

(914)

(723)

(154)

(286)

(327)

(804)

(48)

(46)

(149)

(73)

(2,610)

–

4,031

1,462

414

105

832

(249)

(985)

(1,184)

4,499

(981)

329

(585)

Directors’ ReportcontinuedOperating and financial review (continued)

Date
commenced

Estimated
portfolio
value

Total
litigation
contract
income

Total
litigation
contract
expenses

Net gain/
(loss) on
derecognition
of intangible
asset

Total
overhead

$ ‘000

$ '000

22 July 2017

22 June 2015

2 April 2018

30 September 2014

25 August 2017

31,257

2,155

18,473

42,623

19,536

8 December 2015

163,389

22 June 2015

20 May 2017

24 March 2017

42,623

3,809

93,756

–

417,621

473,102

Fund 1

USF 010

USF 026

USF 041

USF 020

USF 011

USF 031

USF 025

USF 0042

USF 0023

Further recoveries on
continuing investments

Other4

Total Fund 1

Overhead for Fund investments
allocated on consolidation

Net loss on derecognition
of intangible assets

Provision for impairment

Total loss on derecognition
of intangible assets

3,464

1,912

2,813

4,218

2,906

–

273

–

1,999

–

17,585

35,021

(1,649)

(351)

(1,418)

(2,114)

(1,804)

(9,952)

(1,983)

(515)

(744)

(1,999)

(259)

(22,788)

(33,700)

35,021

(33,700)

–

(2,611)

1,815

1,561

1,395

2,104

1,102

(9,952)

(1,983)

(242)

(744)

–

(259)

(5,203)

(1,290)

(2,957)

(5,568)

(9,571)

(4,247)

(9,571)

35,021

(33,700)

(15,139)

(13,818)

The Group has finalised 192 (2018: 175) investments since listing, excluding withdrawals, with an average investment
period of 2.6 years (2018: 2.6 years). The Group has generated a return on invested capital of 1.34 times (excluding
overheads) (2018: 1.47 times) on invested capital.

The investment portfolio as at 30 June 2019 has a mixture of both mature and new investments. The average age of the
portfolio is 3.62 years.

USA Investment 045 related to residual proceedings following a larger investment that completed via settlement in November 2014. Over the total
life of the investment the Group invested $5.4 million and received $17.3 million in income, generating a ROIC of 2.2x.
USA Fund Investment 004 consisted of an investment in a law firm portfolio. All cases in the portfolio have concluded and the portfolio completed.
Over the total life of the investment the Group invested $1.0 million and received $0.8 million in gross proceeds, generating a (0.2)x ROIC.
USA Fund investment 002 consisted of an ivestment in several proceedings. The funding agreement was terminated in the current period and
accordingly the remaining investment was written off. Over the total life of the investment the Group invested $1.9 million and received $2.4 million
in gross proceeds, generating a 0.3x ROIC.

4. Other incidental expenses incurred in investment management and investigation.

Directors’ ReportcontinuedIMF Bentham Limited Annual Report 2019OverviewDirectors’ ReportFinancial Report Shareholder Information Operating and financial review (continued)
IMF’s share price closed at $2.92 per share on 30 June 2019 (2018: $3.00). IMF entered the ASX top 300 companies on
20 March 2009, when its share price was $1.15. Since entering the index, IMF has outperformed the major indices on an
annualised basis from 30 June 2011 to 30 June 2019 as detailed below:

IMF, ASX 200 & ASX All Ordinaries Annualised Returns - 30 June 2011 to 30 June 2019

s
n
r
u
t
e
R
d
e
s

i
l

a
u
n
n
A

IMF Bentham (Dividends Reinvested)

S&P/ASX 200 Total Return Index

ASX All Ordinaries Total Return

Annualised Return with
Dividend Reinvestment

13.11%

7.94%

7.85%

Liquidity and capital resources

The consolidated Statement of Cash Flows illustrates that there was an increase in cash and cash equivalents for the
year ended 30 June 2019 of $63.4 million (2018: increase of $9.9 million). Operating activities used $36.8 million of net
cash outflows (2018: net cash outflow of $63.6 million), whilst cash flows used in investing activities were $80.9 million
(2018: net cash outflow of $19.3 million), and financing activities raised $181.1 million (2018: $92.8 million) principally as
a result of cash inflows from the issue of shares and bonds.

Directors’ Reportcontinued

Operating and financial review (continued)

Asset and capital structure

Cash and short term deposits

Total debt

Net debt

Total equity

Working Capital Ratio1

2019
$’000

226,460

(143,972)

82,488

515,497

2.2:1

2018
$’000

Change
%

160,231

(120,462)

39,769

367,836

2.3:1

41%

20%

107%

40%

(5%)

In December 2018, the Company restructured the IMF Bentham Bonds, allowing the option for early redemptions of the
bonds issued in April 2014 and issuing additional bonds with a face value of $100 each. 154,048 bonds were redeemed,
and a further 414,048 bonds issued, with appropriate interest paid to maintain the effective interest rate. This brings the
total Bonds on issue to 760,000. The IMF Bentham Bonds 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 was extended from 30 June 2019 to 22 December
2022, introducing a first issuer call date of 8 January 2022 with a step up in margin of 1.0% applying from 1 January 2022.

In April 2017, the Company issued 40,000 Fixed Rate Notes with a face value of $1,000 each raising $40 million 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 million.

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 had an early redemption
option on these Notes at 30 June 2019, which has not been exercised.

Profile of debt
The profile of the Group’s debt finance is as follows:

Current

IMF Bentham Bonds

Fixed Rate Notes

Non-current

IMF Bentham Bonds

Fixed Rate Notes

Total debt2

2019
$’000

2018
$’000

Change
%

–

49,553

(100%)

71,455

72,517

–

72,517

–

49,553

–

70,909

143,972

120,462

100%

44%

100%

(100%)

20%

The working capital ratio is calculated by dividing current assets by current liabilities. The ratio is categorised as non-IFRS information prepared in
accordance with ASIC Regulatory Guidance 230 - Disclosing non-IFRS financial information, issued in December 2011. This information has not
been audited or reviewed.

Total debt is $148.0 million. $76.0 million relates to the IMF Bentham Bonds restructured in December 2018, while during the 2017 financial year,
the Company issued Fixed Rate Notes to the value of $40.0 million to form a single series with $32.0 million issued in 2016. The carrying value of
the debt is net of $4.0 million of unamortised transaction costs and debt premium (See Note 12).

Directors’ ReportcontinuedIMF Bentham Limited Annual Report 2019OverviewDirectors’ ReportFinancial Report Shareholder Information

Operating and financial review (continued)

Shares issued during the year
On 31 October 2018, the Company issued
26,600,000 shares to sophisticated and institutional
investors at $2.80 per share. On 16 November 2018, the
Company issued 580,110 shares under its Share Purchase
Plan at $2.80 per share.

Capital expenditure
There has been an increase in capital expenditure
during the year ended 30 June 2019 to $0.4 million from
$0.2 million in the year ended 30 June 2018. The capital
expenditure in 2019 relates primarily to computer and
office equipment while in the current year, new offices
in Houston were fitted out.

Risk management
The Group’s major risk continues to be the choice of
cases to be funded. The extent of the mitigation of that
risk can best be identified by reference to the fact that in
its 18 years of operation IMF has lost only 21 investments
out of 192 investments 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 very good
chances of success are accepted for funding. The Group
also insures a portion of the adverse costs order exposure
in relation to investments on its own balance sheet and all
investments in the RoW Funds are covered by an After-
The-Event insurance policy.

Another risk which requires constant management is
liquidity. IMF’s strategic plan addresses this risk through
the introduction of innovative fund structures reducing
IMF’s direct capital exposure to potential investment
losses.

Although there is currently portfolio concentration
risk associated with investments in the Wivenhoe and
Westgem investments, the company’s diversification
strategy has reduced this risk for future periods. There are
83 investments in the current portfolio (2018: 75) with an
average investment size of $5.1 million (2018: $4.3 million).

Additionally, IMF constantly monitors proposed legislative,
regulatory, judicial and policy changes that may affect
litigation funding in the markets in which it operates. On
24 January 2019, the Australian Law Reform Commission
(ALRC) released its Report resulting from its federal Inquiry
into Class Action Proceedings and Third-Party Litigation
Funders. The Report made a number of recommendations
relating to case management for class actions, settlement
approval, regulation of litigation funders, solicitors’ fees
and conflicts of interest, regulatory redress and continuous
disclosure obligations. We anticipate there will be further
consultation before any legislation is considered but

timing is unclear. IMF will continue to closely monitor and
participate in future developments whenever possible.

The Victorian Law Reform Commission (VLRC) also
published a Report on their Inquiry into Litigation Funding
and Group Proceedings in June 2018. Following the
publication of this Report, there does not appear to
have been any significant developments.

Commercial litigation funding in the US is now widely
recognised and accepted. There is however, proposed
federal legislation seeking mandatory disclosure of funding
agreements in class actions and multi-district litigation.
We continue to speak with and lobby the relevant parties
as IMF believes that such disclosure is not in the best
interests of claimants.

Third party funding of international arbitration and
commercial litigation related to insolvency proceedings is
expressly permitted in Singapore, while Hong Kong has
only recently introduced a new framework for the funding
of international arbitration. Commercial litigation unrelated
to insolvency proceedings remains heavily restricted in
Hong Kong.

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.

Significant changes in the state of affairs
Total equity increased 40% to $515.5 million at 30 June
2019 from $367.8 million at 30 June 2018. There have
been no significant changes in the Company’s state
of affairs during this reporting period other than as is
disclosed in this report.

Significant events after reporting date
There have been no significant events after reporting date.

Directors’ ReportcontinuedLikely developments and expected results
Approximately 38% of the investment portfolio at 30 June
2019 is anticipated to complete in FY19. (2018: 44%)

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.

The Group does not provide forecasts in light of the
difficulty in estimating the finalisation of its investments
but provides an indication of its view of the possible
completion dates and estimated recoverable amounts in
the quarterly portfolio reports.

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 of America, 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 the Australian
market and new entrants in overseas markets. Litigation
funding is considered non-cyclical or uncorrelated to
underlying economic conditions.

Environmental regulation and performance
The consolidated entity’s operations are not presently
subject to significant environmental regulation under
the respective local laws that IMF operates in.

Share options

Unissued shares
As at the date of this report there were 15,601,589 share
performance rights on issue (2018: 14,355,887).

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 $678,000 during the
current financial year (2018: $456,000).

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.

Directors’ ReportcontinuedIMF Bentham Limited Annual Report 2019OverviewDirectors’ ReportFinancial Report Shareholder Information Letter from the Chairman of the Remuneration Committee

Dear Shareholder,

On behalf of the Board of directors (“Board”) and as Chairman of the Remuneration Committee, I am pleased to present
IMF’s 2019 Remuneration Report.

Our five-year Strategic Business Plan initiated in 2015 resulted in IMF implementing a variable remuneration framework
designed to align executive reward and shareholder value and to incentivise the achievement of our strategic vision over
the longer term. The variable remuneration framework was developed to reflect industry standards and the structure
is designed to ensure that Key Management Personnel (“KMP”), excluding non-executive directors, and executives are
aligned to and rewarded for delivering sustained Group performance. Non-executive directors do not have a variable
remuneration component.

We have continued to monitor our remuneration structure and policies and remain comfortable with the overarching
framework introduced in 2015.

The levels of fixed remuneration of the Group’s senior employees are reflective of the private practice professional services
market within which IMF competes for talent. Investment managers are invariably at or around the partner level of legal
practices prior to joining IMF. Under these remuneration arrangements, a material portion of staff remuneration is ‘at-risk’
and linked to both short-term and long-term performance.

The Group’s variable remuneration framework for KMP, senior executives and investment managers (collectively “Senior
Staff”) consists of two components:

– a Short-Term Incentive Plan (“STIP”) which provides for an annual cash payment, subject to the achievement of key

financial and non-financial performance objectives; and

– an equity-based Long-Term Incentive Plan (“LTIP”) that provides for an annual grant of performance rights. Vesting
of performance rights is contingent on performance against two metrics, positive relative Total Shareholder Return
(“TSR”) and Compound Annual Growth Rate (“CAGR”) of the intangible asset balance (“Funds Deployed”), both
measured over a three-year performance period. The LTIP is independent from the STIP and can be granted or
vested even when there is no STIP for the period.

The target STIP payment for the 2019 financial year was capped at 40% of an employee’s Total Fixed Remuneration
(“TFR”). No STIP has been awarded to our senior staff for the current financial year, as a result of the Group’s financial loss
for the year, notwithstanding the achievement of some major strategic milestones.

The LTIP for Senior Staff is designed to complement the STIP as a form of ‘at-risk’ remuneration tied to long-term
performance for the key contributors to the business. The LTIP directly aligns shareholders’ and participants’ interests.

We are pleased to report that the metrics assessed over the three-year vesting period, for the performance rights granted
in FY2017, have been exceeded and we anticipate 100% vesting will occur.

The Board remains confident that IMF’s remuneration policies support the Group’s financial and strategic goals and we will
continue to review the target metrics to ensure the consistent alignment of employees’ and business focus with those of
shareholders. We are committed to transparency and an ongoing dialogue with shareholders on 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

Directors’ Reportcontinued
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 (Cth)
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 IMF.

Key management personnel
Details of IMF’s Key Management Personnel for the 2019
financial year 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

Wendy McCarthy

Non-Executive Director
(resigned 21 November 2018)

Karen Phin

Non-Executive Director

Christine Feldmanis

Non-Executive Director
(appointed 1 November 2018)

(ii) Executives

Clive Bowman

Chief Executive – Australia and Asia

Charlie Gollow

Stuart Mitchell

Jeremy Sambrook

Chief Executive – USA
(resigned 5 July 2019)

Chief Financial Officer
(appointed 12 November 2018)

General Counsel and Company
Secretary

Clive Bowman became the Global Chief Investment Officer
effective from 1 July 2019. Charlie Gollow resigned with
effect from 5 July 2019 and is now a member of our US
Investment Committee. There were no other changes to
IMF’s KMP 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 Group 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 Group 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. The STIP and LTIP are products
of an external remuneration review that was conducted in
2015 and are reflective of industry standards. The Board
continues to monitor and assess the appropriateness
of the remuneration structure.

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 $506,247 (including
superannuation), as disclosed in the following tables
in this report. At the 2016 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

Group; and

– ensure total compensation is competitive by market

standards.

Directors’ ReportcontinuedIMF Bentham Limited Annual Report 2019OverviewDirectors’ ReportFinancial Report Shareholder Information Remuneration Report (Audited) (continued)

Structure
It is the Remuneration Committee’s policy that employment
contracts are entered into with all KMP. Details of
these contracts are provided below (see Executive
Employment Contracts).

Compensation consists of the following key elements:

– fixed remuneration consisting of base salary,

superannuation and benefits; and

– variable remuneration consisting of a cash

component short term incentive plan (STIP) and
performance right component long term incentive
plan (LTIP).

Fixed remuneration
The levels of fixed remuneration of IMF’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 of legal practices prior to joining IMF.

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. There have been no changes in the
fixed remuneration for the senior employees for this
financial year.

Variable remuneration

Objective
The objective of the variable compensation incentive
is to reward executives in a manner that aligns this
element of their compensation with the objectives and
internal key performance indicators of the Group. 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.
The STIP performance measures were chosen as they
reflect the core drivers of short - term performance and
also provide a framework for delivering sustainable value
to the Group, its shareholders and other stakeholders.

Key features of the STIP include:

– Applicable 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 their STIP opportunity
expressed as a percentage of their total fixed
remuneration.

– At the beginning of the financial year, financial and

non-financial performance objectives will be set with
reference to an employee’s role and contribution to
the Group. This encompasses areas such as growth,
culture, strategic objectives, business development,
staff and risk management.

– 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.

For 2019, the maximum STIP incentive is 40% of TFR. The
STIP metrics set for the 2019 financial year were:

– Target 1 – 50% of the STIP opportunity (or 20% of the
employees’ salary) will be awarded to employees if
the Group achieves 5% growth in net profit before tax
(before bonus); and

– Target 2 – 50% of the STIP opportunity (or 20% of

the employees’ salary) will be awarded if employees
achieve their non-financial objectives (which are set
individually).

In financial years where no net profit before tax
(before bonus) is achieved, it is at the discretion of the
Remuneration Committee as to whether to pay STIP.

Long 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 are eligible to participate in
the LTIP. These 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.

– The value of the LTIP opportunity is set at 60% of
TFR calculated on face value by reference to IMF’s
volume weighted average share price at the start
of the applicable period.

– If elected prior to the start of the financial year, and

with approval of the remuneration committee, senior
executives have a one-off non reversible option of
foregoing their STIP allocation and electing to receive
100% of their at-risk remuneration in performance
rights, under the same terms as the existing LTIP
structure.

Directors’ ReportcontinuedRemuneration Report (Audited) (continued)
– 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, at 30 June, which will include ASX-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:

TSR Percentile Ranking

Percentage Vesting

Less than the 50th percentile

Equal to the 50th percentile

Nil vesting

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 CAGR

Percentage Vesting

Below 5% CAGR

At 5% CAGR

Nil vesting

50% vesting

Between 5% CAGR and 7% CAGR

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.

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 64 shows the performance of the Group as
measured by its share price and compared to other shares listed on the ASX.

The following is a summary of the Group’s earnings per share (shown as cents per share) over the last five years:

IMF share price at 30 June

Earnings/(loss) per share (cents per share)

Diluted earnings/(loss) per share
(cents per share)

2015

1.72

3.78

2016

1.53

12.38

3.78

12.38

2017

1.89

9.04

8.68

2018

3.00

(6.40)

2019

2.92

(25.00)

(6.40)

(25.00)

Note, comparatives have not been restated for the impact of AASB 15 and AASB 9.

Directors’ ReportcontinuedIMF Bentham Limited Annual Report 2019OverviewDirectors’ ReportFinancial Report Shareholder Information – notice period by either the employee or the

Company is 12 months; and

– no other termination payment arrangements

(excluding statutory entitlements) apply other than
the notice period specified above.

Charlie Gollow, Chief Executive - USA:

– contract commenced 22 April 2003;
– gross salary package of $600,000 pa including

superannuation;

– salary to be reviewed annually, (2018: 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.

