Annual Report 2020 In November 2019 IMF Bentham and Omni Bridgeway merged to form the largest dispute funding team in the world and subsequently adopted the global name Omni Bridgeway. Omni Bridgeway includes the leading funders formerly known as IMF Bentham Limited, Bentham IMF and ROLAND ProzessFinanz as well as a joint venture with IFC (part of the World Bank Group). Omni Bridgeway is the global leader in dispute resolution finance, with expertise in civil and common law legal and recovery systems, and operations spanning Asia, Australia, Canada, Europe, the Middle East, the UK and the US. We offer dispute finance from case inception through to post-judgment enforcement and recovery. With IMF Bentham listing on the Australian Stock exchange in 2001, and Omni Bridgeway commencing operations in Europe in 1986, our merged business has an established track record of funding disputes and enforcement proceedings around the world. Omni Bridgeway | Annual Report 2020 Contents Highlights ....................................................................................2 C. CAPITAL STRUCTURE 81 Chairman’s and Managing Director’s Report ........................4 Note 15: Financial risk management ................................. 81 Directors’ Report ..................................................................... 19 Note 16: Cash and cash equivalents ................................. 87 Auditor’s Independence Declaration ................................... 50 Note 17: Debt securities ...................................................... 88 Statement of Comprehensive Income ................................. 51 Note 18: Contributed equity ............................................... 89 Statement of Financial Position ............................................ 52 Note 19: Retained earnings and reserves ........................ 90 Statement of Cash Flows ....................................................... 53 Statement of Changes in Equity ........................................... 54 Notes to the Financial Statements ....................................... 56 About this Report .................................................................... 56 A. RESULTS FOR THE YEAR 61 Note 1: Segment information ........................................... 61 Note 2: Revenue from contracts with customers ......... 65 Note 3: Interest revenue .................................................. 67 Note 4: Net gain/(loss) on derecognition of intangible assets .............................................. 67 Note 5: Other income ....................................................... 68 Note 6: Expenses ................................................................ 68 D. WORKING CAPITAL, OTHER ASSETS AND OTHER LIABILITIES 91 Note 20: Receivables from litigation contracts and other ............................................................... 91 Note 21: Contract costs ....................................................... 92 Note 22: Other assets .......................................................... 92 Note 23: Plant and equipment ........................................... 93 Note 24: Trade and other payables ................................... 95 Note 25: Provisions .............................................................. 95 Note 26: Lease liabilities ...................................................... 97 Note 27: Other liabilities ..................................................... 99 Note 28: Commitments and contingencies .................... 100 Note 7: Income tax ............................................................. 70 E. THE GROUP, MANAGEMENT AND RELATED PARTIES 101 Note 8: Earnings per share ............................................... 73 Note 9: Dividends paid and proposed by Omni Bridgeway Limited (the parent entity) ....74 Note 10: Statement of cash flows reconciliation ............. 75 B. INVESTMENTS AND INTANGIBLE ASSETS 76 Note 29: Key management personnel ............................ 101 Note 30: Share-based payment plan............................... 101 Note 31: Business combination ....................................... 103 Note 32: Parent entity information ................................. 108 Note 33: Material partly-owned subsidiaries ................111 Note 11: Claims portfolio .................................................... 76 Note 34: Investment in associates and joint ventures . 114 Note 12: Purchased claims ................................................. 76 Note 35: Related party disclosure ................................... 115 Note 13: Intangible assets – litigation contracts in progress ............................................................. 77 Note 14: Goodwill ................................................................. 80 Note 36: Auditor’s remuneration ..................................... 115 Note 37: Events after the reporting date ....................... 115 Directors’ Declaration .......................................................... 116 Independent Auditor’s Report ............................................ 117 Shareholder Information ..................................................... 123 Corporate Information ......................................................... 126 Glossary of Terms ................................................................. 127 i H g h l i g h t s 1 Financial Report Shareholder Information OverviewDirectors’ Report Highlights Cash and Receivables 35% to $329.114m Significant cash reserves and receivables are enabling us to continually grow our business, finance increasingly large investments and support clients through the disruptive world-events of 2020 and beyond. . 1 9 2 3 . 3 3 4 2 . 7 1 9 1 . 7 1 9 1 . 9 5 8 1 Investments 47% to $627.929m The carrying amount of investments has grown 47% and average size increased. Our Investment Committees and teams are busier than ever and we continue to generate investments for future returns. . 9 7 2 6 . 0 7 2 4 . 3 1 2 3 . 9 0 9 1 . 6 5 4 1 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 The global leader in financing and managing legal risks Supporting clients from case inception through to post-judgment enforcement and recovery for 30+ years 2001 World’s first publicly listed litigation funder (ASX) Perth Sydney 2003 Melbourne 2007 Brisbane 2009 Adelaide 2011 New York 2013 Los Angeles 1990 Distressed asset recovery & restructuring 2001 Asset tracing & enforcement intelligence 1986 Founded as Omni Finance – distressed debt trading, Amsterdam 2009 Geneva m a h t n e B F M I y a w e g d i r B i n m O 2 Omni Bridgeway | Annual Report 2020 Total Gross Investment Revenue and Income 727% to $290.304m Investment completions generated record revenue and income. This reinforces our robust financial position. . 8 9 9 . 3 3 1 1 . 1 5 3 . 2 1 7 EPV 67% to $15,831m* Our EPV continues to increase, representing potential future returns. . 3 0 9 2 1 3 8 , 5 1 6 5 4 9 , 9 6 8 5 , 8 3 4 3 , 6 9 0 4 , 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020 * Portfolio value since 2017 includes conditionally funded investments and investments approved for funding by our Investment Committees, but not yet funded. 2017 Fund 1 US$172m Funds 2 & 3 A$180m Houston Singapore 2018 Fund 4 US$500m Hong Kong Montreal London 2015 San Francisco 2016 Toronto 2019 Fund 5 US$500m NOV 2019 IMF Bentham / Omni Bridgeway merger 2015 Singapore 2016 Fund 6 €150m 2017 Cologne (ROLAND ProzessFinanz) 2018 Dubai 2019 Fund 7 US$100m (DARP) ~160 people A$2.2 billion FUM (7 Funds) 3 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Chairman’s and Managing Director’s Report This financial year has been the strongest in our history, with record income, an unprecedented number of resolutions for clients, a record number of applications and more funds committed to investments than ever before. Image top, left to right: Raymond van Hulst Executive Director, Managing Director EMEA Wieger Wielinga Managing Director Enforcement & EMEA Andrew Saker Managing Director and CEO 4 Introduction We are pleased to report to shareholders that this financial year has been the strongest in our company’s history. We have achieved record gross income of $314.302 million, profit before tax and fair value adjustments on financial liabilities of $47.086 million, and final profit before tax of $33.489 million. This has been generated from an unprecedented number of 45 partial and complete resolutions, delivering wonderful outcomes for our clients around the world, including the PFAS contamination cases and Murray Goulburn investor class action. As we transition our capital structure from balance sheet to Fund management (and from first to second generation funds within that model), profit attribution shifts from shareholders to Fund investors, and ultimately returns to shareholders again. Although much of our net profit in FY20 is attributed to Fund investors, this accelerates us towards the time when shareholders will benefit from the first generation Fund structures. This year we also received a record number of 1,296 applications for finance and, in the face of increased opportunities to fund, we upheld our rigorous underwriting process to preserve our success rate. Our conversion rate has remained around 3 – 5% throughout FY20. We committed more funds to investments in FY20 than any prior year, in total $313.214 million in conditional and unconditional commitments, continuing the annual trend reported by our business. Our commitments have had a compound annual growth rate of over 40% since 2015. We are pleased that FY21 has also started strongly with a number of unconditional completions and we remain hopeful that our clients in the Wivenhoe matter will see a positive outcome soon. One of our other key highlights this year was the successful merger between IMF Bentham and Omni Bridgeway to complete our strategic expansion in EMEA. We are now the largest dispute funding team in the world, offering a major, diversified global dispute funding platform across common law and civil law jurisdictions in developed and emerging markets. Omni Bridgeway | Annual Report 2020 Integration Progress Marketing and Business Development People and Culture Commenced numerous co-investments and investment collaborations across legacy IMF Bentham and Omni Bridgeway Funds and teams, growing the portfolio Global name Omni Bridgeway adopted New branding Global website Global digital marketing Industry leadership recognised (market feedback, Chambers & Partners, Leaders’ League, Who’s Who Legal, LawDragon) On-boarding and skill-development program focusing on business development and leadership capability Business Platform (Operations & IT) IT infrastructure and security platforms consolidated Proprietary databases and applications deployed globally Global General Manager, People & Culture and Global Human Resources Business Partner appointed Employment contracts and policies streamlined and employees transitioned to consistent global contracts and incentive structures Well-being programs Global internal communications People strategy ratified by Board (including post- COVID workplace agility, employee well-being, revised performance management framework and cultural integration) Legal and Risk Global Head of Risk and Compliance appointed Legal and Risk team structure formalised under leadership of Group General Counsel Investment documents and processes harmonised for joint merits and enforcement investments Finance Global communications platform deployed Group finance platforms amalgamated Global re-branded intranet Class actions portal on website Group reports FY20 consolidated Group budgets FY21 consolidated Over recent years IMF Bentham and Omni Bridgeway had worked together on business development and other projects and delighted in the mutual trust and respect experienced by all. We found our businesses to be culturally aligned, with commonalities in our histories and our vision for the future. We are now proud to come together globally under the name Omni Bridgeway and to share a mission to develop a formidable global organisation. Our merged business now has 18 offices in 10 countries, with approximately 160 experts speaking 25+ languages, with over $2.200 billion in funds to invest in dispute resolution and recovery across the globe. With significant world events largely outside our control, we operate in an industry in which returns are uncorrelated, and to some extent counter-cyclical, to economic conditions. The long-range Strategic Plan we set in motion five years ago has positioned us well for the macro-economic environment in which we now operate and has laid a platform for our future. We have significant cash and receivables, a service offering that delivers value in today’s environment, an income and supply chain that is not dependent upon any one market, and an agile team of knowledge workers who transitioned without interruption in March 2020 from 18 offices to approximately 160 ‘virtual’ home offices around the world. This year our team accomplished a merger and associated capital-raising, name-change, re-brand, commenced and largely completed the integration of global operations, adjusted to working-from-home during a global pandemic and, during all this, took care of ‘business as usual’ and grew the business. In addition to assisting clients and prudently managing investments on behalf of our Fund investors and shareholders, it has been particularly important to assist others in a year when so many are facing substantial challenges. We support our communities – through contributions to Australia’s bushfire relief efforts, foodbanks around the world, underprivileged children in Vietnam, and others. We are also actively advocating for the introduction of industry standards in Australia, to ensure that all recipients of dispute finance receive the same comfort around capital adequacy, adverse costs cover and acceptable returns, that Omni Bridgeway’s clients experience. In FY20 we achieved significant progress towards integrating our market offering and business operations globally. We are pleased to report the achievements in the list above and will continue this focus in FY21. 5 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Chairman’s and Managing Director’s Report continued This year we re-confirmed our core values during our merger and re-branding. Our business growth and value proposition to all our stakeholders will continue to be guided by the principles of transparency, accountability, rigour, entrepreneurship, partnership and engaging our talent. We have also exceeded the goals we set in our 2015-2020 Strategic Plan. 1 July 2015 30 June 2020 Increased jurisdictional coverage Australia, USA, UK Australia, USA, Canada, Asia, UK, EMEA Increased investments 41 304* Increased EPV $2.0 billion $15.8 billion Increased team 35 ~160 Funds management – 7 Funds (~$2.2 billion) * Includes Investment Committee Approved and Conditionally Funded investments Each year we seek feedback on our performance and why the market comes to us. Around the world the themes are consistent. Omni Bridgeway is highly regarded because: – We provide more than just capital. Our professionals are experts in funding and in specialist areas of law and enforcement management. We know how to achieve recovery for our clients. – Our people are likeable and collaborative and integrity is non-negotiable. – We are on-the-ground with our clients and investments so we understand jurisdictions, we have expansive networks and we are culturally-sensitive. – Our track record and transparency engenders trust and respect. Clients know we are with them for the duration. – We are entrepreneurial and adaptive in finding ways to meet clients’ funding requirements and case strategies. Businesses, governments, individuals and groups enlist our capital and know-how to recover what is rightfully theirs, and we are glad to be in a position to assist. We are now poised to embark on our 2020-2025 vision to solidify our position in an industry that is fast becoming a mainstream financial services offering. FY20 Results Profit Our FY20 profit before tax and fair value adjustments on financial liabilities of $47.086 million represents a $94.748 million turnaround since FY19. Following our acquisition of Omni Bridgeway Holding B.V. (OBE), we now have financial liabilities to the OBE vendors that require fair valuing and associated changes to be booked through our statement of comprehensive income. Given our substantial share price increase from $3.40 at the time of the OBE acquisition to $4.77 at 30 June 2020, a fair value adjustment of $13.597 million is captured within our profit for the year. Similar non-cash fair value adjustments may occur in the future until the consideration liabilities are extinguished in conjunction with share price movements. Subject to AUD:EUR exchange fluctuations, the number of shares owed to the OBE vendors remains the same and there is no additional dilution to shareholders. Cash Generation This year the completion of a number of our investments has converted into cash or debtors. 13% of our 30 June 2019 EPV has completed during the year. In FY20 we generated $295.064 million in cash and receivables comprising $111.867 million from balance sheet investments and $183.197 million for our Funds. $90.813 million arose from completed US investments, $44.772 million from completed 6 Omni Bridgeway | Annual Report 2020 Sources and Applications of Cash and Receivables – Non-IFRS (unaudited) Cash and receivable generation Proceeds from litigation funding Proceeds from claims portfolio investments Proceeds from disposal of financial asset NCI contribution to OBE costs Net interest Other proceeds Movement in receivables Cash burn Operational cash expenditure Transaction costs - purchase of Omni Bridgeway (one-off) Professional advisors (one-off) Income tax received / (paid) Net cash and receivable generation1 Cash and net receivables Balance Sheet Funds Movement in receivables FY 2020 $’000 FY 2019 $’000 170,978 15,004 9,675 4,500 (4,694) 817 117,864 314,144 43,179 – – – (4,630) – (8,824) 29,725 (68,550) (57,506) (4,838) (300) (3,904) (77,592) 236,552 133,205 61,179 117,864 312,248 – (1,600) 3,459 (55,647) (25,922) 132,827 93,633 (8,824) 217,636 1. Net cash generation is categorised as non-IFRS information. This information has not been audited or reviewed. UK and EMEA investments, $6.056 million from completed Canada investments and $153.423 million from completed Australian investments. We also collected $7.572 million on investments that had completed in FY19. During FY20 a number of investments completed with an estimated $179.335 million of income to be accounted for in FY21 and beyond (assuming court approvals and satisfaction of other conditions). A number of Australian and EMEA investments also advanced towards completion during the year, with favourable judgments and awards. In some cases, we are now funding the enforcement and recovery of those awards (an example of our service offering that assists clients from case inception through to ultimate recovery). Our results were impacted by the loss of a few cases. However, we are now funding the appeal in some of these cases. Balance Sheet Our net assets are $767.201 million representing an increase of more than 49% from $515.497 million (53% increase in respect to movement in equity attributable to equity holders of the parent). Our balance sheet investments continue to run- off and, with the anticipated completion in the Wivenhoe class action, will be substantially wound down. World-wide Portfolio Adding a strong presence in the EMEA region to our geographic footprint enhances our resilience to jurisdictional dynamics. 10 23 18 6 EPV by Geography (%) 43 Asia Australia Canada UK & EMEA United States 7 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Chairman’s and Managing Director’s Report continued Non-Controlling Interest (NCI) We have continued to grow and diversify our investment portfolio significantly throughout FY20, with results to be reflected in our P&L over future years. Our average realised investment gestation is 2.7 years from initial commitment of funds to final resolution and return on investment. Market dynamics (such as court closures and delays during COVID-19) may alter that lifespan. Expenses increased during the year reflecting our strategy to diversify, establish new offices in new jurisdictions and address competition. Transaction costs and professional advisor fees were higher because of the merger and capital raising in the first-half, but decreased significantly in the second-half. In addition to the merger, we also grew our team organically, with senior appointments in each jurisdiction, and this is reflected in a corresponding increase in employee benefits expense. Australian Regulatory Reform We address our regulatory landscapes elsewhere in this Report. However, legislative reform proposed in Australia this year warrants specific mention here. In May 2020, the Australian Federal Government announced regulatory changes to litigation funding and class actions and initiated a Parliamentary Joint Committee Inquiry (PJC) to consider these two areas further. The PJC has completed its initial hearings and is due to issue a report in December 2020. This follows the 2018 Australian Law Reform Commission Inquiry into Class Action Proceedings and Third-Party Litigation Funders and the Victorian Law Reform Commission Inquiry into Litigation Funding and Group Proceedings. The Australian class action regime is almost thirty years old and regulatory reform is to be expected, as is a review of the third-party litigation funding industry, whose role in protecting claimants’ rights and providing access to justice is now well established. Omni Bridgeway welcomes improvements to the class actions system and appropriate regulation of the dispute funding industry in Australia. We detailed our position in a number of written submissions to the Parliamentary Inquiry in June and July 2020. Andrew Saker also attended a hearing of the Parliamentary Joint Committee conducting the Inquiry in July 2020. As the pioneer of litigation funding in Australia, we support the recommendation for the introduction in Australia of a licensing regime for funders that sets minimum onshore capital adequacy requirements, disclosure obligations and reporting standards. Having previously held an Australian Financial Services Licence (AFSL) we have reapplied for a licence in the context of these anticipated reforms. The application of the managed investment scheme regime to class actions requires some modifications via regulatory relief to be fit for purpose. We have outlined our views on this to ASIC and are currently preparing for the initiation of the new regulatory position on 22 August 2020. We also recommended that any licensing requirements extend to law firms acting as funders of class actions, under ‘no win, no fee’ arrangements or pursuant to the recent Victorian legislation that permits law firms to charge contingency fees in class actions in that State. We have also advocated this year for other measures to enhance the integrity of the class action system including: a six-month moratorium from May 2020 on new class actions that are associated with COVID-19 related disclosures; legislated minimum level of returns for claimants in a class action; and legislation to end the use of common fund orders. We have expanded upon each of the above in ASX Announcements and media statements throughout the year. Strategic Capital Management Acquisition of European Business and Associated Equity Raising As announced on 15 October 2019, the Group agreed to acquire 100% of the shares in Omni Bridgeway Holding B.V. (OBE), an un-listed company headquartered in the Netherlands, in exchange for cash and share consideration. The transaction completed on 8 November 2019. At acquisition the purchase consideration included a cash payment of EUR31.177 million; deferred consideration with a fair value of EUR22.983 million and contingent variable deferred consideration, subject to new business generation targets, with a fair value of EUR41.250 million. Shareholders have approved the payment of any contingent variable deferred amount in Omni Bridgeway shares and will vote on the payment of the deferred amount in shares at the forthcoming AGM. The accounting for the acquisition has been provisionally determined as at 30 June 2020. Provisionally, goodwill of $103.072 million has been recognised and $103.065 million of fair value adjustment was required to individually identifiable assets. As the OBE Group was a leading funder of litigation, arbitration and enforcement proceedings, focusing on civil law jurisdictions primarily in Continental Europe and Central Asia, this acquisition provides complementary investment strengths and expertise, expanded geographic presence and portfolio and financing diversification for the Group. The OBE Group was founded in the Netherlands in 1986 and had built a strong reputation as a leading financier of high- value claims and global specialist in cross-border enforcement, including against sovereign governments. The OBE Group included ROLAND ProzessFinanz, a leading German litigation funder which became part of the OBE Group in 2017. It also included a joint venture with IFC (part of the World Bank Group), comprising a dedicated Fund and Dubai-based expertise centre aimed at assisting banks with funding and managing the enforcement of non-performing loans and related disputes in the Middle East and Africa region. 8 Omni Bridgeway | Annual Report 2020 To facilitate the acquisition, we raised $138.471 million (excluding costs) in new equity from institutional and retail shareholders. We issued (i) 23,939,201 shares to institutional investors as a 1 to 5.8 accelerated non-renounceable rights entitlement offer at $3.40 per share and 5,291,608 shares under a placement to institutional investors at $3.50 per share, and (ii) 11,340,259 shares under the retail portion of the entitlement offer at $3.40 per share. The rights offer and placement attracted strong support. Notes Refinanced As foreshadowed in last year’s Annual Report, we extended the maturity profile of our debt, aligned covenants (including the allowed debt ceiling) across debt facilities and reduced our borrowing rate. On 20 December 2019, we refinanced our Fixed Rate Notes, which were due to mature on 30 June 2020, with the issue of new Fixed Rate Notes with a maturity date of 8 January 2026 and a fixed interest rate of 5.65% per annum payable quarterly. The new Fixed Rate Notes have an equal ranking with the existing Bonds and are secured by a security interest over all present and after-acquired property of Omni Bridgeway Limited and guarantees from certain wholly owned subsidiaries. Investment Portfolio Portfolio Overview Our global investment portfolio has grown as a result of the merger and the business development drive of our investment team. The portfolio is now larger and more diverse in terms of geography, type and size of investments than ever before. As at 30 June 2020 our diversified portfolio comprised over 300 investments, not counting underlying portfolio investments separately, with 16 remaining on the balance sheet and the rest within Fund structures. Having prioritised the diversification of our portfolio over recent years to mitigate the risks of competition and adverse regulatory intervention, our investments now represent a suitable range by investment type and geography. Our annual investments on a conditional and unconditional basis total $313.214 million in capital commitments. Our FY20 target to commit $276.000 million was exceeded by 14% (with funded and conditionally funded investments). We are experiencing demand for increasingly larger investments and expect that trend to continue. Geographically, the portfolio is well diversified with the US being the largest portion at 43%, with UK & EMEA representing 23% and Australian investments down to 18% of EPV. We expect the US proportion of the total portfolio will increase in future. While multi-party investments in Australia, Canada and Europe continue to represent an important part of our global portfolio, we anticipate this will decrease as a percentage of investment type within the global portfolio. Our portfolio increasingly reflects a corporate client base who seek our capital and expertise to prosecute claims and enforce judgments and awards. Funding Applications Our investment committees are busier than ever. This year we recorded 1,296 applications, representing a greater than 30% increase on last year and nearly a 200% increase since the beginning of FY16. This is attributable to a number of factors. Number of Funding Applications 1400 1200 1000 800 600 400 200 0 669 309 301 59 FY16 827 371 345 104 7 FY17 866 356 302 127 55 26 FY18 1,296 651 218 136 172 119 974 440 201 130 84 119 FY19 FY20 Consolidated Australia USA Canada Asia UK & EMEA 9 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Chairman’s and Managing Director’s Report continued Our leading market reputation and business development activities are generating opportunities and these are now amplified by the cross-border collaboration of our expanded, post-merger team. Our competitor landscape has also changed with a favourable impact on Omni Bridgeway’s market share. An increasing general awareness of dispute finance is also growing the total market and is expected to result in an increase in funding applications. Although the long-term impact of COVID-19 is yet to crystallise, business and consumer claims across numerous industries are expected to result in funding applications. Estimated Portfolio Value During FY20 we committed, or agreed to commit, $313.214 million, translating to a compound annual growth rate (CAGR) of over 40% since FY15. Our increased portfolio produced an EPV of $15.831 billion in FY20 (including IC approved and conditionally funded investments), representing a CAGR of >45% over five years. Funds Management In total, we now have close to A$2.200 billion in funds under management to invest in dispute resolution and recovery. The majority of our investments sit within seven Funds. Funds 1, 2 and 3 are fully committed. The commitment periods for those Funds are complete and they are now in their ‘harvest phase’. Estimated Portfolio Value growth change (2016-2020) 16,000 12,000 8,000 4,000 0 2016 2017 2018 2019 2020 Balance Sheet Fund 4 Fund 1 Fund 5 Funds 2&3 Fund 6 Less than 6% of our investments (by number) remain on our balance sheet. These investments continue to ‘run-off’ and, following the anticipated completion in the Wivenhoe class action, will be substantially wound down. New investments are made from Funds 4, 5, 6 and 7, with each Fund at a different stage of maturity. Given the increasing size of some of our individual investment opportunities, we may establish an ‘overflow’ mechanism to accommodate investments that exceed the concentration limits of Funds 4 and 5. Fund 6 is rapidly approaching its capacity. The establishment of new Funds is under consideration. Our Fund investors have been selected in part because of their low credit risk, their commitment to the Fund arrangements and because their capital is non-discretionary. Our strategy is to remain a meaningful minority investor in each of our Funds, to harness investment returns as an equity participant, with management and performance fee revenue from returns on third party capital. Investment Portfolio Profile Number of current investments Number of completed investments Average current investment length (years) Average completed investment length (years) Success rate on dollar weighted average (%)* ROIC excluding overhead (%) IRR excluding overhead (%) Investment Costs $ million EPV $ million FY2021 FY2022 FY2023 FY2024+ Possible completion EPV $ million Balance sheet Fund 1 Funds 2 & 3 Fund 4 Fund 5 Fund 6 Fund 7 16 30 31 9 11 180 – 88 19 8 1 – 138 n/a 4.7 3.7 1.4 0.5 n/a n/a n/a 2.9 2.1 1.0 0.3 n/a 3.2 n/a 75 70 92 100 n/a n/a n/a 137 20 314 16 n/a 306 n/a 80 11 513 93 n/a 158 n/a 121.1 1,110.7 869.8 234.2 5.7 1.0 191.2 2,798.8 1441.3 798.6 258.3 300.6 62.1 2,939.9 935.3 1,180.0 791.1 33.5 93.7 3,847.9 101.2 1,549.5 1,336.0 861.2 5.9 706.3 290.1 110.9 288.7 16.6 153.9 2,112.2 264.7 537.5 537.2 772.8 – n/a n/a n/a n/a n/a Data covers the period from 1 July 2011 for the direct balance sheet investments and each of the funds from their dates of inception. * A successful investment is one where the income (including cost recovery) exceeds investment costs. Costs for successful investments compared to total costs for completions. 