TIDMJIL
RNS Number : 6921T
Juridica Investments Limited
31 March 2016
Juridica Investments Limited
("Juridica," "JIL" or the "Company")
Results for the year ended 31 December 2015
Juridica, the leading provider of strategic capital for
corporate legal claims, announces its results for the year ended 31
December 2015.
Financial highlights
-- Total comprehensive loss of US$49.2 million, a substantial part of which was reported at the time of the interim
results
-- The Company declared an interim dividend of 5 pence per share payable on 30 December 2015 to shareholders of
record on 27 November 2015. In accordance with the run-off strategy adopted by the Board it will carefully
consider the timing and amount of payment of future dividends
-- Net asset value per ordinary share US$1.14 or 77 pence per share, (2014: US$1.66 or 107 pence per share)
Corporate update
The Board of Directors announced on 18 November 2015, that it
would not make any new investments (other than further funding of
existing investments where such funding was reasonably required in
the interests of shareholders); and that it would seek to return
capital to shareholders in the most appropriate manner, following
the completion of investments (the "run-off strategy").
Investment portfolio
There were 15 investments current at the year end of 2015; eight
of these investments involved litigation (including several which
consist of multiple underlying cases), five were in either
pre-litigation or Special Purpose Vehicle ("SPV") in relation to
patent monetisation, one has elements of both litigation and SPV
patent monetisation, and one pertains to revenue rights associated
with a coal mine. As to the non-litigation investments, these are
explained further in the Investment Manager's Report.
A considerable portfolio of litigation remains and there are
other investments that require active management in varying
degrees.
- Ends -
This report contains forward looking statements, which are based
on the current expectations and assumptions of the Investment
Manager and involve known and unknown risks and uncertainties that
could cause actual results or performance to differ materially from
those expressed or implied in such statements. It is believed that
the expectations reflected in these statements are reasonable but
they may be affected by a number of variables that could cause
actual results or trends to differ materially. Each forward looking
statement speaks only as of the date of this report. Except as
required by the AIM Rules or otherwise by law, the Company and the
Manager expressly disclaims any obligation or undertaking to
release publicly any updates or revisions to any forward looking
statements contained herein to reflect any change in the Company's
or Manager's expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is
based.
For further information contact:
Juridica Asset Management Limited +1 (866) 443
Richard W. Fields 1080
Cenkos Securities PLC - Nominated
Adviser and Joint Broker
Nicholas Wells +44 (0) 20
Camilla Hume 7397 8900
Investec Bank PLC - Joint Broker
Darren Vickers +44 (0) 20
Jeremy Ellis 7597 4000
Bell Pottinger +44 (0) 20
Olly Scott 3772 2500
CHAIRMAN'S STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2015
On behalf of the Board, I present the audited results of
Juridica Investments Limited ("JIL" or the "Company") for the year
ended 31 December 2015 which shows a total comprehensive loss of
US$49.2 million, a substantial part of which was reported to the
shareholders in the 2015 mid-year accounts.
Corporate update
After a careful review of the Company and its future, the Board
of Directors announced on 18 November 2015, that: i) it would not
make any new investments (other than further funding of existing
investments where such funding was reasonably required in the
interests of shareholders); and ii) that it would seek to return
capital to shareholders in the most appropriate manner, following
the completion of investments (the "run-off strategy").
JIL was a pioneer of litigation funding since its admission to
AIM in 2007 with an investment approach that did not permit
significant reinvestment of returns from the Company's investments.
It was with this background that towards the end of 2015 the Board
of Directors undertook its review of the future of the Company with
an important consideration being the Company's continuing position
in the developing market for litigation funding in the future,
particularly in the United States, where both scale and diversity
are the key challenges.
Taking into account the lack of significant capital available to
the Company for ongoing investment and the complexity of some
aspects of the investment structures required to be used, a
decision to adopt the run-off strategy was considered to be in the
best interest of shareholders.
Investment results
There were a limited number of case results in 2015 as fully
documented in the Investment Manager's Report and there were no
significantly large returns over the year. The final appellate
result announced for Case 8008-L, in June 2015, was very
disappointing and the particular circumstances of this case were
discussed at length in the Company's interim results for the period
ended 30 June 2015. In November 2015 the Company announced the
outcome of Case 5009-S, where despite a positive result on
liability, the damages awarded were significantly lower than the
case valuation in the net asset value ("NAV") at 30 June 2015.