Stuart Mitchell, Chief Financial Officer:

– contract commenced 12 November 2018;
– gross salary package of $435,000 pa including

superannuation;

– salary to be reviewed annually;
– notice period by either the employee or the

Company is 6 months; and

– no other termination payment arrangements apply
other than the notice periods specified above.

Jeremy Sambrook, General Counsel and Company
Secretary:

– contract commenced 18 January 2016;
– gross salary package of $350,000 pa including

superannuation;

– salary to be reviewed annually;
– notice period by either the employee or the

Company is 6 months; and

– no other termination payment arrangements apply
other than the notice periods specified above.

Remuneration Report (Audited) (continued)

Executive Employment Contracts

Andrew Saker, Managing Director and CEO:

– contract commenced 5 January 2015;
– gross salary package of $1,200,000 pa plus

superannuation;

– salary may be reviewed by the Board from time

to time;

– notice period by the employee is 12 months and

6 months’ notice by the Company; and

– Upon termination on good terms, the following
termination payment arrangements apply:

the notice periods specified above;

ii. 12 months’ salary; and
iii. statutory entitlements.

– If termination occurs due to the provision of six
months notice by IMF, or the provision of notice
by Mr Saker in situations where either a material
breach of his executive services agreement occurs,
material diminution of Mr Saker’s role or if Mr Saker
is unfit due to illness or injury then in addition to the
above the following benefit is paid –

i. A payment calculated by reference to the
number of shares Mr Saker would have
retained from any unvested performance rights
multiplied by the 5-day VWAP calculated at
the date such performance rights would have
vested had they continued to be held.

Hugh McLernon, Executive Director:

– contract commenced 1 July 2007;
– gross salary package of $1,150,000 pa including

superannuation;

– salary to be reviewed annually, with the 2019 review
determining there should be a 0% increase in
salary (2018: 0% increase);

– notice period by either the employee or the

Company is 12 months; and

– no other termination payment arrangements

(excluding statutory entitlements) apply other than
the notice period specified above.

Clive Bowman, Chief Executive – Australia and Asia:

– contract commenced 1 July 2012;
– gross salary package of $925,000 pa including

superannuation;

– salary to be reviewed annually, with the 2019 review
determining there should be a 0% increase in
salary (2018: 0% increase);

Directors’ ReportcontinuedRemuneration Report (Audited) (continued)

(a) Remuneration of Key Management Personnel
Table 1: Remuneration for the year ended 30 June 2019

Short-term benefits

Salary &
fees
$

Cash
bonus
accrued1
$

Post-
employment

Long term
benefits

Share based
payments

Super-
annuation
$

Leave
entitle-
ments
$

Share
performance
rights
$

Total
Remuneration
$

Performance
related
%

205,384
1,200,000
1,129,469
91,324
39,182
91,324
56,912

904,469
579,469
248,150
379,469
4,925,152

–
–
–
–
–
–
–

–
–
–
–
–

19,616
20,531
20,531
8,676
3,722
8,676
5,407

–
35,166
(53,987)
–
–
–
–

–
693,946
654,148
–
–
–
–

20,531
20,531
14,153
20,531
162,905

(40,211)
8,883
5,831
7,976
(36,342)

462,775
300,178
39,510
170,012
2,320,569

225,000
1,949,643
1,750,161
100,000
42,904
100,000
62,319
–
–
1,347,564
909,061
307,644
577,988
7,372,284

0%
36%
37%
0%
0%
0%
0%

34%
33%
13%
29%

2019

Directors
Michael Kay
Andrew Saker
Hugh McLernon
Michael Bowen
Wendy McCarthy
Karen Phin
Christine Feldmanis

Executives
Clive Bowman
Charlie Gollow
Stuart Mitchell
Jeremy Sambrook
Total

Table 2: Remuneration for the year ended 30 June 2018

Short-term benefits

Salary &
fees
$

Cash
bonus
accrued1
$

Post-
employment

Long term
benefits

Share based
payments

Super-
annuation
$

Leave
entitle-
ments
$

Share
performance
rights
$

Total
Remuneration
$

Performance
related
%

2018

Directors
Michael Kay
Andrew Saker
Hugh McLernon
Michael Bowen
Alden Halse
Wendy McCarthy
Karen Phin

Executives
Clive Bowman
Charlie Gollow
Total

205,384
1,200,000
1,129,951
82,192
36,426
82,192
66,409

904,951
579,951
4,287,456

–
–
–
–
–
–
–

–
–
–

19,616
20,049
20,049
7,808
3,460
7,808
6,309

–
24,741
30,554
–
–
–
–

–
576,323
543,456
–
–
–
–

20,049
20,049
125,197

33,561
5,778
94,634

432,783
280,723
1,833,285

225,000
1,821,113
1,724,010
90,000
39,886
90,000
72,718
–
–
1,391,344
886,501
6,340,572

1. No bonus in respect of the 2019 financial year has been accrued for KMP (2018: $nil).

0%
32%
32%
0%
0%
0%
0%

31%
32%

Directors’ ReportcontinuedIMF Bentham Limited Annual Report 2019OverviewDirectors’ ReportFinancial Report Shareholder Information Remuneration Report (Audited) (continued)
The following table outlines the proportion of maximum STIP earned by KMP in the 2019 financial year.

Andrew Saker1

Hugh McLernon1

Clive Bowman

Charlie Gollow

Stuart Mitchell

Jeremy Sambrook

Maximum
STIP
opportunity
(% of TFR)

% of
maximum
earned

40%

elected to receive 100% of variable remuneration as LTIP.

In light of the financial performance of the Group, the Remuneration Committee has determined that no STIP is payable for
the financial year.

(b) Share performance rights awarded, vested and lapsed during the year

Tranche 1
performance
rights
awarded
during the
year
Number

Fair value of
Tranche 1
performance
rights at
grant date1
$

Tranche 2
performance
rights
awarded
during the
year
Number

Fair value of
Tranche 2
performance
rights at
grant date1
$

Total
performance
rights
awarded
during the
financial
year
Number

Value of
performance
rights
granted
during the
year
$

Total
performance
rights
vested
during the
year
Number

Value of
performance
rights
remaining
to be
expensed to
profit and
loss
$

Grant
date

Vesting
date

Expiry
Date

–

205,405

1.35

205,405

2.43

410,810 21-Nov-2018 30-Jun-2021 1-Jul-2033

776,431

543,588

704,427

193,535

1.35

193,535

2.43

387,070 21-Nov-2018 30-Jun-2021 1-Jul-2033

731,562

512,688

663,789

–

93,402

1.60

93,402

2.67

186,804

1-Jul-2018 30-Jun-2021 1-Jul-2033

398,266

412,380

407,142

60,585

1.60

60,585

2.67

121,170

1-Jul-2018 30-Jun-2021 1-Jul-2033

258,334

267,490

264,091

27,798

1.60

27,798

2.67

55,596

1-Jul-2018 30-Jun-2021 1-Jul-2033

118,531

–

79,020

2019

Directors

Michael Kay

Andrew Saker

Hugh McLernon

Michael Bowen

Wendy McCarthy

Karen Phin

Christine
Feldmanis

Executives

Clive Bowman

Charlie Gollow

Stuart Mitchell

Jeremy Sambrook

35,341

1.60

35,341

2.67

70,682

1-Jul-2018 30-Jun-2021 1-Jul-2033

150,694

144,890

154,053

Total

616,066

1,232,132

2,433,818

1,881,036

2,272,522

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 24.

Directors’ ReportcontinuedRemuneration Report (Audited) (continued)

Tranche 1
performance
rights
awarded
during the
year
Number

Fair value of
Tranche 1
performance
rights at
grant date1
$

Tranche 2
performance
rights
awarded
during the
year
Number

Fair value of
Tranche 2
performance
rights at
grant date1
$

Total
performance
rights
awarded
during the
financial
year
Number

Value of
performance
rights
granted
during the
year
$

Total
performance
rights
vested
during the
year
Number

Value of
performance
rights
remaining
to be
expensed to
profit and
loss
$

Grant
date

Vesting
date

Expiry
Date

–

210,052

0.948

210,052

1.720

420,104 24 Nov 2017 30 Jun 2020 1 Jul 2032

560,419

474,580

621,941

197,992

0.948

197,992

1.720

395,984 24 Nov 2017 30 Jun 2020 1 Jul 2032

528,243

447,604

586,375

–

159,255

0.948

159,255

1.720

318,510 24 Nov 2017 30 Jun 2020 1 Jul 2032

424,892

360,030

471,650

103,300

0.948

103,300

1.720

206,600 24 Nov 2017 30 Jun 2020 1 Jul 2032

275,604

233,532

305,935

670,599

1,341,198

1,789,158

1,515,746

1,985,901

2018

Directors

Michael Kay

Andrew Saker

Hugh McLernon

Michael Bowen

Alden Halse

Wendy McCarthy

Karen Phin

Executives

Clive Bowman

Charlie Gollow

Total

2019

Directors
Michael Kay
Andrew Saker
Hugh McLernon
Michael Bowen
Wendy McCarthy
Karen Phin
Christine Feldmanis

Executives
Clive Bowman
Charlie Gollow
Stuart Mitchell
Jeremy Sambrook

Total

Balance
1 July 2018
Number

Granted as
remuneration
Number

Performance
rights
exercised
Number

Balance
30 June 2019
Number

Exercisable
Number

Not
exercisable
Number

–
1,438,271
1,356,276
–
–
–
–

–
410,810
387,070
–
–
–
–

–
–
–
–
–
–
–

–
1,849,081
1,743,346
–
–
–
–

1,090,920
707,622
–
323,466

186,804
121,170
55,596
70,682

–
–
–
(58,058)

4,916,555

1,232,132

(58,058)

1,277,724
828,792
55,596
336,090
6,090,629

–
1,018,167
960,292
–
–
–
–

772,410
501,022
–
144,890

–
830,914
783,054
–
–
–
–

505,314
327,770
55,596
191,200

3,396,781

2,693,848

Directors’ ReportcontinuedIMF Bentham Limited Annual Report 2019OverviewDirectors’ ReportFinancial Report Shareholder Information Remuneration Report (Audited) (continued)

2018

Directors
Michael Kay
Andrew Saker
Hugh McLernon
Michael Bowen
Alden Halse
Wendy McCarthy
Karen Phin

Executives
Clive Bowman
Charlie Gollow

Total

Balance
1 July 2017
Number

Granted as
remuneration
Number

Performance
rights
exercised
Number

Balance
30 June 2018
Number

Exercisable
Number

Not
exercisable
Number

–
1,018,167
960,292
–
–
–
–

–
420,104
395,984
–
–
–
–

772,410
501,022

318,510
206,600

3,251,891

1,341,198

–
–
–
–
–
–
–

–
–

–

–
1,438,271
1,356,276
–
–
–
–

–
474,580
447,604
–
–
–
–

–
963,691
908,672
–
–
–
–

1,090,920
707,622

360,030
233,532

730,890
474,090

4,593,089

1,515,746

3,077,343

(d) Shareholdings of Key Management Personnel

2019

Directors
Michael Kay
Andrew Saker
Hugh McLernon
Michael Bowen
Wendy McCarthy
Karen Phin
Christine Feldmanis

Executives
Clive Bowman
Charlie Gollow
Stuart Mitchell
Jeremy Sambrook

Total

Balance
1 July 2018

Received as
remuneration

Share
performance
rights exercised

Net change
other1

Balance
30 June 2019

307,692
163,506
5,299,045
1,009,264
–
23,256
–

533,172
467,058
–
8,298

7,811,291

–
–
–
–
–
–
–

–
–
–
–

–

–
–
–
–
–
–
–

–
–
–
58,058

58,058

5,357
5,357
(194,643)
10,714
–
–
–

–
–
–
(58,058)

(231,273)

313,049
168,863
5,104,402
1,019,978
–
23,256
–

533,172
467,058
–
8,298
7,638,076

1. Net change other relates to shares subscribed for or transacted on market.

Directors’ ReportcontinuedRemuneration Report (Audited) (continued)

2018

Directors
Michael Kay
Andrew Saker
Hugh McLernon
Michael Bowen
Alden Halse
Wendy McCarthy
Karen Phin

Executives
Clive Bowman
Charlie Gollow

Total

Balance
1 July 2017

Received as
remuneration

Share
performance
rights exercised

Net change
other1

Balance
30 June 2018

307,692
158,317
5,299,045
977,234
879,780
–
–

533,172
467,058

8,622,298

–
–
–
–
–
–
–

–
–

–

–
–
–
–
–
–
–

–
–

–

–
5,189
–
32,030
–
–
23,256

307,692
163,506
5,299,045
1,009,264
879,780
–
23,256

–
–

533,172
467,058

60,475

8,682,773

1. Net change other relates to shares subscribed for or transacted on market.

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) Loans to Key Management Personnel
There have been no loans provided to KMP in 2019 (2018: 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
$499,176 (2018: $470,272). The legal advice was obtained at normal market prices. IMF engages a number of different
law firms for its external legal advice and hence the relationship with DLA Piper is not exclusive. Michael Bowen does
not participate in any board decisions to appoint external counsel when DLA Piper is being considered for engagement.
Refer to Note 27.

– End of Remuneration Report –

Directors’ ReportcontinuedIMF Bentham Limited Annual Report 2019OverviewDirectors’ ReportFinancial Report Shareholder Information Directors’ Meetings
The number of meetings of directors held during the period under review and the number of meetings attended by each
director were as follows:

Total number of meetings held:

Meetings Attended:

M Kay

A Saker

H McLernon

M Bowen

W McCarthy

K Phin

C Feldmanis

Board
Meetings

Project Sub-
Committee
Meetings

Audit
and Risk
Committee

Remuneration
Committee

Nomination
Committee

Corporate
Governance
Committee

–

Committee membership
The Company has 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 and Risk Committee

Remuneration Committee

Nomination Committee

Corporate Governance Committee

C Feldmanis4 (Chair)

M Bowen (Chair)

M Kay

K Phin

M Bowen

W McCarthy3

M Kay

K Phin

C Feldmanis4

W McCarthy3

M Kay (Chair)5

C Feldmanis4

M Bowen

K Phin

A Saker

W McCarthy3

K Phin (Chair)6

M Kay

M Bowen

C Feldmanis4

W McCarthy3

1. Mr Saker attended 2 meetings as a member of the committee and 3 meetings by invitation.

2. Attended by invitation.

Ms McCarthy retired as a director on 21 November 2018. Ms McCarthy retired as Chair of the Nomination Committee and the Corporate
Governance Committee and as a member of the Audit and Risk Committee and Remuneration Committee on the same date. During FY19,
Ms McCarthy attended all meetings for which she was eligible.

Ms Feldmanis was appointed as a director on 1 November 2018 and was appointed to the Audit & Risk Committee, Remuneration Committee,
Nomination Committee and Corporate Governance Committee on the same date. Ms Feldmanis became Chair of the Audit and Risk Committee
on 4 April 2019. During FY19, Ms Feldmanis attended all meetings for which she was eligible.

5. Mr Kay was appointed as Chair of the Nomination Committee on 20 June 2019.

6. Ms Phin was appointed as Chair of the Corporate Governance Committee on 4 April 2019.

The Project Sub-Committee heading is an amalgam of the various Project Sub-Committees appointed by the board
through the year. The purpose of the project sub-committees is to progress strategic matters intra-board meetings
and to spread the workload evenly across the non-executive board members. The Project Sub-Committees have been
chaired by Michael Kay and vary as to the other non-executive directors participants.

Directors’ Reportcontinued

Rounding
The amounts contained in the financial report have been rounded to the nearest $1,000 (where rounding is applicable)
where noted ($000) under the option available to the Company under ASIC Corporations Instrument 2016/191. The
Company is an entity to which this legislative instrument applies.

Auditor’s Independence Declaration
EY, the Company’s auditors, have provided a written independence declaration to the directors in relation to its audit of the
Financial Report for the year ended 30 June 2019. This Independence Declaration which forms part of this report, can be
found at page 80.

Non-audit services
The directors are satisfied that the provision of non-audit services by EY to the Group is compatible with the general
standard of independence for auditors imposed by the Corporations Act 2001. The nature and scope of each type of non-
audit service provided means that auditor independence was not compromised.

EY received or are due the following amounts for the provision of non-audit services:

– Tax compliance services and other non-audit services: nil (2018: $60,000).

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. 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.

Signed in accordance with a resolution of the directors.

Michael Kay
Chairman

Perth, 21 August 2019

Andrew Saker
Managing Director

Directors’ ReportcontinuedIMF Bentham Limited Annual Report 2019OverviewDirectors’ ReportFinancial Report Shareholder Information Auditor’s
Independence
Declaration

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

Tel: +61 8 9429 2222
Fax: +61 8 9429 2436
ey.com/au

Ernst & Young
11 Mounts Bay Road
Perth WA 6000 Australia
GPO Box M939 Perth WA 6843

As lead auditor for the audit of IMF Bentham Limited for the financial year ended 30 June 2019, 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

Auditor’s Independence Declaration to the Directors of IMF Bentham
Limited

relation to the audit; and

b) no contraventions of any applicable code of professional conduct in relation to the audit.

As lead auditor for the audit of IMF Bentham Limited for the financial year ended 30 June 2019, I declare
This declaration is in respect of IMF Bentham Limited and the entities it controlled during the financial
to the best of my knowledge and belief, there have been:
year.

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.

Ernst & Young
This declaration is in respect of IMF Bentham Limited and the entities it controlled during the financial
year.