10 Omni Bridgeway | Annual Report 2020 Funds Summary – Non IFRS (unaudited) Fund 1 100% committed USD million Capital called Total Investors 166.7 Distributions Total USD AUD equivalent 125.0 (69.6) 55.4 80.8 Funds 2&3 99% committed AUD million Capital called Total Investors 80.9 Distributions Total AUD 64.7 (14.6) 50.1 OBL 41.7 – 41.7 60.8 OBL 16.2 – Uncalled capital Total Investors 5.0 n/a 5.0 7.2 Total 99.1 n/a 3.8 n/a 3.8 5.5 Uncalled capital Investors 79.3 n/a 79.3 16.2 99.1 Fund 4 22% committed USD million Capital called Total Investors 89.8 Distributions Total USD 71.8 n/a (1.1) 70.7 OBL 18.0 n/a (0.3) 17.7 Uncalled capital Total Investors 410.2 328.2 n/a n/a n/a n/a 410.2 328.2 AUD equivalent 103.2 25.8 598.5 478.8 119.6 Fund 5 20% committed USD million Capital called Total Investors 39.1 Distributions Total USD AUD equivalent 31.3 – 31.3 45.7 Uncalled capital Total Investors 460.9 n/a 460.9 368.7 n/a 368.7 OBL 7.8 – 7.8 OBL 92.2 n/a 92.2 11.4 672.5 537.9 134.5 OBL 1.2 n/a 1.2 1.8 OBL 19.8 n/a 19.8 OBL 82.0 n/a n/a 82.0 Accumulated preferred return Accumulated special distribution Accumulated management fee Investors Investors 34.5 (8.3) 26.2 38.3 1.8 – 1.8 2.6 OBL 4.3 – 4.3 6.3 Accumulated preferred return Accumulated special distribution Accumulated management fee Investors Investors 16.4 – 16.4 3.6 – 3.6 Recycled proceeds Total Investors – 18.5 – 18.5 30.3 – 14.8 – 14.8 24.2 OBL 1.4 – 1.4 OBL – 3.7 – 3.7 6.1 Recycled proceeds Total Investors OBL – – – – – – – – – – – – OBL – 0.7 – 0.7 1.1 Fund 6 42% called EUR million Capital called Total Investors 63.4 Distributions Total EUR AUD equivalent 60.4 n/a – 60.4 98.9 Uncalled capital Total Investors 86.6 n/a n/a 86.6 82.1 n/a n/a 82.1 141.9 134.5 OBL 3.0 n/a – 3.0 4.9 OBL 4.5 n/a n/a 4.5 7.4 Recycled proceeds Total Investors – 15.0 – 15.0 24.6 – 14.3 – 14.3 23.4 Fund 7 4% called USD million Capital called Uncalled capital Recycled proceeds Total Investors Fund 6 Total Investors Fund 6 Total Investors Fund 6 3.5 Distributions Total USD AUD equivalent 1.0 – 1.0 1.5 2.5 – 2.5 3.6 96.5 n/a 96.5 140.8 49.0 n/a 49.0 71.5 47.5 n/a 47.5 69.3 – – – – – – – – – – – – 11 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Chairman’s and Managing Director’s Report continued Updates from Around the World Our team continues to grow in response to increased demand for dispute finance and is in the process of achieving full integration, following the merger. We have active global focus groups and operate cohesively with success already evident in cross-referrals and co-funding of matters across the team. Competition We have the largest dispute funding team in the world with the most extensive geographic coverage including on-the-ground permanent presence in our key jurisdictions. This is particularly evident in jurisdictions in which dispute funding is relatively new and growing, such as in Asia, Canada and the Middle East. In some of our jurisdictions, notably the US, UK and Australia, there have been an increasing number of funders active in recent years. However, many of these funders do not have our extensive on-the-ground geographic coverage or expertise and cannot support the multi-jurisdictional, high value claims we fund, and few offer the full suite of merits funding coupled with enforcement and recovery. In some of our European markets, for example the Netherlands and Germany, only a few global funders operate, along with some smaller domestic funders. However, again, Omni Bridgeway has a leading combination of access to significant capital, geographic presence, specialist legal skills, language abilities, local cultural understanding and longstanding relationships in continental Europe. Fundedi,ii and/or managed (litigation, arbitration and/or enforcement and recovery) Assessedii Omni Bridgeway offices Non-recourse financing of domestic or international arbitration, litigation (individual claimant or group litigation) and enforcement and recovery actions. Reflects locations of parties, disputes, proceedings, enforcement actions. i ii 12 Omni Bridgeway | Annual Report 2020 Asia-Pacific Our Asia investment team doubled in size this year as a result of organic growth and the merger. In November 2019, the team was strengthened by the recruitment of one of the pioneers of the dispute funding industry in Asia and, as a result of the merger, the team also includes two enforcement specialists. In addition to their expertise in funding and management capabilities, all of the new team members bring considerable local knowledge and extensive professional networks. The team now offers full-service funding from case inception through to enforcement and recovery, in common law and civil law disputes. In Australia, the investment team has grown with four new team members joining in early 2020 in Sydney and Melbourne. The new team members are all experienced former commercial litigators. One of the new joiners strengthens our insolvency and restructuring team in anticipation of shifting economic conditions. Another new team member brings extensive in-house corporate experience to assist our corporate funding. In addition, the Australian team is working closely with our enforcement and other specialists around the globe. We have also expanded our geographic footprint to New Zealand, where we are funding two class actions and assessing a broad range of cases, including commercial, insolvency and insurance claims. We currently service this market on a fly in/fly out basis from Australia and Asia. Regulatory Environment As we reported last year, Singapore and Hong Kong, the two leading centres for international dispute resolution in Asia, have actively embraced third-party funding in arbitration and insolvency proceedings. Both jurisdictions are now reviewing the position with respect to a form of contingency fee agreement for lawyers in arbitration. In Singapore, the Ministry of Law issued a consultation paper in late 2019 seeking views. In Hong Kong, the issue is being considered by a sub- committee of the Law Reform Commission of Hong Kong. In Australia, we are participating in the Commonwealth Government Parliamentary Inquiry into litigation funding and the regulation of the class action industry, as we have set out in more detail elsewhere in this Report. We are also providing input on the implementation of the new licensing regime. In June 2020, the Victorian State Government passed legislation which permits lawyers in that State to charge “percentage- based” or contingency fees in class actions. This was a recommendation of the Victorian Law Reform Commission which conducted an inquiry and published a report into litigation funding and class actions in June 2018. UK & EMEA Prior to the merger, our UK and EMEA team comprised two investment managers in London with fly in/fly out support from the wider global investment team. Post-merger, our UK and EMEA team comprises over 50 members located in Amsterdam, Cologne, Dubai, Geneva and London. In early 2020, the team expanded further by the hire of a senior commercial lawyer, based in Amsterdam, who joined as director of collective redress. Many of the EMEA team are enforcement and recovery specialists who operate across the globe, depending on the jurisdiction-specific needs of clients. Enforcement and recovery often involves parties and assets across multiple jurisdictions and requires a multi-cultural, multi-lingual and multi-disciplined team. Our enforcement team includes seasoned litigators and recovery specialists, as well as economists, financial experts, business intelligence and asset tracing professionals. Our Dubai team is actively progressing the joint venture with the IFC (part of the World Bank Group) known as the MENA DARP program. This program is designed to assist banks in the MENA regions with funding and cross border legal enforcement of high value non-performing loans. Regulatory Environment In England, the dispute funding industry is self-regulated and there is a voluntary code of conduct promoted by the Association of Litigation Funders of which Omni Bridgeway is a member. Previously, if an English case was unsuccessful and an adverse costs order was made against the funded party, a commercial funder’s liability for the adverse costs was limited to the amount of funding it had provided (known as the “Arkin cap” 1). However, there have been a number of decisions, most recently in February 2020, where the English Court of Appeal confirmed that the Arkin cap was not a binding rule and does not automatically apply in all cases2. We have the largest dispute funding team in the world with the most extensive geographic coverage including on-the-ground permanent presence in our key jurisdictions. 1 2 After Arkin v Borchard Lines (Nos 2 and 3) [2005] 1 WLR 3055. Chapelgate Credit Opportunity Master Fund Limited v Money and Others [2020] EWCA Civ 246. 13 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Chairman’s and Managing Director’s Report continued The wider EMEA region comprises mainly civil law jurisdictions where litigation funding is permitted and is currently largely unregulated. However, in Germany the funding of larger scale collective cases/ group claims can be unpredictable and requires specialist expertise. In several cases, competitors have had adverse decisions against them. For example, in February 2020, the Lower Regional Court of Munich dismissed a claim brought by a funder on the basis that the claim vehicle did not comply with the German laws on debt collection and the provision of legal services. While the judgment is not yet final, the assignment model for funding is unlikely to be used for group claims in Germany for the time being. The questions raised in the case may also lead to additional regulatory attention. In general, EU jurisdictions await harmonisation of collective redress regimes. Through inter-institutional negotiations, the EU has agreed a new class action regime for consumer disputes and published the Collective Redress Directive in June 2020. This Directive requires Member States to ensure their domestic laws for collective redress meet specified minimum standards. The Council of the European Union and the European Parliament will now finalise the wording of the Directive and, once finalised, Member States will have twenty four months to transpose the Directive into domestic law and a further six months to enact the provisions. In the meantime, the most reliable collective action regime for international claims in Europe continues to be in the Netherlands. This regime can be used in cases where there is a Dutch anchor defendant or another adequate connection with the Netherlands. To date there is no opt out class action regime for international claimants. However, the assignment model which is a group mechanism has been used positively in Omni Bridgeway’s elevators and air cargo cartel cases. The general view is that the Dutch courts have undertaken an active and constructive approach to handling these large and complex group claims. In January 2020, the Dutch Settlement of Large-scale Losses or Damage (Class Actions) Act (WAMCA) came into effect. Under the WACMA, an exclusive representative is appointed to act on behalf of the class of aggrieved parties residing in the Netherlands. These Dutch resident parties have the opportunity to opt-out. In principle, a different regime applies to aggrieved parties residing abroad: they are not bound by the court’s decision unless they have already opted-in. The WAMCA has not yet been tested but will be of potential interest for claims with Dutch claimants and/or a Dutch anchor defendant or other connection with the Netherlands, establishing admissibility under this new regime. North America The US investment team has also grown this year with three new team members. Given increasing demand, the team is expected to expand further in the near future. The US team strengthened its capabilities in recent years with the addition of senior and highly regarded specialists in practice areas including international arbitration, insurance, bankruptcy and intellectual property. This specialist expertise has led to significant growth and diversification of the US portfolio, as well as the ability to choose quality investments to fund. The US team’s specialists in insolvency and restructuring are proving invaluable in the current economic conditions. The team is also working closely with the EMEA- based enforcement specialists, as well as other international colleagues in the global focus groups. The Canada investment team was also strengthened with the addition of an international arbitration specialist, based in Montreal. The investment team now comprises seven members who continue to advance the case law relating to litigation funding in Canada which is now a popular solution for corporates and individuals alike. Regulatory Environment Third-party funding has become much more accepted in the most active litigation jurisdictions in the United States. Various attempts - often led by the US Chamber of Commerce - to regulate the industry at the federal and state level have largely been unsuccessful to date, as have attempts to impose extraordinary discovery requirements on claimants and law firms using third-party dispute financing (as distinguished from any other type of financing) in the courts. In Canada, the dispute funding industry is still largely unregulated. However, the jurisprudence is developing rapidly. In January 2020, Canada’s highest court, the Supreme Court of Canada, considered litigation funding for the first time and approved an Omni Bridgeway funding agreement to support a large commercial claim in an insolvency matter3. This case has highlighted the importance of funding in the insolvency and restructuring context. It will be particularly helpful to insolvency and restructuring professionals in Canada as an option to finance litigation claims and seek to maximise recoveries for a company’s creditors. In the province of Ontario, we were asked to comment on proposed changes to the class proceedings regime which seek to codify rules around dispute funding in the class action context. The proposals again demonstrate how dispute finance is now part of the legal landscape. 14 3 9354-9186 Québec Inc. v. Callidus Capital Corporation 2020 SCC 10. Omni Bridgeway | Annual Report 2020 Global Risk, Compliance and Governance Risk Management Investing in assets where our income is contingent upon successful resolution of a dispute or recovery from enforcement action, involves inherent risks and these are often magnified in non-portfolio early stage financing (especially in loser pays jurisdictions). Effective management of those inherent risks, together with broader risks common to many enterprises in a global economy, is instrumental to our success. Accordingly, risk management is core to our diversification and growth strategy. We identify our key risks through an analysis of our internal and external operating environments and outline below some of these and the mitigations we deploy to minimise their impact. Quality of Investment Decisions Like all investment managers, the quality of our investment decisions is fundamental to our success and sustainability. We continue to build on the processes which have served the Group well to date and have augmented our three investment committees with appointments of senior advisers with deep experience in litigation, bankruptcy and arbitration and our Global Chief Investment Officer joining the Fund 6 (EMEA) investment committee following our merger. We have undertaken a comprehensive update to our investment management governance documentation, consolidating our global best practice. Competitors We compete in a growing industry from a position of depth in capability and strength. We have a differentiated strategy, strong vertical and horizontal relationships throughout the market, and agile business operations. Our fully global footprint provides us access to established, maturing and developing markets. Our culture and reputation are core to our retention and attraction of the best talent across all aspects of our business. We have a long track record and a long-term focus and strategy. There are competitors seeking market share through under-pricing, who will ultimately fail a sustainability test, akin to the Australian market for directors and officers insurance which is now remediating its under- pricing. Success in our asset class is built upon long range development of a diversified portfolio across a range of metrics, with sustainable returns for clients, Fund investors, shareholders and employees. Regulatory Change The regulatory environment in our key markets is summarised elsewhere in this Report. The advantages of dispute financing as a business risk management tool and a powerful vehicle for access to justice have been broadly accepted in global jurisprudence. However, our developing industry engenders debate between proponents and opponents of third-party dispute finance, with some high profile global lobbying groups often pushing for greater levels of regulation. We engage in constructive dialogue with regulators and support appropriate industry regulation to safeguard the interests of all participants. We are currently regulated by the US Securities and Exchange Commission, ASIC and the ASX in Australia. Time and Open-ended Capital Commitments Two primary factors, beyond the quality of an investment decision, have a major impact upon our financial returns: the duration of, and amount of capital committed to, an investment. Across all dispute finance investments, it is largely unknown how long it will take for a dispute to conclude, by settlement, final judicial or arbitral determination and potentially, subsequent enforcement of that decision. This risk is exacerbated, particularly at present in the US, by the slowdown in the judicial and arbitration systems as a consequence of COVID-19. While our returns often step up over the life of an investment, increases are invariably capped and uncertainty in the timing of income creates capital management and liquidity challenges. In addition, outside the US, most of our non- portfolio investments are an open commitment to fund the costs of bringing the case to completion. The commitment is based on a budget from the lawyers to whom we seek to transfer a portion of the risk of ‘budget creep’ in order to align our respective interests in efficient cost management. However, there are a myriad of reasons over the life of complex, hard-fought litigation or arbitration against well- resourced defendants, why unforeseen costs can arise. With our return being fully contingent on a successful outcome, we meet these additional costs. A MOIC based return structure mitigates the return compression risk, provided the ultimate return is sufficient, but the capital management and liquidity challenges remain. 15 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Chairman’s and Managing Director’s Report continued Cyber Security Cyber-attacks continue to be a risk faced by businesses around the world. Their sophistication and volume increases year on year. We employ a variety of people-centric cybersecurity tactics, including regular training and simulated attack scenarios for our people in order 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. The Future Looking forward, Omni Bridgeway will be expanding our product and service offering and global footprint to capitalise on increasing demand. Focusing inwards, we are likely to adjust aspects of our operations to achieve even greater efficiencies such as increased workplace agility through remote working arrangements and ongoing streamlining of our global operations. We also intend to expand team capabilities to ensure resilience for the future. We invest significantly in security hardware, software, systems and policies to prevent attacks and detect (and learn from) new attack tools, methodologies and targets. Cyber security risks are ever-present and we remain vigilant throughout our business at all times. We have developed our new Business Plan which sets our strategy to 2025. This has been ratified by our Board and we have already commenced implementation. We look forward to reporting progress on the objectives which traverse each aspect of our business: Compliance As our business has expanded into different regions, including as a result of the merger, and diversified in capital sources via the Funds management model, we face an increasing breadth of compliance obligations both regulatory and contractual. In recognition of this we have hired a Global Head of Compliance & Risk with deep financial services experience and are enhancing our compliance and risk management frameworks across our network. Governance It has been a busy year from a governance perspective, with ten board meetings and twenty committee meetings. We have reviewed, refreshed and updated our corporate governance policies and procedures in line with the ASX Corporate Governance Principles and Recommendations 4th Edition and have issued a separate Environmental, Social and Governance Statement. This can be accessed at https://omnibridgeway.com/investors/corporate-governance. – Capital management and Fund investors – Business operations and integration – People and culture – Business development and marketing – Product and service expansion – Ongoing risk mitigation through continued diversification We would like to thank our shareholders for your support, our Fund investors for your endorsement and partnership and our wonderful team for your dedication and hard work. Together, we are expanding world-wide awareness and appetite for dispute finance, affirming its importance and asserting Omni Bridgeway’s leadership in this exciting market. Andrew Saker Managing Director and Chief Executive Officer Michael Kay Chairman 16 Omni Bridgeway | Annual Report 2020 17 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Contents Directors’ Report ..................................................................... 19 C. CAPITAL STRUCTURE 81 Auditor’s Independence Declaration ................................... 50 Note 15: Financial risk management ................................. 81 Statement of Comprehensive Income ................................. 51 Note 16: Cash and cash equivalents ................................. 87 Statement of Financial Position ............................................ 52 Note 17: Debt securities ...................................................... 88 Statement of Cash Flows ....................................................... 53 Note 18: Contributed equity ............................................... 89 Statement of Changes in Equity ........................................... 54 Note 19: Retained earnings and reserves ........................ 90 Notes to the Financial Statements ....................................... 56 About this Report .................................................................... 56 D. WORKING CAPITAL, OTHER ASSETS AND OTHER LIABILITIES 91 A. RESULTS FOR THE YEAR 61 Note 20: Receivables from litigation contracts Note 1: Segment information ........................................... 61 Note 2: Revenue from contracts with customers ......... 65 Note 3: Interest revenue .................................................. 67 Note 4: Net gain/(loss) on derecognition of intangible assets .............................................. 67 Note 5: Other income ....................................................... 68 Note 6: Expenses ................................................................ 68 Note 7: Income tax ............................................................. 70 Note 8: Earnings per share ............................................... 73 and other ............................................................... 91 Note 21: Contract costs ....................................................... 92 Note 22: Other assets .......................................................... 92 Note 23: Plant and equipment ........................................... 93 Note 24: Trade and other payables ................................... 95 Note 25: Provisions .............................................................. 95 Note 26: Lease liabilities ...................................................... 97 Note 27: Other liabilities ..................................................... 99 Note 28: Commitments and contingencies .................... 100 Note 9: Dividends paid and proposed by E. THE GROUP, MANAGEMENT AND RELATED PARTIES 101 Omni Bridgeway Limited (the parent entity) ....74 Note 10: Statement of cash flows reconciliation ............. 75 B. INVESTMENTS AND INTANGIBLE ASSETS 76 Note 29: Key management personnel ............................ 101 Note 30: Share-based payment plan............................... 101 Note 31: Business combination ....................................... 103 Note 11: Claims portfolio .................................................... 76 Note 32: Parent entity information ................................. 108 Note 12: Purchased claims ................................................. 76 Note 33: Material partly-owned subsidiaries ................111 Note 13: Intangible assets – litigation contracts in progress ............................................................. 77 Note 14: Goodwill ................................................................. 80 Note 34: Investment in associates and joint ventures . 114 Note 35: Related party disclosure ................................... 115 Note 36: Auditor’s remuneration ..................................... 115 Note 37: Events after the reporting date ....................... 115 Directors’ Declaration .......................................................... 116 Independent Auditor’s Report ............................................ 117 18 Omni Bridgeway | Annual Report 2020 Directors’ Report The directors of Omni Bridgeway Limited submit their report for the year ended 30 June 2020. 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 the 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. 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 Omni Bridgeway Limited (formerly IMF Bentham Limited), Quintis Limited, Lovisa Holdings Limited (retired October 2018), ApplyDirect Limited (retired March 2019) and City Chic Collective Limited. Mr Kay holds a Bachelor of Laws from the 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, product diversification, and migrating the company’s business model from capital management to fund management. Mr Saker began his career at Ferrier Hodgson (now KPMG), 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. During the past three years he has not served as a Director of any listed company other than Omni Bridgeway Limited (formerly IMF Bentham Limited). Mr Saker holds a Bachelor of Commerce in Accounting and Finance from the University of Western Australia. He is a Member of the Institute of Chartered Accountants. Until his appointment as Managing Director and Chief Executive Officer, he was an Official Liquidator of the Supreme and Federal Courts. 19 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Directors’ Report continued Hugh McLernon Executive Director Hugh McLernon is one of the founders and pioneers of the contemporary dispute finance industry. He has been an Executive Director and member of the company’s Investment Committee since 2001. He also oversees Special Projects for the company. Mr McLernon is a lawyer by training. After graduation, he worked as a Crown Prosecutor for eight years and then as a barrister at the independent bar for a further nine years, before joining Clayton Utz for three years as a litigation partner. In 1988, he retired from legal practice and introduced the secondary life insurance market into Australia through the Capital Life Exchange. He also pioneered the funding of large-scale litigation in Australia through McLernon Group Limited in 1992. In 1997 Mr McLernon faced and overcame the first claim of champerty in the modern era made in the Federal Court before French J (as he then was) in Penale -v- McLernon Group Limited. From 1996 to 2001, he was the Managing Director of McLernon Group Limited, as well as the Hill Group of companies which operates in the finance, mining, property, insurance and general investment arenas of Australia. In 2001, Mr McLernon promoted the listing of Insolvency Management Fund Limited (now Omni Bridgeway Limited) onto the ASX. He was the inaugural Managing Director from 2001 to 2004, and again from 2009 to 2015. During the past three years Mr McLernon has not served as a Director of any listed company other than Omni Bridgeway Limited (formerly IMF Bentham Limited). Mr McLernon holds a Bachelor of Laws degree from the University of Western Australia. The American Lawyer included Mr McLernon in its list of the Top 50 innovators for Big Law in the US during the course of the previous half century. 20 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 Omni Bridgeway Limited (formerly IMF Bentham Limited) and Trek Metals Limited. Mr Bowen holds Bachelor of Laws, Jurisprudence and Commerce from the 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 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 was appointed to the Board as a Non-Executive Director in August 2017. Ms Phin is a member of Omni Bridgeway’s Audit and Risk Committee, Remuneration Committee, Nomination Committee and Chair of the Corporate Governance Committee. She is currently a Non-Executive Director of Magellan Financial Group Limited and ARB Corporation Limited and is a member of the Takeovers Panel. During the past three years, she has not served as a Director of any company other than Omni Bridgeway Limited (formerly IMF Bentham Limited), Magellan Financial Group Limited and ARB Corporation Limited. Ms Phin holds a Bachelor of Arts and Bachelor of Laws (Honours) from the University of Sydney, Australia and is a graduate of the Australian Institute of Company Directors. Omni Bridgeway | Annual Report 2020 Christine Feldmanis Non-Executive Director 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 Financial Group Ltd, Bell Asset Management Limited and not- for-profit organisation, Foodbank NSW. Ms Feldmanis was appointed to the Board as a Non-Executive Director in November 2018. Ms Feldmanis is Chair of the Audit and Risk Committee and a member of the Remuneration Committee, Nomination Committee and Corporate Governance Committee. During the past three years she has not served as a Director of any listed company other than Omni Bridgeway Limited (formerly IMF Bentham Limited), Bell Financial Group Ltd and Perpetual Equity Investment Company Limited. Ms Feldmanis holds a Bachelor of Commerce from the University of Wollongong, Australia and Master of Applied Finance from 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. Raymond van Hulst Executive Director – appointed 9 April 2020 Raymond van Hulst was a Managing Director of the Omni Bridgeway Holding B.V. business that was acquired by Omni Bridgeway Limited (then IMF Bentham Limited) in November 2019. Mr van Hulst has close to two decades of experience in structuring innovative solutions for complex and high value litigation funding and legal enforcement matters. He has a successful track record of managing the asset identification processes, enforcement strategies and settlement negotiations for multiple prominent (sovereign) awards and judgments. In addition, Mr van Hulst has established two institutionally backed funds aimed at funding legal disputes and enforcement matters, including in joint venture with the International Finance Corporation, part of the World Bank for the Distressed Asset Recovery Program. He leads Omni Bridgeway’s Investment Committee for these funds. Mr van Hulst also led Omni Bridgeway’s acquisition of its German funding business, Roland ProzessFinanz, in 2017. Before joining Omni Bridgeway, Mr van Hulst was with ABN AMRO Bank Structured Finance, based out of India and Europe. During the past three years he has not served as a Director of any listed company other than Omni Bridgeway Limited. Mr van Hulst holds an MBA from INSEAD and a Master’s Degree in Management (University of Groningen, the Netherlands). 21 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Directors’ Report continued Officers Stuart Mitchell Group Chief Financial Officer Stuart Mitchell joined the company 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 from the 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 Group 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 the company 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 and has become Group General Counsel and Company Secretary from 2020 following the expansion of the Legal and Risk team. Mr Sambrook holds a Bachelor of Laws from the University of Bristol, UK. 22 Omni Bridgeway | Annual Report 2020 Interests in shares, bonds and performance rights of the Company As at the date of this report, the interests of the directors in shares, Omni Bridgeway Bonds, Fixed Rate Notes and share performance rights of the Company were: Michael Kay Andrew Saker Hugh McLernon Raymond van Hulst Michael Bowen Karen Phin Christine Feldmanis Total Number of Omni Bridgeway Bonds Number of Fixed Rate Notes Number of performance rights Number of ordinary shares 417,023 180,190 5,394,990 50,000 1,103,124 27,266 45,185 – – 7,500 – 1,500 – – 7,217,778 9,000 – – – – – – 80 80 – 2,283,813 2,160,688 – – – – 4,444,501 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 Omni Bridgeway Limited Declared date Record date Payment date Cents $m Dividends paid in the year: Interim for the year On ordinary shares Final for 2019, as recommended in the 2019 financial report On ordinary shares 20/02/2020 27/02/2020 20/03/2020 3.0 7.482 n/a n/a n/a nil – Where dividends are paid by Omni Bridgeway 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. The Directors have today declared a final fully franked dividend of 4.0 cents per share as a final dividend for the period, totalling $9,995,000. The record date for this dividend is 2 September 2020 and the payment date will be 25 September 2020. Shareholders are able to elect to participate in the dividend reinvestment plan in relation to this dividend. 