Further detail on investment results is given in the Investment
Manager's Report.
Investment portfolio
There were 15 active investments at the year end of 2015; eight
of these investments involved litigation (including several which
consist of multiple underlying cases), five were in either
pre-litigation or Special Purpose Vehicle ("SPV") in relation to
patent monetisation, one has elements of both litigation and SPV
patent monetisation, and one pertains to revenue rights associated
with a coal mine. As to the non-litigation investments, these are
explained further in the Investment Manager's Report.
A considerable portfolio of litigation remains and there are
other investments that require active management in varying
degrees.
Amendments to investment management arrangements
After the November 2015 announcement, the Board and the
Company's manager, Juridica Asset Management Limited ("JAML" or the
"Manager"), undertook lengthy and detailed discussions as to new
arrangements that would serve shareholder interests. This led to
the agreements set out in the Company announcement of 8 February
2016 whereby:
-- The pre-existing arrangements made with JAML, whereby they
were contractually entitled to be paid management fees up to the
end of 2016 calculated by reference to net asset value ("NAV"),
were replaced by a new investment management agreement to pay fixed
management fees of US$3.0 million for 2016, and US$1.75 million for
2017. These amounts are expected to be significantly less than
would have been payable under the previous arrangements.
-- The amount payable in 2016 is subject to a deduction in the
amount of fees paid to JAML in 2016 in respect of 2015 financial
year consequent upon year end calculations that establish an
over-payment. This process involves a "true-up" calculation leading
in the past to an extra payment to the Manager but because of the
calculation for 2015 this year the reverse applies and there is to
be a repayment from the Manager to JIL. This is agreed at
US$720,000 and will be deducted from the management fees for the
remaining tranches to be paid during 2016.
-- The new arrangements with JAML continue until 31 December
2017 when the Company is entitled to terminate its investment
management agreement with JAML. Should circumstances involve the
continuation of any significant investments into 2018 then, the
Company will make appropriate arrangements as required.
-- The existing performance fee provisions in the investment
management agreement with JAML remain unchanged and the Company's
previous Investment Manager JCML 2007 Limited ("JCML") will
continue to be entitled to performance fees (to the extent payable)
in respect of investments made prior to the end of 2013. The
Company remains a shareholder in JCML and is entitled to 32.6% of
any performance fees received by it in such capacity.
Further cost reductions
Since the November announcement the Board has undertaken a
detailed review of the Company's costs other than those involving
the Manager directly and have set budget estimates for the coming
year of 2016, with a targeted reduction of up to US$900,000. These
reductions include significant reductions in the fees and expenses
of the Board together with other significant reductions with this
target in mind.
Proposed amendment to the Company's Articles of Incorporation
for the run-off strategy
At the Company's next Annual General Meeting ("AGM") in May the
Board will propose amendments to the Company's Articles of
Incorporation ("Articles") to facilitate the present run-off
strategy.
These amendments will seek to remove the requirement for the
Company to table a winding-up proposal at a general meeting in
November 2016 and every 3 years thereafter.
(MORE TO FOLLOW) Dow Jones Newswires
March 31, 2016 04:42 ET (08:42 GMT)
Given the Company's adoption of the run-off strategy the Board
believes that a formal liquidation of the Company is unnecessary
and potentially costly to the Company. The directors believe that
any liquidator appointment would place an unnecessary cost burden
on the Company over the period in which investments are completed
and such an appointment will also negatively impact the Company's
ability to realise investments at maximum shareholder value in
accordance with the run-off strategy. Further information on the
proposed change to the Articles will be included in the Company's
Notice for the AGM.
Dividend
The Company declared an interim dividend of 5 pence per share
payable on 30 December 2015 to shareholders of record on 27
November 2015. In accordance with the run-off strategy adopted by
the Board it will carefully consider the timing and amount of
payment of future dividends.
Conclusion
The Board considers that the fund has had considerable success
over its lifetime and that having been the first significant
litigation funder, especially in the United States market. The
acceptance of litigation funding as an asset class has been due in
large measure to the activities of the Company. The Board will
continue its run-off strategy in order to maximise value to
shareholders.