Robert A Kirkby
Partner
21 August 2019
Ernst & Young

Robert A Kirkby
Partner
21 August 2019

A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation

RK:DA:IMF:083

Statement of
Comprehensive Income

for the year ended 30 June 2019

Continuing Operations

Interest revenue

Other revenue

Net (loss)/gain on derecognition of intangible assets

Other income

Total Income

Finance costs

Depreciation expense

Employee benefits expense

Corporate and office expense

Other expenses

Loss Before Income Tax

Income tax benefit

Net Loss for the year

Attributable to:

Equity holders of the parent

Non-controlling interests

Other Comprehensive Income

Items that may be subsequently reclassified to profit and loss:

Movement in foreign currency translation reserve

Items that will not be subsequently reclassified to profit and loss:

Movement in foreign currency translation reserve attributed to
non-controlling interests

Other comprehensive income net of tax

Total Comprehensive Income for the Year

Attributable to:

Equity holders of the parent

Non-controlling interests

Consolidated

2019
$’000

2018
$’000

Note

5(a)

5(b)

5(c)

5(d)

5(e)

4,181

114

(4,247)

5,686

5,734

117

676

28,541

12,773

11,289

(47,662)

(11,514)

(36,148)

2,299

–

16,307

4,524

23,130

621

22,055

7,212

1,516

(8,360)

(513)

(7,847)

(36,098)

(50)

(11,017)

3,170

(1,810)

6,027

12,533

10,723

(25,425)

–

6,027

(1,820)

(38,008)

12,583

(4,990)

3,170

Earnings per share attributable to the equity holders of the Company (cents per share)

Basic earnings per share (cents per share)

Diluted earnings per share (cents per share)

(25.00)

(6.40)

The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

OverviewDirectors’ ReportFinancial Report Shareholder Information IMF Bentham Limited Annual Report 2019

Statement of
Financial Position

as at 30 June 2019

ASSETS

Current Assets

Cash and cash equivalents

Litigation contract and other receivables

Contract costs

Other assets

Income tax receivable

Total Current Assets

Non-Current Assets

Plant and equipment

Intangible assets

Contract costs

Other assets

Deferred tax assets

Total Non-Current Assets

TOTAL ASSETS

LIABILITIES

Current Liabilities

Trade and other payables

Provisions

Debt securities

Other liabilities

Total Current Liabilities

Non-Current Liabilities

Provisions

Debt securities

Deferred income tax liabilities

Total Non-Current Liabilities

TOTAL LIABILITIES

NET ASSETS

EQUITY

Contributed equity

Reserves

Retained earnings

Equity attributable to equity holders of the parent

Non-controlling interests

TOTAL EQUITY

Consolidated

2019
$’000

2018
$’000

Note

226,460

16,866

939

1,901

1,116

160,231

25,690

–

1,411

5,455

247,282

192,787

1,112

1,332

426,977

321,268

5,400

9,324

18,848

461,661

708,943

23,992

15,192

71,455

915

111,554

432

72,517

8,943

81,892

193,446

515,497

–

11,509

12,355

346,464

539,251

18,047

14,656

49,553

658

82,914

277

70,909

17,315

88,501

171,415

367,836

15(b)

15(a)

205,558

127,630

893

12,494

218,945

296,552

16,110

48,592

192,332

175,504

515,497

367,836

The above Statement of Financial Position should be read in conjunction with the accompanying notes.

Statement of
Cash Flows

for the year ended 30 June 2019

Consolidated

2019
$’000

2018
$’000

Note

Cash flows from operating activities

Payments to suppliers and employees

Interest income

Interest paid

Income tax received/(paid)

(35,625)

4,308

(8,938)

3,459

Net cash flows used in operating activities

(36,796)

(44,316)

2,225

(8,303)

(13,231)

(63,625)

Cash flows from investing activities

Proceeds from litigation funding contracts – settlements, fees and reimbursements

Payments for litigation funding contracts – external costs

Payments for litigation funding contracts – capitalised overhead and employee costs

Purchase of plant and equipment

Loans made to third parties

Net cash flows used in investing activities

Cash flows from financing activities

Dividends paid

Proceeds from issue of shares

Payments for costs of issuing shares

Proceeds from issue of debt

Payments for costs of issuing debt

Contributions from non-controlling interests

Distributions to non-controlling interests

Payments for fund establishment costs

Receipts for reimbursement of fund establishment costs

Net 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 equivalents at end of year

43,179

94,893

(116,851)

(106,999)

(6,826)

(6,419)

(364)

–

(236)

(521)

(80,862)

(19,282)

–

(8,093)

76,105

(2,327)

26,000

(3,016)

–

121,844

114,855

(28,299)

(10,331)

1,117

(9,694)

(4,226)

–

181,093

92,842

63,435

2,794

9,935

5,405

160,231

144,891

226,460

160,231

The above Statement of Cash Flows should be read in conjunction with the accompanying notes.

The comparative information has been restated to reclassify $4,226,000 of payments for fund establishment costs from
investing activities to financing activities.

OverviewDirectors’ ReportFinancial Report Shareholder Information IMF Bentham Limited Annual Report 2019Statement of
Changes in Equity

for the year ended 30 June 2019

Share
based
payments
reserve
$’000

Foreign
currency
translation
reserve
$’000

Issued
capital
$’000

Option
premium
reserve
$’000

Convertible
note
reserve
$’000

Fund
equity
reserve
$’000

Retained
earnings
$’000

Non-
controlling
interests
$’000

Total
$’000

Total
equity
$’000

CONSOLIDATED

As at 1 July 2018

127,630

15,251

1,383

3,404

3,832

(7,760)

48,592

192,332

175,504

367,836

Profit for the year

Other comprehensive
income

Total Comprehensive
Income for the Year

Equity Transactions:

Proceeds from shares
issued

Transaction costs
associated with share
issue, net of tax

Share based payments

Contributions from non-
controlling interests

Distributions to non-
controlling interests

Changes in the
proportion of equity
held by non-controlling
interests

Transaction costs
– disposal of non-
controlling interests,
net of tax

–

76,105

–

(766)

2,589

–

2,498

–

(1,810)

–

(36,098)

(50)

(36,148)

–

(1,810)

12,533

10,723

–

(36,098)

(37,908)

12,483

(25,425)

–

76,105

–

76,105

–

(766)

5,087

–

(766)

5,087

–

121,844

–

(28,299)

–

(15,905)

–

(15,905)

15,905

–

(885)

As at 30 June 2019

205,558

17,749

(427)

3,404

3,832

(23,665)

12,494

218,945

296,552

515,497

As at 1 July 2017

123,654

5,962

(4,644)

3,404

3,832

–

71,679

203,887

2,366

206,253

Profit for the year

Other comprehensive
income

Total Comprehensive
Income for the Year

Equity Transactions:

Dividend paid

Share based payments

Shares issued under the
Dividend Reinvestment
Plan

Contributions from non-
controlling interests

Distributions to non-
controlling interests

Changes in the
proportion of equity
held by non-controlling
interests

Transaction costs
– disposal of non-
controlling interests,
net of tax

–

3,976

–

9,289

–

6,027

–

(11,017)

3,170

(7,847)

–

6,027

–

6,027

–

(11,017)

(4,990)

3,170

(1,820)

–

(12,070)

–

9,289

–

(12,070)

9,289

–

3,976

–

3,976

–

175,017

(9,694)

–

(7,760)

–

(7,760)

7,760

–

(3,115)

As at 30 June 2018

127,630

15,251

1,383

3,404

3,832

(7,760)

48,592

192,332

175,504

367,836

The above Statement of Changes in Equity should be read in conjunction with the accompanying notes.

Notes to the
Financial Statements

for the year ended 30 June 2019

About this Report
The financial report of IMF Bentham Limited (“IMF”,“the
Company” or “the Parent”) and its subsidiaries (“the
Group” or “consolidated entity”) for the year ended
30 June 2019 was authorised for issue in accordance
with a resolution of the directors on 21 August 2019.

IMF Bentham Limited (ABN 45 067 298 088) is a for profit
company incorporated and domiciled in Australia and
limited by shares that are publicly traded on the Australian
Securities Exchange (ASX code: IMF).

IMF Bentham Limited is not economically dependent on
any other entity.

This section sets out the basis upon which the Group’s
Financial Statements are prepared. Specific accounting
policies are described in the respective notes to the
Financial Statements. This section also shows information
on new or amended accounting standards and
interpretations and their impact on the financial position
and performance of the Group.

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 Corporations (Rounding in Financial/Directors’
Reports) Instrument 2016/191.

b. Compliance with IFRS
The financial report also complies with International
Financial Reporting Standards (“IFRS”), as issued by the
International Accounting Standards Board.

c. New and amended accounting standards

and interpretations adopted during the year

Except for the effect of adopting new and amended
accounting standards and interpretations effective from 1 July
2018, described below, the accounting policies adopted are
consistent with those of the previous financial year.

The Group applied AASB 15 Revenue from Contracts
with Customers (“AASB 15”) and AASB 9 Financial
Instruments (“AASB 9”) for the first time. The nature
and effect of the changes resulting from the adoption of
these new accounting standards are described below.

Several other amendments and interpretations were
applied for the first time in 2019 but did not have a
significant impact on the consolidated financial statements
of the Group. The Group has not early adopted any new or
amended accounting standard or interpretation issued but
not yet effective.

AASB 9 and consequential amendments to other
Australian Accounting Standards
AASB 9 replaces AASB 139 Financial Instruments:
Recognition and Measurement (“AASB 139”) for annual
periods beginning on or after 1 January 2018, bringing
together all three aspects of the accounting for financial
instruments: classification and measurement; impairment;
and hedge accounting.

The Group has applied AASB 9 retrospectively from 1 July
2018 and elected not to restate comparative information.

In applying AASB 9 the Group concluded the following:

– The Group’s financial assets consist of cash, short
term deposits, litigation receivables and other short-
term receivables. The Group classified its receivables
and other financial assets as loans and receivables
under AASB 139 and measured these financial assets
at amortised cost. Under AASB 9, the financial assets
are classified as financial assets at amortised cost.
This classification reflects the Group’s business model,
of which its objective is holding financial assets is to
collect contractual cash flows and those cash flows
give rise on specified dates and are solely payments
of interest and principal outstanding. The change
in classification did not result in any measurement
adjustments on transition to AASB 9;

– The Group’s financial liabilities include short term
accounts payable and interest-bearing debt. No
changes to the carrying values or classification were
made on transition to AASB 9;

– The Group does not apply hedge accounting and has

no hedges in place;

– The Group has no financial instruments measured
at fair value through the profit or loss and has not
elected to classify any financial instruments at fair value
through the profit or loss;

– The Group held its receivables and other financial

assets at amortised cost under AASB 139 and these
were classified as loans and receivables. Under
AASB 9, the financial assets are classified as financial
assets at amortised cost. This classification reflects
the Group’s business model, of which its objective in
holding financial assets is to collect contractual cash
flows and those cash flows give rise on specified
dates and are solely payments of interest and principal
outstanding; and

OverviewDirectors’ ReportFinancial Report Shareholder Information IMF Bentham Limited Annual Report 2019Prior to the adoption of AASB 15 and the consequential
amendments to AASB 138, AASB 138 required the Group
to recognise net income on disposal of its intangible
assets with the proceeds on disposal measured in
accordance with AASB 118. After the amendment, AASB
138 requires the proceeds on disposal of intangible
assets to be recognised and measured in accordance
with the requirements of AASB 15. In this regard, the
date of disposal of an intangible asset is now the date
that the recipient obtains control of the intangible asset
in accordance with the requirements for determining
when a performance obligation is satisfied in AASB 15.
The amount of consideration to be included in the gain
or loss arising from the derecognition of an intangible
asset is determined in accordance with the requirements
for determining the transaction price under AASB 15.
Subsequent changes to the estimated amount of the
consideration included in the gain or loss are accounted
for in accordance with the requirements for changes in
the transaction price in AASB 15.

Further detail of the new accounting policy applicable to
litigation contracts in progress can be found in Note 10.

Following the adoption of AASB 15, the Group has entered
into management services agreements with Fund investors
and will derive revenue from customer contracts. The
accounting policy for revenue recognition can be found
in Note 2.

Transition impact
The Group adopted AASB 15 using the modified
retrospective method of adoption. At the date of initial
application, 1 July 2018, the adoption of AASB 15 did not
have a material effect on the Group and no adjustment
was taken to opening retained earnings as at 1 July 2018.
There was no material impact of applying AASB 15 and
the consequential amendments to AASB 138 in the current
year. In applying the consequential amendments to AASB
138 relating to the disposal of intangible assets, the Group
did not apply the amended Standard to litigation contracts
derecognised prior to the date of initial application of
the amended Standard consistent with the transitional
provisions of AASB 15 using the modified retrospective
method of adoption.

About this Report (continued)
– The adoption of AASB 9 has changed the Group’s

accounting for impairment losses of financial assets by
replacing AASB 139’s incurred loss approach with a
forward-looking expected credit loss (ECL) approach.
Upon transition to AASB 9 no material variance in asset
values stated under the new ECL approach to previous
book values were noted as the litigation receivables
had either immaterial expected credit losses assessed
due to the credit quality of the debtor or had already
assumed an amount equal to the life-time expected
credit losses where there was a material movement in
the receivables credit risk. In addition, expected credit
losses on cash and cash equivalents were deemed
to be immaterial as cash deposits are short term, less
than 90 days and with AA rated banks. Accordingly,
no adjustment was required.

AASB 15 Revenue from Contracts with Customers
and consequential amendments to other Australian
Accounting Standards
The Group adopted AASB 15 with effect from 1 July
2018. AASB 15 outlines a single comprehensive model
of accounting for revenue arising from contracts with
customers and supersedes the revenue recognition
requirements that are included in other Accounting
Standards and Interpretations, in particular AASB 118
Revenue (“AASB 118”).

AASB 15 moves from a “risks and rewards” model of
revenue recognition under AASB 118 to a “control” model
of revenue recognition. Set out below are the key impacts
arising from the adoption of the new standard applicable
to the Group’s litigation contracts in progress.

The Group adopted AASB 15 using the modified
retrospective method (see below). At the date of initial
application of AASB 15, 1 July 2018, the Group had no
material contracts falling directly within the scope of
AASB 15. The Group’s Litigation Contracts in Progress
do not fall directly within the scope of AASB 15 as they
are collaborative arrangements and there is no customer/
vendor relationship established within the contract.
However, AASB 15 is relevant to the Group due to the
consequential amendments to AASB 138 Intangible Assets
(“AASB 138”) relating to the disposal of intangible assets.

The Group’s Litigation Contracts in Progress are classified
as intangible assets. Litigation Contracts in Progress are
derecognised when the Group disposes of the intangible
asset. Gains or losses arising from derecognition of
Litigation Contracts in Progress are measured as the
difference between the net disposal proceeds and the
carrying amount of the asset and are recognised in the
profit or loss as other income.

Notes to the Financial StatementscontinuedAbout this Report (continued)
d. New and amended accounting standards and
interpretations issued but not yet effective
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 16 Leases (“AASB 16”)
AASB 16 was issued in January 2016 and it replaces
AASB 117 Leases, AASB Interpretation 4 Determining
whether an Arrangement contains a Lease, AASB
Interpretation-115 Operating Leases – Incentives and
AASB Interpretation 127 Evaluating the Substance of
Transactions Involving the Legal Form of a Lease.

AASB 16 sets out the principles for the recognition,
measurement, presentation and disclosure of leases and
requires lessees to account for all leases under a single
on-balance sheet model similar to the accounting for
finance leases under AASB 117. The standard includes two
recognition exemptions for lessees – leases of “low value”
assets (e.g. personal computers) and short-term leases (i.e.
leases with a lease term of 12 months or less). AASB 16
does not define “low value assets” in monetary terms and
whilst assets that are “low value” to one entity may not be
for another, the IASB has noted that it had in mind that
typically low value assets value would be US$5,000 or less
(circa A$7,150). The Group has considered this threshold
appropriate when applying the standard.

At the commencement date of a lease, a lessee will
recognise a liability to make lease payments (i.e. the lease
liability) and an asset representing the right to use the
underlying asset during the lease term (i.e. the right-of-use
asset). Lessees will be required to separately recognise the
interest expense on the lease liability and the depreciation
expense on the right-of-use asset.

Lessees will be also required to remeasure the lease
liability upon the occurrence of certain events (e.g.
a change in the lease term, a change in future lease
payments resulting from a change in an index or rate used
to determine those payments). The lessee will generally
recognise the amount of the remeasurement of the lease
liability as an adjustment to the right-of-use asset.

Lessor accounting does not apply to the Group as it has
no assets that it provides to third parties under lease
agreements.

AASB 16, which is effective for annual periods beginning
on or after 1 January 2019, requires lessees and lessors to
make more extensive disclosures than under AASB 117.

Transition to AASB 16
The Group has leases of office space, car parking and
office equipment (printers) that fall within the scope of
AASB 16.

In accordance with AASB 16, the Group plans to apply
AASB 16 retrospectively with the cumulative effect of
initially applying the Standard to be recognised at the date
of initial application, being 1 July 2019, as an adjustment
to the opening balance of retained earnings (or other
component of equity, as appropriate) and shall not restate
comparative information.

On transition the Group intends to measure the right of
use assets as if the Standard had been applied since
commencement and using the Group’s incremental
borrowing rate at the date of initial application of
the Standard.

The Group applied the requirements in C8(b)(ii) of AASB
16 and measured the right of use assets as if the standard
has been applied since commencement and using the
Group’s incremental borrowing rate.

The only practical expedient the Group will elect to use
is the practical expedient of hindsight when determining
lease terms where contracts contain a right to extend or
terminate.

During 2019, the Group has performed an impact
assessment of AASB 16 and found it will not have a
material impact on the Group’s equity on transition.

AASB Interpretation 23 Uncertainty over Income Tax
Treatments (“Interpretation 23”)
Interpretation 23 is applicable for reporting periods
beginning on or after 1 January 2019 and therefore will be
effective for the Group for its reporting period beginning
1 July 2019. Interpretation 23 clarifies the application of
the recognition and measurement criteria in AASB 112
Income Taxes where there is uncertainty over income
tax treatments. It requires assessment of each uncertain
tax position as to whether it is probable that a taxation
authority will accept the position. Where it is not probable,
the effect of the uncertainty will be reflected in determining
the relevant taxable profit or loss, tax bases, unused tax
losses, unused tax credits or tax rates. The amount will
be determined as either the single most likely amount
or the sum of the probability weighted amounts in a
range of possible outcomes, whichever better predicts
the resolution of the uncertainty. Judgements will be
reassessed as and when new facts and circumstances
come to light. The Group is in the process of assessing
the impact of Interpretation 23 and is not yet able to
reasonably estimate the impact on its financial statements.