23 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report OBL does not consider that the pandemic has had a negative impact on its solvency or going concern. Possibly, COVID-19 related causes of action may result in more investment opportunities to be available for consideration by the Group. 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 into existing investments that were created prior to the origination of the Funds. The Group operates through 18 offices in 10 countries around the world. Originating in Australia in 2001, the Group expanded into the US, opening an office in New York in 2011, Los Angeles in 2013, San Francisco in 2015 and Houston in 2017. In 2016 the Group expanded into Canada, opening an office in Toronto followed by a presence in Montreal in 2018. Our UK and EMEA activities were supplemented in 2018 with the opening of a London office. Our legacy businesses each established offices in Singapore in 2015 and 2017 and a Hong Kong office was opened in 2018. On 8 November 2019, the Group completed the acquisition of Omni Bridgeway Holding B.V. (OBE), a non-listed company headquartered in the Netherlands, in exchange for cash and share capital consideration. OBE is a leading provider of funding and specialised skills for litigation, arbitration and enforcement proceedings, and for the work-out and monetisation of claims and non-performing loans focusing on civil law jurisdictions primarily in Continental Europe, and the Middle East, North Africa and Central Asian regions. This acquisition added offices in Amsterdam, Cologne, Dubai and Geneva to the global footprint. In 2017 the Group established its first-generation Funds (Fund 1, and Funds 2 & 3) with external investor capital commitments. During the 2019 financial year the Group established its second-generation Funds (Fund 4 (series I), and 5 (series I)). The acquisition of OBE in November 2019 included two more Funds (Fund 6 and Fund 7). 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 and enforcement matters globally and (ii) the continued holding of direct investments into similar litigation and dispute resolution, and enforcement matters. The Group (either via the Funds or directly) invests by purchasing awards, claims or rights to action, or entering into funding agreements with claimants, liquidators, creditors or law firms to provide funding, recovery, enforcement and associated services. The Group does not provide legal advice. The key business driver is to make investments which ultimately result in a successful conclusion. If the litigation, arbitration, recovery or enforcement action is successful, the Group earns a return from the realised amount. The return 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, arbitration, recovery or enforcement is ultimately unsuccessful the Group does not generate any return and will realises/derecognise its investment 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) to the funded litigation. The Group may also receive fees for successful performance of the Funds. Additionally, fees for managing and servicing the Funds will provide an ongoing regular revenue stream independent of litigation investment returns. COVID-19 pandemic impact Whilst the pandemic has interrupted dispute resolution systems to different degrees in jurisdictions where the Group has investments, generally they have continued to operate. This has led to some delays in completions, or the expected completion date. In assessing the carrying value and associated impairment of investments, the most up to date estimates of success and timing have been used. This has not led to significant impairments. Additionally, the Group has specifically considered the impact of COVID-19 in assessing the values of its assets (including intangibles, inventories, receivables/loans, investments, other financial assets, contract assets and deferred tax assets) and liabilities. No significant adjustments have been required. 24 continuedDirectors’ ReportOmni Bridgeway | Annual Report 2020 Operating and financial review (continued) Fund 1 In February 2017, the Group launched its first fund, Fund 1 for US investments. The Group and an external investor have committed up to US$171.670 million to this Fund to be deployed on US cases over a three year investment period. The external investor’s capital commitment is for 75% with OBL funding 25%. Under the Fund’s NCI waterfall, the external investor is entitled to a capped priority return on invested capital and a further preferred return on committed but undrawn capital, after which OBL is entitled to a manager return and its invested capital. The residual net cash flows received are distributed 85% to OBL and 15% to the external investor. By 30 June 2020, the Fund’s exclusivity period had completed; and it had committed 100% of its available capacity as shown graphically below. Future US investments will be made by Fund 4. Funds 2 & 3 In October 2017, the Group launched its second fund, (collectively) Funds 2 & 3 which are mandated to make non-US investments. Funds 2 & 3 invest in litigation in jurisdictions outside the USA. The external investors’ capital commitment is for 80% with OBL funding 20%. The Funds’ economics and NCI waterfall profile for investors and OBL 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 OBL and 20% to the external investors. At 30 June 2020, Funds 2 & 3 were committed to 98.5% of available capacity as shown diagrammatically below: US$16.7m US$7.3m $15.4m $2.7m Deployed Deployed $99.2m Fund 1 100% Committed Start Date – 10 Feb 2017 Fund Size – US$171.7m Investments Committed US$165.0m Investments Deployed US$148.3m Funds 2 & 3 98.5% Committed Start Date – 03 Oct 2017 Fund Size – $180.0m Investments Committed $161.9m Investments Deployed $62.7m Committed (fully funded, IC approved, conditionally funded) Remaining for Investment Other Costs Committed (fully funded, IC approved, conditionally funded) Remaining for Investment Other Costs 25 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Operating and financial review (continued) Fund 4 In November 2018, OBL successfully raised its fourth fund, a US centric investment structure established to follow on from the US investment activity of Fund 1. It has capital commitments of US$500.000 million (series I), with the potential to increase to US$1.000 billion (with Series II). 20% of the capital is to be provided by OBL, 80% is from external investors. OBL will periodically receive management, advisory, administration and performance fees in relation to the Fund from the external investors in the Fund. Fund 5 On 20 June 2019, OBL 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$500.000 million (series I), with the potential to increase to US$1.000 billion (with series II). 20% of the capital is to be provided by OBL, and 80% is from external investors. OBL will periodically receive management, advisory, administration and performance fees in relation to the Fund. OBL will receive its investor return on its committed capital pari passu with the external investors. OBL receives its investor return on its committed capital pari passu with the external investors. At 30 June 2020, the Fund has committed 20.0% of its available capacity as shown graphically below. At 30 June 2020, the Fund has committed 21.9% of its available capacity as shown graphically below. US$4m (US$3m) Deployed US$21.3m US$44.9m Deployed U$63.4m Fund 4 21.9% Committed Start Date – 01 Apr 2019 Fund Size – US$500m Investments Committed US$108.3m Investments Deployed US$63.4m Fund 5 20.0% Committed Start Date – 27 Sep 2019 Fund Size – US$500m Investments Committed US$78.5m Investments Deployed US$15.1m US$390.7m US$400.2m Committed (fully funded, IC approved, conditionally funded) Remaining for Investment Recycled receipts Other Costs Committed (fully funded, IC approved, conditionally funded) Remaining for Investment Other Costs 26 continuedDirectors’ ReportOmni Bridgeway | Annual Report 2020 Operating and financial review (continued) Fund 6 Fund 6 was created in 2016 and was acquired by the Group as part of the November 2019 acquisition of OBE. This is an EMEA focused investment structure established to invest in litigation, arbitration and enforcement proceedings, and for the work- out and monetisation of claims. It has capital commitments of EUR $150.000 million, 5% of the capital is to be provided by OBL, and 95% is from external investors. OBL will periodically receive management, advisory, administration and performance fees in relation to the Fund. OBL will receive its investor return on its committed capital pari passu with the external investors. Under the Funds’ economics and NCI waterfall profile returns are attributed between OBL and investors based on the category of underlying case. At 30 June 2020, the Fund was 42.3% called as shown graphically below. Fund 7 Fund 7 was created in 2018, as a joint initiative with the International Finance Corporation (part of the World Bank) and was acquired by the Group as part of the November 2019 acquisition of OBE. The Fund began operations during the year. This is a MENA focused investment structure established to focus on Bank non-performing loans in the Middle East and North Africa. It has capital commitments of USD $100.000 million, 50% of the capital is to be provided by Fund 6, and 50% (comprising 20% of capital and 30% by way of a loan) from International Finance Corporation as an external investor. OBL will periodically receive management, advisory, administration and performance fees in relation to the Fund. Under the distribution waterfall, funds will be applied firstly to repay the IFC debt, after which Fund 6 is entitled to its investor return on its committed capital pari passu with the external investor. At 30 June 2020, the Fund was 3.5% called as shown graphically below. Committed to Fund 7 EUR 42.3m EUR 44.3m US$3.5m Fund 6 42.3% Capital Called Start Date – 2016 Fund Size – EUR 150m Fund 7 3.5% Capital Called Start Date – 2018 Fund Size – US$100m EUR 63.4m US$96.5m Undrawn Capital Capital Called Undrawn Capital Capital Called 27 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report EPV by investment type (%) 0 1 13 13 0 11 21 27 10 2 1 0 Appeal Law Firm Arbitration Commercial Corporate Funding Defence Funding Insolvency Multi-party Other IP Patent Whistleblower Inclusion of OBE Group Operating and financial review (continued) In any given year the Group’s profitability is significantly dependent upon the outcome of funded investments that complete in the 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 multi-party actions. The global expansion also creates diversification across jurisdictions. At 30 June 2020, there were 277 investments in the Group’s portfolio. During the year 51 new investments commenced, 183 were purchased as part of the OBE acquisition and 40 investments completed including withdrawals. In aggregate the 277 investments at 30 June 2020 had an Estimated Portfolio Value of $13.516 billion. Rest of the World Since its acquisition of Omni Bridgeway Holding B.V., the Group has funded 21 new investments, and 15 pre-existing investments have completed. At 30 June 2020 there are a total of 235 non-US investments in the entire rest of the world portfolio: 13 on balance sheet investments; 31 in Funds 2&3; 11 in Fund 5 and 180 in Fund 6. During the year a total of 42 new investments commenced and 33 completed (including withdrawals). There were four losses (2019: 1) and there were five withdrawals (2019: 1). Two investments are currently on appeal (2019: 2). Since 2001, there have been a total of 246 funded non- US investments, with 189 completions. Since August 2011, there have been a total of 123 funded non-US investments and 92 completions, excluding withdrawals. 28 continuedDirectors’ ReportOmni Bridgeway | Annual Report 2020 Operating and financial review (continued) US Since entering the US in 2011, a total of 81 investments have been funded, with 39 completions. At 30 June 2020 there are 42 US investment in the portfolio: 3 being on the balance sheet, 30 in Fund 1 and 9 in Fund 4. During the year 9 new US investments commenced and 7 completed (2019: 10), one of which was a loss (2019: 3) and there were no withdrawals (2019: 0). Investment Returns Metrics Since the purchase of Omni Bridgeway Holding B.V., its investment completions have demonstrated a (i) 1.98 times ROIC on the purchased fair values and (ii) 3.83 times ROIC on their invested cost. The Group in total has completed 227 (2019: 192) investments since listing, excluding withdrawals, with an average investment period of 2.7 years (2019: 2.6 years). The Group has generated a ROIC of 1.32 times (excluding overheads) (2019: 1.34 times). The ”two Ws” The Wivenhoe Dam and Westgem investments are direct balance sheet investments. The Wivenhoe Dam class action involves people who suffered loss in the Brisbane floods of 2011, who alleged the increased flooding was caused by the negligence of the dam operators. There is a participation agreement between OBL and a co- funder to share the costs (including any adverse costs) and any return from this claim. A positive judgment for OBL’s funded client was received on 29 November 2019. However two of the three defendants have appealed that decision with the hearing of the appeal scheduled in May 2021. 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. Employees At 30 June 2020, the Group employed 159 permanent staff (full time equivalents and including the three executive directors), who provide investigative, information technology, accounting and management expertise (2019: 97 full time equivalent permanent staff). The non-US business employs 136 staff (2019: 75) including 67 investment managers and legal counsel; 49 of these are within the Omni Bridgeway Holding B.V. business. The US business has 23 staff (2019: 22) including 17 investment managers and legal counsel. Operating results for the financial year The following summary of operating results reflects the Group’s performance for the year ended 30 June 2020: Shareholder Returns Basic loss per share (cents per share) Diluted loss per share (cents per share) Return on assets (NPAT/average assets) Return on equity (NPAT/average equity) Net debt/equity ratio % * 2020 2019 (4.90) (4.90) 1.9% 2.7% N/A (24.40) (24.40) (5.8%) (8.2%) N/A The comparatives have not been restated for the impact of adopting AASB16 Leases (AASB16) with effect from 1 July 2019 using the modified retrospective approach. * Net debt (cash and short term deposits less total debt) is positive as cash and short term deposits are greater than total debt. 29 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Operating and financial review (continued) A summary of the impact of investment completions and impairment on the profit and loss for the year is below: Intangible derecognition Net gain/(loss) Attributed to ROIC IRR Date commenced EPV (crystallised) $’000 Proceeds $’000 incl capitalised overheads excl capitalised overheads incl capitalised overheads excl capitalised overheads $’000 $’000 $’000 $’000 OBL $’000 NCI $’000 incl capitalised overheads excl capitalised overheads excl capitalised overheads Name INTANGIBLES Forge securities 20/2/14 16,500 7,540 (5,497) (3,897) 2,043 3,643 2,043 Confidential Confidential 24/2/14 6,000 – (2,234) (1,910) (2,234) (1,910) (2,234) 27/2/15 43,000 9,342 (9,453) (8,232) (111) 1,110 (111) UGL securities 31/3/17 18,000 9,040 (5,637) (5,115) 3,403 3,925 3,403 Sirtex Medical Group 19/12/17 50,000 11,344 (4,810) (4,216) 6,534 7,128 6,534 Williamtown 4/8/16 86,000 31,413 (12,674) (10,456) 18,739 20,957 18,739 Bellamy's Australia 23/2/17 30,000 11,384 (3,789) (2,849) 7,595 8,535 7,595 Department of Defence 15/3/17 34,000 15,828 (8,758) (7,616) 7,070 8,212 7,070 Ongoing investments N/A 12,300 (3,156) (3,156) 9,144 9,144 9,144 Other N/A 475 (1,145) (659) (670) (184) (670) Direct balance sheet investments 108,666 (57,153) (48,106) 51,513 60,560 51,513 – – – – – – – – – – – 0.4x 0.9x 29% (1.0x) (1.0x) (0.0x) 0.1x – 9% 0.6x 0.8x 59% 1.4x 1.5x 2.0x 0.8x N/A 1.7x 107% 2.0x 62% 3.0x 105% 1.1x N/A Confidential Confidential Confidential Confidential 28/11/17 205,135 32,172 (21,052) (20,219) 11,120 11,953 (833) 11,953 18/4/19 98,544 10,751 (7,477) (7,404) 3,274 3,347 (73) 3,347 21/9/18 54,217 6,093 (3,293) (3,105) 2,800 2,988 (188) 2,988 22/10/18 13,303 1,369 (860) (829) Ongoing investments N/A 13,518 (13,401) (13,341) 509 117 540 177 (31) (60) 540 177 Other N/A 397 (2,743) (2,571) (2,346) (2,174) (172) (2,174) 55% N/A N/A 26% 71% 52% 83% N/A N/A 0.9x 1.3x 0.5x 0.4x 0.9x 0.6x 0.6x 0.5x 1.0x 0.7x N/A N/A Fund 1 investments 64,300 (48,826) (47,469) 15,474 16,831 (1,357) 16,831 0.3x 0.4x Confidential 26/10/18 21,612 1,112 (625) (568) 487 544 (57) 544 Murray Goulburn 29/6/18 42,000 12,615 (3,159) (2,630) 9,456 9,985 (529) 9,985 RAAF Base Tindal 13/6/18 92,500 29,966 (8,324) (7,362) 21,642 22,604 (962) 22,604 0.8x 3.0x 2.6x 1.0x 63% 3.8x 396% 3.1x 205% Confidential 10/9/19 15,913 3,485 (585) (500) 2,900 2,985 (85) 2,985 5.0x 6.0x 2657% Other N/A – (446) (1,252) (446) (1,252) 806 (1,252) N/A Funds 2 & 3 investments 47,178 (13,139) (12,312) 34,039 34,866 (827) 34,866 2.6x 3.1x Confidential 21/6/19 198,716 29,465 (25,384) (25,323) 4,081 4,142 (61) 4,142 0.2x 0.2x 149% Ongoing investments N/A 263 (78) (78) 185 185 – 185 N/A N/A Other N/A 1,208 (1,541) (1,506) (333) (298) (35) (298) N/A N/A Fund 4 investments 30,936 (27,003) (26,907) 3,933 4,029 (96) 4,029 0.1x 0.1x Other Fund 5 investments – – (68) (68) (68) (68) (68) (68) (68) (68) – – (68) (68) (1.0x) (1.0x) 30 continuedDirectors’ ReportOmni Bridgeway | Annual Report 2020 Operating and financial review (continued) Intangible derecognition Net gain/(loss) Attributed to ROIC IRR Date commenced EPV (crystallised) $’000 Proceeds $’000 incl capitalised overheads excl capitalised overheads incl capitalised overheads excl capitalised overheads $’000 $’000 $’000 $’000 OBL $’000 NCI $’000 incl capitalised overheads excl capitalised overheads excl capitalised overheads 4,180 (2,775) (2,084) 1,405 2,096 (691) 2,096 739 115 356 (164) (104) – – (400) (221) 575 115 (44) 635 115 (60) – 135 (179) 635 115 135 0.5x 3.5x 1.0x 6.1x 0.0x 0.0x N/A N/A 1,043 (1,512) (2,558) (469) (1,515) 1,046 (1,515) 6,433 (4,851) (4,967) 1,582 1,466 116 1,466 0.3x 1.2x 257,513 (151,040) (139,829) 106,473 117,684 49,349 57,124 0.7x 0.9x Amortisation of claims Net gain/(loss) Attributed to ROIC IRR incl capitalised overheads excl capitalised overheads incl capitalised overheads excl capitalised overheads $’000 $’000 $’000 $’000 Revenue $’000 OBL $’000 NCI $’000 incl capitalised overheads excl capitalised overheads excl capitalised overheads 14,115 (7,401) (1,767) 6,714 12,348 (5,634) 12,348 7,678 (5,340) (2,435) 2,338 5,243 (2,905) 5,243 0.9x 0.4x 7.0x 2.2x (99) (1,779) (1,678) (1,878) (1,777) (101) (1,777) Name Confidential Confidential Confidential Ongoing investments Other Fund 6 investments TOTAL INTANGIBLES Name CLAIMS PORTFOLIO Confidential Confidential Other TOTAL CLAIMS PORTFOLIO 21,694 (14,520) (5,880) 7,174 15,814 (8,640) 15,814 0.5x 2.7x Name IMPAIRMENT EXPENSE Expense Net gain/(loss) Attributed to incl capitalised overheads excl capitalised overheads incl capitalised overheads excl capitalised overheads $’000 $’000 $’000 $’000 OBL $’000 NCI $’000 Direct balance sheet investments (5,116) (4,692) (5,116) (4,692) (5,116) – Fund 1 investments Funds 2 & 3 investments Fund 4 investments Fund 6 investments (9,867) (7,174) (9,867) (7,174) (2,693) (7,174) (1,430) (1,193) (1,430) (1,193) (237) (1,193) 6 6 6 6 (772) (772) (772) (772) – – 6 (772) TOTAL IMPAIRMENT EXPENSE (17,229) (13,825) (17,229) (13,825) (8,096) (9,133) TOTAL 279,207 (182,789) (159,534) 96,418 119,673 32,613 63,085 0.5x 0.8x 31 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Operating and financial review (continued) OBL’s share price closed at $4.77 per share on 30 June 2020 (2019: $2.92). OBL entered the ASX top 200 companies on 22 June 2020. Since entering the ASX 300 index in 2011, OBL has outperformed the major indices on an annualised basis from 30 June 2011 to 30 June 2020 as detailed below: ) % ( s n r u t e R d e s i l a u n n A 18 16 14 12 10 8 6 4 2 0 IMF Share Price ASX 200 AXIO ASX All Ordinaries AORD Annualised Return with Dividend Reinvestment 17.8% 7.3% 7.4% Liquidity and capital resources The consolidated Statement of Cash Flows illustrates that there was a decrease in cash and cash equivalents for the year ended 30 June 2020 of $33.982 million (2019: increase of $63.435 million). Operating activities used $50.181 million of net cash outflows (2019: net cash outflow of $36.796 million), whilst cash flows used in investing activities were $77.406 million (2019: net cash outflow of $80.862 million), and financing activities raised $93.605 million (2019: net cash inflow of $181.093 million) principally as a result of cash inflows from issue of shares. 32 continuedDirectors’ ReportOmni Bridgeway | Annual Report 2020 Operating and financial review (continued) Asset and capital structure Cash and short term deposits Total interest-bearing debt Net cash Total equity Working Capital Ratio 2020 $’000 194,384 (149,468) 44,916 767,201 3.7:1 2019 $’000 Change % 226,460 (143,972) 82,488 515,497 2.2:1 (14%) 4% (46%) 48% 66% There are 760,000 Bonds on issue with a face value of $100 each. The Omni Bridgeway 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 is 22 December 2022, with a first issuer call date of 8 January 2022 and an increase in the margin of 1.0% applying from 1 January 2022 to the maturity date. On 20 December 2019, the Company refinanced its Fixed Rate Notes by early redemption of the existing notes by payment of 101% of the outstanding principle and accrued interest to the date of redemption. Of the notes on issue, 34,284 notes were redeemed and reissued to new noteholders and 37,716 notes were exchanged for new notes. The interest rate payable to new noteholders is 5.65% per annum payable quarterly. The Fixed Rate Notes are due to mature on 8 January 2026 and are secured by a security interest over all present and after-acquired property of OBL, with guarantees provided by certain wholly-owned subsidiaries. OBL has the discretion to redeem the Notes prior to the maturity date on 8 January in each year between 2022 and 2024 (inclusive), and again on 8 July 2025. To the extent OBL exercise its early redemption right it will pay a redemption premium, of between zero and 2%. Profile of interest-bearing debt The profile of the Group’s interest-bearing debt finance is as follows: Current Omni Bridgeway Bonds Fixed Rate Notes Leases Non-current Omni Bridgeway Bonds Fixed Rate Notes Leases Total interest-bearing debt1 2020 $’000 2019 $’000 Change % – – 2,870 2,870 73,942 69,842 2,814 146,598 149,468 – 71,455 – 71,455 72,517 – – 72,517 143,972 100% (100%) 100% (96%) 2% 100% 100% 102% 4% 1 Face value of the Bonds and Notes is $148.000 million. $76.000 million relates to the Omni Bridgeway Bonds restructured in December 2018, while Fixed Rate Notes of $72.000 million were refinanced in December 2019. The carrying value of the debt is net of transaction costs and debt premium (See Note 17). 33 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Operating and financial review (continued) Shares issued during the year On 23 October 2019, the Company issued 23,939,201 shares to institutional investors as a 1 to 5.8 accelerated non-renounceable rights entitlement offer at $3.40 per share and 5,291,608 shares under a placement to institutional investors at $3.50 per share. On 5 November 2019, the Company issued 11,340,259 shares under the retail portion of the entitlement offer at $3.40 per share. Capital expenditure For the year ended 30 June 2020, capital expenditure has remained consistent from the prior year at $0.416 million. The total additions to the carrying amount of property, plant and equipment has increased to $9.241 million during the year ended 30 June 2020 from $0.442 million in the prior year, primarily due to assets acquired through the business combination with the OBE Group and the recognition of right- of-use assets. Risk management The Group’s major risk continues to be the choice of cases to be funded. 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 certain investments on its own balance sheet and all investments in Funds 2 & 3 and Fund 5 are covered by After- The-Event insurance policies. Another risk which requires constant management is liquidity. OBL’s strategic plan addresses this risk through the introduction of fund structures that reduce OBL’s direct capital exposure to potential investment losses. There is currently portfolio concentration risk associated with investments in the Wivenhoe and Westgem investments. However, the company’s diversification strategy has reduced this risk for future periods. There are 277 investments in the current portfolio (2019: 83). The overall average investment size for the group’s entire portfolio is $2.267 million. The OBE Group’s cases average $0.840 million. Excluding the new OBE Group portfolio, the average investment size is $5.139 million (2019: $5.144 million). OBL also constantly monitors proposed legislative, regulatory, judicial and policy changes that may affect litigation funding in the markets in which it operates. OBL, 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, OBL 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 49% to $767.201 million from $515.497 million at 30 June 2020. 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 the reporting date. Likely developments and expected results Based upon EPV, approximately 29% of the investment portfolio at 30 June 2020 is anticipated to complete in FY21. (2019: 38%) The estimated completion period is OBL’s current 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. 34 continuedDirectors’ ReportOmni Bridgeway | Annual Report 2020 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 EPV in the quarterly portfolio reports. OBL expects demand for its funding to continue in each of its markets. Competition is expected to increase in coming years with new entrants in each market. Litigation funding is considered non-cyclical or uncorrelated to underlying economic conditions. Environmental regulation and performance The consolidated entity’s operations are not presently subject to significant environmental regulation under the laws of the Commonwealth and the States. Share options Unissued shares As at the date of this report there were 17,302,007 share performance rights on issue (2019: 15,601,589). 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 $1,261,000 during the current financial year (2019: $678,000). 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. 35 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report 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 OBL’s 2020 Remuneration Report. Our 2015 five-year Strategic Business Plan resulted in OBL 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 to ensure that Key Management Personnel (“KMP”) and executives are aligned to and rewarded for delivering sustained Group performance. We will undertake a review of our variable remuneration framework as part of the implementation of the new five year strategic business plan with the aim of ensuring the optimum alignment of remuneration outcomes with sustained Group performance. The levels of fixed remuneration of the Group’s senior employees are reflective of the private practice professional services market within which OBL competes for talent. Investment managers are invariably at or around the partner level of legal practices prior to joining OBL. Under the total 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. For those employees participating in the STIP, the target STIP payment for the 2020 financial year is capped at 40% of an employee’s Total Fixed Remuneration (“TFR”). Following two years when no STIP payments have been earned due to losses being recorded, we are pleased to report that in light of the profit level for the 2020 financial year, STIP payments will be made and the exact level of those payments will vary depending on individual performance against KPIs. 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 FY2018, have been exceeded and 100% vesting will be effected. For the TSR performance metric, we note that, consistent with the last two years, the vesting result would have been unaltered had the comparator group for current awards been in effect for the FY18 performance rights. This is largely a reflection of the share price appreciation over the three year performance period. The Board remains confident that OBL’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 36 continuedDirectors’ ReportOmni Bridgeway | Annual Report 2020 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 OBL. Key management personnel Details of OBL’s Key Management Personnel for the 2020 financial year are: 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. (i) Directors Michael Kay Andrew Saker Chairman and Non-Executive Director Managing Director and Chief Executive Officer Hugh McLernon Executive Director Raymond van Hulst Executive Director (appointed 9 April 2020) Michael Bowen Non-Executive Director Karen Phin Non-Executive Director Christine Feldmanis Non-Executive Director (ii) Executives Stuart Mitchell Group Chief Financial Officer Jeremy Sambrook Group General Counsel and Company Secretary Due to the Company’s shift towards funds management, Clive Bowman and Charlie Gollow are no longer considered KMP. There were no other changes to OBL’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 Board 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. During the year, the Comparator Group used for the Long Term Incentive Plan (LTIP) was assessed with involvement from PwC, who provided two alternative Comparator Groups that could be adopted by the Remuneration Committee. PwC were paid $37,000 for remuneration consulting services and no other services were provided by PwC during the 2020 financial year. The Board is satisfied that the recommendation provided was free from undue influence by eligible participants of the LTIP. 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 Remuneration Committee will undertake a review of the STIP and LTIP structures as part of the implementation of the new five year strategic business plan with the aim of ensuring continued alignment of remuneration outcomes with sustained Group performance. 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 $525,000 (including superannuation), as disclosed in the following tables in this report. At the 2015 Annual General Meeting, shareholders approved payments up to $700,000 to non-executive directors. There are no retirement allowances for non-executive directors, nor do they participate in any incentive programs. Non-executive directors may, however, elect to have a portion of their remuneration paid into their personal superannuation plans. Executive remuneration Objective The Group 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 Group 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. 37 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Remuneration Report (Audited) (continued) Key features of the STIP include: Structure It is the Remuneration Committee’s policy that employment contracts are entered into with all 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 OBL’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 OBL. Fixed compensation is reviewed periodically 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. 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 values, strategic objectives and internal key performance indicators of the Group. The total potential incentive available is set at a level which balances the aim of providing sufficient incentive to the executive to achieve operational targets with the participation interests of shareholders in the outcomes of such achievements. 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. – 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. – The STIP opportunity is 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. Key performance indicators are set for individuals aligned to the strategic and commercial objectives of the business incorporated in the approved business plan and budget, risk and compliance policies and procedures, and cultural, leadership and behavioural expectations. The KPIs are targeted to the individual roles and their ability to influence each of these pillars of performance, from an outcome perspective and in respect to how they go about achieving the results. – If elected prior to the start of the financial year, and with approval of the remuneration committee, senior executives have the 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. – At the end of the financial year, actual performance will be assessed against the pre-set financial and non-financial performance objectives set at the beginning of the year. The maximum STIP incentive for participating employees is 40% of TFR. The STIP metrics set for the 2020 financial year were: i. Target 1 – Between 25% and 50% of the STIP opportunity (or 10% to 20% of the employees’ fixed salary) will be awarded to employees if the Group achieves growth in net profit before tax (before bonus) of between 5% and 15%; and ii. Target 2 – 50% of the STIP opportunity (or 20% of the employees’ fixed 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. 