Lord Daniel Brennan QC
Chairman
30 March 2016
INVESTMENT MANAGER'S REPORT
FOR THE YEAR ENDED 31 DECEMBER 2015
As noted in the Chairman's Statement, on 18 November 2015, JIL
announced that it will no longer make new investments (other than
for funding existing investments in the Company's portfolio where
such funding is reasonably required to realise maximum value to
shareholders) and that it would return capital to shareholders in
the most appropriate manner. In accordance with this, and based on
the returns generated during the year, the Company paid a dividend
of 5 pence per share to shareholders on the Register at 27 November
2015.
The Company began operation in December 2007 and has, since
inception, made 30 investments (some of which have multiple
underlying cases or other assets and some which have had
supplemental investments). A total of 15 of these investments have
come to full conclusion. Of the remaining 15 investments, six have
had some return on the Company's investment (including the
Company's investment in JCML), either from settlements or other
distributions, and still remain active.
Investment results during 2015
Case 0108-S, Case 0209-S, and Case 0108-SD:
Case 0108-S was the first investment made by the Company in
2008. The underlying case involved the prosecution of a patent
infringement claim. Two additional investments (0209-S and 0108-SD)
relating to the same patent were subsequently made to enhance the
Company's potential return. During 2015, the case resulted in a
favourable judgment after trial in excess of US$20 million. The
investment underperformed our expectations, in terms of both amount
of damages and timing, but still returned a modest cash profit of
US$1.7 million.
Case 8008-L:
During the year ended 31 December 2015, and as detailed in the
Company's 2015 mid-year report, Case 8008-L (which was one of the
six underlying cases in our single antitrust and competition
investment) lost a damages appeal in the Court of Appeals and then
was denied an opportunity for further review by the US Supreme
Court. Case 8008-L had previously delivered gross returns of
US$89.7 million on a direct investment of US$26.0 million.
Notwithstanding the disappointing ruling, it was still a successful
investment by the Company.
Case 0409-C:
Case 0409-C settled during 2015 after previously receiving a
successful jury verdict of US$50 million in the client's favour.
The jury verdict was returned in 2012 but a reasonable settlement
offer was delayed because of remaining non-jury issues that the
trial judge had not decided. The case returned US$9.7 million on an
investment of US$4.6 million.
Investment 114107:
Investment 114107 is an investment made during 2015 that
involves five separate patent portfolios comprising several hundred
patents. The Company invested US$1.3 million in this pool of patent
assets. An early settlement returned the Company's entire
investment in the case while maintaining an ongoing interest in
potential future proceeds from the investment.
In addition to the above results, during the year ended 31
December 2015, the Company received US$4.7 million in cash proceeds
from a dividend distribution made by our previous manager, JCML. An
additional US$650,000 in Company stock was also distributed to the
Company by JCML and returned to the Company's treasury. Both of
these receipts are as a result of the Company's 36.17% holding of
JCML.
New investments made during 2015
Prior to the Company's decision to cease funding of new
investments (except in limited circumstances), the Company made two
new investments in 2015 as follows:
-- Investment 114107: As discussed above, the Company invested
in a pool of litigation ready patents covering various technology
industries. The asset pool included two existing lawsuits that
provided excess collateral for the Company's investment that is
being used to fund three new cases. A settlement in one of the
older cases provided as collateral resulted in return of all the
Company's investment within 60 days of funding while potential
future proceeds from the three new cases remain.
-- Investment 12013: This investment involves a legal claim of
misappropriation of trade-secrets. This investment funded an appeal
which, during the fourth quarter of 2015, was lost. At 31 December
2015, a motion for reconsideration was in process as the first step
in the appeals process. Subsequent to 2015 year-end, the motion for
reconsideration was lost and the plaintiff is evaluating their
remaining options with the case. A total of US$250,000 was invested
by the Company into this case. Approximately US$95,000 of the
Company's 2015 year-end NAV was applicable to this investment.
Both of these new investments were made under our previously
announced co-allocation policy with a third-party.