Notes to the Financial StatementscontinuedOverviewDirectors’ ReportFinancial Report Shareholder Information IMF Bentham Limited Annual Report 2019About this Report (continued)

Conceptual Framework for Financial Reporting
and relevant amending standards
The revised Conceptual Framework was issued by the
AASB in May 2019 and applies to the Group for the
financial year beginning 1 July 2020. It includes some new
concepts, provides updated definitions and recognition
criteria for assets and liabilities and clarifies some important
concepts. It is arranged in eight chapters, as follows:

– Chapter 1 – The objective of financial reporting
– Chapter 2 – Qualitative characteristics of useful
financial information

– Chapter 3 – Financial statements and the
reporting entity

– Chapter 4 – The elements of financial statements
– Chapter 5 – Recognition and derecognition
– Chapter 6 – Measurement
– Chapter 7 – Presentation and disclosure
– Chapter 8 – Concepts of capital and capital
maintenance

Amendments to References to the Conceptual Framework
in IFRS Standards has also been issued, which sets
out the amendments to affected standards in order to
update references to the revised Conceptual Framework.
The changes to the Conceptual Framework may affect
the application of IFRS in situations where no standard
applies to a particular transaction or event. In addition,
relief has been provided in applying IFRS 3 and developing
accounting policies for regulatory account balances
using IAS 8, such that entities must continue to apply
the definitions of an asset and a liability (and supporting
concepts) in the 2010 Conceptual Framework, and not
the definitions in the revised Conceptual Framework. The
Group is in the process of assessing the impact of the
changes and is not yet able to reasonably estimate the
impact on its financial statements.

e. Basis of consolidation
The consolidated financial statements comprise the
financial statements of IMF Bentham Limited and its
subsidiaries as at 30 June 2019. 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 Group includes fund investment vehicles over which
IMF Bentham Limited has the right to direct the relevant
activities of the fund under contractual arrangements and
has exposure to variable returns from the fund investment
vehicles. See Note 26.

The financial results 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.

f. 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 to the Company’s functional currency are
recognised in profit or loss except for 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.

Notes to the Financial StatementscontinuedSignificant Accounting Judgments,
Estimates and Assumptions

g. Significant accounting judgments,

estimates and assumptions

The preparation of the Group’s consolidated financial
statements requires management to make judgments,
estimates and assumptions that affect the reported
amounts in the financial statements. Management
continually evaluates its judgments and estimates in
relation to assets, liabilities, contingent liabilities, revenues
and expenses. Management bases its judgments on
historical experience and on other factors it believes to
be reasonable under the circumstances, the results of
which form the basis of the carrying values of assets and
liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under
different assumptions and conditions. In connection with
the Group’s funds where the Group does not own 100%
of the entity in question, the Group makes judgements
about whether it is required to consolidate such entities
by applying the factors set forth in the relevant accounting
standards, including but not limited to the Group’s equity
and economic ownership interest, the economic structures
in use in the entity, the level of control the Group has over
the entity through the entity’s structure or any relevant
contractual agreements, and the rights of other investors.

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.

Taxation
The Group’s accounting policy for taxation requires
management’s judgment in assessing whether deferred tax
assets and certain deferred tax liabilities are recognised on
the Statement of Financial Position. Deferred tax assets,
including those arising from tax losses, capital losses and
temporary differences, are recognised only where it is
considered more likely than not that they will be recovered,
which is dependent on the generation of sufficient future
taxable profits.

Assumptions about the generation of future taxable profits
depend on management’s estimates of future cash flows
as contained in the Group’s yearly budget. 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.

Intangible Assets – Litigation Contracts in Progress
Litigation Contracts in Progress are recognised as an
intangible asset in the financial statements of the Group as
the litigation contract does not give rise to an unconditional
right to receive cash. Rather, it provides the Group 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 10).

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 Black-Scholes model for Tranche 2 grants.
The assumptions and models used for estimating fair value
for share-based payment transactions are disclosed in
Note 24.

Long service leave provision
As discussed in Note 21, 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.

Notes to the Financial StatementscontinuedOverviewDirectors’ ReportFinancial Report Shareholder Information IMF Bentham Limited Annual Report 2019Provision for adverse costs
The Group raises a provision for adverse costs when it
has lost a litigation funding contract investment which it
has funded. When an investment is lost and an appeal is
lodged, the Group still 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.

Measurement of non-controlling interests (“NCI”)
Profits and losses are allocated to non-controlling interests
in line with the allocation of profit distributions under the
terms of the respective agreements. Therefore, at the end
of each reporting period, the allocation of non-controlling
interests will be represented by the non-controlling
shareholders’ share of net assets, as would be distributed
under the agreements.

h. Reclassification adjustment
The comparative information has been restated to
reclassify a foreign exchange gain of $4,311,000 from
Other revenue to Other income to ensure consistency with
the presentation in the current financial year.

A. RESULTS FOR THE YEAR

Note 1: Segment information
The Group only operates in one industry, being investing
in litigation funding. For management purposes, the Group
is organised into operating segments comprising wholly
owned operations and the Group’s fund structures.

– The Group’s wholly owned subsidiaries own historical

litigation in progress investments and provide
investment management advisory and administration
services to the Group’s fund structures in the following
locations:
– Australia
– United States
– Canada
– Asia
– EMEA (Europe, Middle East, Africa)
– The Group’s Fund structures include:

– Fund 1 – This comprises Bentham IMF 1 LLC,

Security Finance 1 LLC and HC 1 LLC. The Fund
invests in litigation investments in the United States;

– Rest of World (RoW) Funds – This comprises

IMF Bentham (Fund 2) Pty Ltd and IMF Bentham
(Fund 3) Pty Ltd. These two entities jointly invest in
litigation investments outside the United States;

– Fund 4 – This structure invests in litigation

investments in the United States. It consists of
a series of parallel investing entities comprising
Bentham Investments 1 LP; Bentham Investments
2 LP; Bentham Investments 3 LP; Bentham
Investments 4 LP; Bentham Investments 5 LP;

Bentham Investments 6 LP; Bentham Investments
7 LP; Bentham Investments 8 LP; Bentham
Investments 9 LP; Security Finance 2 LLC and
Bentham HPCR LP.

– ROW Fund 5 was launched on 20 June 2019.

The operating segment relating to this Fund was
immaterial at 30 June 2019 and therefore not
included separately below.

For Fund 1 and ROW Funds the non-controlling interest
is comprised of an equity interest which carries an
entitlement to receive a capped priority return on drawn
capital and a further preferred return on committed but
undrawn capital. IMF retains control and ownership of
the Funds via its equity interests. Upon satisfaction of the
non-controlling interests’ priority returns, IMF is entitled to a
manager return. After satisfaction of the priority return and
the manager returns, the residual net cash flows are to be
distributed (i) for the Fund 1: 85% to IMF and 15% to the
non-controlling interests: (ii) for the RoW Funds, 80% to IMF
and 20% to non-controlling interests.

For Fund 4 the non-controlling interest is comprised of an
equity interest which, together with IMF’s interest, carries
an entitlement to receive a maximum capped hurdle return
on invested capital. IMF retains control and ownership of
the Funds via its equity interest. IMF is entitled to a periodic
management fee and transactional based performance fee.

Intersegment revenue comprises interest revenue on
intercompany loans and management fees.

Intercompany interest revenue is recognised in accordance
with AASB 9 using the effective interest method.

The intercompany management fee revenue earned during
the year was derived from management and advisory
agreements between the group entities. The consideration
received is determined by reference to costs plus a
percentage mark-up. The revenue is recognised over the
period in which costs are incurred as it is deemed that
the Group transfers control of the management services
over this period and, therefore, satisfies its performance
obligations and recognises revenue over time.

Adjustments and eliminations
Certain finance and overheads costs are not allocated
to individual segments as the underlying expenses are
incurred within wholly owned operations. These costs are
capitalised into litigation funding contracts on consolidation
of the Group. The associated tax effect accounting for
these items are also managed on a Group basis and not
allocated to the individual segments.

Inter-segment revenues and expenses are eliminated
on consolidation and reflected in the “adjustments and
eliminations” column.

Adjustments made in the balance sheet include
adjustments to non-current assets to eliminate
intercompany loans and investments in subsidiaries on
consolidation.

Notes to the Financial StatementscontinuedNote 1: Segment information (continued)
Inter-segment revenues and expenses are eliminated on consolidation.

Wholly owned operations

Funds

Consolidation

Australia
$’000

United
States
$’000

Canada
$’000

Asia
$’000

EMEA
$’000

Total
Subsidiaries
$’000

Fund 1
$’000

Fund 4
$’000

ROW
Funds 2&3
$’000

Total
Funds
$’000

Adjustments
and
eliminations
$’000

Consolidated
$’000

Summarised statement
of profit or loss for 2019

Interest revenue

Inter-segment

Performance fee revenue

Management fee revenue

Net gain/(loss) on
derecognition of intangible
assets

Other income

Total Income

3,469

3,420

–

5,949

4,526

–

114

(931)

904

–

3,473

6,409

2,541

1,865

14,235

–

(410)

603

–

(33)

–

114

4,608

(5,203)

6,099

–

653

708

–

4,181

–

(14,235)

–

114

(854)

(6,057)

(2,798)

(4,247)

(73)

(340)

5,686

17,364

6,606

2,640

1,832

28,529

(5,148)

(274)

(5,422)

(17,373)

5,734

Expenses

46,957

20,436

3,657

1,636

1,678

74,364

6,636

(Loss)/profit before tax

(29,593)

(20,349)

2,949

1,004

Income tax

9,118

6,546

(651)

Net (loss)/profit

(20,475)

(13,803)

2,298

(137)

867

154

(33)

121

(45,835)

(11,784)

14,843

(69)

(30,992)

(11,853)

Attributable to:

Equity holders of the
parent

(20,475)

(13,803)

2,298

867

121

(30,992)

(11,838)

Non-controlling interests

–

(15)

(42)

–

(42)

(7)

(35)

671

7,349

(28,317)

53,396

(945)

(12,771)

10,944

(47,662)

218

149

(3,478)

11,514

(727)

(12,622)

7,466

(36,148)

(727)

(12,572)

7,466

(36,098)

–

(50)

–

(50)

Wholly owned operations

Funds

Consolidation

Australia
$’000

United
States
$’000

Canada
$’000

Asia
$’000

EMEA
$’000

Total
Subsidiaries
$’000

Fund 1
$’000

Fund 4
$’000

ROW
Funds 2&3
$’000

Total
Funds
$’000

Adjustments
and
eliminations
$’000

Consolidated
$’000

Summarised statement
of financial position as
at 30 June 2019

Cash

132,409

Other current assets

21,251

137

868

176

132,827

49,680

5,627

38,326

93,633

–

226,460

1,451

2,577

1,856

28,003

–

740

(7,921)

20,822

Intangible assets

142,276

7,304

3,595

Other non-current assets

190,349

84,529

1,466

–

153,175 194,252

28,456

34,043

256,751

17,051

426,977

276,359

16,544

(1)

9,294

25,837

(267,512)

34,684

Total assets

486,285

92,838

6,688

2,683

1,870

590,364 260,476

34,082

82,403

376,961

(258,382)

708,943

Current liabilities

105,736

4,155

949

102

111,018

2,313

2,839

4,239

9,391

(8,855)

111,554

Non-current liabilities

106,275

38,249

7,005

2,570

1,617

155,716

–

(73,824)

81,892

Total liabilities

212,011

42,404

7,954

2,646

1,719

266,734

2,313

2,839

4,239

9,391

(82,679)

193,446

Net assets

274,274

50,434

(1,266)

151

323,630 258,163

31,243

78,164

367,570

(175,703)

515,497

Equity attributable to:

Equity holders of the parent

274,274

50,434

(1,266)

Contributed equity – NCI

Earnings – NCI

Total equity

–

274,274

50,434

(1,266)

–

151

323,630

55,635

5,793

9,590

71,018

(175,703)

218,945

–

– 185,242

25,485

58,639

269,366

–

17,286

(35)

9,935

27,186

–

269,366

27,186

151

323,630 258,163

31,243

78,164

367,570

(175,703)

515,497

Notes to the Financial StatementscontinuedOverviewDirectors’ ReportFinancial Report Shareholder Information IMF Bentham Limited Annual Report 2019

Note 1: Segment information (continued)

Wholly owned operations

Funds

Consolidation

Australia
$’000

United
States
$’000

Canada
$’000

Asia
$’000

EMEA
$’000

Total
Subsidiaries
$’000

Fund 1
$’000

Fund 4
$’000

ROW
Funds 2&3
$’000

Total
Funds
$’000

Adjustments
and
eliminations
$’000

Consolidated
$’000

Summarised statement
of profit or loss for 2018

Interest revenue

Inter–segment

Performance fee revenue

Management fee revenue

Net gain/(loss) on
derecognition of intangible
assets

Other income

Total Income

2,282

46,372

–

13,362

(3,424)

8,149

(117)

70,165

(3,541)

–

(62)

157

104

Expenses

29,173

15,895

2,376

Profit/(loss) before tax

40,992

(19,436)

(2,272)

Income tax

1,948

1,820

501

Net profit/(loss)

42,940

(17,616)

(1,771)

Attributable to:

–

763

(727)

133

(594)

Equity holders of the parent

42,940

(17,616)

(1,771)

(594)

Non–controlling interests

–

2,291

46,372

–

9,876

1,178

8,225

(1)

66,764

1,177

–

48,207

18,557

1,142

4,402

(36)

22,959

1,106

22,959

–

1,106

–

2,299

(46,372)

–

2,979

4,157

2,274

16,307

(3,717)

4,524

3,004

4,181

(47,815)

23,130

–

(16,807)

31,490

2,949

4,091

(31,008)

(8,360)

(885)

(921)

(2,968)

513

2,064

3,170

(33,976)

(7,847)

–

(33,976)

(11,017)

2,064

3,170

–

3,170

Wholly owned operations

Funds

Consolidation

Australia
$’000

United
States
$’000

Canada
$’000

Asia
$’000

EMEA
$’000

Total
Subsidiaries
$’000

Fund 1
$’000

Fund 4
$’000

ROW
Funds 2&3
$’000

Total
Funds
$’000

Adjustments
and
eliminations
$’000

Consolidated
$’000

Summarised statement
of financial position as
at 30 June 2018

Cash

132,100

987

1,057

101

Current assets

21,486

3,595

127

Intangible assets

111,614

8,815

1,383

Non-current assets

113,224

40,650

Total assets

378,424

54,047

2,615

Current liabilities

78,145

1,264

273

Non-current liabilities

84,320

(1,738)

6,393

Total liabilities

162,465

(474)

6,666

(7)

–

804

862

Net assets

215,959

54,521

(4,051)

(767)

Equity attributable to:

Equity holders of the parent

215,959

54,521

(4,051)

(767)

Contributed equity – NCI

Earnings – NCI

Total equity

–

215,959

54,521

(4,051)

(767)

–

134,245

10,096

25,201

3,408

121,812 178,049

153,923

15,695

435,181

207,248

79,740

1,000

89,779

(1)

169,519

999

265,662 206,249

265,662

59,298

– 143,681

–

3,270

265,662 206,249

–

15,890

25,986

13,341

160,231

5,104

8,512

(1,157)

32,556

8,066

186,115

–

321,263

11,139

26,834

(155,561)

25,196

40,199

247,447

(143,377)

539,251

3,331

4,331

(1,157)

82,914

(1,285)

88,501

3,339

4,338

(2,442)

171,415

36,860

243,109

(140,935)

367,836

8,307

67,605

(140,935)

192,332

25,936

169,617

2,617

5,887

–

169,617

5,887

36,860

243,109

(140,935)

367,836

Notes to the Financial Statementscontinued

Note 1: Segment information (continued)
Geographically, other income and net gain/(loss) on derecognition of intangible assets can be represented geographically
as follows:

Australia

United States

Canada

EMEA

Asia

Consolidated

2019
$’000

9,900

(7,270)

(1,062)

(100)

(29)

2018
$’000

14,185

3,969

1,825

(18)

870

Total other income and net gain/(loss) on derecognition of intangible assets

1,439

20,831

The Group earned 99% (2018: 99%) of its interest revenue in Australia.

The above comparative information has been restated to reclassify a foreign exchange gain of $4,311,000 from Other
revenue to Other income to ensure consistency with the presentation in the current financial year.

Non-current assets, excluding financial assets, can be represented geographically as follows:

Australia

United States

Canada

EMEA

Asia

Net exposure

Consolidated

2019
$’000

161,758

243,604

15,585

659

6,482

2018
$’000

116,631

211,776

5,717

783

428,088

334,955

Notes to the Financial StatementscontinuedOverviewDirectors’ ReportFinancial Report Shareholder Information IMF Bentham Limited Annual Report 2019Note 2: Revenue

(i) Interest revenue
Revenue is recognised as interest accrues using the effective interest rate method. The effective interest rate 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.

Interest received from National Australia Bank Ltd of $966,659 (2018: $473,453), Bankwest of $346,121 (2018: $339,473),
and Westpac Banking Group Ltd of $2,936,244 (2018: $1,384,320) contributed more than 99% of the Group’s bank
interest revenue (2018: 99%).

(ii) Management fee revenue (policy applied from 1 July 2018)
The management fee revenue earned during the year was derived from Investment Management Agreements with the
investors in Fund 4. Revenue from contracts with customers is recognised when control of the service is transferred to
the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those
services. The consideration receivable is considered to be variable consideration and determined with reference to the
net invested capital attributable to the Investor’s accounts. The revenue is recognised over the period in which there is
net invested capital in the fund as the Group transfers control of the services over this period and, therefore, satisfies
its performance obligations over time. Variable consideration is recognised to the extent that it is highly probable that
a significant reversal in the amount of cumulative revenue recognised will not occur.

Revenue

Interest revenue calculated using effective interest rate method

Revenue from contracts with customers – Management fee revenue

Consolidated

2019
$’000

2018
$’000

4,181

114

4,295

2,299

–

2,299

Note 3: Net (loss)/gain on derecognition of intangibles assets
Net (loss)/gain on derecognition of intangibles assets is derived from the disposal of the Group’s Litigation Contracts
in Progress. The accounting policy for Litigation Contracts in Progress is outlined in Note 10.

Net (loss)/gain on derecognition of intangible assets

Litigation funding contracts – settlements, fees and reimbursements

Litigation funding contracts – derecognition of intangible (successful investments)1

Litigation funding contracts – derecognition of intangible (unsuccessful investments)2

Consolidated

2019
$’000

2018
$’000

35,021

(22,432)

(16,836)

(4,247)

71,223

(49,591)

(5,325)

16,307

This balance includes costs related to the Group’s derecognition of litigation contracts intangibles on cases that have settled or been won.

This balance includes costs related to the Group’s derecognition of litigation contracts intangibles on (i) cases lost by the Group, (ii) cases not
pursued by the Group due to the cases not meeting the Group’s required rate of return, and (iii) any adverse costs provision raised when a litigation
contract in progress has been lost.