38 continuedDirectors’ ReportOmni Bridgeway | Annual Report 2020 Remuneration Report (Audited) (continued) 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: – Eligible participants include employees and contractors performing an investment role, senior employees or contractors in non-investment roles, directors and company secretaries. – Awards will be granted annually as performance rights over OBL ordinary shares. – The LTIP opportunity will be expressed as a percentage of TFR. – The value of the LTIP opportunity is set at 60% (or 100%, if LTIP has been elected and approved to replace forgone STIP) of TFR calculated on face value by reference to Omni Bridgeway Limited’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 the 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. – Two performance metrics have been set and the performance rights, or a portion thereof, will vest in three years on the following basis: i. 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 2020, which will include listed entities in the ASX 300 Diversified Financials industry group with a market capitalisation below $10 billion. For the 2020 financial year, this group consists of the following companies: – Magellan Financial Group Limited – Janus Henderson Group PLC – Eclipx Group Limited – IOOF Holdings Limited – Netwealth Group Limited – OFX Group Limited – Pinnacle Investment Management Group Limited – Pendal Group Limited – Platinum Asset Management Limited – Flexigroup Limited – AMP Limited – Money3 Corporation Limited – Hub24 Limited – Challenger Limited – Perpetual Limited – Credit Corp Group Limited – Navigator Global Investments Limited 39 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Remuneration Report (Audited) (continued) – 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 ii. 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 and KMP is aligned with the Group’s strategy to increase the OBL portfolio, invest in future income and potential earnings capacity, and create shareholder wealth. In addition to the above, shareholder approval was obtained at the General Meeting on 14 February 2020 to amend the LTIP for future issues as follows: – The number of Performance Rights issued to an Eligible Participant is determined by reference to their Total Fixed Remuneration and the Company VWAP to an applicable date of i. 30 June of the preceding Financial Year; or ii. 31 December of the preceding Half Financial Year, depending on when a participant became eligible to participate in the LTIP. – The definition of “Comparator Group” to mean i. such companies or entities, being not less than 6, selected by the Remuneration Committee with effect from the applicable Start Date, and each being in the diversified financial industry sector, listed on the ASX and having a market capitalisation of between 50% and 200% of the Company’s market capitalisation on the applicable date of invitation, save that the Remuneration Committee may at any time thereafter during the relevant Performance Period, add any other company or entity to such group which satisfies the above criteria (as at the date of such addition) and may remove any company or entity within the group which no longer satisfies such criteria (as at the date of such removal), save that where such removal results in the group comprising less than 6 companies and entities, the Remuneration Committee shall, to the extent such company or entity exists, add another company or entity to such group which satisfies the above criteria (as at the date of such addition) in order to maintain, so far as possible, that the group comprises a minimum of 6 companies or entities; or ii. such industry or market index selected by the Remuneration Committee, in its absolute discretion, with effect from the applicable Start Date. 40 continuedDirectors’ ReportOmni Bridgeway | Annual Report 2020 Remuneration Report (Audited) (continued) Group Performance The objectives and philosophy of the Remuneration Committee are based upon aligning the performance of the Group’s employees with increasing value to shareholders. The graph on page 32 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: OBL share price at 30 June ($) Dividends paid per share (cents) Earnings / (loss) per share (cents) Diluted earnings / (loss) per share (cents) 2016 1.53 7.50 12.08 12.08 2017 1.89 7.00 8.82 8.47 2018 3.00 3.00 (6.25) (6.25) 2019 2.92 – (24.40) (24.40) 2020 4.77 7.00 (4.90) (4.90) Note, comparatives have been restated for the impact of the bonus element of the entitlement offers during the 2020 financial year. Comparatives have not been restated for the impact of adopting AASB 9, Financial Instruments and AASB 15 Revenue from Contracts with Customers in 2019 and AASB 16 Leases in 2020. Executive Employment Contracts Andrew Saker, Managing Director and CEO: – contract commenced 5 January 2015; – gross salary package of $1,250,000 pa including 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 – As approved by shareholders at the AGM held on 21 November 2018, upon termination on good terms, the following termination payment arrangements apply: i. the notice periods specified above; ii. 12 months’ salary; and iii. statutory entitlements. – As approved by shareholders at the AGM held on 21 November 2018, if termination occurs due to the provision of six months notice by OBL, or the provision of notice by Mr Saker in situations where either a material breach of his executive services agreement occurs, there is a 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 $1,200,000 pa including superannuation; – salary to be reviewed annually; – 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. 41 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Remuneration Report (Audited) (continued) Raymond van Hulst, Executive Director: – contract commenced 21 April 2020; – gross salary package of CHF518,376 pa; – salary to be reviewed annually; – notice period by either the employee or the Company is 3 months; and – no other termination payment arrangements (excluding statutory entitlements) apply other than the notice period specified above. Stuart Mitchell, Chief Financial Officer: – contract commenced 12 November 2018; – gross salary package of $450,000 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 $420,000 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. (a) Remuneration of Key Management Personnel Table 1: Remuneration for the year ended 30 June 2020 Short-term benefits Post- employment Long term benefits Share based payments Salary & fees $ Cash bonus accrued1 $ Super- annuation /pension $ Leave entitlements $ Share performance rights $ Termination payments $ Total remuneration $ Performance related % 2020 Directors Michael Kay Andrew Saker Hugh McLernon Raymond van Hulst2 Michael Bowen Karen Phin Christine Feldmanis 205,488 1,228,997 1,178,997 512,313 91,324 91,324 91,324 – – – 97,179 – – – 19,512 21,003 21,003 25,209 8,676 8,676 8,676 – 49,740 112,421 29,340 – – – – 1,044,170 994,545 26,391 – – – Executives Stuart Mitchell Jeremy Sambrook 428,997 398,997 180,000 168,000 21,003 21,003 37,592 19,708 168,798 224,490 Total 4,227,761 445,179 154,761 248,801 2,458,394 – – – – – – – – – – 225,000 2,343,910 2,306,966 690,432 100,000 100,000 100,000 836,390 832,198 7,534,896 0% 45% 43% 15% 0% 0% 0% 42% 47% 1 2 The 2020 bonus has been accrued and will be paid in the 2021 year. Performance rights relating to the FY2020 issue have not been granted to Mr van Hulst during the 2020 financial year as they are subject to shareholder approval. Should shareholder approval be obtained, Mr van Hulst will receive 31,946 performance rights (Tranche 1:15,973 and Tranche 2: 15,973) on the same terms as the FY20 LTIP disclosed in Note 30 of the financial statements. 42 continuedDirectors’ ReportOmni Bridgeway | Annual Report 2020 Remuneration Report (Audited) (continued) Table 2: Remuneration for the year ended 30 June 2019 Short-term benefits Post- employment Long term benefits Share based payments Salary & fees $ Cash bonus accrued1 $ 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 20,531 20,531 14,153 20,531 – 35,166 (53,987) – – – – – 693,946 654,148 – – – – 225,000 1,949,643 1,750,161 100,000 42,904 100,000 62,319 (40,211) 8,883 5,831 7,976 462,775 300,178 39,510 170,012 1,347,564 909,061 307,644 577,988 162,905 (36,342) 2,320,569 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 1 No bonus in respect of the 2019 financial year was accrued for KMP. The following table outlines the proportion of maximum STIP earned by KMP in the 2020 financial year. Andrew Saker2 Hugh McLernon2 Raymond van Hulst Stuart Mitchell Jeremy Sambrook Maximum STIP opportunity (% of TFR) % of maximum earned 0% 0% 40% 40% 40% 0% 0% 100% 100% 100% 2 Elected to receive 100% of variable remuneration as LTIP. In recognition of the financial performance of the Group, the Remuneration Committee has determined that the maximum STIP is payable for the 2020 financial year. The Group expects to pay the STIP in FY21. In considering the payment of the STIP and bonus the directors considered the impact of COVID-19. The performance of the Group has not been impacted such that there has been an impact in this regard. Refer to Note 25 for the bonus provision recorded as at 30 June 2020. 43 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Remuneration Report (Audited) (continued) (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 Grant date Vesting date Expiry Date 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 & loss $ – – – – – – – – – – – 217,366 3.93 217,366 4.33 434,732 14/02/2020 30/06/2022 1/07/2034 1,795,661 420,104 1,455,917 208,671 3.93 208,671 4.33 417,342 14/02/2020 30/06/2022 1/07/2034 1,723,831 395,984 1,393,075 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 46,951 3.93 46,951 4.33 93,902 14/02/2020 30/06/2022 1/07/2034 387,862 – 298,085 43,821 3.93 43,821 4.33 87,642 14/02/2020 30/06/2022 1/07/2034 362,005 120,518 291,568 2020 Directors Michael Kay Andrew Saker Hugh McLernon Raymond van Hulst2 Michael Bowen Karen Phin Christine Feldmanis Executives Stuart Mitchell Jeremy Sambrook Total 516,809 516,809 1,033,618 4,269,359 936,606 3,438,645 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 Grant date Vesting date Expiry Date 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 & loss $ – – – – – – – – – – – 205,405 1.35 205,405 2.43 410,810 21/11/2018 30/06/2021 1/07/2033 776,431 543,588 704,427 193,535 1.35 193,535 2.43 387,070 21/11/2018 30/06/2021 1/07/2033 731,562 512,688 663,789 – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – 93,402 1.60 93,402 2.67 186,804 1/07/2018 30/06/2021 1/07/2033 398,266 412,380 407,142 60,585 1.60 60,585 2.67 121,170 1/07/2018 30/06/2021 1/07/2033 258,334 267,490 264,091 27,798 1.60 27,798 2.67 55,596 1/07/2018 30/06/2021 1/07/2033 118,531 – 79,020 35,341 1.60 35,341 2.67 70,682 1/07/2018 30/06/2021 1/07/2033 150,694 144,890 154,053 616,066 616,066 1,232,132 2,433,818 1,881,036 2,272,522 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 1 The fair value of performance rights is determined at the time of grant as prescribed in AASB 2. For details on the valuation of performance rights, including models and assumptions used, refer to Note 30. 2 Performance rights relating to the FY2020 issue have not been granted to Mr van Hulst during the 2020 financial year as they are subject to shareholder approval. 44 continuedDirectors’ ReportOmni Bridgeway | Annual Report 2020 Remuneration Report (Audited) (continued) Share performance right holdings of Key Management Personnel 2020 Directors Michael Kay Andrew Saker Hugh McLernon Raymond van Hulst1 Michael Bowen Karen Phin Christine Feldmanis Executives Stuart Mitchell Jeremy Sambrook Total Balance 1 July 2019 Number Granted as remuneration Number Performance rights exercised Number Balance 30 June 2020 Number Exercisable Number Not exercisable Number – 1,849,081 1,743,346 – 434,732 417,342 – – – – – – – – 55,596 336,090 93,902 87,642 3,984,113 1,033,618 – – – – – – – – – – – 2,283,813 2,160,688 – 1,438,272 1,356,276 – 845,541 804,412 – – – – 149,498 423,732 – – – – – 265,408 – – – – 149,498 158,324 5,017,731 3,059,956 1,989,721 1 Performance rights relating to the FY2020 issue have not been granted to Mr van Hulst during the 2020 financial year as they are subject to shareholder approval. 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 – – – – – – – – 1,090,920 707,622 – 323,466 186,804 121,170 55,596 70,682 – – – – – – – – – – (58,058) – 1,849,081 1,743,346 – 1,018,167 960,292 – 830,914 783,054 – – – – – – – – – – – – 1,277,724 828,792 55,596 336,090 772,410 501,022 – 144,890 505,314 327,770 55,596 191,200 4,916,555 1,232,132 (58,058) 6,090,629 3,396,781 2,693,848 45 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Remuneration Report (Audited) (continued) (c) Shareholdings of Key Management Personnel 2020 Directors Michael Kay Andrew Saker Hugh McLernon Raymond van Hulst Michael Bowen Karen Phin Christine Feldmanis Executives Stuart Mitchell Jeremy Sambrook 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 2019 Received as remuneration Share performance rights exercised Net change other1 Balance 30 June 2020 313,049 168,863 5,104,402 – 1,019,978 23,256 – – 8,298 6,637,846 – – – – – – – – – – – – – – – – – – – – 103,974 11,327 290,588 50,000 83,146 4,010 45,185 417,023 180,190 5,394,990 50,000 1,103,124 27,266 45,185 3,941 61 3,941 8,359 592,232 7,230,078 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 – – – – – – – – – – – – – – – – – – – – – – 5,357 5,357 (194,643) 10,714 – – – – – – 58,058 58,058 (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. 46 continuedDirectors’ ReportOmni Bridgeway | Annual Report 2020 Remuneration Report (Audited) (continued) (d) Loans to Key Management Personnel There have been no loans provided to KMP in 2020 (2019: nil). (e) Transactions with Key Management Personnel During the year, the Group obtained legal advice from DLA Piper, a legal firm associated with Michael Bowen, totalling $2,035,577 (2019: $499,176). The legal advice was obtained at normal market prices. OBL 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. During the year, OBL refinanced its Fixed Rate Notes. This resulted in transaction costs totalling $1,776,243 (2019: nil) paid to FIIG Securities, for which Christine Feldmanis is a mutual director. The services were provided at normal market rates. Refer to Note 35 for details. – End of Remuneration Report – 47 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Directors’ Meetings The number of meetings of directors held during the period under review, and the number of meetings attended by each director, were as follows: Total number of meetings held: Meetings Attended: M Kay A Saker H McLernon R van Hulst M Bowen K Phin C Feldmanis Board Meetings Project Sub- Committee Meetings Audit and Risk Committee Remuneration Committee Nomination Committee Corporate Governance Committee 10 10 10 10 51 10 10 10 12 12 122 – – 7 12 8 2 2 23 – – 2 2 2 2 2 23 – – 2 2 2 1 1 13 – – 1 1 1 3 3 33 – – 3 3 3 1 Mr van Hulst attended 2 meetings as a board member and 3 meetings by invitation (as he was not eligible to attend other meetings at the time) 2 Mr Saker attended 11 meetings as a member of the sub-committee and 1 meeting by invitation 3 Attended by invitation. Committee membership As at the date of this report, the Company had an Audit and Risk Committee, a Remuneration Committee, a Nomination Committee and a Corporate Governance Committee. Directors acting on committees of the board during the year were as follows: Audit and Risk Committee Remuneration Committee Nomination Committee Corporate Governance Committee C Feldmanis (Chair) M Bowen (Chair) M Kay K Phin M Bowen M Kay K Phin C Feldmanis M Kay (Chair) C Feldmanis M Bowen K Phin A Saker K Phin (Chair) M Kay M Bowen C Feldmanis 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 director participants. 48 continuedDirectors’ ReportOmni Bridgeway | Annual Report 2020 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 2020. This Independence Declaration which forms part of this report, can be found at page 50. 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: 1. Tax compliance services and other non-audit services: $439,000 (2019: $12,000). For further detail regarding auditors’ remuneration, refer to Note 36. 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 https://omnibridgeway.com/investors/corporate-governance. Signed in accordance with a resolution of the directors. Michael Kay Chairman Sydney 24 August 2020 Andrew Saker Managing Director 49 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report 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 Omni Bridgeway Limited As lead auditor for the audit of Omni Bridgeway Limited for the financial year ended 30 June 2020, I declare to the best of my knowledge and belief, there have been: a. No contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and b. No contraventions of any applicable code of professional conduct in relation to the audit. This declaration is in respect of Omni Bridgeway Limited and the entities it controlled during the financial year. Ernst & Young Robert A Kirkby Partner 24 August 2020 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation RK:DA:IMF:012 50 Omni Bridgeway | Annual Report 2020 Statement of Comprehensive Income for the year ended 30 June 2020 Continuing Operations Revenue from contracts with customers Interest revenue Net gain/(loss) on derecognition of intangible assets Net gain on disposal of financial assets Other income Total income Finance costs Amortisation of claims portfolio Depreciation expense Employee benefits expense Corporate and office expense Other expenses Share of loss in associates Profit/(loss) before tax and fair value adjustments Loss on fair value of financial liabilities Profit/(loss) before tax Income tax expense/(benefit) Profit/(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 (loss)/income net of tax Total comprehensive income/(loss) for the year Attributable to: Equity holders of the parent Non-controlling interests Consolidated Note 2020 $’000 2019 $’000 2 3 4 12 5 6(a) 6(b) 6(c) 6(d) 6(e) 6(f) 31 7 8 33 23,128 3,579 106,473 3,848 20,419 157,447 1,336 14,520 2,912 50,336 20,043 21,056 158 47,086 13,597 33,489 15,890 17,599 114 4,181 (4,247) – 5,686 5,734 117 – 676 28,541 12,773 11,289 – (47,662) – (47,662) (11,514) (36,148) (11,542) 29,141 (36,098) (50) (10,981) (1,810) 4,091 (6,890) 10,709 12,533 10,723 (25,425) (22,523) 33,232 (38,008) 12,583 Earnings per share attributable to the equity holders of the Company (cents per share) Basic loss per share (cents per share) Diluted loss per share (cents per share) 8 8 (4.90) (4.90) (24.40) (24.40) The above Statement of Comprehensive Income should be read in conjunction with the accompanying notes. 51 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Statement of Financial Position as at 30 June 2020 ASSETS Current Assets Cash and cash equivalents Receivables from litigation contracts and other Contract costs Other assets Income tax receivable Total Current Assets Non–Current Assets Receivables from litigation contracts and other Plant and equipment Claims portfolio Purchased claims Intangible assets – litigation contracts in progress Goodwill Investment in associates and joint ventures Contract costs Other assets Deferred tax assets Total Non–Current Assets TOTAL ASSETS LIABILITIES Current Liabilities Trade and other payables Income tax payable Provisions Lease liabilities Debt securities Other liabilities Total Current Liabilities Non–Current Liabilities Provisions Lease liabilities Debt securities Deferred income tax liabilities Other 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 Note 2020 $’000 2019 $’000 16 20 21 22 20 23 11 12 13 14 34 21 22 7 24 25 26 17 27 25 26 17 7 27 194,384 128,987 939 5,024 – 329,334 5,743 6,922 93,680 17,019 517,230 103,072 4,596 4,461 12,409 26,004 791,136 1,120,470 24,044 9,557 14,923 2,870 – 38,336 89,730 677 2,814 143,784 30,747 85,517 263,539 353,269 226,460 16,866 939 1,901 1,116 247,282 – 1,112 – – 426,977 – – 5,400 9,324 18,848 461,661 708,943 23,992 – 15,192 – 71,455 915 111,554 432 – 72,517 8,943 – 81,892 193,446 767,201 515,497 347,630 (5,032) (6,597) 336,001 431,200 767,201 205,558 893 12,494 218,945 296,552 515,497 18 19(b) 19(a) 33 The above Statement of Financial Position should be read in conjunction with the accompanying notes. 52 Omni Bridgeway | Annual Report 2020 Statement of Cash Flows for the year ended 30 June 2020 Cash flows from operating activities Proceeds from claims portfolio investments Proceeds from deferred recognition of performance fees Payments to suppliers and employees Payments for transaction costs of acquiring a business Interest income Interest paid Income tax (paid)/received Consolidated Note 2020 $’000 2019 $’000 15,004 817 – – (53,374) (35,625) (4,838) 2,811 (7,460) (3,904) – 4,308 (8,938) 3,459 Net cash flows used in operating activities 10 (50,944) (36,796) Cash flows from investing activities Proceeds from litigation funding Payments for litigation funding – external costs Payments for litigation funding – capitalised overhead and employee costs Payments for claims portfolio investments – external costs Proceeds from disposal of financial asset Payments for plant and equipment Loans to related parties Loans to third parties Payments for investment in an associate Payments for acquisition of business Net cash acquired in a business combination Net cash flows used in investing activities Cash flows from financing activities Dividends paid Proceeds from raising capital Payments for costs of raising capital Proceeds from issue of debt Repayment of debt Payments for costs of issuing debt Payments of lease liabilities 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 31 31 170,978 (183,611) (7,341) (23,210) 9,675 (416) (938) (933) (1,743) (50,212) 10,345 (77,406) (41,051) 138,471 (6,276) 34,284 (34,284) (2,183) (1,515) 43,179 (116,851) (6,826) – – (364) – – – – – (80,862) – 76,105 (2,327) 26,000 – (3,016) – 69,092 121,844 (62,254) (28,299) (652) 736 94,368 (33,982) 1,906 (10,331) 1,117 181,093 63,435 2,794 226,460 160,231 16 194,384 226,460 The above Statement of Cash Flows should be read in conjunction with the accompanying notes. 53 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Statement of Changes in Equity for the year ended 30 June 2020 Consolidated At 1 July 2019 - as previously reported Effect of adoption of AASB 16 Leases At 1 July 2019 - restated Profit for the year Other comprehensive income Total Comprehensive Income for the Year Equity Transactions: Dividend paid / declared Proceeds from shares issued Transaction costs associated with share issue, net of tax – – – – 138,471 (4,259) – – – – – – Shares issued 6,021 (6,021) Share based payments, net of tax Shares issued under Dividend Reinvestment Plan Contributions from non-controlling interests Distributions to non- controlling interests Changes in the proportion of equity held by non- controlling interests Non-controlling interests arising on a business combination – 12,190 1,839 – – – – – – – – – 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 $’000 205,558 17,749 (427) 3,404 3,832 (23,665) 12,494 218,945 296,552 515,497 – – – – – – (67) (67) – (67) 205,558 17,749 (427) 3,404 3,832 (23,665) 12,427 218,878 296,552 515,430 – (10,981) (10,981) – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – (1,113) – (11,542) (11,542) 29,141 17,599 – (10,981) 4,091 (6,890) (11,542) (22,523) 33,232 10,709 (7,482) (7,482) – 138,471 (4,259) – 12,190 1,839 – – – – – (7,482) 138,471 (4,259) – 12,190 1,839 – – 69,092 69,092 (71,778) (71,778) (1,113) 1,993 880 – 102,109 102,109 – – – – – – – – At 30 June 2020 347,630 23,918 (11,408) 3,404 3,832 (24,778) (6,597) 336,001 431,200 767,201 54 Omni Bridgeway | Annual Report 2020 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 (Accumulated loss)/ Retained Earnings $’000 Non- controlling interests $’000 Total $’000 Total equity $’000 At 1 July 2018 127,630 15,251 1,383 3,404 3,832 (7,760) 48,592 192,332 175,504 367,836 Loss 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, net of tax 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) (1,810) – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – (36,098) (36,098) (50) (36,148) – (1,810) 12,533 10,723 (36,098) (37,908) 12,483 (25,425) – – – – – 76,105 (766) 5,087 – – – 76,105 (766) 5,087 – – 121,844 121,844 (28,299) (28,299) (15,905) – (15,905) 15,905 – – – – (885) (885) At 30 June 2019 205,558 17,749 (427) 3,404 3,832 (23,665) 12,494 218,945 296,552 515,497 The above Statements of Changes in Equity should be read in conjunction with the accompanying notes. 55 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Notes to the Financial Statements for the year ended 30 June 2020 About this Report The financial report of Omni Bridgeway Limited, formerly IMF Bentham Limited, (“OBL”, “the Company” or “the Parent”) and its subsidiaries (“the Group” or “consolidated entity”) for the year ended 30 June 2020 was authorised for issue in accordance with a resolution of the directors on 24 August 2020. The principal activities of the entities within the consolidated group are: c. Basis of consolidation The consolidated financial statements comprise the financial statements of Omni Bridgeway Limited and its subsidiaries as at 30 June 2020. 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. i. the investment into and 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 includes Fund collective investment vehicles over which Omni Bridgeway Limited has the right to direct the relevant activities of the Fund under contractual arrangements and has exposure to variable returns from the Fund collective investment vehicles. See Note 33. Omni Bridgeway 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: OBL, formerly IMF). 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 been prepared on a historical cost basis, except for deferred and variable deferred consideration that have been measured at fair value. 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. 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. Foreign currency The Group’s consolidated financial statements are presented in Australian dollars, which is also the Parent’s functional currency. The Group determines the functional currency of each entity in the Group. 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 each entity in the Group 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 converted at the functional currency spot rates of exchange at the reporting date. Exchange differences arising on settlement or conversion of monetary items are recognised in profit or loss. 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). 56 Omni Bridgeway | Annual Report 2020 About this Report (continued) 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. d. New and amended accounting standards and interpretations adopted during the year The accounting policies adopted are consistent with those of the previous financial year, except for changes to accounting policies as a result of adopting new and amended standards and interpretations effective as of 1 July 2019 and the adoption of accounting policies during the year relating to new transactions and events, as follows: – Claims portfolio (Note 11); – Purchased claims (Note 12); – Goodwill (Note 14); – Other liabilities (Note 27); – Business combination (Note 31); and – Investment in associates and joint ventures (Note 34). The Group applied AASB 16 Leases (“AASB 16”) for the first time. The nature and effect of the changes as a result of adoption of the new accounting standard are described below. Several other amendments and interpretations were applied for the first time in 2020, but do not have an impact on the consolidated financial statements of the Group. The Group has not early adopted any standards, interpretations or amendments that have been issued but are not yet effective. AASB 16 Leases AASB 16 was issued in January 2016 and replaces AASB 117 Leases (“AASB 117”), 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 and short-term leases (ie. leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognise a liability to make lease payments (ie. the lease liability) and an asset representing the right to use the underlying asset during the lease term (ie. 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 also be 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. Prior to the adoption of AASB 16, the Group classified each of its leases at inception as either operating or finance leases based on the extent to which, risks and rewards incidental to ownership of the leased asset were transferred to the Group. Operating lease payments were previously recognised as an expense in the profit or loss on a straight-line basis over the lease term, excluding contingent rentals which were expensed as incurred. Operating lease incentives were recognised as a liability when received and subsequently reduced by allocating lease payments between rental expense and reduction of the liability. Transition to AASB 16 The Group has leases of office space, car parking and office equipment that fall within the scope of AASB 16. In accordance with AASB 16, the Group applied AASB 16 retrospectively with the cumulative effect of initially applying the Standard recognised at the date of initial application, being 1 July 2019, as an adjustment to the opening balance of retained earnings and did not restate comparative information. On transition, the Group has measured the right of use assets as though the new Standard had been applied since commencement of the lease using the Group’s incremental borrowing rate, at the initial application date of the Standard. The only practical expedient the Group elected to use was the practical expedient of hindsight when determining lease terms where contracts contain a right to extend or terminate. 57 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report About this Report (continued) The impact of the adoption of AASB 16 on transition is reflected as follows: Assets Property, plant and equipment - right-of-use assets Property, plant and equipment - leasehold improvements Prepayments Lease incentive receivable Liabilities Lease liabilities Lease incentive liabilities Provisions Net impact on equity (retained earnings) 1 July 2019 $’000 3,054 (114) (91) (478) 2,371 3,205 (915) 148 2,438 (67) A reconciliation of operating lease commitments disclosed at 30 June 2019 to total lease liabilities recognised under AASB 16 at 1 July 2019 is below: Total operating lease commitments disclosed at 30 June 2019 Recognition exemption - leases with term of less than 12 months Effect of discounting using the Group's incremental borrowing rate Total lease liabilities recognised under AASB 16 at 1 July 2019 30 June 2019 $’000 7,769 (12) (4,552) 3,205 The Group’s weighted average incremental borrowing rate was 6% at the date of initial application of AASB 16. AASB Interpretation 23 Uncertainty over Income Tax Treatments (“Interpretation 23”) Interpretation 23 is applied by the Group from 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 is reflected in determining the relevant taxable profit or loss, tax bases, unused tax losses, unused tax credits or tax rates. The amount is 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. Judgments are reassessed as and when new facts and circumstances come to light. No material impact was noted on the application of Interpretation 23. e. 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. New and amended accounting standards that are issued but not yet effective that are not listed below have been deemed to either be not relevant or have no material impact on the Group. 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 58 Notes to the Financial StatementscontinuedOmni Bridgeway | Annual Report 2020 About this Report (continued) Amendments to References to the Conceptual Framework in AASB 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 AASB in situations where no standard applies to a particular transaction or event. In addition, relief has been provided in applying AASB 3 and developing accounting policies for regulatory account balances using AASB 108, 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. f. 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 of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities at the date of the consolidated financial statements. Key judgments In the process of applying the Group’s accounting policies, management has made the following judgments, which have the most significant effect on the amounts recognised in the consolidated financial statements: Consolidation of entities in which the Group holds less than a majority voting right (de facto control) The Group has assessed the entities in which it has an interest to determine whether or not control exists and the entity is, therefore, consolidated into the Group. These entities are listed in Note 32. For those entities consolidated with an interest less than 51%, the Group uses judgment to determine that it has power to direct the relevant activities of the investee under contractual arrangements and sufficient exposure to variable returns. In reviewing whether the Group has power and sufficient exposure to variable returns the Group considers whether it is acting as a principal or as an agent of the entity. 