Financial performance during 2015
The net asset value ("NAV") per ordinary share decreased from
US$1.66 (107 pence per share as at 31 December 2014 to US$1.14 (77
pence per share) as at 31 December 2015. This decrease of 52 cents
in NAV per ordinary share was primarily attributable to the
following:
-- Dividend declared on 18 November 2015 and paid on 30 December
2015 of US$8.2 million or 7.4 cents per ordinary share (5 pence per
share).
-- Total comprehensive loss of US$49.2 million or 44.4 cents per ordinary share.
The Company's US$49.2 million total comprehensive loss for the
year ended 31 December 2015 was due principally to the net
unrealised loss of US$47.8 million generated from the change in
valuation of the Company's investments partly offset by the JCML
dividend of US$5.4 million. Operating expenses of US$7.0 million
and other net positive adjustments of US$200,000 account for the
remainder of the loss.
The Company's net unrealised loss from net reduction in the
valuation of the Company's investments of US$47.8 million was
attributable to the following:
-- US$35.2 million reduction in value associated with the
Company's debt securities consisting exclusively of our antitrust
and competition portfolio and was primarily attributable to case
8008-L as discussed above.
-- US$5.1 million reduction in value associated with the
Company's contractual interests primarily associated with Case
5009-S as discussed below.
-- US$7.5 million reduction in value associated with the
Company's equity investments primarily attributable to a change in
the value associated with the Company's interest in JCML
substantially resulting from the receipt of dividend valued at
US$5.4 million consisting of cash and Company stock. The receipt of
the dividend value by the Company is reflected as dividend income
in the accounts. An additional US$1.4 million reduction in value
was attributable to Case 1610.
Fair value of investments
The fair value of the Company's investments at 31 December 2015
was US$90.8 million. These investments are categorised as
contractual interests, debt securities, or equity investments.
These categories reflect the following changes from the carrying
value as at 31 December 2014:
Net Realised
Proceeds Gains Fair Value
Additions Attributable Attributable Change
During to the to the During
31 Dec the Year Ended Year Ended the Year 31 Dec
2014 Fair Year Ended 31 Dec 31 Dec Ended 2015
Value 31 Dec 2015 2015 31 Dec Fair
$USM 2015 $USM $USM 2015 Value
$USM $USM $USM
-------------------- ------------ ------------- -------------- -------------- ------------- ---------
Contractual
Interests:
includes
assets
from the
Company's
patent
and commercial
claims
portfolios 54.5 2.8 (24.1) 1.3 (5.1) 29.4
-------------------- ------------ ------------- -------------- -------------- ------------- ---------
Debt Securities:
includes
assets
from our
antitrust
and competition
portfolio 82.6 8.0 - - (35.2) 55.4
-------------------- ------------ ------------- -------------- -------------- ------------- ---------
(MORE TO FOLLOW) Dow Jones Newswires
March 31, 2016 04:42 ET (08:42 GMT)
Equity
Investments:
includes
assets
from our
patent
and commercial
claims
portfolios
as well
as other
investments 13.0 0.5 - - (7.5) 6.0
-------------------- ------------ ------------- -------------- -------------- ------------- ---------
Total 150.1 11.3 (24.1) 1.3 (47.8) 90.8
-------------------- ------------ ------------- -------------- -------------- ------------- ---------
In addition to the above changes, the Company is reflecting at
31 December 2015:
-- A fair value adjustment of approximately US$(700,000) for its
forward currency contract purchased to protect the Company from
currency fluctuations relating to the 2014 dividend which was paid
on 14 January 2015. As at 31 December 2015, this forward currency
contract had matured.
The above table excludes US$27.0 million in additions and net
proceeds associated with the Company's debt securities.
Specifically, and as detailed in Note 5(c) to the Company's
financial statements, a clawback of US$27.0 million in payments
made under the swap component of the facility with Fields Law PLLC
("Fields Law") was made during 2015 in order to enable Fields Law
to repay accrued interest and principal owed to the Company under
the note component of the facility. This activity had no net impact
to the Company's NAV or to the fair value of the Company's debt
securities.