Notes to the Financial StatementscontinuedNote 4: Other Income

Other income

Foreign exchange gain

Other income

Note 5: Expenses

Consolidated

2019
$’000

2018
$’000

4,269

1,417

5,686

4,311

213

4,524

Finance 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
the Group incurs in connection with the borrowing of funds. Detailed information is provided in Note 13.

Deprecation
The depreciation policy is disclosed in Note 19.

Employee benefits
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.

Share based payments
Share based payment policy is disclosed in Note 24.

Impairment of intangible assets
The policy for intangible assets is disclosed in Note 10.

Notes to the Financial StatementscontinuedOverviewDirectors’ ReportFinancial Report Shareholder Information IMF Bentham Limited Annual Report 2019
Note 5: Expenses (continued)

(a) Finance costs

Other finance charges

(b) Depreciation

Depreciation expense

Wages and salaries

Superannuation expense

Directors' fees

Payroll tax

Share based payments

Long service leave provision

(d) Corporate and office expense

Insurance expense

Network expense

Marketing expense

Occupancy expense

Professional fees expense

Recruitment expense

Travel expense

(e) Other expenses

ASX fees

General expenses

Amortisation of contract costs

Postage, printing and stationery

Repairs and maintenance

Share registry costs

Staff training, development and conferences

Impairment of intangible assets

Consolidated

2019
$’000

2018
$’000

117

676

621

19,459

1,509

464

1,898

5,266

(55)

14,758

1,305

486

1,346

4,134

28,541

22,055

1,203

903

1,381

1,244

5,723

995

1,324

12,773

201

661

235

481

9,571

11,289

885

745

1,455

1,119

1,556

576

876

7,212

103

435

–

385

491

–

1,516

Notes to the Financial Statementscontinued

Note 6: Income tax

Income tax
Current income tax assets and liabilities 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 for using the full liability balance sheet method.

Deferred income tax liabilities are recognised for all taxable temporary differences except:

– when the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a

transaction that is not a business combination and that, at the time of the transaction, affects neither the accounting
profit nor taxable profit or loss; or

– when the taxable temporary difference is associated with investments in subsidiaries, associates or interests in joint
ventures, and the timing of the reversal of the temporary difference can be controlled and it is probable that the
temporary difference will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets
and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible
temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilised, except:

– when the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of
an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither
the accounting profit nor taxable profit or loss; or

– when the deductible temporary difference is associated with investments in subsidiaries, associates or interests in

joint ventures, in which case a deferred tax asset is only recognised to the extent that it is probable that the temporary
difference will reverse in the foreseeable future and taxable profit will be available against which the temporary
difference can be utilised.

The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no
longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.

Unrecognised deferred income tax assets are reassessed at each reporting date and are recognised to the extent that it has
become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the
asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted
at the reporting date.

Income taxes relating to items recognised directly in other comprehensive income are recognised in equity and not in profit
or loss.

Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets
against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same
taxation authority.

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.

Notes to the Financial StatementscontinuedOverviewDirectors’ ReportFinancial Report Shareholder Information IMF Bentham Limited Annual Report 2019Note 6: Income tax (continued)
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.

Statement of Comprehensive Income

The major components of income tax expense are:

Current income tax

Current income tax charge

Adjustment in respect of current income tax expense of previous year

Payment/(refund) of foreign state-based taxes

Current year losses moved to deferred tax asset

Other

Deferred tax:

Relating to origination and reversal of temporary differences

Current year losses moved to deferred tax asset

Change in federal tax rate in United States

Adjustment in respect of deferred income tax of previous year

Other

Income tax benefit reported in the Statement of Comprehensive Income

Deferred income tax related to items charged or credited directly to equity

Deferred tax associated with share based payments

Deferred tax associated with transaction costs recognised in equity

Income tax expense reported in equity

Consolidated

2019
$’000

2018
$’000

(14,354)

254

14,910

(108)

3,367

(14,910)

–

(592)

(105)

(11,514)

(1,112)

(1,049)

(2,161)

(7,882)

2,598

(130)

9,993

–

3,217

(9,993)

4,000

(2,233)

(83)

(513)

(3,775)

(1,427)

(5,202)

A reconciliation between tax expense and the product of accounting profit before income multiplied by the Group’s
applicable income tax rate is as follows:

Accounting loss before income tax

At the Group’s statutory income tax rate of 30% (2018: 30%)

Adjustment in respect of income and deferred tax of previous years

Expenditure not allowable for income tax purposes

Non-assessable income

Foreign tax rate adjustment

State income tax

Change in federal tax rate in the United States

Relating to origination of temporary differences not previously recognised

Other

Income tax benefit reported in the Statement of Comprehensive Income

Consolidated

2019
$’000

(47,662)

(14,298)

(568)

3,940

–

2,154

(1,539)

–

(874)

(329)

(11,514)

2018
$’000

(8,360)

(2,508)

365

787

(400)

(132)

(1,241)

4,000

(1,262)

(122)

(513)

Notes to the Financial StatementscontinuedNote 6: Income tax (continued)

Deferred income tax at 30 June 2019 relates to the following:

CONSOLIDATED

Deferred income tax liabilities

Intangibles

Accrued interest & unrealised foreign exchange differences

Receivables

Other

Statement of
Financial Position

Statement of
Comprehensive Income

2019
$’000

2018
$’000

2019
$’000

2018
$’000

38,348

32,880

(5,468)

(3,469)

–

(38)

–

Gross deferred income tax liabilities

38,389

32,972

(5,417)

(3,418)

Deferred income tax assets

Net operating losses

Accruals and provisions/bond raising costs

Share based payments

Expenditure deductible for income tax over time

Gross deferred income tax assets

Net deferred income tax liabilities

Foreign deferred tax assets

Accruals and provisions

Intercompany

Expenditure deductible for income tax over time

16,204

4,257

6,750

2,235

29,446

8,943

212

4,575

4,467

4,275

2,340

15,657

17,315

115

538

–

11,628

(210)

1,363

(1,154)

11,627

(111)

(510)

212

Share based payments

4,398

2,700

1,698

Deferred tax assets – Foreign net operating losses –
federal and state

Deferred tax assets

14,206

18,848

9,002

12,355

Movements in foreign currency exchange

Deferred tax benefit

5,204

6,493

12,703

(463)

12,240

4,575

(1,060)

–

1,430

4,945

(30)

(1,475)

372

5,087

3,990

5,517

(425)

5,092

The prior year comparative has been changed to remove the effects of equity transactions and reclassify the movements
in foreign currency exchange.

Temporary differences and tax losses
At 30 June 2019 the Group had no (2018: nil) unrecognised temporary differences and tax losses.

Within the deferred tax assets relating to foreign net operating losses $14,206,000 (2018: $9,002,000) are amounts relating
to carried forward tax losses of Bentham Holdings Inc (USA) of $13,350,000 (2018: $7,200,000) and Bentham IMF Capital
Limited (Canada) of $856,000 (2018: 1,541,000). Both subsidiaries have incurred losses over the last two financial years
following additional costs related to the Group’s expansion of activity and change in operations to a Fund management
structure. Bentham Holdings Inc is expected to generate future taxable profits from the Fund structures in the United
States and Bentham IMF Capital Limited has put in place Sub-Investment Advisory Agreements with its parent company,
IMF Bentham Limited to enable it to generate future taxable profits from the services it provides in relation to the Group’s
ROW Funds. The group has concluded that the deferred assets will be recoverable using the estimated future taxable
income based on the approved budgets for the subsidiaries. Both subsidiaries are expected to generate taxable income
from 2020 onwards. The losses can be carried forward indefinitely and have no expiry date.

Notes to the Financial StatementscontinuedOverviewDirectors’ ReportFinancial Report Shareholder Information IMF Bentham Limited Annual Report 2019

Note 7: Earnings per share
Basic earnings per share is calculated as net profit attributable to members of the Parent, adjusted to exclude any costs of
servicing equity (other than dividends), divided by the weighted average number of ordinary shares outstanding during the
financial year, adjusted for any bonus element.

Diluted earnings per share is calculated as net profit attributable to members of the Parent, adjusted for:
– costs of servicing equity (other than dividends);
– the after-tax effect of interest dividends associated with dilutive potential ordinary shares that have been recognised; and
– other non-discretionary changes in revenue or expenses during the period that would result from dilution of potential

ordinary shares;

– divided by the weighted average number of shares and dilutive shares, adjusted for any bonus element.

At 30 June 2019, 15,601,589 performance rights (2018: 14,355,887) were on issue as detailed in Note 24. 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 contingently issuable and are therefore not considered dilutive.

The following reflects the income and share data used in the basic earnings per share computation:

(a) Earnings used in calculating earnings per share

Consolidated

2019
$’000

2018
$’000

For basic and diluted earnings per share

Total net loss attributable to equity holders of the Parent

(36,098)

(11,017)

(b) Weighted average number of shares

Number ‘000

2019

2018

Weighted average number of ordinary shares outstanding

194,897

172,839

Effect of dilution:

Performance rights1

Weighted average number of ordinary shares

–

194,897

172,839

Performance rights granted under the Long Term Incentive Plan are only included in diluted earnings per ordinary share where the performance
hurdles are met as at year end and they do not have an anti-dilutive effect. As at 30 June 2019, there were 9,768,040 performance rights calculated
as meeting the performance criteria for inclusion in diluted earnings per share, however these were not included due to their anti-dilutive effect.

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.

Options
As at 30 June 2019 there were no options issued over shares in the Company (2018: nil).

100

Notes to the Financial Statementscontinued

Note 8: Dividends paid and proposed by IMF Bentham Limited (the parent entity)

(a) Cash dividends on ordinary shares declared and paid

Final dividend for 2018: nil cents per share (2017: 4.0 cents per share)

Interim dividend for 2019: nil cents per share (2018: 3.0 cents per share)

Consolidated

2019
$’000

–

2018
$’000

6,882

5,188

12,070

The Directors have determined not to pay a final dividend for the year ended 30 June 2019. IMF Bentham Limited’s
retained earnings are disclosed in Note 25.

(b) Franking credit balance

IMF Bentham Limited

2019
$’000

2018
$’000

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%

19,056

10,239

– Franking debits arising from the payment of last year's final dividend

– Franking debits arising from the payment of current year's interim dividend

–

(2,949)

(2,224)

– Franking credits arising from the payment of income tax installments paid during

1,644

13,990

the financial year

– Franking credits that will arise from the refund of income tax receivable as at the end

of the financial year

20,700

19,056

(5,934)

14,766

(5,830)

13,226

101

Notes to the Financial StatementscontinuedOverviewDirectors’ ReportFinancial Report Shareholder Information IMF Bentham Limited Annual Report 2019Note 9: Statement of cash flows reconciliation

Reconciliation of net profit after tax to net cash flows used in operations:

Net loss after tax

Adjustments for:

Consolidated

2019
$’000

2018
$’000

(36,148)

(7,847)

Net impact of the reclassification of litigation intangibles related cashflows to investing
activities

73,672

12,106

Receipts for reimbursement of fund establishment costs

Fund establishment costs in net loss after tax

Depreciation

Share based payments

Unrealised foreign exchange gain

Lease incentive adjustments

Changes in assets and liabilities

Decrease in receivables

Increase in other current assets

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 payable/(receivable)

Net cash used in operating activities

(i) Disclosure of financing facilities
Refer to Note 12 and Note 13.

(1,117)

1,461

676

6,952

(3,535)

209

–

621

5,525

(4,311)

(182)

1,393

(490)

21,094

(151)

(105,709)

(72,000)

5,945

691

14,865

4,339

(4,094)

(3,979)

(9,293)

(1,114)

(36,796)

(63,625)

(ii) Significant non-cash financing transactions
During the year, there were no significant non-cash financing transactions. In 2018, an investment was made by one
of the Group’s subsidiaries, through a combination of cash and a $60,352,000 increase in the non-controlling interest
of the subsidiary.

102

Notes to the Financial Statementscontinued

B. INTANGIBLE ASSETS

Note 10: Intangible assets

(a) Recognition and measurement

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 through disposal.

Gains or losses arising from derecognition of Litigation Contracts in Progress are measured as the difference between
the net disposal proceeds and the carrying amount of the asset and are recognised in the profit or loss when the asset
is derecognised.

The following specific asset recognition and derecognition rules have been applied to Litigation Contracts in Progress:

(i) Actions still ongoing:
When litigation is ongoing and pending a determination, Litigation Contracts in Progress are carried at cost (subject to
any provision for impairment). Subsequent and ongoing expenditure is capitalised when it meets all the following criteria:

(a) the Group is able to demonstrate its ability to complete the litigation so that the asset will be available for use and

the benefits embodied in the asset will be realised;

(b) the Group retains control of the asset;

(d) the Group is able demonstrate the availability of adequate technical, financial and other resources to complete

the litigation;

(e) the Group can measure reliably the expenditure attributable to the intangible asset during the life of the Litigation

Contracts In Progress; and

(f) Impairment is considered in line with policy described in (c) Impairment testing of intangible assets.

(ii) Successful completion:
Prior to AASB 15, where the litigation had been determined in favour of the Group or a positive settlement agreed,
it constituted a derecognition of the intangible asset and accordingly a gain or loss was recognised in the Statement
of Comprehensive Income.

Any future costs relating to the defence of an appeal by the defendant are expensed as incurred.

On adoption of AASB 15, where the litigation has been finally determined in favour of the client or a positive settlement has
been agreed, this constitutes a disposal transaction and a gain or loss on disposal of the intangible asset is recognised
in the Statement of Comprehensive income. Control of the intangible asset is considered to be transferred as follows:

– For judgements, typically after a judgement has been determined in favour of the Group and the relevant appeal

periods have expired, subject to the circumstances of the case; and

– For settlements, typically when settlement agreement is reached and court approval is obtained, subject to the

circumstances of the case.

(iii) Unsuccessful completion:
Where the litigation is unsuccessful the cost of the intangible asset net of accumulated impairment is derecognised and
a loss is recognised in the Statement of Comprehensive Income.

If the claimant, having been unsuccessful at trial, appeals against the judgment, then the future costs incurred by the
Group on the investment in relation to the appeal are expensed as incurred.

Refer to Notes to the Financial Statements c. New and amended accounting standards AASB 15 for accounting policies
applied prior 1 July 2018.

103

Notes to the Financial StatementscontinuedOverviewDirectors’ ReportFinancial Report Shareholder Information IMF Bentham Limited Annual Report 2019Note 10: Intangible assets (continued)

(b) Reconciliation of carrying amounts

Balance at 1 July 2018

Additions – external expenditure

Additions – capitalised borrowing costs

Additions – capitalised employee costs

Additions – capitalised overheads

Derecognitions – external expenditure (successful investment)

Derecognitions – capitalised borrowing costs and overheads (successful investment)

Derecognitions – external expenditure (unsuccessful investment)

Derecognitions – capitalised borrowing costs and overheads (unsuccessful investment)

Provision for impairment

Effect of movement in foreign currency

Balance at 30 June 2019

Consolidated

2019
$’000

321,268

125,634

10,127

7,274

1,239

(18,503)

(3,929)

(15,197)

(1,639)

(9,571)

10,274

2018
$’000

190,876

164,379

9,327

6,781

1,090

(43,124)

(6,467)

(5,003)

(185)

–

3,594

426,977

321,268

The carrying value of Litigation Contracts In Progress includes the funding of external costs such as solicitors’ fees,
counsels’ fees and experts’ fees, the capitalisation of certain directly attributable internal costs of managing the litigation
funding investment, such as certain wages, occupancy costs, other out of pocket expenses and the capitalisation of
borrowing costs as described below. The capitalised wages in 2019 equated to approximately 22.6% of the Group’s total
salary costs (2018: 26.4%). The other internal capitalised expenses equated to approximately 49.8% of related overhead
costs (2018: 49.3%).

The Group has determined that Litigation Funding Contracts In Progress meet the definition of qualifying assets and that
all borrowing costs are eligible for capitalisation. The weighted average cost of borrowing was 7.6% (2018: 7.6%).

The carrying value of Litigation Funding Contracts In Progress can be summarised as follows:

Litigation funding contracts – funded external costs

Litigation funding contracts – capitalised internal costs

Litigation funding contracts – capitalised borrowing costs

Gross carrying amount at cost

Accumulated impairment

Balance at 30 June

Consolidated

2019
$’000

2018
$’000

376,285

276,575

33,078

27,185

25,268

19,425

436,548

321,268

(9,571)

–

426,977

321,268

(c) Impairment testing of intangible assets
Based on the below assumptions, 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 for
the length of each investment.

The value in use calculation of the Group’s portfolio of intangible assets results in a net present value which has headroom
of $941 million to $972 million over its carrying value. Headroom in a value in use analysis does not constitute a valuation
but is the output from a calculation in assessing the impairment of the intangible assets.

104

Notes to the Financial StatementscontinuedNote 10: Intangible assets (continued)
The following describes each key assumption on which management has based its cash flow projections when
determining the value in use of Litigation Contracts in Progress:

– The estimated cost to complete a Litigation Contract in Progress is budgeted based on estimates provided by the

external legal advisors handling the litigation.

– The value to the Group of the Litigation Contracts in Progress, once completed, is estimated based on the successful
conclusion and the resulting expected settlement or judgment amount of the litigation and the fees due to the Group
under the litigation funding contract.

– The discount rate applied to the cash flow projections is based on the Group’s weighted average cost of capital and

other factors relevant to the particular Litigation Contracts in Progress including country risk. The discount rate applied
ranged between 10.0% and 11.5% (2018: between 10.0% and 11.5%).

At 30 June 2019, a provision for impairment has been recognised for $9,571,000 (2018: nil). The impairment related to five
litigation contract funding investments, with a combined total carrying value prior to impairment of $11,391,000. During the
impairment review, management have determined that either a successful outcome for the case was no longer likely to
occur or that the likely award would not recover the current carrying value of the investment. After taking into account the
impairment, at 30 June 2019, the five litigation contract investments have a combined carrying value of $1,770,000. This
amount reflects the net recoverable amount expected to be received from the investments.

C. CAPITAL STRUCTURE

Note 11: Financial risk management
The Group’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’s financial risk management policy. The objective of the policy is to support the delivery of the Group’s financial
targets whilst protecting its future financial security.

The main risks arising from the Group’s financial instruments are interest rate risk, foreign currency risk, credit risk and
liquidity risk. The Group uses different methods to measure and manage different types of risks to which it is exposed.
These include monitoring levels of exposure to interest rates and currencies and assessments of market forecasts for
interest rates and foreign currencies. Aging analyses and monitoring of specific credit allowances are undertaken to
manage credit risk. Liquidity risk is monitored through the development of future rolling cash flow forecasts.