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. Lease term of contracts with renewal and termination options – Group as lessee The Group determines the lease term as the non-cancellable term of the lease, together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The Group has several lease contracts that include extension and termination options. The Group applies judgment in evaluating whether it is reasonably certain whether or not to exercise the option to renew or terminate the lease. That is, it considers all relevant factors that create an economic incentive for it to exercise either the renewal or termination. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise or not to exercise the option to renew or to terminate (eg, construction of significant leasehold improvements or significant customisation to the leased asset). The Group does not include the renewal period as part of the lease term for leases of motor vehicles because the Group typically leases motor vehicles for not more than five years and, hence, is not exercising any renewal options. The periods covered by termination options are included as part of the lease term only when they are reasonably certain not to be exercised. Refer to Note 26 for information on potential future rental payments relating to periods following the exercise date of extension and termination options that are not included in the lease term. 59 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report About this Report (continued) Intangible Assets - Litigation Contracts in Progress Classification of litigation investments as Intangible Assets - Litigation Contracts in Progress requires judgment on the circumstances and contracts attached to the investment. Refer to Note 13 on the accounting policy on and significant judgments for Intangible Assets - Litigation Contracts in Progress. Significant estimates and assumptions The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Group based its assumptions and estimates on parameters available when the consolidated financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising that are beyond the control of the Group. Such changes are reflected in the assumptions when they occur. Covid 19 pandemic Whilst the pandemic has interrupted dispute resolution systems to different degrees in jurisdictions where the Group has investments, generally they have continued to operate. This has led to some delays in completions, or the expected completion date. In assessing the carrying value and associated impairment of investments, the most up to date estimates of success and timing have been used. Impairment of non-financial assets The Group assesses impairment of all required non-financial assets at each reporting date by evaluating conditions specific to the Group and to the particular asset that may lead to impairment. Impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the higher of its fair value less costs of disposal and its value in use. The group primarily relies on value in use calculations based on DCF models. The cash flows are derived from either the Group’s budget or from estimates made by investment managers. The recoverable amount is sensitive to the discount rate used for the DCF model as well as the expected future cash-inflows and the growth rate used for extrapolation purposes. These estimates are most relevant to goodwill and other intangibles recognised by the Group. Refer to individual notes for further information around impairment of non- financial assets. Fair value measurement of financial assets and net assets acquired in a business combination The Group measures financial instruments at fair value at each balance sheet date and the net assets of an acquired Group in a business combination at fair value at acquisition date. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. The principal or the most advantageous market must be accessible by the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole: – Level 1 – Quoted (unadjusted) market prices in active markets for identical assets or liabilities – Level 2 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable – Level 3 – Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable Fair value measurement of financial liabilities through profit and loss Deferred and variable deferred consideration, resulting from business combinations, is valued at fair value at the acquisition date as part of the business combination. When the deferred and variable deferred consideration meets the definition of a financial liability, it is subsequently remeasured to fair value at each reporting date. The determination of the fair value is based on option pricing methodology. The key inputs are detailed in the Notes 15, 27 and 31. 60 Notes to the Financial StatementscontinuedOmni Bridgeway | Annual Report 2020 About this Report (continued) Provision for adverse costs The Group raises a provision for adverse costs when the underlying litigation, arbitration, enforcement or recovery which was funded is lost and the jurisdiction requires adverse costs to be paid to the counter party. 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. Typically this estimate is between 40% to 70% of the amount spent by the plaintiff, on the basis that there is only one defendant per case. Refer to Notes 25 and 28 for further details on adverse costs. Measurement of non-controlling interests (“NCI”) Profits and losses are attributed to non-controlling interests in line with the allocation of profit distributions under the terms of the respective agreements with non-controlling investors. Therefore, at the end of each reporting period, the non- controlling interests represents the non-controlling shareholders’ share of net assets, as would be distributed under the relevant shareholders or investors agreements at the balance date. Revenue recognition – estimating variable consideration on management and performance fees The Group estimates variable considerations to be included in the transaction price for management and performance fees charged. Management fees are based on the level of external investors net deployed capital per quarter and any uncertainty is resolved at the end of the same quarter. Therefore, management fee revenues are recognised quarterly in arrears, corresponding with the delivery of performance obligations. The calculation of performance fees are subject to some uncertainties. Accordingly, performance fee revenue is not recognised until it is highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. A. RESULTS FOR THE YEAR Note 1: Segment information The Group only operates in one industry, being funding and provision of services in relation to dispute resolution. For management purposes, the Group is organised into operating segments comprising the OBL Group’s corporate operations, and the Group’s fund structures. With the changing structure, the Group has chosen to alter the presentation of its segments. The presentation of the Fund segments has remained consistent with that of prior periods, however, the parent entity and wholly owned subsidiaries have been combined for internal reporting purposes and are now shown as Corporate. Comparative information has been restated to align with the new segments. – Corporate reflects the parent entity and its wholly owned subsidiaries which 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), including corporate costs associated with the OBE Group that was acquired in a business combination on 8 November 2019. – The Group’s Funds include: – Fund 1 – This comprises Omni Bridgeway (Fund 1) LLC (formerly Bentham IMF 1 LLC), Security Finance (Fund 1) LLC (formerly Security Finance 1 LLC) and HC 1 LLC. The Fund invests in litigation investments in the United States. Fund 1 is consolidated into the Group; – Funds 2 & 3 – This comprises Omni Bridgeway (Fund 2) Pty Ltd (formerly IMF Bentham (Fund 2) Pty Ltd) and Omni Bridgeway (Fund 3) Pty Ltd (formerly IMF Bentham (Fund 3) Pty Ltd) and IMF Bentham ROW SPV 1 Limited. These entities jointly invest in litigation investments outside the United States. Funds 2&3 are consolidated into the Group; – Fund 4 – This Fund invests in litigation investments in the United States. It consists of a series of parallel investing entities comprising Omni Bridgeway (Fund 4) Invt 1 LP (formerly Bentham Investments 1 LP); Omni Bridgeway (Fund 4) Invt 2 LP (formerly Bentham Investments 2 LP); Omni Bridgeway (Fund 4) Invt 3 LP (formerly Bentham Investments 3 LP); Omni Bridgeway (Fund 4) Invt 4 LP (formerly Bentham Investments 4 LP); Omni Bridgeway (Fund 4) Invt 5 LP (formerly Bentham Investments 5 LP); Omni Bridgeway (Fund 4) Invt 6 LP (formerly Bentham Investments 6 LP); Omni Bridgeway (Fund 4) Invt 7 LP (formerly Bentham Investments 7 LP); Omni Bridgeway (Fund 4) Invt 8 LP (formerly Bentham Investments 8 LP); Omni Bridgeway (Fund 4) Invt 9 LP (formerly Bentham Investments 9 LP); Security Finance (Fund 4) LLC (formerly Security Finance 2 LLC) and Bentham HPCR LP. Fund 4 entities except for Bentham HPCR LP are consolidated into the Group. – Fund 5 – Consists of a collective investment group comprising Omni Bridgeway (Fund 5) LP (formerly IMF Bentham (Fund 5) LP), Omni Bridgeway (Cayman) Limited (formerly IMF Bentham (Fund 5) Cayman Investments Ltd), Omni Bridgeway (Fund 5) Australian Invt Pty Ltd (formerly IMF Bentham (Fund 5) Australia Investments Pty Ltd) as well as parallel joint investor, Omni Bridgeway (Fund 5) GPA Pty Ltd (formerly IMF Bentham GPA 5 Pty Ltd). This Fund invests in litigation investments outside the United States. Only the parallel joint investor is consolidated within the Group. The segment note includes the parallel joint investor as well as Omni Bridgeway (Cayman) Limited which is the investment advisor to Fund 5. 61 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Note 1: Segment information (continued) – Fund 6: This is an EMEA focused investment structure that was acquired in a business combination on 8 November 2019 and includes the entity responsible for providing the management of Fund 7. Fund 7 itself is not consolidated into Fund 6. It was established to invest in litigation, arbitration and enforcement proceedings, and for the work-out and monetisation of claims. Revenue is derived from enforcement and recovery services and other income is derived from litigation contracts in progress investments and purchased claims. OBL retains control and ownership of Fund 6 via its equity interests. Legal ownership of the investments are spread across the entire OBE Group. Fund 6 is consolidated into the Group. For Fund 1 and Funds 2 & 3, the non-controlling interest is comprised of an equity interests which carry an entitlement to receive a capped priority return on drawn capital and a further preferred return on committed but undrawn capital. OBL retains control and ownership of the Funds via its equity interests. Upon satisfaction of the non-controlling interests’ priority returns, OBL 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 Fund 1: 85% to OBL and 15% to the non-controlling interests: (ii) for Funds 2 & 3, 80% to OBL and 20% to non-controlling interests. The Funds have an infinite life and all distributions are discretionary. For Fund 4 the non-controlling interest is comprised of an equity interest which, together with OBL’s interest, carries an entitlement to receive return of capital plus a hurdle return on invested capital; and a pro-rata share of any residual after OBL’s periodic management fee and transactional based performance fee. OBL retains control and ownership of the Funds via its equity interest. The Fund has an infinite life and all distributions are discretionary. For Fund 5, there is no non-controlling interest as only OBL’s 100% owned parallel joint investor vehicle is consolidated. OBL is entitled to periodic management fees and transactional based performance fees. For Fund 6, the non-controlling interest is comprised of an equity interest which, together with OBL’s interest, carries a case by case entitlement to receive return of capital plus a return on invested capital after OBL’s transactional based performance fee. OBL retains control and ownership of the Funds via its equity interest. The Fund has an infinite life and all distributions are discretionary during the investment period. 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 relate to certain finance and overheads costs that 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. 62 Notes to the Financial StatementscontinuedOmni Bridgeway | Annual Report 2020 Note 1: Segment information (continued) Segment result for the year ended 30 June 2020 Interest revenue Purchased claims interest revenue Inter-segment Revenue from contracts with customers Segment revenue Group (excl Funds) Funds Consolidation Corporate $’000 1 $’000 2&3 $’000 4 $’000 5 $’000 6 $’000 Adjustments and eliminations $’000 Consolidated $’000 2,141 836 18,038 1,293 192 – – – 413 896 – – 22,308 192 1,309 – – – – – – – – 76 – – (975) 4,069 (22,107) 141 21,694 – 141 25,839 (23,082) 2,822 757 – 23,128 26,707 Net gain/(loss) on derecognition of intangible assets 51,513 16,831 34,866 4,029 (68) 1,466 (2,164) 106,473 (Loss)/profit before tax and fair value adjustments on financial liabilities (19,964) 9,802 34,674 3,874 (1,151) Fair value adjustments on financial liabilities (13,597) – – – – Net gain/(loss) on disposal of financial assets Other income Total Income Impairment expenses Amortisation of claims portfolio Expenses Share of loss in associates (Loss)/profit before tax Income tax Segment result Attributable to: Equity holders of the parent Non-controlling interests Segment assets and liabilities at 30 June 2020 Cash1 Other current assets Claims portfolio Purchased claims Intangible assets Provision for impairment Goodwill Other non-current assets Total segment assets Current liabilities Non-current liabilities Total segment liabilities Net assets Equity attributable to: Equity holders of the parent Contributed equity - NCI Earnings - NCI Total equity – 19,815 – – – (32) – (5) – 3,848 (736) 1,314 – 63 3,848 20,419 93,636 17,023 36,143 4,024 (663) 32,467 (25,183) 157,447 5,166 7,174 1,193 – 108,434 – – 47 – – 276 – (6) – 156 – – – 772 2,930 14,520 – 17,229 14,520 488 16,274 (47,221) 78,454 – 158 743 – 743 – 158 19,108 47,086 – (13,597) 19,108 33,489 (33,561) 9,802 34,674 3,874 (1,151) (1,056) (143) (10,213) – (342) (3,704) (1,116) (15,890) (34,617) 9,659 24,461 3,874 (809) (2,961) 17,992 17,599 (34,617) – 5,399 968 (809) (475) 17,992 (11,542) – 9,659 19,062 2,906 – (2,486) – 29,141 Group (excl Funds) Funds Consolidation Corporate $’000 1 $’000 2&3 $’000 4 $’000 5 $’000 6 $’000 Adjustments and eliminations $’000 Consolidated $’000 133,205 17,366 6,671 28,533 49 8,560 – 194,384 80,956 5,886 39,390 – – – – – 5,726 3 – 1 1,368 16,199 (8,852) 134,950 – 93,680 3,032 8,260 – – 93,680 17,019 126,655 191,339 51,902 92,017 1,874 33,244 48,199 545,230 (8,086) (13,149) (1,813) 103,072 170,618 – (1) – 6,894 – – – – – (898) (4,054) (28,000) – – 103,072 (7,243) 173,791 (283,924) 60,135 606,420 201,441 108,770 120,554 (920) 332,836 (248,631) 1,120,470 31,741 1,181 11,721 3,311 (141) 51,725 (9,808) 89,730 198,824 – 5,018 – – 83,823 (24,126) 263,539 230,565 1,181 16,739 3,311 (141) 135,548 (33,934) 353,269 375,855 200,260 92,031 117,243 (779) 197,288 (214,697) 767,201 374,098 32,103 23,681 23,190 (779) 96,648 (214,697) 336,001 – – 127,511 54,871 94,479 40,646 13,479 (426) – – 98,609 2,031 – – 375,470 55,730 375,855 200,260 92,031 117,243 (779) 197,288 (214,697) 767,201 1 Cash in Funds can only be used for litigation matters and expenses in the Funds. 63 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Note 1: Segment information (continued) Segment result for the year ended 30 June 2019 Interest revenue Purchased claims interest revenue Inter-segment Revenue from contracts with customers Segment revenue Net gain/(loss) on derecognition of intangible assets Net gain/(loss) on disposal of financial assets Other income Total Income Impairment expenses Amortisation of claims portfolio Expenses (Loss)/profit before tax Income tax Net (loss)/profit Attributable to: Equity holders of the parent Non-controlling interests Segment assets and liabilities at 30 June 2019 Cash1 Other current assets Claims portfolio Purchased claims Intangible assets Provision for impairment Goodwill Other Non-current assets Total segment assets Current liabilities Non-current liabilities Total segment liabilities Net assets Equity attributable to: Equity holders of the parent Contributed equity - NCI Earnings - NCI Total equity Group (excl Funds) Funds Consolidation Corporate $’000 1 $’000 2&3 $’000 4 $’000 5 $’000 6 $’000 Adjustments and eliminations $’000 Consolidated $’000 3,473 – 14,235 114 17,822 55 – – – 55 653 – – – 653 4,608 (5,203) (854) – 6,099 – – – (73) 28,529 (5,148) (274) 1,113 6,545 620 – 73,251 – 91 (45,835) (11,784) 14,843 (69) – 51 (945) 218 (30,992) (11,853) (727) (30,992) (11,838) (727) – (15) – Group (excl Funds) – – – – – – – – – – – 42 (42) – (42) (7) (35) – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – (14,235) – 4,181 – – 114 (14,235) 4,295 (2,798) (4,247) – (340) (17,373) – 5,686 5,734 1,291 9,569 – – (29,608) 43,827 10,944 (47,662) (3,478) 11,514 7,466 (36,148) 7,466 (36,098) – (50) Funds Consolidation Corporate $’000 1 $’000 2&3 $’000 4 $’000 5 $’000 6 $’000 Adjustments and eliminations $’000 Consolidated $’000 132,827 49,680 38,326 5,627 28,003 – – – – – 740 – – – – – 154,287 200,846 34,663 28,456 (1,112) (6,594) (620) – – – 276,359 16,544 9,294 – – (1) 590,364 260,476 82,403 34,082 111,018 2,313 4,239 2,839 155,716 – – – 266,734 2,313 4,239 2,839 323,630 258,163 78,164 31,243 323,630 55,635 9,590 5,793 – – 185,242 58,639 25,485 17,286 9,935 (35) 323,630 258,163 78,164 31,243 – – – – – – – – – – – – – – – – – – – – 226,460 (7,921) 20,822 – – – – – 18,347 436,599 (1,296) (9,622) – – (267,512) 34,684 (258,382) 708,943 (8,855) 111,554 (73,824) 81,892 (82,679) 193,446 (175,703) 515,497 (175,703) 218,945 – – 269,366 27,186 (175,703) 515,497 – – – – – – – – – – 1 Cash in Funds can only be used for litigation matters and expenses in the Funds. 64 Notes to the Financial StatementscontinuedOmni Bridgeway | Annual Report 2020 Note 1: Segment information (continued) Geographically, non-current assets, excluding financial assets and deferred tax assets, can be represented geographically as follows: Australia United States Canada EMEA Asia Consolidated 2020 $’000 2019 $’000 238,041 295,443 17,844 58,512 15,627 161,758 243,604 15,585 659 6,482 625,467 428,088 Note 2: Revenue from contracts with customers 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. (i) Enforcement and recovery services The nature of services Revenue is generated from enforcement and recovery services. The revenue generated from recovery services consists of revenue earned for the recovery services provided for various claims such as court judgments, non-performing loans and unpaid account receivables. Performance obligations At contract inception, the Group assesses the services promised in its contracts with customers and identifies performance obligations in each promise to transfer to the customer funds recovered from various claims such as court judgments, non- performing loans and unpaid account receivables. Performance obligations are satisfied at a point in time, upon the recovery of each dollar of a judgment. Transaction price Almost all revenues from enforcement and recovery services are based on a no success, no fee basis. The entire transaction price is variable as the Group only receives a contingent fee on achievement of recovering funds on behalf of the customer. The Group includes variable consideration (a portion or all) in the transaction price only when it is highly probable that the recognised revenue will not incur a significant revenue reversal. The revenue is based on a percentage of the funds recovered so the uncertainty is typically removed when the funds have been received or settlement agreement has been signed and where applicable, court approval obtained as then the revenue formula can be applied to the outcome. (ii) Management fees The management fee revenue earned during the year was derived from Investment Management Agreements with the investors in Fund 4 and Fund 5. The services provided are for the administration of the investor accounts and fund structures. The consideration receivable is considered to be variable consideration and is 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. As the net invested capital is known at the end of each quarter the management fees are able to be calculated and recognised as it is then highly probable that a significant reversal in the amount of cumulative revenue recognised will not occur. 65 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Note 2: Revenue from contracts with customers (continued) Corporate $’000 Fund 5 $’000 Fund 6 $’000 Total $’000 2020 Type of service Enforcement and recovery services Management fees 2019 Type of service Management fees 2020 Geographical markets Europe Australia United States Cayman Islands 2019 Geographical markets United States 2020 Timing of revenue recognition Services transferred at a point in time Services transferred over time 2019 Timing of revenue recognition Services transferred over time – 1,293 1,293 114 114 – 109 1,184 – 1,293 114 114 – 1,293 1,293 114 114 – 141 141 21,694 – 21,694 21,694 1,434 23,128 – – – – – 141 141 – – – 141 141 – – – – 114 114 21,694 21,694 – – – 109 1,184 141 21,694 23,128 – – 114 114 21,694 – 21,694 21,694 1,434 23,128 – – 114 114 Not included in revenue is $0.812 million (2019: $nil) of performance fees that relate to the completion of an investment in Fund 4 that has not satisfied the requirements to recognise variable consideration. This is held as deferred revenue in other liabilities on the balance sheet. Within enforcement and recovery services income there is revenue from one customer totalling $14.115 million and another totalling $7.678 million. Both are in the Fund 6 segment and Europe geographic market. 66 Notes to the Financial StatementscontinuedOmni Bridgeway | Annual Report 2020 Interest revenue Note 3: Interest revenue is recognised 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. The Group earned 91% (2019: 99%) of its interest revenue in Australia. The purchased claims interest revenue relates to the Europe geographical market. Interest revenue Interest revenue calculated using effective interest rate method Purchased claims interest revenue calculated using the effective interest rate method Consolidated 2020 $’000 2019 $’000 2,822 757 3,579 4,181 – 4,181 Note 4: Net gain/(loss) on derecognition of intangible assets Net gain/(loss) 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 13. Net gain/(loss) on derecognition of intangible assets Litigation funding contracts - proceeds Litigation funding contracts - derecognition of intangible (successful investments)1 Litigation funding contracts - derecognition of intangible (unsuccessful investments)2 Consolidated 2020 $’000 2019 $’000 257,513 (134,393) (16,647) 106,473 35,021 (22,432) (16,836) (4,247) 1 2 This consists of costs related to the Group’s derecognition of litigation contracts intangibles on cases that have settled or been won. It includes derecognition of fair value adjustments of $912,000. This consists of 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. It includes derecognition of fair value adjustments of ($221,000). Net gain/(loss) on derecognition of intangible assets can be represented geographically as follows: Australia United States Canada EMEA Asia Consolidated 2020 $’000 82,964 19,343 3,317 1,150 (301) 2019 $’000 5,670 (8,755) (1,658) 554 (58) Total net gain/(loss) on derecognition of intangible assets 106,473 (4,247) 67 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Note 5: Other income Other income Foreign exchange gain Other income Fair value gain on equity instruments at fair value through profit or loss Consolidated 2020 $’000 2019 $’000 17,843 2,221 355 20,419 4,269 1,417 – 5,686 Note 6: Expenses 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 17. Amortisation of claims portfolio Amortisation of claims portfolio represents the amortisation of the previously capitalised contract costs relating to the claims portfolio assets due to the completion of the underlying enforcement or recovery claims. Detailed information is provided in Note 11. Depreciation The depreciation policy is disclosed in Note 23. 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 The policy for share based payments is disclosed in Note 30. Impairment of intangible assets The policy for intangible assets is disclosed in Note 13. 68 Notes to the Financial StatementscontinuedOmni Bridgeway | Annual Report 2020 Note 6: Expenses (continued) (a) Finance costs Interest on lease liabilities (Note 26) Other finance charges (b) Amortisation of claims portfolio Amortisation of claims portfolio (c) Depreciation expense Depreciation (d) Employee benefits expense Wages and salaries Superannuation expense Directors' fees Payroll tax Share based payments Long service leave provision (e) Corporate and office expense Insurance expense Network expense Marketing expense Occupancy expense Professional fees expense Recruitment expense Travel expense (f) 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 2020 $’000 2019 $’000 263 1,073 1,336 14,520 – 117 117 – 2,912 676 39,307 19,459 1,524 496 1,682 7,313 14 1,509 464 1,898 5,266 (55) 50,336 28,541 2,711 1,544 1,708 538 11,416 557 1,569 20,043 267 1,438 939 788 41 111 243 17,229 21,056 1,203 903 1,381 1,244 5,723 995 1,324 12,773 201 661 235 481 32 31 77 9,571 11,289 69 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Note 7: 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. Australian consolidated tax group The Parent Company and its Australian resident wholly owned subsidiaries have formed a tax consolidated group. The Parent Company has entered into tax funding arrangements with its Australian resident wholly owned subsidiaries, pursuant to which each subsidiary has agreed to pay or receive a tax equivalent amount based on the net taxable amount or loss of the subsidiary at the current tax rate. The tax consolidated group has applied the separate taxpayer approach in determining the appropriate amount of current taxes to allocate to each entity. Other taxes Revenues, expenses and assets are recognised net of the amount of GST, except: – when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST is recognised as part of the cost of acquisition of the asset or as part of the expense item, as applicable; and – receivables and payables, which are stated with the amount of GST included. The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the Statement of Financial Position. Cash flows are included in the Statement of Cash Flows on a gross basis and the GST component of cash flows arising from investing and financing activities, which is recoverable from, or payable to, the taxation authority is classified as part of cash flows from operating activities. 70 Notes to the Financial StatementscontinuedOmni Bridgeway | Annual Report 2020 Note 7: Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority. Income tax (continued) 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 Refund of foreign state-based taxes Current year losses moved to deferred tax asset Other Deferred income tax: Relating to origination and reversal of temporary differences Current year losses moved to deferred tax asset Adjustment in respect of deferred income tax of previous year Deferred tax assets derecognised Other Consolidated 2020 $’000 2019 $’000 8,762 (14,354) (14) 23 5,150 (545) 3,649 (5,150) 563 3,019 433 24 254 14,910 (108) 3,367 (14,910) (592) – (105) Income tax expense/(benefit) reported in the Statement of Comprehensive Income 15,890 (11,514) 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 (7,240) (763) (8,003) (1,112) (1,049) (2,161) A reconciliation between tax expense and the product of accounting profit before income multiplied by the Group’s applicable income tax rate is as follows: Accounting profit/(loss) before income tax At the Group’s statutory income tax rate of 30% (2019: 30%) Foreign tax rate adjustments Adjustment in respect of income and deferred tax of previous years Expenditure not allowable for income tax purposes Non-assessable income State income tax Relating to deductible temporary differences not previously recognised Deferred tax assets derecognised Other Consolidated 2020 $’000 2019 $’000 33,489 10,047 2,605 548 5,418 (3,742) (1,363) (514) 3,019 (128) (47,662) (14,298) 2,154 (568) 3,940 – (1,539) (874) – (329) Income tax expense/(benefit) reported in the Statement of Comprehensive Income 15,890 (11,514) 71 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Note 7: Income tax (continued) Statement of Financial Position Statement of Comprehensive Income 2020 $’000 2019 $’000 2020 $’000 2019 $’000 Deferred income tax at 30 June relates to the following: CONSOLIDATED Deferred income tax liabilities Intangibles Accrued interest & unrealised foreign exchange differences Right-of-use assets Receivables Other 59,220 38,348 22 1,425 – 72 3 – 38 – Gross deferred income tax liabilities 60,739 38,389 Deferred income tax assets Net operating losses Accruals and provisions / bonds raising costs Share based payments Leases 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 Leases Share based payments Deferred tax assets - Foreign net operating losses - federal and state Deferred tax assets Net deferred income tax Movement in foreign exchange Deferred tax expense 1,042 (19) (1,425) 38 (69) (433) 2,028 (2,277) (4,918) 71 (795) (5,891) 1,365 27 1,288 1,215 (5,468) 84 – (38) 5 (5,417) 11,628 (210) 1,363 – (1,154) 11,627 (111) (510) 212 – 19,330 16,204 1,980 6,409 71 2,202 29,992 30,747 1,369 55 1,500 1,215 4,537 4,257 6,750 – 2,235 29,446 8,943 4 28 212 – 4,398 (2,524) 1,698 17,328 26,004 14,206 18,848 3,122 4,493 (1,830) (685) (2,515) 5,204 6,493 12,703 (463) 12,240 Unrecognised temporary differences and tax losses At 30 June 2020, the Group had $3.019 million (30 June 2019: nil) of unrecognised deferred tax assets. This relates to temporary differences and tax losses in its Canadian subsidiaries. Deferred tax assets relating to USA operations The deferred tax assets balance includes $17.362 million (30 June 2019: $13.350 million) of assets relating to carried forward tax losses of Omni Bridgeway Holdings (USA) Inc (formerly Bentham Holdings Inc). Under existing tax regulations, these losses are available to be carried forward indefinitely and have no expiry date. The US business has a recent history of incurring tax losses. The losses have arisen primarily from the implementation of the expansion of the administrative base in the United States to support strategic growth initiatives that are, according to plan, yet to realise their full value. The Group has considered the utilisation of these tax losses within the expanded US business and has determined that, based on approved budgets and existing case matters, that it is probable that the US tax group will earn sufficient taxable income to utilise the losses. Further, in assessing the utilisation of the tax losses, the Group considers there to be convincing other evidence to support the recoverability of these tax losses including: 72 Notes to the Financial StatementscontinuedOmni Bridgeway | Annual Report 2020 Note 7: (i) Income tax (continued) The US business has been in an expansion and infrastructure growth phase. Additional costs have been incurred in the business related to the expansion of activity and changes in operations to a Fund management structure. Investments in people, systems and infrastructure have been made ahead of the expected investment activity of the Funds. Fund 1 commenced in 2017 and Fund 4 in 2019. Whilst Fund 1 is fully invested; Fund 4 (with an approved portfolio size of US$500 million of which the US business has a 20% interest) is commencing its investment commitment activity. With an average investment life of approximately 3 years, a significant portion of the expected income is in the future. This income generation will be by way of both investment returns and fee revenues; (ii) The US business has raised substantial external capital over the past three years via its Fund structures. Fund 1 raised US$171.670 million (75% external commitments) and Fund 4 raised US$500 million (80% external commitments). The external capital raised is the foundation of the investing activity that enables the US business to grow and generate returns to realise future taxable income. OBL has access to more investment capital than at any time in its history; (iii) There are 42 US investments. The carrying value of intangibles assets (investments) has increased from $241.151 million at 30 June 2019 to $293.237 million at 30 June 2020. The US business historically has an 83% success rate, based on number of investments. The US business has historically had a return on invested capital (“ROIC”) (refer to Glossary) of 0.4x, including losses and excluding overheads. The growth in the Group’s investments together with the Group’s historical performance provides an indication of growth in future taxable income. Note 8: 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 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 2020, 17,302,007 performance rights (2019: 15,601,589) were on issue as detailed in Note 30. 