As discussed in previous reports, we value JIL's investments
using valuation and accounting methods that are applied in a manner
that follows International Financial Reporting Standards' ("IFRS")
accounting principles. In particular, we follow guidance provided
by IFRS 13 in establishing the method of applying fair value
accounting. Under this guidance, we develop a fair value of a case
or investment by discounting its expected terminal value from its
expected completion date. We determine our initial expectations on
quantum and timing of case results by assigning a probability of
various scenarios coming to fruition and applying risk factors
that: i) are intrinsic to the specific case; and ii) reflect
general risks within and outside of the legal process. Our
assumptions behind an investment's fair value are revisited on a
semi-annual basis (to coincide with the Statement of Financial
Position date). If needed, we will re-run the investment's
valuation model and revise its expected future cash flow which we
then discount to the reporting date. The discount rate used for
valuation purposes is the Company's cost of equity. All due
diligence and transaction costs related to an investment are
expensed.
Relative to the expectations we have at the time an investment
is made, the investment itself is carried at any point in time at a
discount to what we believe the investment will ultimately be
worth. This is in part due to the timing discount we apply but is
mostly attributable to the potential adverse actions that can arise
in any litigation. Unlike an investment that is backed by a
physical asset, litigation assets are subject to certain legal
hurdles each of which has the potential to cause the litigation
portion of any investment to be worthless. A key element in
selecting investment worthy cases is the likelihood of a particular
case overcoming any remaining hurdles and generate either a
settlement or trial victory.
As part of our valuation process, we consider the current legal
merits of each underlying case, the legal history of the case, the
current legal environment, and any other factors we feel are
relevant as of the date of our valuation. Working with the lawyers
assigned to each case, we develop scenarios of potential outcomes,
including the various situations that can generate outsized
returns, moderate returns, or a complete loss, and assign each
scenario a probability. The Monte Carlo simulation runs the
statistically relevant number of iterations to provide us with an
expected value and timing. These results are then discounted to the
reporting date at the Company's cost of equity.
Of significance is the risk of loss that is assigned to each
case. This must be considered given the typical binary
characteristics of a legal case (i.e. win or lose). Because of this
ever-present risk of loss (and to a lesser extent the impact of
discounting), the accounting fair value of a particular case or
investment is typically less than the expectation we hold should
the case prevail, and in some instances, the actual outcome of the
case may be significantly greater than its fair value for this
reason. The Company experienced such an event in 2014 when one of
the larger antitrust and competition cases settled and generated
proceeds significantly greater than its fair value in the reporting
period preceding the settlement.
Our accounting fair value on the Company's investments is not
intended to express our prediction about the ultimate outcome of
any investment, but rather our fair value estimate based on the
best information available to us at the Statement of Financial
Position date using a range of possible outcomes.
It must be emphasised again that any of our litigation assets
that carry a value at a particular measurement date could become
worthless, even a short period of time after our measurement date,
if the case fails to overcome a particular set of hurdles. In some
instances, and particularly for Case 8008-L, incorporating a
heightened risk of loss may be muted by the potential of the case
to overcome its set of legal hurdles. For Case 8008-L, the quantum
of potential proceeds had the case overcome its hurdles were very
large and thus retained value in the case, even with the heightened
risk of loss.
Concentration risk and size of existing portfolio
Overall the concentration risk in the three portfolio groups is
highlighted in the table below:
Number Carrying
Portfolio category of active value % of total
investments $US Million NAV
(1)
---------------------------- ------------- ------------- -------------
Antitrust and
competition (2) 1 55.4 43.9%
Patents and intellectual
property 7 23.1 18.3%
Commercial (3) 6 14.3 11.3%
------------- ------------- -------------
Total 14 92.8 73.5%
============= ============= =============
(1) Number of active investments include some of which have
multiple underlying cases or other assets, and some which have had
supplemental investments. Excludes the Company's investment in
JCML.
(2) One of the two remaining cases in the antitrust and
competition portfolio has the potential to deliver significant cash
proceeds to the Company. After considering all possible outcomes in
our fair value calculation (including potential for outsized
returns as well as the potential for a loss), this individual case
represents a carrying value of over US$40.0 million at 31 December
2015.
(3) Commercial portfolio fair value includes an investment in
which US$2.1 million of its carrying value is categorised as an
intangible. Commercial portfolio excludes US$27,000 in fair value
associated with the Company's investment in JCML.