Impairment of financial assets
Expected credit losses are recognised in the income statement on financial assets measured at amortised cost.

For financial assets a 12-month expected credit loss (“ECL”) allowance is recorded on initial recognition. If there is evidence
of a significant increase in the credit risk of an asset, the allowance is increased to reflect the full lifetime ECL. If there is no
realistic prospect of recovery, the asset is written off.

Risk exposures and responses

Interest rate risk
The Group’s exposure to the risk of changes in market interest rates relates primarily to:

– the Group’s cash holdings with a floating interest rate,
– the Group has a $76,000,000 variable rate bond debt outstanding as at 30 June 2019. 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;

105

Notes to the Financial StatementscontinuedOverviewDirectors’ ReportFinancial Report Shareholder Information IMF Bentham Limited Annual Report 2019Note 11: Financial risk management (continued)
At reporting date the Group had the following financial instruments exposed mainly to Australian variable interest rate risk:

Financial instruments

Cash and cash equivalents

IMF Bentham Bonds

Net exposure

Consolidated

2019
$’000

2018
$’000

226,460

160,231

(72,517)

153,943

(49,553)

110,678

The Group regularly analyses its interest rate exposure. Within this analysis, consideration is given to expected interest
rate movements and the Group’s future cash requirements, potential renewals of existing positions, alternative financing
available, and the mix of fixed and variable interest rates.

The following sensitivity analysis is based on the interest rate risk exposures in existence at the reporting date.

At 30 June 2019, if interest rates had moved with all other variables held constant, post-tax profit and equity would have
been affected as follows:

+0.25% (25 basis points) (2018: +0.25%)

-0.25% (25 basis points) (2018: -0.25%)

Post Tax Profit
Higher/(Lower)

Equity
Higher/(Lower)

2019
$’000

269

(269)

2018
$’000

194

(194)

2019
$’000

269

(269)

2018
$’000

194

(194)

Credit risk
Credit risk arises from the financial assets of the Group, which comprises cash and cash equivalents and Litigation and other
receivables. The Group’s exposure to credit risk arises from potential default of the counterparty, with a maximum exposure
equal to the carrying amount of these instruments. Exposure at reporting date is addressed in each applicable note.

To mitigate credit risk on Litigation and other receivables the Group assesses the defendants in the investments 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. The Group’s continual monitoring of the defendants’ financial capacity mitigates
this risk.

To mitigate credit risk on cash and cash equivalents, the Group holds over 90% of its cash with Australian AA rated banks.

The Group assesses the defendants in the investments 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. The Group’s continual
monitoring of the defendants’ financial capacity mitigates this risk.

Liquidity risk
The liquidity position of the Group is managed to ensure sufficient liquid funds are available to meet the Group’s expected
financial commitments in a timely and cost-effective manner.

Management continually reviews the Group’s liquidity position, including the preparation of cash flow forecasts, to
determine the forecast liquidity position and to maintain appropriate liquidity levels. All financial liabilities of the Group,
except the IMF Bentham Bonds and Fixed Rate Notes, are current and payable within 30 days.

106

Notes to the Financial StatementscontinuedNote 11: Financial risk management (continued)
The maturity profile of the Group’s financial liabilities based on contractual maturity on an undiscounted basis are:

< 6 months
$’000

6-12 months
$’000

1-5 years
$’000

>5 years
$’000

Total
$’000

2019

Financial Liabilities

Trade and other payables

Bonds and Notes – principal

Bonds and Notes – interest

2018

Financial Liabilities

Trade and other payables

Bonds and Notes – principal

Bonds and Notes – interest

23,992

–

4,720

28,712

18,047

–

4,223

22,270

–

72,000

4,720

76,720

–

50,000

4,223

54,223

–

76,000

8,223

84,223

–

72,000

5,328

77,328

–

23,992

148,000

17,663

189,655

18,047

122,000

13,774

153,821

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 2019, and
the Fixed Rate Notes fair value has been determined using the price from FIIG Securities Limited, an independent privately-
owned corporate bonds and government bonds specialist.

For the purposes of disclosure, the fair value measurements used for the Bonds and Notes are both level 1 on the fair
value hierarchy.

IMF Bentham Bonds

Fixed Rate Notes

Carrying Value

Principal

Fair Value

2019
$’000

72,517

71,455

2018
$’000

49,553

70,909

2019
$’000

76,000

72,000

2018
$’000

50,000

72,000

2019
$’000

78,014

72,936

2018
$’000

51,150

74,745

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 translation risk arising from 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 are eliminated on consolidation. The gains or losses on re-measurement of these intercompany
receivables from foreign currencies to Australian Dollars are not eliminated on consolidation as the loans are not
considered to be part of the net investment in the subsidiary.

107

Notes to the Financial StatementscontinuedOverviewDirectors’ ReportFinancial Report Shareholder Information IMF Bentham Limited Annual Report 2019

Note 11: Financial risk management (continued)
The Group’s exposure to foreign currency risk at 30 June were as follows:

2019

Financial Assets

Cash and cash equivalents

Litigation contracts and
other receivables1

Total assets

Financial Liabilities

Trade Payables

Total liabilities

2018

Financial Assets

Cash and cash equivalents

Litigation contracts and
other receivables1

Total assets

Financial Liabilities

Payables

Total liabilities

USD
$’000

GBP
$’000

EUR
$’000

SGD
$’000

CAD
$’000

HKD
$’000

18,172

26,290

44,462

895

906

–

522

–

2,417

1,241

6,321

11,321

–

522

2,493

7,562

11,321

114

USD
$’000

GBP
$’000

EUR
$’000

SGD
$’000

CAD
$’000

HKD
$’000

43,772

11,675

55,447

1,244

3,632

–

498

1,002

1,529

10,294

11,734

–

3,632

1,500

11,823

11,734

–

434

107

Litigation contracts and other receivables balance includes the intercompany loan receivable that IMF Bentham Limited has with Bentham
Holdings Inc (USD), Bentham IMF Capital Limited (CAD) and IMF Bentham Pte Limited (SGD).

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 $47,498,000 (2018: $16,901,000). The sensitivity is based on management’s
estimate of reasonably possible changes over the financial year.

Impact on profit or loss before tax (A$’000)

USD

GBP

EUR

SGD

+10%

-10%

+10%

-10%

(2,682)

2,682

(6,412)

6,412

(2)

(14)

(85)

(573)

573

(8)

(49)

CAD

(123)

123

(382)

382

HKD

–

(2)

2019

2018

108

Notes to the Financial StatementscontinuedNote 12: Cash and cash equivalents
Cash and cash equivalents in the Statement of Financial Position and Statement of Cash Flows comprise cash at bank
and on 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.

Cash and cash equivalents comprise the following at 30 June:

Cash at bank

Short-term deposits

Current Assets Cash and cash equivalents

2019
$’000

2018
$’000

94,446

58,449

132,014

226,460

101,782

160,231

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 2019, 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 investments funded under litigation contracts. As at 30 June 2019, guarantees
of $1,138,000 were outstanding (2018: $1,114,000). The Group has a total guarantee facility limit of $1,462,000 (2018:
$1,439,000) that is secured by an offset arrangement with deposits of $1,662,000 (2018: $1,639,000).

Note 13: Debt securities
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.

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.

Current

IMF Bentham Bonds

Fixed Rate Notes

Non-Current

IMF Bentham Bonds

Fixed Rate Notes

Consolidated

2019
$’000

2018
$’000

–

49,553

71,455

–

49,553

72,517

–

72,517

–

70,909

109

Notes to the Financial StatementscontinuedOverviewDirectors’ ReportFinancial Report Shareholder Information IMF Bentham Limited Annual Report 2019Note 13: Debt Securities (continued)

Balance as at 1 July 2018

Proceeds from issue of debt

Payments for costs of issuing debt

Gain on debt modification

Amortisation of costs of issuing debt

Balance as at 30 June 2019

Consolidated

2019
$’000

2018
$’000

120,462

119,469

26,000

(3,016)

(700)

1,226

–

993

143,972

120,462

On 5 December 2018, the Company restructured the IMF Bentham Bonds, allowing the option for early redemptions of the
bonds issued in April 2014 with a make-whole payment of $2.37 and issuing additional bonds with a face value of $100
each. 154,048 bonds were redeemed and a further 414,048 bonds issued, with appropriate refund of $1.11 to maintain
the effective interest rate. This brings the total Bonds on issue to 760,000. The IMF Bentham Bonds 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 was
extended from 30 June 2019 to 22 December 2022, introducing a first issuer call date of 8 January 2022 with a step up
in margin of 1.0% applying from 1 January 2022 to the maturity date.

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.

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 $10,127,000 (2018:
$9,327,000) 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 10).

In relation to the debt securities held by the Group, there were no breaches in covenants. The following ratios are
applicable to the Group for the 2019 financial year:

Gearing ratio1

Working capital ratio2

Interest cover3

Consolidated

2019
$’000

38%

2.22

N/A

2018
$’000

47%

2.33

N/A

The gearing ratio is calculated as total liabilities over total equity in accordance with CO 14/1276. It is categorised as non-IFRS information
prepared in accordance with ASIC Regulatory Guidance 230 – Disclosing non-IFRS financial information, issued in December 2011.

The working capital ratio is calculated as current assets over current liabilities in accordance with CO 14/1276. It is categorised as non-IFRS
information prepared in accordance with ASIC Regulatory Guidance 230 – Disclosing non-IFRS financial information, issued in December 2011.

The interest cover ratio is calculated as EBITDA over net interest expense in accordance with CO 14/1276. It is not applicable as interest is
capitalised on qualifying assets.

In accordance with clause 4.3(a)(ii)(C) of Schedule 2 of the IMF Bond Trust Deed, no wholly owned subsidiary held
cash on its balance sheet in an amount which at any time exceeds the subsidiary cash limit at that time for a period of
more than 30 consecutive calendar days, unless the relevant wholly owned subsidiary has provided an unconditional
guarantee of all amounts owing on the bonds then outstanding in favour of the Trustee.

110

Notes to the Financial StatementscontinuedNote 14: Contributed equity

Contributed equity
Ordinary shares are classified as equity. Issues and paid up capital is recognised at the fair value of the consideration
received by the Company. 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.

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 1 July 2017

Shares issued under the Dividend Reinvestment Plan

As at 30 June 2018

Shares issued during the year (Placement and Share Purchase Plan)

Shares issued upon exercise of performance rights

As at 30 June 2019

Consolidated

2019
$’000

2018
$’000

205,558

127,630

Number
‘000

$’000

172,047

123,654

1,816

3,976

173,863

127,630

27,180

3,566

75,339

2,589

204,609

205,558

On 31 October 2018, the Company issued 26,600,000 shares to sophisticated and institutional investors at $2.80
per share. On 16 November 2018, the Company issued 580,110 shares under its Share Purchase Plan at $2.80 per share.

On 24 April 2018, the Company issued 916,449 shares at $2.35 per share, and on 20 October 2017 the company issued
900,253 shares at $2.02 per share under its Dividend Reinvestment Plan.

(b) Performance rights
As at 30 June 2019, there were 15,601,589 unissued ordinary shares in respect of which share performance rights were
outstanding (30 June 2018: 14,355,887).

(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 while maintaining 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 Group’s earnings often vary dramatically, and this is expected to continue in 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 IMF fall below 75% of the Group financial indebtedness or retained earnings are less than $52,000,000, 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). IMF Bentham
Limited’s retained earnings are disclosed in Note 25.

111

Notes to the Financial StatementscontinuedOverviewDirectors’ ReportFinancial Report Shareholder Information IMF Bentham Limited Annual Report 2019

Note 15: Retained earnings and reserves

(a) Movements in retained earnings were as follows:

Balance 1 July 2018

Net profit for the year

Dividend paid

Balance 30 June 2019

(b) Movements in reserves were as follows:

Consolidated

2019
$’000

48,592

(36,098)

–

12,494

2018
$’000

71,679

(11,017)

(12,070)

48,592

Share based
payment
reserve
$’000

Foreign
currency
translation
reserve
$’000

Option
premium
reserve
$’000

Convertible
note reserve
$’000

Fund equity
reserve
$’000

Total
reserves
$’000

5,962

9,289

15,251

2,498

(4,644)

6,027

1,383

(1,810)

3,404

–

3,404

–

3,832

–

(7,760)

3,832

(7,760)

–

(15,905)

8,554

7,556

16,110

(15,217)

As at 1 July 2017

Movements in reserves during
the period

As at 30 June 2018

Movements in reserves during
the period

As at 30 June 2019

17,749

(427)

3,404

3,832

(23,665)

893

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 24 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 foreign operations.

iii. Other capital reserves
Other capital reserves comprise:

a) 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.

b) 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.

c) Fund equity reserve

This reserve is used to record changes in the proportion of equity held by non-controlling interests within the
Group.

112

Notes to the Financial Statementscontinued

D. WORKING CAPITAL, OTHER ASSETS AND OTHER LIABILITIES

Note 16: Litigation contracts and other receivables
Litigation contracts receivables 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. Litigation contracts receivables were
previously classified as trade receivables in prior years.

Collectability of litigation contracts receivables is reviewed on an ongoing basis. Refer to Note 11 for information regarding
impairment of financial assets.

Current

Litigation contracts receivables1

Other receivables2

Consolidated

2019
$’000

2018
$’000

14,098

2,768

16,866

21,529

4,161

25,690

1. Litigation contracts receivables are non-interest bearing and generally on 0-90 day terms.

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.

(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’s policy to transfer (on-sell) receivables.

(b) Loans and receivables
Litigation contracts and other 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. Refer to Note 11 regarding impairment of financial assets.

113

Notes to the Financial StatementscontinuedOverviewDirectors’ ReportFinancial Report Shareholder Information IMF Bentham Limited Annual Report 2019Note 17: Contract costs
The Group holds management and advisory contracts in respect of Fund 4 and ROW Fund 5. In accordance with AASB
15, incremental costs in obtaining a contract are capitalised and amortised over a systemic basis that is consistent with
the Group’s transfer of related services to the customer.

During the year the Group incurred incremental costs in obtaining the contracts in regard to Fund 4. The amounts have
been capitalised as shown below. The amounts are being amortised on a straight line basis over a period of seven years,
being in reference to the initial four-year commitment period of the fund plus the estimated litigation funding contract life of
three years.

Balance as at 1 July 2018

New contracts

At 30 June 2019

Current 2019

Non-current 2019

Note 18: Other assets

Current

Prepayments

Rental deposits

Lease incentive receivable

Current Assets Other assets

Non-current

Prepayments

Lease incentive receivable

Other

Non-Current Assets Other assets

Consolidated

2019
$’000

–

6,339

939

5,400

6,339

Consolidated

2019
$’000

959

753

189

1,901

2018
$'000

–

2018
$'000

694

598

119

1,411

9,022

11,242

289

267

–

9,324

11,509

Note 19: Plant and equipment
Plant and equipment is stated at historical cost less accumulated depreciation and any accumulated impairment losses.
Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing parts is
incurred. All other repairs and maintenance are recognised in the profit or loss as incurred.

Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets. The major categories
of property, plant and equipment are depreciated as follows:

– Equipment
– Furniture
– Leasehold

2 to 5 years;
2 to 6 years; and
2 to 11 years.

The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each
financial year end.

114

Notes to the Financial Statementscontinued

Note 19: Plant and equipment (continued)

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.

Gross carrying amount – at cost

Accumulated depreciation

Net carrying amount

Consolidated

2019
$’000

3,592

(2,480)

1,112

Reconciliation of carrying amounts at the beginning and end of the year

Equipment
$’000

Furniture,
Fixtures and
Fittings
$’000

Leasehold
Improvements
$’000

Gross carrying amount

Balance as at 1 July 2017

Additions

Disposals

At 30 June 2018

Additions

Disposals

Effect of movement in foreign currency

At 30 June 2019

Accumulated depreciation

Balance as at 1 July 2017

Depreciation charge for the year

Disposals

At 30 June 2018

Depreciation charge for the year

Disposals

Effect of movement in foreign currency

At 30 June 2019

697

174

(4)

867

212

–

1,085

497

111

(5)

603

152

–

760

373

(19)

423

(4)

482

138

(14)

213

104

(3)

323

2018
$’000

3,119

(1,787)

1,332

Total
$’000

2,895

259

(35)

3,119

442

(4)

1,825

(12)

1,829

183

–

2,025

3,592

560

421

(10)

971

420

–

1,195

621

(29)

1,787

676

(3)

1,397

2,480

Plant and Equipment of the Company is subject to a fixed charge to secure the Company’s debt due to Bondholders as
covered in Note 13.

115

Notes to the Financial StatementscontinuedOverviewDirectors’ ReportFinancial Report Shareholder Information IMF Bentham Limited Annual Report 2019Note 20: 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, non-interest bearing and are usually paid within 30 days of recognition.

Trade payables

Wage accruals

Interest accruals

Consolidated

2019
$'000

21,481

1,374

1,137

23,992

2018
$'000

16,100

1,167

780

18,047

Fair Value
Due to the nature of trade and other payables, their carrying value approximates their fair value.

Note 21: Provisions

General provisions
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.

Provisions are measured at the present value of management’s best estimate of the expenditure required to settle the present
obligation at the balance date using a discounted cash flow methodology. If the effect of the time value of money is material,
provisions are discounted using a current pre-tax rate that reflects the time value of money and the risks specific to the liability.

The increase in the provision resulting from the passage of time is recognised in finance costs.

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.

Current

Annual leave and long service leave

Adverse costs

Non-Current

Make good

Long service leave

116

Consolidated

2019
$'000

2018
$'000

2,575

12,617

15,192

2,521

12,135

14,656

153

279

432

191

277

Notes to the Financial StatementscontinuedNote 21: Provisions (continued)

(a) Movement in provisions

As at 1 July 2018

Arising during the year

Utilised

Effect of movement in foreign currency

As at 30 June 2019

Current 2019

Non-current 2019

Current 2018

Non-current 2018

Adverse
costs
$'000

Annual
leave
$'000

Long service
leave
$'000

12,135

617

(135)

–

12,617

–

12,617

12,135

–

12,135

1,472

1,505

(1,329)

1,668

–

1,668

1,472

–

1,472

1,240

111

(165)

–

1,186

907

279

1,186

1,049

191

1,240

Make
good
$'000

–

Total
$'000

14,933

2,300

(1,629)

153

15,624

–

153

–

15,192

432

15,624

14,656

277

14,933

(b) Nature and timing of provisions

Adverse costs
During the financial year 2019, the Group raised a further provision of $617,000 for estimated adverse costs obligations
against a particular litigation investment that is held on the Group’s balance sheet which was lost and which is currently
being appealed. The provision raised is the Group’s best estimate of the amount of adverse costs it will have to remit.
The outcome of the appeal should be known by the end of the financial year 2020.