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 2020 $’000 2019 $’000 For basic and diluted earnings per share Total net loss attributable to equity holders of the Parent (11,542) (36,098) (b) Weighted average number of shares 2020 ’000 2019 ’000 Weighted average number of ordinary shares outstanding 235,709 194,897 Effect of dilution: Performance rights1 Weighted average number of ordinary shares – – 235,709 194,897 1 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 2020, there were 17,302,007 performance rights on issue that were not included in diluted earnings per share as they were either contingently issuable or were anti-dilutive potential ordinary shares. Details of contingently issuable shares related to deferred and variable deferred consideration that were not included in the diluted earnings per share as they were either contingently issuable or were anti-dilutive potential ordinary shares are detailed in Note 31. 73 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Note 8: Earnings per share (continued) The weighted average number of ordinary shares outstanding includes: i. The bonus element arising from an institutional offer during the period reflecting the pricing of the offer at a discount to the market value. All periods prior to the institutional offer have been restated to reflect the impact of the bonus element using a bonus adjustment factor of 1.03. ii. The bonus element arising from a retail offer during the period reflecting the pricing of the offer at a discount to the market value. All periods prior to the retail offer have been restated to reflect the impact of the bonus element using a bonus adjustment factor of 1.01. 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. Note 9: Dividends paid and proposed by Omni Bridgeway Limited (the parent entity) (a) Cash dividends on ordinary shares declared and paid Final dividend for 2019: nil cents per share (2018: nil cents per share) Interim dividend for 2020: 3.0 cents per share (2019: nil cents per share) Consolidated 2020 $’000 – 7,482 7,482 2019 $’000 – – – On 24 August 2020, the Directors declared a final fully franked dividend of 4.0 cents per share for the 2020 financial year, totalling $9,995,000. The record date for this dividend is 2 September 2020 and the payment date will be 25 September 2020. Shareholders are able to elect to participate in the dividend reinvestment plan in relation to this dividend. On 20 February 2020 the Directors declared a fully franked interim dividend of 3.0 cents per share totalling $7,482,000. The record date for this dividend was 27 February 2020 and the payment date was 20 March 2020. Shareholders were able to elect to participate in the dividend reinvestment plan in relation to this dividend. (b) Franking credit balance The amount of franking credits for the subsequent financial year are: – Franking account balance as at the end of the previous financial year at 30% – Franking debits arising from the payment of current year’s interim dividend – Franking credits arising from the payment of income tax instalments paid during the financial year – Franking debits arising from the income tax refund received during the financial year (c) Tax rates The tax rate at which paid dividends have been franked is 30% (2019: 30%). Omni Bridgeway Limited 2020 $’000 2019 $’000 14,766 (3,207) – (1,309) 10,250 19,056 – 1,644 (5,934) 14,766 74 Notes to the Financial StatementscontinuedOmni Bridgeway | Annual Report 2020 Note 10: Statement of cash flows reconciliation Reconciliation of net profit after tax to net cash flows used in operations: Net gain/(loss) after tax Adjustments for: Fair value adjustments to financial liabilities Net impact of the reclassification of litigation intangibles related cashflows to investing activities Receipts of reimbursement of fund establishment costs Fund establishment costs in net loss after tax Amortisation of claims portfolio Amortisation of contract costs Depreciation Share based payments Unrealised foreign exchange gain Lease incentive adjustments Changes in assets and liabilities (Increase)/decrease in receivables Increase in other current assets Increase in other liabilities Increase in lease liabilities Increase in intangibles Increase in trade creditors and accruals (Decrease)/Increase in provisions Increase in deferred tax assets and liabilities Increase in current income tax payable Net cash used in operating activities Disclosure of financing facilities Refer to Note 16 and Note 17. Changes in liabilities arising from financing activities Refer to Note 17 and Note 26. Consolidated 2020 $’000 2019 $’000 17,599 (36,148) (33,225) – 13,364 73,672 (736) – 14,520 939 2,912 9,084 (17,843) (289) (117,864) (3,123) 122,938 5,684 (1,117) 1,461 – – 676 6,952 (3,535) 209 1,393 (490) – – (90,253) (105,709) 52 (24) 14,648 10,673 5,945 691 14,865 4,339 (50,944) (36,796) 75 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report B. INVESTMENTS AND INTANGIBLE ASSETS Note 11: Claims portfolio The claims portfolio assets consist of the capitalised costs incurred to obtain or fulfill a contract with a customer. These contracts with customers comprise the litigation funding enforcement investment contracts and certain merits-based funding contracts. Costs incurred to obtain a contract are only capitalised to the investment when it is expected that a contract will be executed, and where those costs will be recoverable. The Group recognises an asset for costs incurred to fulfill a contract if those costs relate directly to the contract, the costs generate or enhance resources of the Group to satisfy performance obligations in the future and the costs are expected to be recovered. All capitalised contract costs are amortised to the profit and loss on a systematic basis that follows delivery of performance obligations to the customer. The satisfaction of performance obligations on the contracts are aligned with each individual dollar of recovery to the customer. The carrying value of the claims portfolio is measured at cost less amortisation and any impairment loss. At each reporting date an assessment is made on an individual investment by investment basis to determine if the carrying amount of a contract exceeds its recoverable amount. In order to determine the recoverable amount a cashflow model is used which includes forecast revenues and expenses, together with an estimate of directly attributable overheads to complete the contract. If the carrying value exceeds the recoverable amount the difference is recognised as an impairment expense in the profit or loss. Acquisition through business combination1 Additions to claims portfolio investments Amortisation of claims portfolio2 Foreign currency adjustment Consolidated 2020 $’000 2019 $’000 98,330 8,123 (14,520) 1,747 93,680 – – – – – 1 2 Included in the cost of claims portfolio acquired in a business combination was $74.180 million of fair value adjustments booked as part of the accounting for the acquisition of OBE. Refer to Note 31 for further information. Amortisation of claims portfolio represents the amortisation of the capitalised contract costs due to successful closing of claims. It includes $8.540 million of fair value adjustments that originally arose from business combination. Note 12: Purchased claims Purchased claims are litigation assets requiring enforcement which have been acquired by the Group. They are classified as purchased credit-impaired financial assets which are initially recognised at fair value. The credit-adjusted effective interest rate on these financial assets is calculated taking into account the initial lifetime expected credit loss in the estimated cash flows. In determining the lifetime expected credit losses for these financial assets, the Group has taken into account the financial position of the counterparties, the legal environment in which the enforcement occurs, historical default experience and considering various external sources of actual and forecast information, as appropriate. Purchased claims are subsequently measured at amortised cost by applying the credit-adjusted effective interest rate. The Group recognises – i. ii. Interest income through the application of the credit-adjusted effective interest rate to the amortised cost of the purchased claims; and Impairment losses and gains, when material, due to the changes in estimated lifetime expected credit losses. At each reporting period the Group reviews the estimated cash flows from purchased claims on an investment by investment basis, estimating the expected recovery, its timing and any other cashflows that may be attributable to the counterparties. The net present value of the cashflows are then determined using the credit-adjusted effective interest rate and the value compared to the carrying value. Where there is a material gain, this gain is recognised by adjusting the gross carrying amount of the receivable. Where there is a material loss, it is recognised as a loss allowance account. 76 Notes to the Financial StatementscontinuedOmni Bridgeway | Annual Report 2020 Note 12: Purchased claims (continued) Acquisition through business combination1 Interests recognized using the effective tax rate method Additions to Purchased claims Purchased claims expenses2 Foreign currency adjustment Consolidated 2020 $’000 2019 $’000 12,028 757 9,830 (5,815) 219 17,019 – – – – – – At 30 June 2020 the fair value of the purchased claims amounted to $17.019 million and a gross contractual amount of $173.343 million. 1 2 Purchased claims were acquired through the business combination. Refer to Note 31 for further information. Included in the purchased claims expense was $5.595 million of fair value adjustments that originally arose from business combination. Net Gain on disposal of Purchased claims Proceeds from purchased claims disposed Carrying value of purchased claims disposed1 Consolidated 2020 $’000 2019 $’000 9,663 (5,815) 3,848 – – – 1 Included in the carrying value of purchased claims disposed of was $5.595 million of fair value adjustments that originally arose from business combination. Note 13: Intangible assets – litigation contracts in progress (a) Recognition and measurement Litigation Contracts in Progress Litigation Contracts in Progress are recognised as an intangible asset in the financial statements of the Group as they represent future economic benefits controlled by the Group. The Group is able to control the expected future economic benefit as the Litigation Contracts in Progress may be exchanged or sold. The litigation funding 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. The Group’s litigation contracts are not considered contracts with customers as they are collaborative arrangements and there is no vendor-customer relationship established in the contract. 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: 77 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Note 13: Intangible assets – litigation contracts in progress (continued) (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; (c) the Group can demonstrate that it intends to complete the litigation; (d) the Group is able demonstrate the availability of adequate technical, financial and other resources to complete the litigation; and (e) the Group can measure reliably the expenditure attributable to the intangible asset during the life of the Litigation Contracts In Progress. Impairment is considered in line with policy described in (c) Impairment testing of intangible assets, below. (ii) Successful completion: Where the litigation has been finally determined in favour of the client or a positive settlement has been agreed, such that there is not considered to be a significant risk of reversal, 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 judgments, typically after a judgment has been determined in favour of the Group and the relevant appeal periods have expired; and – For settlements, typically when settlement agreement is reached and if relevant, court approval is obtained. (iii) Unsuccessful completion: Where the litigation is unsuccessful at trial, this is an indication for impairment consideration. If there is a successful appeal decision, this is an indication for reassessment of the impairment. If there is no appeal or the appeal is subsequently lost the asset is written off. 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. (b) Reconciliation of carrying amounts Balance at 1 July Additions through business combination Additions - external funding costs 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 78 Consolidated 2020 $’000 2019 $’000 426,977 53,435 177,578 10,385 10,424 465 (124,297) (10,096) (14,501) (2,146) (17,229) 6,235 321,268 – 125,634 10,127 7,274 1,239 (18,503) (3,929) (15,197) (1,639) (9,571) 10,274 517,230 426,977 Notes to the Financial StatementscontinuedOmni Bridgeway | Annual Report 2020 Note 13: Intangible assets – litigation contracts in progress (continued) The carrying value of Litigation Contracts In Progress includes external costs such as solicitors’ fees, counsels’ fees and experts’ fees funded by the Group, 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 2020 equated to approximately 22.6% of the Group’s total salary costs (2019: 22.6%). The other internal capitalised expenses equated to approximately 46.3% of related overhead costs (2019: 49.8%). 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 7.9% (2019: 7.6%). The carrying value of Litigation Contracts In Progress can be summarised as follows: External costs funded by the Group Capitalised internal costs Capitalised borrowing costs Gross carrying amount at cost Accumulated impairment Balance at 30 June Consolidated 2020 $’000 2019 $’000 473,170 376,285 39,000 33,060 33,078 27,185 545,230 436,548 (28,000) 517,230 (9,571) 426,977 (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 expected length of each investment. 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 8.5% and 10% (2019: between 10.0% and 11.5%). At 30 June 2020, a provision for impairment has been recognised for $28,000,000 (2019: 9,571,000). The impairment related to twenty-six litigation contract funding investments, with a combined total carrying value prior to impairment of $40,232,000. 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. The discount rate used in the impairment assessment of these assets was 8.5%. After taking into account the impairment, at 30 June 2020, the fifteen litigation contract investments have a combined carrying value of $12,232,000. This amount reflects the net recoverable amount expected to be received from the investments. 79 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Note 14: Goodwill Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests and any previous interest held over the fair value of the net identifiable assets acquired and liabilities assumed). Goodwill is subsequently measured at cost less any impairment. Goodwill arose on the acquisition of Omni Bridgeway Holding B.V. and its subsidiaries (collectively known as the OBE Group) accounted for as a business combination. For impairment purposes, Goodwill has been solely allocated to the OBE Group. As at reporting date the goodwill generated has been accounted for provisionally. Refer to Note 31 for further information. The Group performs its annual impairment test on the goodwill associated with the OBE Group at 30 June each year. The impairment test performed on the OBE Group goodwill is done via a value-in-use calculation using the following inputs – i. Cashflows generated over a 5 year period from the OBE Group’s annual budget. The annual budget includes an estimation for all cashflows from operations of the OBE Group, including returns from investments and payments of overheads. The budget cashflows are sensitive to the timing and amount of investment completions. The investment completions refer to income earned from claims portfolio, purchased claims and intangible assets – litigation contracts in progress. The timing of completion and amount of investment income are based on the relevant investment manager’s best estimates during the Group’s annual budget process and are reviewed internally by management. The cashflows from investment completions have a compound annual growth rate of 25.3% over the cash flow period. This is reflective of the management’s estimate of the OBE Group’s expected future growth in business activity. ii. Discount rate of 12%. The discount rate represents the current assessment of the risks specific to OBE Group CGU, taking into consideration the time value of money and individual risks of the underlying OBE Group investment that have not been incorporated in the cash flow estimates. The discount rate was arrived using the OBL’s weighted average cost of capital (“WACC”) as a starting base. iii. No reasonably possible change in key assumption would result in the carrying amount of the CGU exceeding its recoverable amount. Balance at 1 July Provisional goodwill recognised on acquisition Foreign currency adjustment Consolidated 2020 $’000 – 101,342 1,730 103,072 2019 $’000 – – – – 80 Notes to the Financial StatementscontinuedOmni Bridgeway | Annual Report 2020 C. CAPITAL STRUCTURE Note 15: Financial risk management The Group’s principal financial instruments comprise cash and short-term deposits, purchased claims, receivables, payables, debt securities (bonds and fixed rate notes), lease liabilities, deferred consideration and variable deferred consideration. The Group manages its exposure to key financial risks, including interest rate risk and currency risk in accordance with the Group’s financial risk management policy. The objective of the policy is to support the delivery of the Group’s financial targets whilst protecting its future financial security. The main risks arising from the Group’s financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk. The Group uses different methods to measure and manage different types of risks to which it is exposed. These include monitoring levels of exposure to interest rates and currencies and assessments of market forecasts for interest rates and foreign currencies. Aging analyses and monitoring of specific credit allowances are undertaken to manage credit risk. Liquidity risk is monitored through the development of future rolling cash flow forecasts. Risk exposures and responses Interest rate risk The Group’s exposure to the risk of changes in market interest rates relates primarily to: – the Group’s cash holdings with a floating interest rate; and – the Group has a $76,000,000 variable rate bond debt outstanding as at 30 June 2020. These Omni Bridgeway Bonds require that the Group make a quarterly coupon payment based on the Bank Bill Rate plus a fixed margin of 4.20% per annum. At reporting date the Group had the following financial instruments exposed mainly to variable interest rate risk: Financial instruments Cash and cash equivalents Omni Bridgeway Bonds Net exposure Consolidated 2020 $’000 2019 $’000 194,384 (73,942) 120,442 226,460 (72,517) 153,943 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 2020, 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) (2019: +0.25%) -0.25% (25 basis points) (2019: -0.25%) Post Tax Profit Higher/(Lower) Equity Higher/(Lower) 2020 $’000 211 (211) 2019 $’000 269 (269) 2020 $’000 211 (211) 2019 $’000 269 (269) 81 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Note 15: Financial risk management (continued) Credit risk Credit risk arises from the financial assets of the Group, which comprises cash and cash equivalents, purchased claims and receivables from litigation contracts and other. 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. Apart from ratings on cash held and litigation contract receivables, as detailed below, the remainder of the Group’s receivables typically do not carry and credit risk rating from a ratings agency. To mitigate credit risk on litigation contract 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, usually with the settlement funds placed into solicitors’ trust accounts. As at 30 June 2020 there are no funds within solicitor’s trust accounts relating to receivables. The Group’s continual monitoring of the defendants’ financial capacity mitigates this risk. As at 30 June 2020 there were $78.204 million of litigation contract receivables that were due to be paid by the AAA rated government (30 June 2019 $nil). To mitigate credit risk on purchased claims, the Group assesses the defendants in the investments funded by the Group prior to purchasing the claim. 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 95% of its cash with Australian and American AA rated banks. Refer to each financial asset’s respective note for information on how impairment and credit loss is determined. 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 Omni Bridgeway Bonds, Fixed Rate Notes, consideration liabilities and non-current lease liabilities, are current and payable within 30 days. The maturity profile of the Group’s financial liabilities based on contractual maturity on an undiscounted basis are: < 6 months $’000 6-12 months $’000 1-5 years $’000 >5 years $’000 Total $’000 2020 Financial Liabilities Trade and other payables Bonds and Notes – principal Bonds and Notes – interest Lease liabilities Deferred and variable deferred consideration1 2019 Financial Liabilities Trade and other payables Bonds and Notes – principal Bonds and Notes – interest 24,044 – 3,668 1,356 42,786 71,854 23,992 – 4,720 28,712 – – 3,668 1,356 – – 76,000 22,059 2,795 76,030 – 24,044 72,000 148,000 2,140 666 – 5,024 176,884 74,806 – 72,000 4,720 76,720 – 76,000 8,223 84,223 – – – – 31,535 6,173 118,816 328,568 23,992 148,000 17,663 189,655 1 Deferred and variable deferred consideration is expected to be satisfied by issuing shares of the Company. 82 Notes to the Financial StatementscontinuedOmni Bridgeway | Annual Report 2020 Note 15: Financial risk management (continued) Equity price risk The fair value of the deferred and variable deferred consideration for the acquisition of the OBE Group (refer to Note 27 and 31) is exposed to changes in the Company’s share price. There is no hedging or policies in place to mitigate the changes in share price. Refer to Fair Value section of Note 15 for sensitivity analysis of this risk. 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 carried at amortised cost approximate their fair values, except for the Omni Bridgeway Bonds and Fixed Rate Notes. The Omni Bridgeway Bonds fair value has been determined using the quoted market price at 30 June 2020, as quoted on the Australian Securities Exchange, and the Fixed Rate Notes fair value has been determined using the price from FIIG, an independent privately-owned corporate bonds and government bonds specialist. For the purposes of disclosure, the fair value measurements used for the Bonds are level 1 on the fair value hierarchy and the Notes level 2. Level 3 inputs were used for all other assets and liabilities below to determine that the carrying value approximates fair value. Financial assets Receivables from litigation contracts and other 134,730 16,866 134,730 16,866 Carrying Value Fair Value 2020 $’000 2019 $’000 2020 $’000 2019 $’000 Purchased claims Other assets/security deposits Financial liabilities Trade and other payables Debt securities Deferred consideration Variable deferred consideration Variable consideration – Purchased claims 17,019 17,396 169,145 – 11,212 28,078 17,019 17,396 169,145 – 11,212 28,078 24,044 23,992 24,044 23,992 143,784 143,972 144,947 150,950 42,786 76,030 4,884 – – – 42,786 76,030 4,884 – – – 291,528 167,964 292,691 174,942 83 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Note 15: Financial risk management (continued) Description of significant inputs to valuation of deferred and variable deferred consideration The significant inputs used in the fair value measurements of deferred and variable deferred consideration, categorised within Level 3 of the fair value hierarchy, together with a quantitative sensitivity analysis as at 30 June 2020 are shown below: Item Variable deferred consideration Valuation technique Black Scholes Option Pricing Model Significant unobservable inputs Exercise price Volatility Range (weighted average) Theoretical exercise price based on the floor price of $3.407 55% at 8 November 2019 and 45% at 30 June 2020 Underlying share price $3.40 at 8 November 2019 and $4.77 at 30 June 2020 Dividend yield 4% Risk free rate 0.98% at 8 November 2019 0.41% at 30 June 2020 Discount for non- performance 2020: 3.25% 2019: – Sensitivity of the input to fair value At 8 November 2019: An absolute 5% increase in the volatility would result in a $1,117,000 increase in the value of the liability. An absolute 5% decrease in the volatility would result in a $1,151,000 decrease in the value of the liability. At 30 June 2020: An absolute 5% increase in the volatility would result in a $1,293,000 increase in the value of the liability. An absolute 5% decrease in the volatility would result in a $1,285,000 decrease in the value of the liability. At 30 June 2020: A relative 5% increase in the share price would result in a $2,755,000 increase in the value of the liability. A relative 5% decrease in the share price would result in a $2,699,000 decrease in the value of the liability. An absolute 3% increase in the discount for non-performance would result in a decrease in the value the variable deferred consideration liability of $2,044,000. An absolute 3% decrease in the discount for non-performance would result in an increase in the value the variable deferred consideration liability of $2,044,000. FX forward rate (AUD/EUR) At 8 November 2019: 8-Nov-20: 1.630 8-Nov-21: 1.657 8-Nov-22: 1.685 8-Nov-23: 1.715 8-Nov-24: 1.747 At 8 November 2019: A relative 5% increase in the forward exchange rates would result in a $3,304,000 increase the value of the liability. A relative 5% decrease in the forward exchange rate would result in a $3,295,000 decrease in the value of the liability. At 30 June 2020: 8-Nov-20: 1.632 8-Nov-21: 1.648 8-Nov-22: 1.668 8-Nov-23: 1.689 8-Nov-24: 1.714 At 30 June 2020: A relative 5% increase in the forward exchange rate would result in a$3,776,000 increase the value of the liability. A 5% decrease in the forward exchange rate would result in a $3,781,000 decrease in the value of the liability. 84 Notes to the Financial StatementscontinuedOmni Bridgeway | Annual Report 2020 Note 15: Financial risk management (continued) Item Deferred consideration Valuation technique Black Scholes Option Pricing Model Significant unobservable inputs Exercise price Volatility Range (weighted average) Theoretical exercise price based on the floor price of $3.407 55% at 8 November 2019 and 45% at 30 June 2020 Underlying share price $3.40 at 8 November 2019 and $4.77 at 30 June 2020 Dividend yield 4% Sensitivity of the input to fair value At 8 November 2019: An absolute 5% increase in the volatility would result in a $430,000 increase in the value of the liability. An absolute 5% decrease in the volatility would result in a $440,000 decrease in the value of the liability. At 30 June 2020: An absolute 5% increase in the volatility would result in a $571,000 increase in the value of the liability. An absolute 5% decrease in the volatility would result in a $553,000 decrease in the value of the liability. At 30 June 2020: A relative 5% increase in the share price would result in a $1,683,000 increase in the value of the liability. A relative 5% decrease in the share price would result in a $1,630,000 decrease in the value of the liability. Risk free rate FX forward rate (AUD/EUR) 0.98% at 8 November 2019 0.41% at 30 June 2020 At 8 November 2019: 8-Nov-20: 1.630 8-Nov-21: 1.657 8-Nov-22: 1.685 8-Nov-23: 1.715 8-Nov-24: 1.747 At 30 June 2020: 8-Nov-20: 1.632 8-Nov-21: 1.648 8-Nov-22: 1.668 8-Nov-23: 1.689 8-Nov-24: 1.714 At 8 November 2019: A relative 5% increase in the forward exchange rates would result in a $1,984,000 increase the value of the liability. A relative 5% decrease in the forward exchange rate would result in a $1,983,000 decrease in the value of the liability. At 30 June 2020: A relative 5% increase in the forward exchange rate would result in a $3,378,000 increase the value of the liability. A 5% decrease in the forward exchange rate would result in a $3,382,000 decrease in the value of the liability. For reconciliation of fair value measurement of financial liabilities classified as financial liabilities designated at fair value through profit and loss, refer to Note 27. 85 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Note 15: Financial risk management (continued) Foreign currency risk The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar. Foreign exchange risk arises from commercial transactions and recognised assets and liabilities denominated in a currency that is not the functional currency in which they are measured. The risk is monitored 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. The Group’s exposures to foreign currency risk at 30 June was as follows: 2020 AUD $’000 USD $’000 GBP £’000 EUR €’000 SGD $’000 CAD $’000 HKD $’000 CHF ₣’000 AED $’000 JPY ¥’000 Financial Assets Cash and cash equivalents Receivables from litigation contracts and other1 Total assets Financial Liabilities Trade Payables Deferred and variable deferred consideration liabilities Total liabilities – – – – 26,821 81 2,573 813 1,225 10,434 89 567 21,219 1,973 1,700 – – – – – 64 – 48,040 2,054 4,273 813 1,225 10,434 89 567 64 18 – 349 1,125 (1) – 307 – – 118,816 118,816 – 18 – – – – 349 1,125 – (1) – – – 307 – – – – 2019 AUD $’000 USD $’000 GBP £’000 EUR €’000 SGD $’000 CAD $’000 HKD $’000 CHF ₣’000 AED $’000 JPY ¥’000 Financial Assets Cash and cash equivalents Receivables from litigation contracts and other1 Total assets Financial Liabilities Trade Payables Total liabilities – – – – – 18,172 11 522 76 1,241 11,321 26,290 895 – 2,417 6,321 – 44,462 906 522 2,493 7,562 11,321 49 49 – – 18 18 11 11 114 114 1 1 – – – – – – – – – – – – – – – 1 The receivables from litigation contracts and other balance includes the intercompany loan receivable that Omni Bridgeway Limited has with Omni Bridgeway Holdings (USA) Inc (formerly Bentham Holdings Inc) (USD), Omni Bridgeway Capital (Canada) Limited (formerly Bentham IMF Capital Limited) (CAD) and Omni Bridgeway (Singapore) Pte Limited (formerly IMF Bentham Pte Limited) (SGD). The Group’s exposure to foreign currency risk on cash and cash equivalents primarily relates to foreign cash holdings within the parent entity. The USD foreign currency risk for receivables is predominately due to the Group’s Euro denominated subsidiaries which have USD receivables. The AUD foreign currency risk for deferred and variable deferred consideration is due to Omni Bridgeway (Storm) Holdings BV’s acquisition of the OBE Group and its requirement to deliver AUD denominated shares in the Company. 86 Notes to the Financial StatementscontinuedOmni Bridgeway | Annual Report 2020 Note 15: Financial risk management (continued) Sensitivity The following table summarises the sensitivity of financial instruments held at balance date to movement in the exchange rate of the subsidiary’s functional currency to the listed currencies, with all other variables held constant. The sensitivity is based on management’s estimate of reasonably possible changes over the financial year. AUD USD GBP EUR SGD CAD HKD CHF AED JPY Impact on profit or loss before tax ($’000) 2020 +10% 14,308 (7,006) -10% (14,326) 7,006 (368) 368 (700) 700 (85) 85 20191 +10% -10% – – (6,327) 6,327 (164) 164 (85) 85 (263) 263 1 2019 sensitivity has been updated to correct the disclosure. (131) 131 (811) 811 (196) 196 – – 33 (33) – – (23) 23 – – – – – – Note 16: 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 Consolidated 2020 $’000 2019 $’000 101,037 93,347 94,446 132,014 194,384 226,460 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. Of the cash at bank, $1,089,000 is restricted as it is held within Stichting vehicles on behalf of customers. The Stichting vehicles were founded as separate, independent foundations to ensure the cash flows related to the claims were secured. Short-term deposits are made for varying periods depending on the immediate cash requirements of the Group. As at 30 June 2020, 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 2020, guarantees of $1,204,000 were outstanding (2019: $1,138,000). The Group has a total guarantee facility limit of $1,474,000 (2019: $1,462,000) that is secured by an offset arrangement with deposits of $1,674,000 (2019: $1,662,000). 