Portfolio historical performance
From inception to 31 December 2015, the Company's portfolio has
generated net cash proceeds of approximately US$222.4 million
(excluding proceeds generated from the Company's investment in its
previous manager, JCML).
The portfolio, since inception, has performed as follows:
-- Fifteen investments (three of which were related) have
reached completion with proceeds from the underlying cases
delivering a total of US$67.2 million in gross proceeds
representing a blended internal rate of return of approximately
20.27% (as calculated from the date of investment to the date of
return).
-- Five investments that have produced returns still remain
active even though some settlements have been reached. One of these
investments is our large antitrust and competition investment that
originally consisted of six cases and now has two active cases
remaining. Three of these investments are part of our patent
portfolio and consists of investments with litigation elements and
patent sale or licensing elements. The final investment with a
partial settlement was part of our commercial portfolio and
currently consists of an asset sale element. Total net proceeds
from active investments with partial settlements are approximately
US$155.2 million.
In addition to the above performance, the Company's investment
in JCML produced returns in the form of dividends valued at US$5.4
million consisting of cash and Company stock (which was returned to
the Company's treasury). This investment remains active.
Investment Number Amount Invested Amount Recovered
(includes (net of fees,
related transaction reinvestment, IRR
costs) reserves %
$US and taxes)
$US
------------------------------ --------------------- ----------------- -------
Completed Investments:
0208-G 12,050,211 13,750,000 29.99
0308-R 9,294 3,500,000 -
0908-U 3,119,371 4,337,693 60.81
6308-F 1,522,802 2,487,749 60.91
(MORE TO FOLLOW) Dow Jones Newswires
March 31, 2016 04:42 ET (08:42 GMT)
0408-W 2,872,424 3,793,389 19.53
6509-A 2,476,681 4,500,000 54.76
6409-V 785,819 5,302,905 260.52
0210-M 1,526,040 2,478,220 45.05
2510 1,059,994 3,000,000 38.11
7608-A 2,141,221 1,239,032 -27.58
0108-S / 0209-S / 0108-SD 11,524,807 13,082,726 3.48
0409-C 4,795,954 9,725,862 13.19
0608-S(1) 4,425,041 - -
Total - Completed Investments 48,309,659 67,197,576 20.27
------------------------------ --------------------- ----------------- -------
Investments With Partial
Recoveries(2) :
7508-O 6,260,229 228,572
0708-B 7,081,122 1,618,500
3608-A(3) 106,598,336 148,024,521
1610 4,220,964 4,000,000
114107 1,345,685 1,308,824
Total - Investments
With Partial Recoveries 125,506,336 155,180,417
-------------------------------- --------------------- -----------------
Total Cash Recovered to 31 December
2015: 222,377,993
-----------------
(1) Case 0608-S was written down to nil during the year ended 31
December 2015.
(2) Excludes proceeds generated from the Company's investment in
its previous manager, JCML.
(3) Amount invested for 3608-A includes gross advances under
debt facility and US$8.0 million clawback in 2015 that was used for
investment funding purposes. Amount excludes US$13.2 million in
principal repayments made from proceeds.
Portfolio update
The Company's current portfolio remains diversified with three
primary groups: antitrust and competition, patent and other forms
of intellectual property, and commercial.
The cash summary at 31 December 2015 for each of these groups
(excluding the Company's investment in JCML) is as noted on the
following table:
Cumulative Amount Invested Commitment
Net Proceeds in Current Available
Generated(1) Portfolio for Current
Type of claim US$ million Holdings(2) Portfolio
or litigation US$ million Holdings(3)
US$ million
-------------------------- -------------- ---------------- -------------
Antitrust and
competition 148.0 91.8 7.0
-------------------------- -------------- ---------------- -------------
Patents and intellectual
property 37.5 28.8 0.3
-------------------------- -------------- ---------------- -------------
Commercial 36.9 18.3 -
-------------------------- -------------- ---------------- -------------
Total 222.4 138.9 7.3
-------------------------- -------------- ---------------- -------------
(1) Cumulative Net Proceeds Generated refers to partially
settled investments and completed investments from inception until
31 December 2015. Additional proceeds have been generated within
the antitrust and competition portfolio and the patent portfolio
and have been used to fulfil funding requirements for cases within
each portfolio.