During the financial year 2018 the Group raised a provision of $135,000 for estimated adverse costs obligations in relation
to a withdrawn investment. The provision raised is the Group’s best estimate of the amount of adverse costs it will have
to remit. The adverse costs provision for the investment, recognised in 2018, was paid in the current year.

Make Good
The make good provision relates to amounts recognised for make good requirements on operating leases of office space.

Note 22: Commitments and contingencies

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.

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.

(a) Operating lease commitments – Group as lessee
The Group has entered into commercial leases for its premises. These leases have a life of between one and eight
years with renewal options included in the contracts. There are no restrictions placed upon the lessee by entering into
these leases.

117

Notes to the Financial StatementscontinuedOverviewDirectors’ ReportFinancial Report Shareholder Information IMF Bentham Limited Annual Report 2019Note 22: Commitments and contingencies (continued)
Future minimum rentals payable under non-cancellable operating leases as at 30 June are as follows:

Within one year

After one year but no more than five years

After more than five years

Total minimum lease payments

(b) Remuneration commitments

Commitments for the payment of salaries and other remuneration under long-term
employment contracts in existence at the reporting date but not recognised as liabilities
payable:

Within one year

After one year but no more than five years

Consolidated

2019
$’000

1,818

2,662

3,289

7,769

2018
$’000

1,794

4,118

2,192

8,104

Consolidated

2019
$’000

2018
$’000

5,064

–

5,064

4,963

–

4,963

Amounts disclosed as remuneration commitments also include commitments arising from the service contracts of, and
bonuses payable to, directors and executives referred to in the Remuneration Report of the Directors’ Report that are not
recognised as liabilities and are not included in the compensation of Key Management Personnel.

(c) Contingencies
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. In
addition, the Company has insurance arrangements which, in some circumstances, will lessen the impact of such awards.
RoW Funds 2 and 3 entire portfolio has an after the event (“ATE”) insurance policy that will respond to claims for adverse
costs in excess of $7.5m. Based on past experience, an award of adverse costs to a defendant will approximate 40% to
70% (depending on jurisdiction) 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 40% to 70% of the amount spent by the
plaintiff and that there is only one defendant per case.

At 30 June 2019, the total amount spent on currently funded investments by the Group where undertakings to pay adverse
costs have been provided was $136,112,000 (2018: $88,702,000) divided between those funded directly on IMF’s balance
sheet of $108,420,000 and those funded through the RoW Funds of $27,692,000. The potential adverse costs orders
using the above methodology would amount to $64,862,000 for investments on IMF’s balance sheet, and $16,061,000
for RoW Fund investments. Subject to impairment considerations, the Company does not currently expect that any of the
investments will be unsuccessful. The Company maintains a large cash holding in the event that one or more investments
are unsuccessful and an adverse costs order is made which is not covered by its insurance arrangements.

118

Notes to the Financial StatementscontinuedE. THE GROUP, MANAGEMENT AND RELATED PARTIES

Note 23: Key management personnel

(a) Details of Key Management Personnel
Subsequent to 30 June 2019, Charlie Gollow (Chief Executive - USA) retired, effective 5 July 2019.

There were no further 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 term employee benefits
Share based payments

Note 24: Share-based payment plan

Share-based payment transactions

Consolidated

2019
$’000

4,925

–
163
(36)
2,321

7,373

2018
$’000

4,288

–
125
93
1,833

6,339

(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 or Black Scholes 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/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 (the share-based payment reserve).

Equity-settled awards granted by IMF to employees of subsidiaries are recognised in the Parent’s separate financial
statements as an additional investment in the subsidiary with a corresponding credit to equity. These amounts are
eliminated through consolidation. As a result, the expenses recognised by the Company in relation to equity-settled
awards only represents the expense associated with grants to employees of the Parent. The expense recognised by
the Group is the total expense associated with all such awards.

Until an award has vested, any amounts recorded are contingent and will be adjusted if more or fewer awards vest than
were originally anticipated to do so. Any award subject to a market condition is considered to vest irrespective of whether
or not that market condition is fulfilled, provided that all other conditions are satisfied.

If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been
modified. An additional expense is recognised for any modification that increases the total fair value of the share-based
payment arrangement, or is otherwise beneficial to the employee, as measured at the date of modification.

If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and an expense not yet
recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award and
designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were
a modification of the original award, as described in the previous paragraph.

Where outstanding rights do not have an anti-dilutive effect and are currently meeting the performance criteria, the dilutive
effect, if any, is added to share dilution in the computation of diluted earnings per share.

119

Notes to the Financial StatementscontinuedOverviewDirectors’ ReportFinancial Report Shareholder Information IMF Bentham Limited Annual Report 2019Note 24: Share-Based Payment Plan (continued)

(ii) Cash-settled transactions
The Group does not provide cash-settled share-based benefits to employees or senior executives.

Long Term Incentive Plan
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 Black-Scholes model is used.

4,255,816 share performance rights were issued during 2019 (2018: 5,122,146). Specific assessment for performance
rights issued in the period is below:

Grant Date

Share price at grant date

Expected Volatility (%)

Dividend yield (%)

Risk-free rate (%)

Performance period

Models used

Tranche 1 – relative TSR (value per right $)

Tranche 2 – CAGR (value per right $)

1 July
2018

$3.00

30%

4.00%

2.07%

21 November
2018

$2.69

30%

4.00%

2.12%

3 years ending

2.61 years ending

30 June 2021

Monte Carlo &
Black Scholes

$1.60

$2.67

$1.35

$2.43

The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share
performance rights during the year:

2019
Number

2019
WAEP

2018
Number

2018
WAEP

14,355,887

4,255,816

(2,398,473)

(611,641)

15,601,589

6,699,191

–

11,177,055

5,122,146

–

(1,943,314)

14,355,887

4,125,409

–

Movements during the year

Outstanding at 1 July 2018

Granted

Exercised

Forfeited

Outstanding at 30 June 2019

Exercisable at 30 June 2019

120

Notes to the Financial StatementscontinuedNote 25: Parent entity information

Information relating to IMF Bentham Limited:

Current assets

Total assets

Current liabilities

Total liabilities

Net assets

Issued capital

Retained earnings

Reserves

Total shareholders’ equity

Profit or loss of the Parent

Total comprehensive income of the Parent

The Parent has not entered into any guarantees with any of its subsidiaries.

Details of the contingent liabilities of the Parent are contained in Note 22(c).

Details of the contractual commitments of the Parent are contained in Notes 22(a) and 22(b).

2019
$’000

2018
$’000

151,920

453,535

147,673

372,511

(103,995)

(179,262)

(72,233)

(156,552)

274,273

215,959

204,553

127,630

46,190

23,530

68,165

20,164

274,273

215,959

(20,476)

39,261

121

Notes to the Financial StatementscontinuedOverviewDirectors’ ReportFinancial Report Shareholder Information IMF Bentham Limited Annual Report 2019

Note 25: Parent entity information (continued)
The consolidated financial statements include the financial statements of IMF and the subsidiaries listed in the following table:

Name

Row Funds
IMF Bentham (Fund 2) Pty Ltd
IMF Bentham (Fund 3) Pty Ltd

Fund 1
Bentham IMF 1 LLC
HC 1 LLC
Security Finance 1 LLC

Fund 4
Bentham Investments 1 LP1
Bentham Investments 2 LP1
Bentham Investments 3 LP1
Bentham Investments 4 LP1
Bentham Investments 5 LP1
Bentham Investments 6 LP1
Bentham Investments 7 LP1
Bentham Investments 8 LP1
Bentham Investments 9 LP1
Security Finance 2 LLC2

Wholly owned subsidiaries
Bentham IMF Holdings 1 LLC
Bentham Capital GP LLC3
Bentham Capital LLC
Bentham Capital Management LLC4
Bentham Holdings Inc
Security Finance LLC
Bentham IMF Capital Limited
Lien Finance Canada Limited
IMF Bentham Pte. Limited
IMF Litigation Funding Services Limited5
IMF Bentham GPA 5 Pty Ltd6
IMF Bentham Cayman Advisory Services Limited7

Percentage owned

Country of
Incorporation

2019
%

2018
%

Australia
Australia

USA
USA
USA

USA
USA
USA
USA
USA
USA
USA
USA
USA
USA

USA
USA
USA
USA
USA
USA
Canada
Canada
Singapore
United Kingdom
Australia
Cayman Islands

20
20

28
7
28

20
20
20
20
20
20
20
20
20
20

100
100
100
100
100
100
100
100
100
100
100
100

20
20

27
7
27

–
–
–
–
–
–
–
–
–
–

100
–
100
–
100
100
100
100
100
–
–
–

These entities were formed on 4 December 2018. Percentage owned decreased to 20% on 30 January 2019, following the finalisation of the
amended and restated limited partnership agreements.

2. This entity was incorporated on 29 November 2018.
3. This entity was incorporated on 26 October 2018.
4. This entity was incorporated on 2 July 2018.
5. This entity was incorporated on 27 September 2018.
6. This entity was incorporated on 6 June 2019.
7. This entity was incorporated on 4 June 2019.

For all subsidiaries where there is less than 51% ownership interest, the Group has power to direct the relevant activities
of the investee under contractual arrangements; and exposure to variable returns. The Group is considered to be acting
as principal and thus has control.

122

Notes to the Financial StatementscontinuedNote 26: Material partly-owned subsidiaries
Financial information of subsidiaries that have material non-controlling interests is provided below:

Non-controlling interest

Country of
Incorporation

2019
%

2018
%

Proportion of equity interest held by non-controlling interests:

Row Funds

IMF Bentham (Fund 2) Pty Ltd1
IMF Bentham (Fund 3) Pty Ltd1

Fund 1

Bentham IMF 1 LLC2
HC 1 LLC2
Security Finance 1 LLC2
Fund 4

Bentham Investments 1 LP3
Bentham Investments 2 LP3
Bentham Investments 3 LP3
Bentham Investments 4 LP3
Bentham Investments 5 LP3
Bentham Investments 6 LP3
Bentham Investments 7 LP3
Bentham Investments 8 LP3
Bentham Investments 9 LP3
Security Finance 2 LLC3

Accumulated balances of material non-controlling interest:
Bentham IMF 1 LLC2
HC 1 LLC2
IMF Bentham (Fund 2) Pty Ltd1
IMF Bentham (Fund 3) Pty Ltd1
Fund 4
Transaction costs, net of tax – disposal of non-controlling interest Fund 12
Transaction costs, net of tax – disposal of non-controlling interest Row Funds

Profit allocated to material non-controlling interest:

Bentham IMF 1 LLC
IMF Bentham (Fund 2) Pty Ltd1
IMF Bentham (Fund 3) Pty Ltd1
Fund 4

Australia
Australia

USA
USA
USA

USA
USA
USA
USA
USA
USA
USA
USA
USA
USA

80
80

72
93
72

80
80
80
80
80
80
80
80
80
80

80
80

73
93
73

–
–
–
–
–
–
–
–
–
–

2019
$'000

2018
$'000

161,369
47,092
53,613
17,871
25,450
(5,934)
(2,909)
296,552

(15)
–
–
(35)
(50)

105,799
47,086
22,933
7,644
–
(5,934)
(2,024)
175,504

1,106
1,548
516
–
3,170

The results and non-controlling interest of these entities comprise the results of the Row Funds, included in Note 1 Segment information. Under
the contractual arrangements with the Row Funds, Group entities are required to contribute a total of $36,00,000 of equity, with non-controlling
interests contributing $144,000,000 of equity (total of $180,000,000). As at 30 June 2019 the Group had contributed $16,200,000 of the total
commitment (30 June 2018: $3,400,000).
The results and non-controlling interest of these entities comprise the results of Fund 1, included in Note 1 Segment information. Under the
contractual arrangements with Fund 1, Group entities are required to contribute a total of US$41,700,000 of equity, with non-controlling interests
contributing US$125,000,000 of equity (total US$166,700,000). As at 30 June 2019 the Group had contributed US$41,700,000 of the total
commitment (30 June 2018: US$29,900,000).
The results and non-controlling interest of these entities comprise the results of Fund 4, included in Note 1 Segment information. Under the
contractual arrangements with Fund 4, Group entities are required to contribute a total of US$100,000,000 of equity, with non-controlling
interests contributing US$400,000,000 of equity (total US$500,000,000). As at 30 June 2019 the Group had contributed US$4,600,000 of
the total commitment (30 June 2018: nil).

123

Notes to the Financial StatementscontinuedOverviewDirectors’ ReportFinancial Report Shareholder Information IMF Bentham Limited Annual Report 2019

Note 26: Material partly-owned subsidiaries (continued)

Net assets attributable to NCI
Movements in net assets attributable to NCI’s during the year were as follows:

Bentham IMF
1 LLC

$'000

2,366

HC 1
LLC

$'000

–

IMF Bentham
(Fund 2)
Pty Ltd

IMF Bentham
(Fund 3)
Pty Ltd

$'000

Fund 4

–

100,096

47,086

20,877

(9,694)

8,188

(1,091)

99,865

59,473

(24,247)

10,627

9,719

–

47,086

–

(3,368)

3,353

–

2,056

(1,518)

21,415

27,649

(3,037)

6,068

–

(665)

155,437

47,092

51,430

–

6,958

–

686

(506)

7,138

9,216

(1,015)

2,024

–

(220)

17,143

–

25,485

–

554

(589)

–

Total

$'000

2,366

175,017

(9,694)

10,930

(3,115)

175,504

121,844

(28,299)

15,905

12,483

(885)

25,450

296,552

As at 1 July 2017

Contributions

Distributions

Change in share of net assets
attributable to NCI

Transaction costs

As at 30 June 2018

Contributions

Distributions

Change in share of net assets
attributable to NCI

Total comprehensive income

Transaction costs

As at 30 June 2019

ROW Funds 2 & 3
On 13 September 2017, the Group established IMF Bentham (Fund 2) Pty Ltd and IMF Bentham (Fund 3) Pty Ltd
(collectively the “ROW Funds 2 & 3”).

On 3 October 2017, the Group undertook a transaction to dispose of a non-controlling interest in the ROW Funds. At date
of disposal the change in equity of the Group was recorded as follows:

Change in equity on disposal of non-controlling interests:

IMF Bentham (Fund 2) Pty Ltd

IMF Bentham (Fund 3) Pty Ltd

Transaction costs net of tax – disposal of non-controlling interests

2019
$'000

2018
$'000

–

(885)

–

(2,024)

Fund 1
On 3 November 2016, IMF established Bentham IMF 1 LLC and its subsidiary Security Finance 1 LLC (collectively “Fund 1”).
Fund 1 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 Fund 1. The change in
equity of the Group resulting from this disposal was recorded as follows:

Change in equity on disposal of non-controlling interests:

Bentham IMF 1 LLC

Security Finance 1 LLC

Transaction costs net of tax – disposal of non-controlling interest

124

2019
$'000

2018
$'000

–

(1,091)

Notes to the Financial Statementscontinued

Note 26: Material partly-owned subsidiaries (continued)
Fund 4
On 26 October 2018, IMF established Bentham Capital GP LLC. On 29 November 2018, IMF established Security Finance
2 LLC. On 4 December 2018, IMF established Bentham Investments 1 – 9 LP (collectively “Fund 4”). Fund 4 has been part
of the Group and consolidated into the results since this time as it was controlled by IMF.

The summarised financial information provided below is based on amounts prior to intercompany eliminations:

Summarised statement
of cash flows

Operating

Investing

Financing

Net increase in cash and
cash equivalents

Cash and cash equivalents
at the beginning of the period

Foreign exchange

Cash and cash equivalents
at the end of the period

Fund 1

ROW Funds 2 & 3

Fund 4

2019
$'000

2018
$'000

2019
$'000

2018
$'000

2019
$'000

2018
$'000

(77)

(15,469)

57,760

(71)

(102,594)

104,570

(988)

(18,690)

42,042

(3)

(18,921)

34,796

(43)

(25,059)

30,729

42,214

1,905

22,364

15,872

5,627

7,466

–

5,561

–

15,889

–

49,680

7,466

38,326

15,889

5,627

–

Note 27: Related party disclosure

Transactions with director related entities
The following table provides the total amount of transactions that were entered into with related parties for the relevant
financial year.

Transactions with related parties1

Consolidated

2019
$'000

499

2018
$'000

470

During the year the Group obtained legal advice from DLA Piper, a legal firm associated with Michael Bowen, totalling $499,176 (2018: $470,272).
The legal advice was obtained at normal market prices. IMF engages a number of different law firms for its external legal advice and hence the
relationship with DLA Piper is not exclusive. Michael Bowen does not participate in any board decisions to appoint external counsel when DLA
Piper is being considered for engagement.

125

Notes to the Financial StatementscontinuedOverviewDirectors’ ReportFinancial Report Shareholder Information IMF Bentham Limited Annual Report 2019Note 28: Auditor’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:

Tax compliance

Other

Consolidated

2019
$’000

2018
$’000

410

–

410

276

–

336

Note 29: Events after the reporting date
Apart from that disclosed in this report, no other circumstances have arisen since 30 June 2019 that have significantly
affected, or may significantly affect the consolidated entities’ operations, the results of those operations, or the
consolidated entities state of affairs in the future financial years.

126

Notes to the Financial StatementscontinuedDirectors’
Declaration

In accordance with a resolution of the Directors of IMF Bentham Limited, we state that:

In the opinion of the Directors:

(a) the financial statements and notes of IMF Bentham Limited for the financial year ended 30 June 2019 are in

accordance with the Corporations Act 2001, including:

ii.

giving a true and fair view of its financial position as at 30 June 2019 and performance for the year ended on that
date; and

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 the

notes to the financial statements;

and payable; and

(d) this declaration has been made after receiving the declarations required to be made to the directors in accordance

with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2019.