87 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Note 17: Debt securities All loans and borrowings are initially recognised at fair value 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 Omni Bridgeway Bonds Fixed Rate Notes Non-Current Omni Bridgeway Bonds Fixed Rate Notes Cash and non-cash movements in debt securities are shown below: Balance 1 July Proceeds from issue of debt Repayment of debt Payments for costs of issuing debt Gain on debt modification Amortisation of costs of issuing debt Balance 30 June Consolidated 2020 $’000 2019 $’000 – – – – 71,455 71,455 73,942 69,842 72,517 – 143,784 72,517 Consolidated 2020 $’000 2019 $’000 143,972 34,284 (34,284) (2,183) – 1,995 120,462 26,000 – (3,016) (700) 1,226 143,784 143,972 There are 760,000 Bonds on issue with a face value of $100 each. The Omni Bridgeway 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 is 22 December 2022, with a first issuer call date of 8 January 2022 with an increase in the margin of 1.0% applying from 1 January 2022 to the maturity date. On 20 December 2019, the Company refinanced its Fixed Rate Notes by early redemption of the existing notes by payment of 101% of the outstanding principle and accrued interest to the date of redemption. Of the notes on issue, 34,284 notes were redeemed and new notes issued to new noteholders and 37,716 notes were exchanged for new notes. The interest rate payable to new Noteholders is 5.65% per annum payable quarterly. The Fixed Rate Notes are due to mature on 8 January 2026 and are secured by a security interest over all present and after-acquired property of the Group. OBL has the discretion to redeem the Notes prior to the maturity date on 8 January in each year between 2022 and 2024 (inclusive), and again on 8 July 2025. To the extent OBL exercises its early redemption right it will pay a redemption premium of between zero and 2%. The application of AASB 123 Borrowing Costs (revised 2007) has resulted in the capitalisation of $10,385,000 (2019: $10,127,000) 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) on 1 July 2009 (refer to Note 13). 88 Notes to the Financial StatementscontinuedOmni Bridgeway | Annual Report 2020 Note 17: Debt Securities (continued) 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 financial year: Gearing ratio1 Working capital ratio2 Interest cover3 Consolidated 2020 46% 3.67 N/A 2019 38% 2.22 N/A 1 2 3 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 OBL 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. Note 18: Contributed equity Ordinary shares are classified as equity. Issued 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 At 1 July 2018 Shares issued during the year (Placement and Share Purchase Plan) Shares issued upon exercise of performance rights At 30 June 2019 Shares issued during the year (Entitlement offer and Placement) Shares issued upon exercise of performance rights Shares issued under the Dividend Reinvestment Plan At 30 June 2020 Consolidated 2020 $’000 2019 $’000 347,630 205,558 Number ‘000 $’000 173,863 127,630 27,180 3,566 204,609 40,571 4,231 454 75,339 2,589 205,558 134,212 6,021 1,839 249,865 347,630 On 23 October 2019, the Company issued 23,939,201 shares to institutional investors as a 1 to 5.8 accelerated non-renounceable rights entitlement offer at $3.40 per share and 5,291,608 shares under a placement to institutional investors at $3.50 per share. On 5 November 2019, the Company issued 11,340,259 shares under the retail portion of the entitlement offer at $3.40 per share. 89 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Note 18: Contributed equity (continued) (b) Performance rights As at 30 June 2020, there were 17,302,007 unissued ordinary shares in respect of which share performance rights were outstanding (30 June 2019: 15,601,589). (c) Capital management Capital includes bonds, notes, lease liabilities 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 the future. Management’s policy is to pay dividends to shareholders from earnings where there is capital surplus to the needs of the business. The Group is not currently subject to any externally imposed capital requirements. Omni Bridgeway Limited’s retained earnings are disclosed in Note 32. Note 19: Retained earnings and reserves (a) Movements in retained earnings were as follows: Balance at 1 July Effect of adoption of AASB 16 Leases Net profit/(loss) for the year Dividend paid At 30 June (b) Movements in reserves were as follows: Consolidated 2020 $’000 2019 $’000 12,494 48,592 (67) – (11,542) (36,098) (7,482) (6,597) – 12,494 Share based payment reserve $’000 Foreign currency translation reserve $’000 15,251 2,498 17,749 6,169 1,383 (1,810) (427) (10,981) Option premium reserve $’000 3,404 – 3,404 – Convertible note reserve $’000 Fund equity reserve $’000 3,832 – (7,760) (15,905) 3,832 (23,665) – (1,113) Total reserves $’000 16,110 (15,217) 893 (5,925) At 1 July 2018 Movements in reserves during the period At 30 June 2019 Movements in reserves during the period At 30 June 2020 23,918 (11,408) 3,404 3,832 (24,778) (5,032) 90 Notes to the Financial StatementscontinuedOmni Bridgeway | Annual Report 2020 Note 19: Retained earnings and reserves (continued) (c) Nature and purpose of reserves i. Share-based payment reserve The share-based payments reserve is used to recognise the value of equity-settled share-based payments provided to employees, including Key Management Personnel as part of their remuneration. Refer to Note 30 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. Option premium reserve This reserve is used to record the value of equity benefits provided to employees and directors, including Key Management Personnel, as part of their remuneration. This reserve relates to the previous plan for options already vested. iv. Convertible note reserve This reserve was used to record the equity portion on the convertible notes (issued on 13 December 2010), which were fully redeemed by the Company during December 2013. v. Fund equity reserve This reserve is used to record changes in the proportion of equity held by non-controlling interests within the Group. D. WORKING CAPITAL, OTHER ASSETS AND OTHER LIABILITIES Note 20: Receivables from litigation contracts and other 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. Collectability of receivables from litigation contracts is reviewed on an ongoing basis. The Group recognises an allowance for expected credit losses (ECLs) for all receivables based on the difference between the contractual cash flows due and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest rate. The expected cash flows may include funds that are already held within a solicitor’s trust account. ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next 12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL). Refer to Note 15 for impairment of financial assets. As at 30 June 2020 the value of the ECL allowance is nil (30 June 2020 nil). Current Receivables from litigation contracts1 Other receivables2 Non-current Receivables from litigation contracts1 Consolidated 2020 $’000 2019 $’000 118,701 10,286 128,987 5,743 5,743 14,098 2,768 16,866 – – 1 2 Receivables from litigation contracts 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. Fair value and credit risk Due to the nature of these receivables, the carrying value of the current receivables approximates its fair value. The maximum exposure to credit risk is the carrying value of receivables. It is not the Group’s policy to transfer (on-sell) receivables. 91 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Note 21: Contract costs The Group holds management and advisory contracts in respect of Fund 4 and Fund 5. Incremental costs incurred in obtaining a contract are capitalised when the Group expects to recover the costs and are amortised on a systemic basis that is consistent with the Group’s transfer of related services to the customer. The amounts have been capitalised as shown below. The amounts are 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. Consolidated 2020 $’000 6,339 – (939) 5,400 939 4,461 5,400 2019 $’000 – 6,339 – 6,339 939 5,400 6,339 Consolidated 2020 $’000 2019 $’000 2,274 2,750 – 5,024 11,522 – 887 12,409 959 753 189 1,901 9,022 289 13 9,324 Balance at 1 July New contracts Amortisation of contract costs At 30 June Current Non-current Note 22: Other assets Current Prepayments Rental deposits Lease incentive receivable Non-current Prepayments Lease incentive receivable Other 92 Notes to the Financial StatementscontinuedOmni Bridgeway | Annual Report 2020 Note 23: Plant and equipment Plant and Equipment Plant and equipment is stated at historical cost less accumulated depreciation and impairment. 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 – Right-of-use 2 to 5 years; 2 to 6 years; 2 to 11 years; and 2 to 7 years. The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial year end. An item of plant and equipment is derecognised upon disposal or when no further future economic benefits are expected from its use or disposal. Right-of-use assets The Group recognises right-of-use assets at the commencement date of the lease (ie. the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised (Refer to Note 26), initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, the recognised right- of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment. Refer to Note 26 for further information regarding leases. Gross carrying amount - at cost Accumulated depreciation Net carrying amount Consolidated 2020 $’000 12,833 (5,911) 6,922 2019 $’000 3,592 (2,480) 1,112 93 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Note 23: Plant and equipment (continued) Reconciliation of carrying amounts at the beginning and end of the year Equipment $’000 Furniture, Fixtures and Fittings $’000 Leasehold Improvements $’000 Right-of-use assets $’000 Gross carrying amount Balance as at 1 July 2018 Additions Disposals Effect of movement in foreign currency At 30 June 2019 Adjustment on adoption of AASB 16 Additions recognised at acquisition Additions Disposals Effect of movement in foreign currency 867 212 – 6 1,085 – 788 166 – 2 423 47 (4) 16 482 – 442 103 – 10 At 30 June 2020 2,041 1,037 Accumulated depreciation Balance as at 1 July 2018 Depreciation charge for the year Disposals Effect of movement in foreign currency At 30 June 2019 Depreciation recognised at acquisition Depreciation charge for the year Disposals Effect of movement in foreign currency At 30 June 2020 603 152 – 5 760 379 221 – (19) 1,341 213 104 (3) 9 323 378 118 – (11) 808 1,829 183 – 13 2,025 – – 138 (231) 6 1,938 971 420 – 6 1,397 – 379 (183) (25) 1,568 Total $’000 3,119 442 (4) 35 3,592 3,054 3,223 3,177 (231) 18 – – – – – 3,054 1,993 2,770 – – 7,817 12,833 – – – – – – 2,194 – – 2,194 1,787 676 (3) 20 2,480 757 2,912 (183) (55) 5,911 Plant and Equipment of the Company is subject to a fixed charge to secure the Company’s debt due to Bondholders. See Note 17 for further details. Refer to Note 26 for further information on Right-of-use assets and their associated leases. 94 Notes to the Financial StatementscontinuedOmni Bridgeway | Annual Report 2020 Note 24: Trade and other payables Trade payables, other payables and accruals 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 or liabilities to provide funding in relation to an investment 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 or deployment against investment commitments. The amounts are unsecured, non- interest bearing and are usually paid within 30 days of recognition. Trade payables Wage accruals Interest accruals Consolidated 2020 $’000 20,333 1,833 1,878 24,044 2019 $’000 21,481 1,374 1,137 23,992 Fair Value Due to the nature of trade and other payables, their carrying value approximates their fair value. Note 25: 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. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the time value of money and the risks specific to the liability. The increase in the provision resulting from the passage of time is recognised in finance costs. Employee benefits 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. Current Annual leave and vested long service leave Adverse costs Bonus Non-Current Premises lease make good Long service leave Consolidated 2020 $’000 2019 $’000 3,498 672 10,753 14,923 282 395 677 2,575 12,617 – 15,192 153 279 432 95 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Note 25: Provisions (continued) (a) Movement in provisions At 1 July 2019 Arising during the year Utilised Effect of movement in foreign currency At 30 June 2020 Current 2020 Non-current 2020 Current 2019 Non-current 2019 Adverse costs $’000 12,617 4,086 (16,031) – 672 672 – 672 12,617 – 12,617 Annual leave $’000 Long service leave $’000 Premises lease make good $’000 1,668 2,354 (1,333) 1,186 31 (17) 4 – 153 129 – – Bonus $’000 – 10,753 – – Total $’000 15,624 17,353 (17,381) 4 2,693 1,200 282 10,753 15,600 2,693 – 2,693 1,668 – 1,668 805 395 1,200 907 279 1,186 – 282 282 – 153 153 10,753 – 10,753 – – – 14,923 677 15,600 15,192 432 15,624 (b) Nature and timing of provisions Adverse costs The Group raises a provision for adverse costs when the underlying litigation, arbitration, enforcement or recovery which was funded is lost and the jurisdiction requires adverse costs to be paid to the counter party. 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. Typically this estimate is between 40% to 70% of the amount spent by the plaintiff, on the basis that there is only one defendant per case. Refer to Note 28 for further details on adverse costs. During the 2020 financial year, the Group raised provisions of $4,086,000 for estimated adverse costs obligations. The provisions raised are the Group’s estimate of the amount of adverse costs it will have to remit. During the year, some of this provision was utilised and at 30 June the balance of the provision was $672,000 relating to one investment which is on the Group’s balance sheet. During the 2019 financial year, 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. Premises lease make good The make good provision relates to amounts recognised for make good requirements on leases of office space. Bonus The bonus provision relates to amounts accrued based on management’s estimate to be paid to employees (including STIP). 96 Notes to the Financial StatementscontinuedOmni Bridgeway | Annual Report 2020 Note 26: Lease liabilities The Group has lease contracts for rental property and motor vehicles. These leases generally have lease terms between 3 and 7 years. The Group’s obligations under its leases are secured by the lessor’s title to the leased assets. Generally, the Group is restricted from assigning and subleasing the leased assets. There are several lease contracts that include extension and termination options and variable lease payments, which are further discussed below. The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. Group as lessee Lease liabilities At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate. In calculating the present value of lease payments, the Group uses the incremental borrowing rate at the lease commencement date if the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset. Short-term leases and leases of low-value assets The Group applies the short-term lease recognition exemption to its short-term leases of machinery and equipment (ie those leases that have a lease term of 12 months or less from the commencement date and do not contain a purchase option). It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered of low value. Lease payments on short-term leases and leases of low-value assets are recognised as expense on a straight-line basis over the lease term. Set out below are the carrying amounts of right-of-use assets recognised and the movements during the period: At 1 July 2019 on adoption of AASB 16 Additions Depreciation expense At 30 June 2020 Rental property $’000 Other equipment $’000 3,001 4,763 (2,171) 5,593 53 – (23) 30 Total $’000 3,054 4,763 (2,194) 5,623 97 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Note 26: Lease liabilities (continued) Set out below are the carrying amounts of lease liabilities and the movements during the period: Balance at 1 July on adoption of AASB 16 Additions Accretion of interest Payments At 30 June Current Non-current The following are the amounts recognised in profit or loss: Depreciation expense of right-of-use assets Interest expense on lease liabilities (included in finance costs) Expense relating to short-term leases Expenses relating to leases of low-value assets (included in corporate and office expense) Total amount recognised in profit and loss Consolidated 2020 $’000 3,205 4,494 263 (2,278) 5,684 2,870 2,814 5,684 Consolidated 2020 $’000 2,194 263 205 189 2,851 The Group had total cash outflows for leases of $2,278,000 in 2020. The future cash outflows for these non-cancellable lease contracts are disclosed in Note 28. The Group has several lease contracts that include extension and termination options. These options are negotiated by management to provide flexibility in managing the leased-asset portfolio and align with the Group’s business needs. Management exercises significant judgment in determining whether these extension and termination options are reasonably certain to be exercised. Set out below are the undiscounted potential future rental payments relating to periods following the exercise date of extension and termination options that are not included in the lease term: Extension options not expected to be exercised Within five years $’000 More than five years $’000 531 – Total $’000 531 98 Notes to the Financial StatementscontinuedOmni Bridgeway | Annual Report 2020 Note 27: Other liabilities Variable consideration relating to purchased claims is initially measured at fair value and subsequently measured at amortised cost using the effective interest rate method. Deferred and variable deferred consideration is valued at fair value at the acquisition date as part of the business combination. The deferred and variable deferred consideration meets the definition of a financial liability, and it is subsequently remeasured at fair value at each reporting date. Current Deferred consideration Variable deferred consideration Other Non-Current Deferred consideration Variable deferred consideration Variable consideration – Purchased claims Other liabilities Consolidated 2020 $’000 2019 $’000 20,681 17,655 – 38,336 22,105 58,375 4,884 153 85,517 – – 915 915 – – – – – Deferred and variable deferred consideration Deferred and variable deferred consideration relates to the acquisition of OBE Group. The determination of the fair value is designated as level 3 in the fair value hierarchy. Refer to Notes 31 and 15 for further information. The following table reconciles the movements in recurring fair value measurements categorised within level 3 of the fair value hierarchy: Current At 30 June 2019 Additions recognised through business combination Fair value remeasurement recognised through profit and loss Effects of movement in foreign currency At 30 June 2020 Non-Current At 30 June 2019 Additions recognised through business combination Fair value remeasurement recognised through profit and loss Effects of movement in foreign currency At 30 June 2020 Deferred consideration $’000 Variable Deferred consideration $’000 – 17,565 2,816 300 20,681 – 19,452 2,321 332 22,105 – 14,997 2,402 256 17,655 – 51,440 6,058 877 58,375 Total $’000 – 32,562 5,218 556 38,336 – 70,892 8,379 1,209 80,480 99 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Note 28: Commitments and contingencies Lease commitments The Group has various lease contracts as at 30 June 2020. The future lease payments for these non-cancellable lease contracts are $2,712,000 within one year, $2,795,000 within five years and $666,000 thereafter. 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 2020 $’000 2019 $’000 4,383 – 4,383 5,064 – 5,064 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. Contingencies In certain jurisdictions litigation funding agreements contain an undertaking from the Group to the client that the Group will pay adverse costs awarded to the successful party in respect of costs incurred during the period of funding, should the client’s litigation be unsuccessful. It is not possible to predict in which cases such an award might be made. In addition, the Group has insurance arrangements which, in some circumstances, will lessen the impact of such awards. The entire Funds 2 and 3 portfolio has an after the event (“ATE”) insurance policy that will respond to claims for adverse costs in aggregate in excess of $7.5m. The entire Fund 5 portfolio has an ATE insurance policy that will respond to claims for adverse costs in aggregate in excess of USD25 million. 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 2020, the total amount spent on currently funded investments by the Group where undertakings to pay adverse costs have been provided was $129,856,000 (2019: $136,112,000). The potential adverse costs orders using the above methodology would amount to $75,735,000. Subject to impairment considerations, around expected investment success and recovery, the Group does not currently expect that any of the investments will be unsuccessful. The Group 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. A portion of the consideration relating to the acquisition of OBE Group is contingent upon the OBE Group meeting performance targets. This is outlined in Note 31. 100 Notes to the Financial StatementscontinuedOmni Bridgeway | Annual Report 2020 E. THE GROUP, MANAGEMENT AND RELATED PARTIES Note 29: Key management personnel Details of Key Management Personnel There were no changes to Key Management Personnel after the reporting date and before the date the financial report was authorised for issue. Compensation of Key Management Personnel Short-term employee benefits Post-employment benefits Long term employee benefits Share based payments Consolidated 2020 $’000 4,673 155 249 2,458 7,535 2019 $’000 4,925 163 (36) 2,321 7,373 Note 30: Share-based payment plan (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 OBL (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. Equity-settled awards granted by OBL 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. 101 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Note 30: 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. 5,431,814 share performance rights were issued during 2020 (2019: 4,255,816). 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 $) The expense recognised for share based payments during the year is shown below: Share based payments expense 14 February 2020 $4.75 30% 4.00% 0.75% 3 years ending 30 June 2022 Monte Carlo & Black Scholes $3.93 $4.33 Consolidated 2020 $’000 2019 $’000 7,313 5,266 The following table illustrates the number and weighted average exercise prices (WAEP) of, and movements in, share performance rights during the year: 2020 Number 2020 WAEP 2019 Number 2019 WAEP 15,601,589 5,431,814 (2,425,845) (1,305,551) 17,302,007 7,862,485 – – – – – – 14,355,887 4,255,816 (2,398,473) (611,641) 15,601,589 6,699,191 – – – – – – Movements during the year Outstanding at 1 July Granted Exercised Forfeited Outstanding at 30 June Exercisable at 30 June 102 Notes to the Financial StatementscontinuedOmni Bridgeway | Annual Report 2020 Note 31: Business combination Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, which is measured at acquisition date fair value, and the amount of any non-controlling interests in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interests in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree. Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration classified as equity is not remeasured and its subsequent settlement is accounted for within equity. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of AASB 9 Financial Instruments, is measured at fair value with the changes in fair value recognised in profit or loss in accordance with AASB 9. Refer to Note 15 and 27 for further information. Acquisition of Omni Bridgeway Holding B.V. On 15 October 2019, the Group agreed to acquire 100% of shares in Omni Bridgeway Holding B.V. (OBE Group), a non-listed company headquartered in the Netherlands, and its subsidiaries in exchange for cash and share capital consideration. The primary purpose for the acquisition was to expand the Group’s geographical footprint and also expand the types of litigation dispute resolution investments that it engages in. The transaction completed on 8 November 2019, for $122.737 million with a cash payment of EUR31.177 million ($51.003 million); a fair value of deferred consideration payable of EUR22.984 million ($37.017 million at acquisition) and a fair value of contingent variable deferred consideration amount payable of up to EUR41.251 million ($66.437 million at acquisition), subject to new business targets. The accounting for the OBE Group acquisition has been provisionally determined, as the process of fair valuing OBE Group’s net assets is still in progress. Provisionally, goodwill of $101,342 million has been recognised and $103.065 million of fair value adjustment was required to individually identifiable assets. Goodwill remains provisional at 30 June 2020 as the Group continues to assess the assumptions used in calculating the fair values of the claims portfolio, purchased claims and intangible assets, together with any impacts on tax and non-controlling interest. 103 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Note 31: Business combination (continued) (a) Assets acquired and liabilities assumed The fair values of the identifiable assets and liabilities of the OBE group as at the date of acquisition have been provisionally determined, as follows: Assets Cash and cash equivalents Other receivables Other financial assets Plant and equipment Right-of-use assets Claims portfolio Purchased claims Intangible assets – litigation contracts in progress Investment in associates and joint ventures Liabilities Trade and other payables Provisions Deferred income tax liabilities Lease liabilities Total identifiable net assets at fair value Non-controlling interests Goodwill arising on acquisition1 Purchase consideration Provisional fair value recognised on acquisition $’000 10,345 39,914 4,923 473 1,993 98,330 12,785 53,435 19 222,217 44,174 1,490 20,127 1,993 67,784 154,433 (102,109) 101,342 153,666 1 Goodwill recognised is primarily attributable to the future investment performance of the OBE Group and expected synergies and other benefits from combining the assets and activities of the OBE Group with those of the Group. The goodwill is not deductible for tax purposes. From the date of acquisition, the OBE Group has contributed revenue of $25.839 million, total income of $32.467 million and $1.299 million loss before tax. If the combination had taken place at the beginning of the year, revenue from continuing operations would have been $30.097 million and the loss before tax from continuing operations for the Group would have been $9.670 million. The fair value of the trade receivables amounted to $7.753 million which was approximately the same as the gross amount of trade receivables. It is expected that the full contractual amounts can be collected from the trade receivables. Other receivables with a carrying value amounting to $32.161 are related party receivables which are fully collectable. Purchased claims had a fair value of $12.785 million with a gross contractual amount of $127.680 million. 104 Notes to the Financial StatementscontinuedOmni Bridgeway | Annual Report 2020 Note 31: Business combination (continued) The value of non-controlling interests acquired has been calculated with reference to the non-controlling interests’ share of the fair value of net assets acquired. Purchase Consideration Cash consideration Deferred consideration Variable deferred consideration Total consideration Analysis of cash flows on acquisition Cash consideration (included in cash flows from investing activities) Transaction costs of the acquisition (included in cash flows from operating activities) Net cash acquired with the subsidiary (included in cash flows from investing activities) Net cash flow on acquisition $’000 50,212 37,017 66,437 153,666 (50,212) (4,838) 10,345 (44,705) Transaction costs of $4.838 million were expensed and are included in professional fees within corporate and office expenses on the Statement of Comprehensive Income. (b) Deferred consideration As part of the purchase agreement with the vendors, an amount of deferred consideration of EUR18.132 million ($29.202 million at acquisition) was agreed, payable in two equal instalments 12 months and 36 months after completion. Subject to shareholder approval the deferred consideration will be satisfied by the issue of shares in Omni Bridgeway at an issue price of $3.407 per share. If the deferred consideration is satisfied by the issue of OBL shares and the market value of those shares is less than $3.407 per share at the time of issue, OBL shall be obliged to make a further payment by way of deferred consideration of the difference in value. If shareholder approval is not obtained for the deferred consideration to be satisfied by way of the issue of OBL shares, OBL will be obliged to make the payment in cash at the higher of EUR18.132 million ($29.202 million at acquisition) or the value of the OBL shares which would have been issued had shareholder approval been obtained. The fair value is determined using the Black Scholes option pricing model. The key assumptions are detailed above in Note 15. As at the acquisition date, the fair value of the deferred consideration payable was estimated to be $37.017 million. As at 30 June 2019 Liability arising on business combination Fair value remeasurement recognised through profit and loss Effect of movement in foreign currency As at 30 June 2020 $’000 – 37,017 5,137 632 42,786 105 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Note 31: Business combination (continued) (c) Variable deferred consideration As part of the purchase agreement with the vendors., an amount of variable deferred consideration of up to EUR32.500 million ($52.343 million at acquisition) was agreed. This will be payable over a five year period subject to performance milestones. On 14 February 2020, the Company obtained shareholder approval for the issue of up to a maximum of 17,328,712 shares toward satisfaction of the variable deferred consideration liability that may become payable. The variable deferred consideration will (to the extent it becomes payable) be satisfied by the issue of shares in the Company at an issue price of $3.407 per share. If the market value of those shares is less than $3.407 at the time of issue, the Group shall be obliged to make a further payment by way of variable deferred consideration for the difference in value. The payment schedule for the variable deferred consideration is: i. EUR8.000 million per year, over the period of 1 to 3 years following acquisition date, if the entity meets stipulated performance milestones; and ii. EUR4.250 million per year, over the period of 4 to 5 years following acquisition date, if the entity meets stipulated performance milestones. The milestones are focused on cumulative annual new business generation of the OBE Group. As at the acquisition date, the fair value of the variable deferred consideration was estimated to be $66.437 million. The fair value of the variable deferred consideration has been determined using a probability weighted payout approach incorporating a Black Scholes option pricing model. The probabilities of meeting the business hurdles have been estimated by management and the valuation method is considered Level 3 in the fair value hierarchy. The key assumptions take into consideration the probability of meeting each target performance milestone % at both acquisition and balance sheet date. As at date of acquisition, the past key performance indicators of Omni Bridgeway show that it is highly probable that the target performance milestones will be achieved. The fair value of the variable deferred consideration determined at date of acquisition reflects this scenario. As at 30 June 2019 Liability arising on business combination Fair value remeasurement recognised through profit and loss Effect of movement in foreign currency At 30 June 2020 $’000 – 66,437 8,460 1,133 76,030 106 Notes to the Financial StatementscontinuedOmni Bridgeway | Annual Report 2020 Note 31: Business combination (continued) ASX has granted the Company a waiver from Listing Rule 7.3.4, to permit the Company to seek Shareholder approval for the issue of the Variable Deferred Consideration Shares in respect of the Variable Deferred Consideration later than 3 months from the date of the Meeting but no later than 60 months after the date of Completion (ASX Waiver). The ASX Waiver was granted subject to the following conditions: i. ii. the Annual Targets not being varied; the maximum number of Variable Deferred Consideration Shares to be issued is calculated based upon the Minimum Deemed Issue Price and is stated in the Notice, along with adequate details regarding potential dilution; iii. for any annual reporting during which any of the Variable Deferred Consideration Shares have been issued or any of them remain to be issued, the Company’s annual report sets out in detail the number of Variable Deferred Consideration Shares issued in that annual reporting period, the number of Variable Deferred Consideration Shares that remain to be issued and the basis on which the Variable Deferred Consideration Shares may be issued; iv. in any half year or quarterly report for a period during which any of the Variable Deferred Consideration Shares have been issued or remain to be issued, the Company must include a summary statement of the number of Variable Deferred Consideration Shares issued during the reporting period, the number of Variable Deferred Consideration Shares that remain to be issued and the basis on which the Variable Deferred Consideration Shares may be issued; and v. the notice of shareholder meeting contains the full terms and conditions of the Variable Deferred Consideration Shares and the conditions of the Waiver. During the period, there were no shares issued in settlement of this obligation. Variable Deferred Consideration shares Maximum approved as permissible to issue Previously issued Issued during the period Total issued Remaining shares to be issued Number 000 17,329 – – – 17,329 The remaining balance may be issued per the payment schedule above if the cumulative annual business generation milestones are met. 107 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Note 32: Parent entity information Information relating to Omni Bridgeway 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 2020 $’000 2019 $’000 201,473 564,818 151,920 453,535 (21,524) (165,826) 398,992 (103,995) (179,262) 274,273 345,548 204,553 25,449 27,995 46,190 23,530 398,992 274,273 (13,315) (13,315) (20,476) (20,476) The Parent has not entered into any guarantees with any of its subsidiaries. Details of the contractual commitments and contingent liabilities of the Parent are contained in Note 28. 