On behalf of the board

Michael Kay
Chairman

Perth, 21 August 2019

Andrew Saker
Managing Director

127

OverviewDirectors’ ReportFinancial Report Shareholder Information IMF Bentham Limited Annual Report 2019

Independent
Auditor’s 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

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
2019, the consolidated statement of comprehensive income, consolidated statement of changes in equity
and 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:

giving a true and fair view of the consolidated financial position of the Group as at 30 June 2019
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:DA:IMF:081

128

Independent
Auditor’s Report
continued

Impairment assessment of intangible assets

Why significant

How our audit addressed the key audit matter

Litigation contracts in progress are recognised as
intangible assets and assessed for impairment by the
Group using cash flow forecasts.

We evaluated the Group’s assessment of the carrying value
of intangible assets. Our audit procedures included the
following:

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, the assets will be impaired.

 Assessed, through testing a sample, the effectiveness
of the Group’s controls in relation to the review of
carrying values for intangible assets, including
controls over the valuation model and assumptions
applied.

This was a key audit matter 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 10 of the financial report for the
amounts recognised by the Group as at 30 June 2019
and related disclosures.

 Examined the Group’s impairment assessment model
and tested the reasonableness of key assumptions
including cash flow forecasts considering the accuracy
of previous forecasts, estimated completion dates and
discount rates, with the involvement of our valuation
specialists.

 We tested the mathematical accuracy of the cash flow

models.

 Conducted sensitivity analyses to ascertain the impact
of reasonably possible changes to key assumptions on
the available headroom.

 Discussed significant case matters with respective
Case Investment Managers, in order to understand
case status and assess judgements made by the Group
that impacted the impairment model including
litigation completion timing, litigation revenue,
budgeted costs to complete and intention to continue
the litigation funding.

 Assessed the adequacy of the financial statement

disclosures regarding impairment and the recoverable
amount of the Group’s intangible assets.

A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation

RK:DA:IMF:081

129

OverviewDirectors’ ReportFinancial Report Shareholder Information IMF Bentham Limited Annual Report 2019

Independent
Auditor’s Report
continued

Income recognition

Why significant

How our audit addressed the key audit matter

We evaluated the Group’s assessment of case outcomes
and income recognised for the year. Our audit procedures
included the following:

 Assessed the timing and quantum of income

recognition based on a sample of settlement terms
agreed with the counterparties, including liquidators
where applicable, and court rulings.

 Assessed the adequacy of the financial statement

disclosures regarding the Group’s income recognition.

During the year ended 30 June 2019, the impact of
investment completions (both successful and
unsuccessful) resulted in the recognition of litigation
contract income of $35.0 million and a net loss on de-
recognition of intangible assets of $4.2 million in the
consolidated statement of comprehensive income.

Where the litigation is unsuccessful, this constitutes a
derecognition of the intangible asset and accordingly a
loss is recognised in the consolidated statement of
comprehensive income.

The Group’s accounting policies outline the guidelines
as to the manner in which income can be recognised
following outcomes on litigation matters funded by the
Group.

Given the magnitude involved income recognition was
a key audit matter.

Refer to Note 3 of the financial report for the amounts
recognised by the Group as at 30 June 2019 and
related disclosure.

Recoverability of deferred tax assets

Why significant

How our audit addressed the key audit matter

At 30 June 2019, the Group had deferred tax assets
including tax losses of $18.8 million recorded in the
statement of financial position. AASB 112 Income
Taxes outlines the requirements necessary to
recognise a deferred tax asset. The recoverability of
the deferred tax assets is reliant on taxable profits
being earnt by Group subsidiaries.

Given the magnitude and judgment involved in
determining the recoverability of deferred tax assets,
it was considered as a key audit matter.

Refer to Note 6 of the financial report for the amounts
recognised by the Group as at 30 June 2019 and
related disclosure.

We evaluated the Group’s assessment of the recoverability
of recognised deferred tax assets. Our audit procedures
included the following:

 Examined the Group’s deferred tax asset

recoverability assessment and evaluated the
reasonableness of key assumptions including forecast
taxable profits of Group subsidiaries.

 Assessed sensitivity analyses prepared by

management to ascertain the impact of possible
changes to key assumptions on the timing of
recoverability.

 Assessed the adequacy of the financial statement

disclosures regarding the Group’s deferred tax assets.

A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation

RK:DA:IMF:081

130

Independent
Auditor’s Report
continued

Existence and collectability of litigation contract receivables

Why significant

How our audit addressed the key audit matter

At 30 June 2019, the Group had litigation contract
receivables of $14.1 million which were significant to
the Group.

We evaluated the Group’s assessment of the carrying value
of litigation contract receivables at 30 June 2019. Our
audit procedures included the following:

Given the magnitude and judgment involved in the
collectability assessment of litigation contract
receivables, existence and collectability of litigation
contract receivables was a key audit matter.

Refer to Note 16 of the financial report for the
amounts recognised by the Group as at 30 June 2019
and related disclosure.

 Assessed whether litigation contract receivables were

recognised in accordance with the Group accounting
policy.

 Selected a sample of balances to determine based on

settlement terms, if the right to record a receivable
had been satisfied.

 Assessed the credit loss provision by reference to the
economic environment applicable to the debtors, the
historical accuracy of forecasting recoverability and
the Group’s assessment of collectability considering
the process to achieve recovery, the likely timing of
these processes and events that could delay or impact
the collectability.

 Considered collection timing assumptions to

determine whether receivables were appropriately
classified as current or non-current.

 Assessed the adequacy of the financial statement

disclosures regarding the Group’s litigation contract
receivables.

Provision for adverse costs

Why significant

How our audit addressed the key audit matter

Adverse costs arise where the Group is instructed by
the court to settle the costs incurred by the defendant
in litigation matters.

The Group records a provision for adverse costs when
a matter which it has funded is lost and that matter in
a geographic location where adverse costs exist.

We focused on this area because it requires a high
level of judgment to determine the adverse cost likely
to be incurred and changes in these assumptions
might lead to a significant change in the amount of
adverse costs the Group will be required to pay.

Refer to Note 21 of the financial report for the
amounts recognised by the Group as at 30 June 2019
and related disclosure.

We evaluated the Group’s assessment of the provision for
adverse costs. Our audit procedures included the following:

 Compared assumptions for current year provision

amounts to evidence, including estimates provided by
the Group’s legal experts.

 Assessed the requirement for provisions for current
year unsuccessful case finalisations based on
settlement terms and geographies of cases.

 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 used and released.

 Assessed the adequacy of the financial statement
disclosures regarding the Group’s provision for
adverse costs.

A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation

RK:DA:IMF:081

131

OverviewDirectors’ ReportFinancial Report Shareholder Information IMF Bentham Limited Annual Report 2019
Independent
Auditor’s Report
continued

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 2019 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, with the exception of the Remuneration Report and
our related assurance opinion.

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.

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.

A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation

RK:DA:IMF:081

132

Independent
Auditor’s Report
continued



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 Group’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 Group 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.

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.

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.

A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation

RK:DA:IMF:081

133

OverviewDirectors’ ReportFinancial Report Shareholder Information IMF Bentham Limited Annual Report 2019

Independent
Auditor’s Report
continued

Report on the Audit of the Remuneration Report

Opinion on the Remuneration Report

We have audited the Remuneration Report included in pages 69 to 77 of the directors' report for the year
ended 30 June 2019.

In our opinion, the Remuneration Report of IMF Bentham Limited for the year ended 30 June 2019,
complies with section 300A of the Corporations Act 2001.

Responsibilities

The directors of the Company are responsible for the preparation and presentation of the Remuneration
Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an
opinion on the Remuneration Report, based on our audit conducted in accordance with Australian
Auditing Standards.

Ernst & Young

Robert A Kirkby
Partner
Perth
21 August 2019

A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation

RK:DA:IMF:081

134

Shareholder
Information

The information set out below is current as at 31 July 2019.

(a) Distribution of Shareholders

Ordinary Share Capital
204,608,858 fully paid ordinary shares are held by 4,171 individual shareholders. All issued ordinary shares carry one vote
per share and carry the right to dividends.

IMF Bentham Bonds
There are 760,000 bonds issued held by 1,165 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
4,255,816 performance rights were issued to 53 rights holders bringing the total number of performance rights on issue
to 15,601,589.

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 2019:

1 – 1,000

1,001 – 5,000

5,001 – 10,000

10,001 – 100,000

100,001 and over

Fully paid
ordinary
shares

Number

927

406,106

1,424

4,099,744

777

971

5,830,842

25,297,254

168,974,912

Number

Bonds

1,115

163,386

81,942

23,407

41,299

449,966

760,000

4,171 204,608,858

1,165

Non-marketable Parcels
There were 255 holders of less than a marketable parcel of ordinary shares.

(b) Substantial Shareholders
As at 31 July 2019, the Shareholders (and their associates) that hold 5% or more of Shares on issue based on Section
671B notices lodged with ASX are set out below:

Shareholder

Kabouter Management, LLC

Perpetual Investment Management

Challenger Limited

Greencape Capital Pty Ltd

Eley Griffiths Group

Number of
ordinary
Shares

% of
issued
capital

19,132,869

15,205,771

13,488,165

13,438,505

11,114,685

72,379,995

9.35

7.43

6.59

6.57

5.43

35.37

135

OverviewDirectors’ ReportFinancial Report Shareholder Information IMF Bentham Limited Annual Report 2019Shareholder
Information
continued

Ordinary Shares

1. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED

2. J P MORGAN NOMINEES AUSTRALIA LIMITED

3. CITICORP NOMINEES PTY LIMITED

4. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA

5. NATIONAL NOMINEES LIMITED

6. UBS NOMINEES PTY LTD

7. MCLERNON GROUP SUPERANNUATION PTY LTD

8. BNP PARIBAS NOMINEES PTY LTD

9. CITICORP NOMINEES PTY LIMITED

10. MR DENNIS JOHN BANKS

11. BNP PARIBAS NOMINEES PTY LTD

12. PACIFIC CUSTODIANS PTY LIMITED

13. BNP PARIBAS NOMINEES PTY LTD

14. MR HUGH MCLERNON

15. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED

16. MR PETER FREDERICK PHILLIPS AND ALICE SAU HAN PHILLIPS

17. PACIFIC CUSTODIANS PTY LTD

18. BOUCHI PTY LTD

19. MUTUAL TRUST PTY LTD

20. B F A PTY LTD

(d) Options as at 31 July 2019 – unquoted
There are no options issued.

(e) Securities subject to escrow
There are no securities subject to escrow.

Number of
ordinary
Shares
‘000

% of issued
capital

41,157

25,546

23,883

16,716

16,404

14,136

3,862

2,529

2,047

1,838

1,743

1,727

1,061

1,002

845

804

763

641

638

586

20.12

12.49

11.67

8.17

8.02

6.91

1.89

1.24

1.00

0.90

0.85

0.84

0.52

0.49

0.41

0.39

0.37

0.31

0.29

157,928

77.19

136

Shareholder
Information
continued

(f) 20 Largest Holders of Quoted IMF Bentham Bonds as at 31 July 2019

Bond Holders

1. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED

2. CITICORP NOMINEES PTY LIMITED

3. NATIONAL NOMINEES LIMITED

4. MCLERNON GROUP SUPERANNUATION PTY LTD

5. ST HEDWIG VILLAGE

6. MUTUAL TRUST PTY LTD

7. J P MORGAN NOMINEES AUSTRALIAN PTY LIMITED

8. PSTAR PTY LTD

9. SUNSTONE FINANCE PTY LTD

10. RACING VICTORIA LIMITED

11. DYSPO PTY LIMITED

11. AGGREGATED CAPITAL PTY LTD

11. BJM INCOME INVESTMENTS PTY LTD

12. CARRIER INTERNATIONAL PTY LIMITED

13. THE GOLF NUT PTY LTD1

14. NETWEALTH INVESTMENTS LIMITED

15. MR CHIA-HO CHEN

16. AGED CARE GROUP PTY LTD

16. CONTINENTAL HOLDINGS PTY LTD

16. SANCTUARY GATE PTY LTD

16. MORBEN NOMINEES PTY LTD

16. SPACE DOOR PTY LTD

16. TUDOR FARM PTY LTD

16. CAROLYN MARGARET EARL AND JOHN WILLIAM NISSEN

16. LEVIEN FOUNDATION PTY LTD

16. SINGAPORE INVESTMENTS PTY LTD

17. ROSEMARIE HANICH

18. THE GOLF NUT PTY LTD1

19. NATIONAL STROKE FOUNDATION

20. LUCA ROTTER AND JANE LOUISE ABBOTT

1. Held in different accounts.

Number of
Bonds

449,966

23,608

17,691

7,500

5,515

5,241

5,151

4,269

3,867

3,310

2,500

2,480

2,446

2,280

2,250

2,000

1,981

1,969

1,910

1,774

% of
units

59.21

3.11

2.33

0.99

0.73

0.69

0.68

0.56

0.51

0.44

0.33

0.32

0.30

0.26

0.25

0.23

568,708

74.83

137

OverviewDirectors’ ReportFinancial Report Shareholder Information IMF Bentham Limited Annual Report 2019Corporate
Information

This annual report covers both IMF Bentham Limited as an individual entity and the consolidated entity comprising
IMF Bentham Limited and its subsidiaries. The Group’s functional and presentation currency is AUD ($).

A description of the Group’s operations and of its principal activities is included in the review of operations and activities
in the Directors’ Report. The Directors’ Report is not part of the financial report.

Directors
Michael Kay
Andrew Saker
Hugh McLernon
Michael Bowen
Karen Phin
Christine Feldmanis

Company Secretary
Jeremy Sambrook

Non-Executive Chairman
Managing Director
Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director

Registered office and principal place of business in Australia
Level 18, 68 Pitt Street
Sydney NSW 2000

Phone: (02) 8223 3567
Fax: (02) 8223 3555

Solicitors
DLA PIPER
Level 31, Central Park
152-158 St George’s Terrace
Perth WA 6000

Share registry
LINK MARKET SERVICES
Locked Bag A14
Sydney South NSW 1235

Phone: 1300 554 474

Auditors
EY
The EY Building
11 Mounts Bay Road
Perth WA 6000

Bankers
NATIONAL AUSTRALIA BANK LIMITED
255 George Street
Sydney NSW 2000

Internet address
www.imf.com.au

The Company is listed on the Australian Securities Exchange with Sydney, Australia as its home exchange.

Its ASX code is “IMF” and its shares were trading as at the date of this report.

138

Glossary
of Terms

AASB

Australian Accounting Standards Board

Addressable
Market

Is IMF’s estimate of the annual amount spent by plaintiff/applicants on external costs of litigation/
dispute resolution that could be addressed by IMF’s litigation funding service offering.

CAGR

EMEA

EPS

Compound Annual Growth Rate

Europe, Middle East and Africa

Earnings Per Share

Estimated
Portfolio Value
(EPV)

EPV for an investment where the IMF funding entity earns a percentage of the resolution proceeds as
a funding commission, is IMF’s current estimate of the claim’s recoverable amount after considering
the perceived capacity of the defendant to meet the claim. It is not necessarily the amount being
claimed by the claimants, nor is it an estimate of the return to IMF if the investment is successful. EPV
for an investment where the IMF funding entity earns a funding commission calculated as a multiple
of capital invested shall be calculated by taking IMF’s estimate of the potential income return from the
investment and grossing this up to an EPV using IMF’s Long-Term Conversion Rate. An EPV is subject
to change over time for a number of reasons, including, but not limited to, changes in circumstances
and knowledge relating to an investment, partial recovery and, where applicable, fluctuations in
exchange rates between the applicable local currency and the Australian dollar.

ICC

Investment Committee

International Chamber of Commerce

ICSID

International Centre for Settlement of Investment Disputes

IFRS

IRR

LTIP

International Financial Reporting Standards

Internal Rate of Return

Long Term Incentive Program

MOIC

Multiple on Invested Capital

NCI

OCA

ROIC

SIAC

STIP

TFR

TSR

Non-Controlling Interest

On-line Client Administration Proprietary Database

Return on Invested Capital

Singapore International Arbitration Centre

Short Term Incentive Program

Total Fixed Remuneration

Total Shareholder Return

Non-IFRS financial information included in this Report has been prepared in accordance with ASIC Regulatory Guidance 230 – Disclosing
Non-IFRS financial information, issued December 2011. This information has not been audited or reviewed.

Disclaimer
None of the content in the IMF Bentham Limited (“IMF”) Annual Report is an offer to sell, or a solicitation of an offer to buy, any securities of
IMF or any other company affiliated with IMF. In addition, nothing herein should be construed as an offer to buy or sell, nor a solicitation of an
offer to buy or sell, any security or other financial instrument, or to invest assets in any account managed or advised by IMF or its affiliates.
This Annual Report is for the use of IMF’s public shareholders and is not an offering of any IMF private fund.

139

Australia

United States

Canada

Asia

Europe

New York
+1 212 488 5331

Toronto
+1 416 583 5720

Singapore
+65 6622 5396

437 Madison Avenue
19th Floor
New York NY 10022

250 The Esplanade
Suite 127
Toronto ON M5A 1J2

Suite 59, Level 42
Six Battery Road
Singapore 049909

London
+44 203 968 6061

81 Chancery Lane
London WC2A 1DD

Los Angeles
+1 213 550 2687

Montreal
+1 514 257 6971

555 West Fifth Street
Suite 3310
Los Angeles CA
90013

60 Rue St Jacques
Bureau 401
Montréal QC H2Y 1L5

Hong Kong
+852 3978 2629
+852 3978 2300

Level 16
Man Yee Building
60-68 Des Voeux Road
Central Hong Kong

San Francisco
+1 415 231 0363

Two Rincon Center
121 Spear Street
Suite 405
San Francisco CA
94105

Houston
+1 713 965 7920

LyondellBasell Tower
1221 McKinney Street
Suite 2860
Houston TX 77010

Sydney
+61 2 8223 3567

Level 18
68 Pitt Street
Sydney NSW 2000

GPO Box 5457
Sydney NSW 2001

Perth
+61 8 9225 2300

Level 6
37 St Georges
Terrace
Perth WA 6000

PO Box 5106
Perth WA 6831

Brisbane
+61 7 3108 1310

Level 4
320 Adelaide Street
Brisbane QLD 4000

Melbourne
+61 3 9913 3301

Level 3
Bourke Place
600 Bourke Street
Melbourne VIC 3000

Adelaide
+61 8 8122 1010

50 Gilbert Street
Adelaide SA 5000