108 Notes to the Financial StatementscontinuedOmni Bridgeway | Annual Report 2020 Note 32: Parent entity information (continued) The consolidated financial statements include the financial statements of OBL and the subsidiaries listed in the following table: Name Fund 1 Omni Bridgeway (Fund 1) LLC (formerly Bentham IMF 1 LLC) HC 1 LLC Security Finance (Fund 1) LLC (formerly Security Finance 1 LLC) Funds 2 & 3 Omni Bridgeway (Fund 2) Pty Ltd (formerly IMF Bentham (Fund 2) Pty Ltd) Omni Bridgeway (Fund 3) Pty Ltd (formerly IMF Bentham (Fund 3) Pty Ltd) IMF Bentham ROW SPV 1 Limited1 Australia Australia United Kingdom Percentage owned Country of Incorporation 2020 % 2019 % USA USA USA USA USA USA USA USA USA USA USA USA USA 37 7 37 20 20 20 20 20 20 20 20 20 20 20 20 20 28 7 28 20 20 – 20 20 20 20 20 20 20 20 20 20 Australia 100 100 The Netherlands The Netherlands The Netherlands The Netherlands Singapore Switzerland Switzerland Germany Guernsey The Netherlands The Netherlands The Netherlands The Netherlands United Arab Emirates 81 41 81 81 81 81 81 81 81 81 N/A N/A N/A 65 – – – – – – – – – – – – – – 109 Fund 4 Omni Bridgeway (Fund 4) Invt 1 LP (formerly Bentham Investments 1 LP) Omni Bridgeway (Fund 4) Invt 2 LP (formerly Bentham Investments 2 LP) Omni Bridgeway (Fund 4) Invt 3 LP (formerly Bentham Investments 3 LP) Omni Bridgeway (Fund 4) Invt 4 LP (formerly Bentham Investments 4 LP) Omni Bridgeway (Fund 4) Invt 5 LP (formerly Bentham Investments 5 LP) Omni Bridgeway (Fund 4) Invt 6 LP (formerly Bentham Investments 6 LP) Omni Bridgeway (Fund 4) Invt 7 LP (formerly Bentham Investments 7 LP) Omni Bridgeway (Fund 4) Invt 8 LP (formerly Bentham Investments 8 LP) Omni Bridgeway (Fund 4) Invt 9 LP (formerly Bentham Investments 9 LP) Security Finance (Fund 4) LLC (formerly Security Finance 2 LLC) Fund 5 Omni Bridgeway (Fund 5) GPA Pty Ltd (formerly IMF Bentham GPA 5 Pty Ltd) Fund 6 Omni Bridgeway BV2 Omni Bridgeway LegalTech BV2 Omni Bridgeway Emerging Markets BV2 Omni Bridgeway Collective Redress BV2 Omni Bridgeway Asia Pte Ltd2 Omni Bridgeway Holding (Switzerland) SA2 Omni Bridgeway SA2 Omni Bridgeway AG (formerly Roland ProzessFinanz AG)2 Minories Capital Ltd2 Omni Bridgeway Finance BV2 Stichting Client Accounts Omni Bridgeway2 3 Stichting Cartel Compensation2 3 Stichting Trucks Cartel Compensation2 3 Fund 7 Omni Bridgeway Advisory Ltd2 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Note 32: Parent entity information (continued) Name Group Subsidiaries Omni Bridgeway Holdings (Fund 1) LLC (formerly Bentham IMF Holdings 1 LLC) Omni Bridgeway Capital GP (Fund 4) LLC (formerly Bentham Capital GP LLC) Omni Bridgeway (USA) LLC (formerly Bentham Capital LLC) Omni Bridgeway Management (USA) LLC (formerly Bentham Capital Management LLC) Omni Bridgeway Holdings (USA) Inc (formerly Bentham Holdings Inc) Security Finance LLC Omni Bridgeway Capital (Canada) Limited (formerly Bentham IMF Capital Limited) Lien Finance Canada Limited Omni Bridgeway (Singapore) Pte Limited (formerly IMF Bentham Pte Limited) Omni Bridgeway (UK) Limited (formerly IMF Litigation Funding Services Limited) Omni Bridgeway (Cayman) Limited (formerly IMF Bentham Cayman Advisory Services Limited) Omni Bridgeway (Storm) Holdings Pty Ltd (formerly IMF Bentham Holdings Pty Ltd4) Percentage owned Country of Incorporation 2020 % 2019 % USA USA USA USA USA USA Canada Canada Singapore United Kingdom Cayman Islands Australia 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 – – – – – Omni Bridgeway (Storm) Holdings BV (formerly IMF Bentham BV5) The Netherlands Omni Bridgeway Investment Management Ltd6 Omni Bridgeway Holding B.V.2 Omni Bridgeway Investment BV2 7 Australia The Netherlands The Netherlands 1 2 3 4 5 6 7 This entity was incorporated 26 July 2019. Acquired through business combination with Omni Bridgeway Holding B.V. Group. The Stichting vehicles were founded as separate, independent foundations to ensure the cash flows related to the claims were secured. This entity was incorporated on 27 September 2019. This entity was incorporated on 9 October 2019. This entity was incorporated 26 June 2020. This holding this represents 100% of type A shares and voting rights. Type B shares, with no voting rights, represent 90% of share capital and receive 10% of yearly profits. Type A shares receive the remaining yearly profits. 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. 110 Notes to the Financial StatementscontinuedOmni Bridgeway | Annual Report 2020 Note 33: Material partly-owned subsidiaries Financial information of subsidiaries that have material non-controlling interests is provided below: Non-controlling interest Country of Incorporation 2020 % 2019 % Proportion of equity interest held by non-controlling interests: Fund 1 Omni Bridgeway (Fund 1) LLC (formerly Bentham IMF 1 LLC)1 HC 1 LLC1 Security Finance (Fund 1) LLC (formerly Security Finance 1 LLC)1 Funds 2 & 3 USA USA USA Omni Bridgeway (Fund 2) Pty Ltd (formerly IMF Bentham (Fund 2) Pty Ltd)2 Omni Bridgeway (Fund 3) Pty Ltd (formerly IMF Bentham (Fund 3) Pty Ltd)2 IMF Bentham ROW SPV 1 Limited2 Australia Australia United Kingdom Fund 4 Omni Bridgeway (Fund 4) Invt 1 LP (formerly Bentham Investments 1 LP)3 Omni Bridgeway (Fund 4) Invt 2 LP (formerly Bentham Investments 2 LP)3 Omni Bridgeway (Fund 4) Invt 3 LP (formerly Bentham Investments 3 LP)3 Omni Bridgeway (Fund 4) Invt 4 LP (formerly Bentham Investments 4 LP)3 Omni Bridgeway (Fund 4) Invt 5 LP (formerly Bentham Investments 5 LP)3 Omni Bridgeway (Fund 4) Invt 6 LP (formerly Bentham Investments 6 LP)3 Omni Bridgeway (Fund 4) Invt 7 LP (formerly Bentham Investments 7 LP)3 Omni Bridgeway (Fund 4) Invt 8 LP (formerly Bentham Investments 8 LP)3 Omni Bridgeway (Fund 4) Invt 9 LP (formerly Bentham Investments 9 LP)3 Security Finance (Fund 4) LLC (formerly Security Finance 2 LLC)3 Fund 6 Omni Bridgeway BV4 Omni Bridgeway LegalTech BV4 Omni Bridgeway Emerging Markets BV4 Omni Bridgeway Collective Redress BV4 Omni Bridgeway Asia Pte Ltd4 Omni Bridgeway Holding (Switzerland) SA4 Omni Bridgeway SA4 Omni Bridgeway AG (formerly Roland ProzessFinanz AG)4 Minories Capital Ltd4 Omni Bridgeway Finance BV4 USA USA USA USA USA USA USA USA USA USA The Netherlands The Netherlands The Netherlands The Netherlands Singapore Switzerland Switzerland Germany Guernsey The Netherlands 63 93 63 80 80 80 80 80 80 80 80 80 80 80 80 80 19 59 19 19 19 19 19 19 19 19 72 93 72 80 80 – 80 80 80 80 80 80 80 80 80 80 – – – – – – – – – – 111 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Note 33: Material partly-owned subsidiaries (continued) Accumulated balances of material non-controlling interest: Omni Bridgeway (Fund 1) LLC1 HC 1 LLC1 Omni Bridgeway (Fund 2) Pty Ltd2 Omni Bridgeway (Fund 3) Pty Ltd2 Fund 43 Fund 64 Fund 7 Transaction costs, net of tax - disposal of non-controlling interest (Fund 1) Transaction costs, net of tax - disposal of non-controlling interest (Funds 2 & 3) Profit allocated to material non-controlling interest: Omni Bridgeway (Fund 1) LLC1 Omni Bridgeway (Fund 2) Pty Ltd2 Omni Bridgeway (Fund 3) Pty Ltd2 Fund 43 Fund 64 Fund 7 1 2 3 4 The results and non-controlling interests of these entities comprise the results of Fund 1, included in Note 1 Segment Information. The results and non-controlling interests of these entities comprise the results of Funds 2 & 3, included in Note 1 Segment Information. The results and non-controlling interests of these entities comprise the results of Fund 4, included in Note 1 Segment Information. The results and non-controlling interests of these entities comprise the results of Fund 6, included in Note 1 Segment Information. Movements in NCI’s during the year were as follows: Fund 5 $'000 Fund 6 $’000 At 1 July 2018 Contributions Distributions Change in share of net assets attributable to NCI Loss Other comprehensive income Transaction costs At 30 June 2019 Business combination Contributions Distributions Change in share of net assets attributable to NCI Profit Other comprehensive income Fund 1 Funds 2 & 3 $'000 $'000 146,951 59,494 (24,247) 7,259 (50) 13,112 – 202,529 – – 28,553 36,865 (4,052) 8,092 – – (885) 68,573 – – (57,753) (10,561) 8,686 9,659 5,036 (8,724) 19,062 – Fund 4 $'000 – 25,485 – 554 – (589) – 25,450 – 69,092 (3,464) (137) 2,906 206 As at 30 June 2020 168,157 68,350 94,053 112 – – – – – – – – – – – – – – – 2020 $'000 2019 $'000 126,987 47,104 53,455 17,804 94,053 100,640 – (5,934) (2,909) 431,200 9,659 14,325 4,737 2,906 (2,486) – 29,141 – – – – – – – – 102,109 – – 2,168 (2,486) (1,151) 161,369 47,092 53,613 17,871 25,450 – – (5,934) (2,909) 296,552 (15) – – (35) – – (50) Total $'000 175,504 121,844 (28,299) 15,905 (50) 12,533 (885) 296,552 102,109 69,092 (71,778) 1,993 29,141 4,091 100,640 431,200 Notes to the Financial StatementscontinuedOmni Bridgeway | Annual Report 2020 Note 33: Material partly-owned subsidiaries (continued) Funds 2 & 3 On 13 September 2017, the Group established Omni Bridgeway (Fund 2) Pty Ltd (formerly IMF Bentham (Fund 2) Pty Ltd) and Omni Bridgeway (Fund 3) Pty Ltd (formerly IMF Bentham (Fund 3) Pty Ltd) (collectively “Funds 2 & 3”). On 3 October 2017, the Group undertook a transaction to dispose of a non-controlling interest in Funds 2 & 3. The change in equity of the Group was recorded as follows: Change in equity on disposal of non-controlling interest: Transaction costs net of tax - disposal of non-controlling interest 2020 $'000 2019 $'000 – – (885) (885) Fund 4 On 26 October 2018, the Group established Omni Bridgeway Capital GP (Fund 4) LLC (formerly Bentham Capital GP LLC). On 29 November 2018, the Group established Security Finance (Fund 4) LLC (formerly Security Finance 2 LLC). On 4 December 2018, the Group 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 the Group. The summarised financial information of controlled entities with material non-controlling interests provided below is based on amounts prior to intercompany eliminations: Fund 1 Funds 2 & 3 Fund 4 Fund 5 Fund 6 2020 $'000 2019 $'000 2020 $'000 2019 $'000 2020 $'000 2019 $'000 2020 $'000 2019 $'000 2020 $'000 2019 $'000 Summarised statement of cash flows Operating Investing Financing Net increase in cash and cash equivalents (98) (77) 6,797 (988) (310) (43) 25,507 (15,469) (27,923) (18,690) (66,042) (25,059) (57,724) 57,760 (10,561) 42,042 91,965 30,729 (32,315) 42,214 (31,687) 22,364 25,613 5,627 Cash and cash equivalents at the beginning of the period 49,680 7,466 38,326 15,889 5,627 Foreign exchange – – 32 73 6 – – Cash and cash equivalents at the end of the period 17,365 49,680 6,671 38,326 31,246 5,627 – – – – – – – – – – (49,682) 58,143 – – 8,461 – – – 95 – 8,556 – – – – – – – 113 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Note 34: Investment in associates and joint ventures An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee, but is not control or joint control over those policies. A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require the unanimous consent of the parties sharing control. The considerations made in determining significant influence or joint control are similar to those necessary to determine control over subsidiaries. The Group’s investment in its associate and joint venture are accounted for using the equity method. Under the equity method, the investment in an associate or a joint venture is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is not tested for impairment separately. The statement of profit or loss reflects the Group’s share of the results of operations of the associate or joint venture. Any change in Other Comprehensive Income (OCI) of those investees is presented as part of the Group’s OCI. In addition, when there has been a change recognised directly in the equity of the associate or joint venture, the Group recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the associate or joint venture are eliminated to the extent of the interest in the associate or joint venture. The financial statements of the associate or joint venture are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group. After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its associate or joint venture. At each reporting date, the Group determines whether there is objective evidence that the investment in the associate or joint venture is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value, and then recognises the loss within ‘Share of profit of an associate and a joint venture’ in the statement of comprehensive income. Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognised in profit or loss. The Group acquired 21% of The Flight Refund Company GmbH, 40% of TCF Ltd and 5% of OB Capital Coop U.A. through the acquisition of Omni Bridgeway Holding B.V. in October 2019. TCF Ltd is a joint venture accounted for using the equity method. OB Capital Coop U.A and The Flight Refund Company GmbH are associates accounted for using the equity method. Investment in OB Capital Coop U.A. for the relevant financial year is provided below. Investments in The Flight Refund Company GmbH and TCF Ltd are immaterial to the Group. Current assets Non–current assets Current liabilities Non–current liabilities Equity Group's share in equity – 5% (2019: nil) Group's carrying amount of the investment 114 2020 $'000 696 101,245 (11,195) – 90,746 4,537 4,537 2019 $'000 – – – – – – – Notes to the Financial StatementscontinuedOmni Bridgeway | Annual Report 2020 Note 35: 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 DLA Piper1 Transactions with FIIG Securities2 Consolidated 2020 $’000 2,036 1,776 3,812 2019 $’000 499 – 499 1 2 During the year, the Group obtained legal advice from DLA Piper, a legal firm associated with director Michael Bowen. The legal advice was obtained at normal market rates. Michael Bowen recuses himself from all discussions regarding the appointment of DLA Piper and review of its service provision. The Group uses several different legal service providers across its network. During the year, the Group obtained services from FIIG Securities, for which Christine Feldmanis is a mutual Director. The services were provided at normal market rates. Christine Feldmanis recuses herself from all discussions regarding the appointment of FIIG Securities and review of its service provision. Note 36: Auditor’s remuneration The auditor of Omni Bridgeway Limited is EY. Consolidated 2020 $'000 2019 $'000 Fees to Ernst & Young (Australia) Fees for auditing the statutory financial report of the parent covering the group and auditing the statutory financial reports of any controlled entities 500 398 Fees for other assurance and agreed-upon procedures services under other legislation or contractual arrangements where there is discretion as to whether the service is provided by the auditor or another firm Fees for other services – Due Diligence Report 85 354 939 12 – 410 Note 37: Events after the reporting date Apart from that disclosed in this report, no other circumstances have arisen since 30 June 2020 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. 115 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Directors’ Declaration In accordance with a resolution of the Directors of Omni Bridgeway Limited, we state that: In the opinion of the Directors: (a) the financial statements and notes of Omni Bridgeway Limited for the financial year ended 30 June 2020 are in accordance with the Corporations Act 2001, including: i. ii. giving a true and fair view of its financial position as at 30 June 2020 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; (c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable; and (d) this declaration has been made after receiving the declarations required to be made to the directors in accordance with section 295A of the Corporations Act 2001 for the financial year ended 30 June 2020. On behalf of the board Michael Kay Non-Executive Director Sydney, 24 August 2020 Andrew Saker Managing Director 116 Omni Bridgeway | Annual Report 2020 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 Omni Bridgeway Limited Report on the audit of the Financial Report Opinion We have audited the financial report of Omni Bridgeway Limited (the Company) and its subsidiaries (collectively the Group), which comprises the consolidated statement of financial position as at 30 June 2020, 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: a) giving a true and fair view of the consolidated financial position of the Group as at 30 June 2020 and of its consolidated financial performance for the year ended on that date; and b) 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 (including Independence Standards) (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:013 117 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Independent Auditor’s Report continued Impairment of litigation related assets Why significant How our audit addressed the key audit matter The Group has recognised three different types of litigation assets which include: Claims portfolio; Purchased claims; and Litigation contracts in progress. Whilst the assets are different from an accounting perspective, they are considered for impairment by the Group on a similar basis, using cash flow forecasts. The carrying values 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 may be impaired. 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 11 Claims portfolio, Note 12 Purchased claims and Note 13 Intangible assets – litigation contracts in progress of the financial report for the amounts recognised by the Group as at 30 June 2020 and related disclosures. We evaluated the Group’s assessment of the carrying value of litigation related assets. Our audit procedures included the following: Assessed, through testing a sample, the effectiveness of the Group’s controls in relation to the review of carrying values for litigation assets, including controls over the valuation model and assumptions applied. 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. Discussed with Case Investment Managers and Chief Investment Officers the impact on case matters, if any, arising from the Covid-19 global pandemic. 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. 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. Assessed the adequacy of the financial statement disclosures regarding impairment and the recoverable amount of the Group’s litigation assets. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation RK:DA:IMF:013 118 Omni Bridgeway | Annual Report 2020 Taxation and recoverability of tax losses Why significant How our audit addressed the key audit matter At 30 June 2020, the Group had deferred tax assets including tax losses of $23.49 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 7 of the financial report for the amounts recognised by the Group as at 30 June 2020 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 entities. 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. Accounting for the acquisition of Omni Bridgeway Why significant How our audit addressed the key audit matter On 8 November 2019, Omni Bridgeway Limited completed the acquisition of Omni Bridgeway Holdings BV (“OBE Group”) for a purchase consideration with a fair value of $153.666 million. The acquisition has been accounted for as a business combination (refer to Note 31 of the financial report). The acquisition date accounting for the business combination is still provisional at 30 June 2020. The deferred consideration component of the purchase consideration is required to be carried at fair value. We focused on this area because it required a high level of judgment to determine the fair value of identifiable assets and liabilities acquired and the resultant goodwill recognised. There was also a high level of judgment required to determine the value of the deferred and variable deferred consideration. Refer to Note 31 of the financial report for the amounts recognised by the Group as at 30 June 2020 and related disclosure. We evaluated the Group’s assessment of the accounting for the acquisition of the OBE Group. Our audit procedures included the following: Read the purchase agreement to gain an understanding of the key terms. Assessed the appropriateness of the acquisition accounting applied. With the assistance of our valuation specialists, we evaluated the Group’s determination of the purchase consideration with reference to the share purchase agreement and cash consideration paid. Assessed the provisional fair value of assets and liabilities acquired, including considering whether the valuation methodologies and assumptions applied, with the assistance of our valuation specialists, were in accordance with the requirements of Australian Accounting Standards. With the assistance of our valuation specialists, we assessed the valuation of and accounting for the deferred consideration as at 30 June 2020. Evaluated the adequacy of the Group’s disclosures in the financial report relating to the acquisition of OBE Group. A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation RK:DA:IMF:013 119 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report 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 2020 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:013 120 Omni Bridgeway | Annual Report 2020 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:013 121 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report 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 37 to 47 of the directors' report for the year ended 30 June 2020. In our opinion, the Remuneration Report of Omni Bridgeway Limited for the year ended 30 June 2020, 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 24 August 2020 A member firm of Ernst & Young Global Limited Liability limited by a scheme approved under Professional Standards Legislation RK:DA:IMF:013 122 Omni Bridgeway | Annual Report 2020 Shareholder Information The information set out below is current as at 31 July 2020. (a) Distribution of Shareholders Ordinary Share Capital 249,865,242 fully paid ordinary shares are held by 3,836 individual shareholders. All issued ordinary shares carry one vote per share and carry the right to dividends. Omni Bridgeway Bonds There are 760,000 bonds issued held by 1,041 individual bond holders. The Omni Bridgeway Bonds do not carry the right to vote at any shareholders meeting. Options There are no options issued over ordinary shares. Performance Rights 17,302,007 performance rights were issued to 97 rights holders. Fixed Rate Notes There are 72,000 Fixed Rate Notes. Distribution of Securities The number of shareholders by size of holding, in each class are as at 31 July 2020: 1 – 1,000 1,001 – 5,000 5,001 – 10,000 10,001 – 100,000 100,001 and over Fully paid ordinary shares % of issued capital Number Bonds Number 1,023 1,352 622 768 418,306 3,773,847 4,610,211 20,618,182 71 220,444,696 3,836 249,865,242 0.17 1.51 1.85 8.25 88.22 100.00 975 59 2 4 1 1,041 160,411 112,618 15,170 130,950 340,851 760,000 Non-marketable Parcels There were 275 holders of less than a marketable parcel of ordinary shares. (b) Substantial Shareholders The names of the substantial shareholders listed in the Company’s register as at 31 July 2020 are: Shareholder Kabouter Management, LLC Perpetual Investment Management Eley Griffiths Group Vanguard Group Number of ordinary Shares % of issued capital 20,576,033 19,110,072 13,129,626 12,657,019 8.23 7.66 5.25 5.07 65,472,750 26.21 123 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Shareholder Information continued (c) 20 Largest Holders of Quoted Equity Securities as at 31 July 2020 Ordinary Shares 1. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 2. J P MORGAN NOMINEES AUSTRALIA PTY LIMITED 3. CITICORP NOMINEES PTY LIMITED 4. NATIONAL NOMINEES LIMITED 5. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED-GSCO ECA 6. UBS NOMINEES PTY LTD 7. BNP PARIBAS NOMINEES PTY LTD 8. MCLERNON GROUP SUPERANNUATION PTY LTD 9. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED - A/C 2 10. PACIFIC CUSTODIANS PTY LIMITED 11. BNP PARIBAS NOMS PTY LTD 12. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 13. CITICORP NOMINEES PTY LIMITED 14. MR DENNIS JOHN BANKS 15. MR PETER FREDERICK PHILLIPS & MRS ALICE SAU HAN PHILLIPS 16. MR HUGH MCLERNON 17. BNP PARIBAS NOMINEES PTY LTD 18. PACIFIC CUSTODIANS PTY LIMITED 19. BOUCHI PTY LTD 20. B F A PTY LTD (d) Options as at 31 July 2020 – unquoted There are no options issued. (e) Securities subject to escrow There are no securities subject to escrow. Number of ordinary Shares ‘000 52,213 41,033 30,227 22,996 18,080 12,035 7,044 4,156 3,941 3,532 2,669 2,487 1,623 1,287 1,054 1,002 971 888 722 687 % of issued capital 20.90 16.42 12.10 9.20 7.24 4.82 2.82 1.66 1.58 1.41 1.07 1.00 0.65 0.52 0.42 0.40 0.39 0.36 0.29 0.27 208,647 83.50 124 Omni Bridgeway | Annual Report 2020 (f) 20 Largest Holders of Quoted Omni Bridgeway Bonds as at 31 July 2020 Bond Holders 1. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 2. J P MORGAN NOMINEES AUSTRALIA PTY LIMITED 3. HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED 4. CITICORP NOMINEES PTY LIMITED 5. NATIONAL NOMINEES LIMITED 6. MUTUAL TRUST PTY LTD 7. MCLERNON GROUP SUPERANNUATION PTY LTD 8. CARRIER INTERNATIONAL PTY LIMITED 9. PSTAR PTY LTD 10. SANCTUARY GATE PTY LTD 11. MR CHIA-HO CHEN 12. CITER INVESTMENTS PTY LTD 13. ROBROZ PTY LTD 13. VOSBURG PTY LTD 13. MS CAROLYN MARGARET EARL & MR JOHN WILLIAM NISSEN 14. DYSPO PTY LIMITED 14. BJM INCOME INVESTMENTS PTY LTD 14. SINGAPORE INVESTMENTS PTY LTD 15. THE GOLF NUT PTY LTD1 16. BRIGHTON GRAMMAR SCHOOL FOUNDATION LTD 17. JOWENE PTY LIMITED 18. JENONDA INVESTMENTS PTY LTD 18. AGED CARE GROUP PTY LTD 18. D & M COE PTY LIMITED 18. LEVIEN FOUNDATION PTY LTD 18. MELPEAT PTY LTD 18. MORBEN NOMINEES PTY LTD 18. SPACE DOOR PTY LTD 18. TUDOR FARM PTY LTD 18. MR COLLIN MERVYN TURNER & MRS VICKI JUNE TURNER 18. MALACHI THREE TEN PTY LTD 18. COLIN WISE CONSULTING PTY LTD 19. MRS ROSEMARIE HANICH 20. THE GOLF NUT PTY LTD1 1 Held in different accounts Number of Bonds % of units 340,851 44.85 60,667 24,744 23,608 21,931 7,670 7,500 4,580 4,269 4,000 3,185 3,002 3,000 3,000 3,000 2,500 2,500 2,500 2,446 2,250 2,124 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 1,981 1,969 7.98 3.26 3.11 2.89 1.01 0.99 0.60 0.56 0.53 0.42 0.40 0.39 0.39 0.39 0.33 0.33 0.33 0.32 0.30 0.28 0.26 0.26 0.26 0.26 0.26 0.26 0.26 0.26 0.26 0.26 0.26 0.26 0.26 555,277 73.06 125 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Corporate Information This annual report covers both Omni Bridgeway Limited as an individual entity and the consolidated entity comprising Omni Bridgeway 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 Non-Executive Chairman Michael Kay Managing Director Andrew Saker Executive Director Hugh McLernon Executive Director Raymond van Hulst Non-Executive Director Michael Bowen Karen Phin Non-Executive Director Christine Feldmanis Non-Executive Director Company Secretary Jeremy Sambrook 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 WESTPAC BANKING CORPORATION Level 18, 275 Kent Street Sydney NSW 2000 Internet address www.omnibridgeway.com The Company is listed on the Australian Securities Exchange with Sydney, Australia as its home exchange. Its ASX code is “OBL” and its shares were trading as at the date of this report. 126 Omni Bridgeway | Annual Report 2020 Glossary of Terms AASB CAGR CGU DCF EMEA EPS Estimated Portfolio Value (EPV) Australian Accounting Standards Board Compound Annual Growth Rate Cash Generating Unit Discounted Cash Flow Europe, Middle East and Africa Earnings Per Share EPV for an investment where the funding entity earns: i. a percentage of the resolution proceeds as a funding commission, is the current estimate of the investment’s recoverable amount after considering the perceived capacity of the defendant to meet the claim and any other pertinent factors. Such amount is not necessarily the amount being claimed by the claimants, nor is it an estimate of the return to the group if the investment is successful; ii. a funding commission calculated as a multiple of capital invested is arrived at by taking the estimated potential income return from the investment and grossing this up to an EPV using the Long-Term Conversion Rate; and iii. a funding commission calculated on a combination of the above bases or on an alternative basis, may utilise one of the above methodologies, or a hybrid construct, or an alternative methodology depending upon the components of the funding commission. OBE Group’s EPV has been estimated on a conceptually consistent basis; enforcement case investments may have a multi-layered approach from a timing and value perspective. Where OBE Group have not yet been able to ascertain an EPV consistent with the disclosed methodology an EPV of zero has been used. However calculated, an EPV is an estimate and 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 or the defendant(s) perceived capacity to meet the claim, partial recovery and, where applicable, fluctuations in exchange rates between the applicable local currency and the Australian dollar. Possible EPV’s are reviewed and updated where necessary. The portfolio’s value is the aggregation of individual investments’ EPVs as determined above. EU FUM IC IFC IFRS IRR LTIP European Union Funds Under Management Investment Committee International Finance Corporation International Financial Reporting Standards Internal Rate of Return Long Term Incentive Program MENA DARP Middle East and North Africa Distressed Asset Recovery Program. A joint venture with the IFC (part of the World Bank Group) designed to assist banks in the MENA regions with funding and cross border legal enforcement of high value non-performing loans. MOIC NCI OBE Multiple on Invested Capital Non-Controlling Interest Omni Bridgeway Holding B.V. (ie ‘Omni Bridgeway Europe’) OBE Group OBE Group included Omni Bridgeway Holding B.V., Omni Bridgeway AG (formerly ROLAND ProzessFinanz), and a joint venture with IFC (part of the World Bank Group) OBL OCA ROIC STIP TFR TSR Omni Bridgeway Limited, also referred to in this Report as “Omni Bridgeway”, “the Company” or “the Parent” On-line Client Administration Proprietary Database Return on Invested Capital 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 Omni Bridgeway Limited (“OBL”) Annual Report is an offer to sell, or a solicitation of an offer to buy, any securities of OBL or any other company affiliated with OBL. 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 OBL or its affiliates. This Annual Report is for the use of OBL’s public shareholders and is not an offering of any OBL private fund. 127 HighlightsFinancial Report Shareholder Information OverviewDirectors’ Report Asia Australia Canada United States Europe, Middle East & Africa Hong Kong +852 3978 2629 Level 27 World-Wide House 19 Des Voeux Road Central Central, Hong Kong Singapore +65 6813 2647 Level 13-03 6 Battery Road Singapore 049909 Adelaide +61 8 8122 1010 50 Gilbert Street Adelaide SA 5000 Brisbane +61 7 3108 1311 Level 18 175 Eagle Street Brisbane QLD 4000 Melbourne +61 3 9913 3301 Level 3 Bourke Place 600 Bourke Street Melbourne VIC 3000 Perth +61 8 9225 2300 Level 6 37 St Georges Terrace Perth WA 6000 Sydney +61 2 8223 3567 Level 18 68 Pitt Street Sydney NSW 2000 Montreal +1 514 257 6971 Houston +1 713 965 7919 Amsterdam +31 70 338 4343 60 Rue St Jacques Bureau 401 Montréal QC H2Y 1L5 Toronto +1 416 583 5720 250 The Esplanade Suite 127 Toronto ON M5A 1J2 LyondellBasell Tower 1221 McKinney Street Suite 2860 Houston TX 77010 Schiphol Boulevard 121 1118 BG Schiphol Amsterdam The Netherlands Los Angeles +1 213 550 2687 555 W. Fifth Street Suite 3310 Los Angeles CA 90013 Cologne +49 221 801155-0 Gereonstr. 43-65 50670 Cologne Germany New York +1 212 488 5331 Geneva +41 22 818 6300 437 Madison Avenue 19th Floor New York NY 10022 Rue de la Rôtisserie 4 1204 Geneva Switzerland San Francisco +1 415 231 0363 London +44 203 968 6061 50 California Street Suite 2550 San Francisco CA 94111 81 Chancery Lane London WC2A 1DD United Kingdom Dubai +971 4 514 4608 Unit 1905, Level 19 Index Tower Dubai International Financial Centre 507152 Dubai United Arab Emirates www.omnibridgeway.com