(2) Amount Invested in Current Portfolio Holdings reflects cash
investment as at 31 December 2015 (excludes any related transaction
costs) by JIL for the current investment holdings in each
portfolio. Antitrust and competition portfolio reflects advances
under the Facility net of repayment totalling US$13.2 million and
US$8.0 million in funding from the related swap instrument.
(3) Commitment Available for Current Portfolio Holdings reflects
remaining funding commitment (as of 31 December 2015) by JIL for
the current investment holdings in each portfolio. A portion of the
commitment related to the antitrust and competition portfolio may
be fulfilled from portfolio returns and cash reserves held within
the investment.
Antitrust and competition portfolio
Of the six original cases in the Company's antitrust and
competition portfolio, three remained active during the year ended
31 December 2015.
Case summaries:
-- Case 8008-L lost a damages appeal in the Court of Appeals and
then was denied an opportunity for further review by the US Supreme
Court. Case 8008-L had previously delivered gross returns of
US$89.7 million on a direct investment of US$26.0 million.
-- Case 5308-U began its trial in early March 2016 and that
trial is still ongoing as of the date of this release. The Company
will provide updates upon conclusion.
-- Case 1008-A involves statutory claims against an
international bank. One part of the case is set for trial in May
2016 and is likely to result in settlement. The second part of the
case is on appeal after a dismissal of certain claims by the trial
court.
Patent portfolio
The Company began 2015 with a total of 11 investments in the
Company's patent and intellectual property portfolio. Four of these
investments came to conclusion during 2015 and as of 31 December
2015, the Company held seven investments in this portfolio.
Case summaries:
-- Case 0108-S, 0209-S, and 0108-SD came to a conclusion as detailed above.
-- Case 0409-C came to a conclusion as detailed above.
-- Case 0808-C involves several components. The underlying
litigation several years ago resulted in a judgment of liability
but low damages and is still on appeal. The Company no longer
expects to generate proceeds from the litigation component. The
Company has also been developing a portfolio of patents, in an SPV
structure, related to the key patent involved in the litigation.
During 2015, it was determined that the underlying inventions for
these new patents have limited value and thus minimal value has
been assigned to these inventions in the Company's NAV. The final
component in this investment is an equity interest in a company
that has developed energy-saving software for electrical motors.
The Company obtained this interest as additional collateral at the
time of financing the original litigation. The claimant has been
marketing the underlying technology and is currently in
negotiations to sell the technology to a major industrial
conglomerate. This equity interest represents most of the value in
the NAV for this asset.
-- Case 2709-E now consists of two patents and, after a lengthy
delay, has begun to progress quickly. Limited settlement
discussions have occurred, a Markman hearing is presently set for
mid-2016 and we expect additional progress during 2016.
-- Case 0708-B began with litigation involving an underlying
patent for which the Company previously has received proceeds.
During 2014, we believed that significant value can be unlocked by
developing a portfolio of related patents in the areas of rich
media and multimedia. The inventor of the patent that was the
subject of the original litigation, along with other subject matter
experts, are developing these patents under a SPV structure.
-- Case 7508-O consists of litigation surrounding core computer
technology, which is nearing completion, as well as a developing
portfolio of patents (under a SPV structure) covering various
elements of communications. As of 31 December 2015, a total of 37
application for US patent protection have been filed (with
additional filings made for international protection). During 2015,
nine patents had been granted or notice of granting was received.
We have already begun marketing this developing patent
portfolio.
-- Investment 7313 reflects the Company's 7.8% preferred
ownership in ipCreate, Inc ("ipCreate"). The Company is expecting
to monetise this investment as part of future capital raising by
ipCreate.
-- Investment 9713 is an investment (under a SPV structure)
established to develop and monetise a large portfolio of patents in
the technology and sports market. The Company has partnered with
the National Football League Players Association in this endeavour.
As of 31 December 2015, a total of 55 applications application for
US patent protection have been filed (with additional filings made
for international protection).
-- Investment 114107 is a new investment involving five separate
patent portfolios comprising several hundred patents and is
detailed above.
Commercial portfolio
The Company began 2015 with a total of eight investments in its
commercial portfolio, of which seven involve claims related to
commercial disputes including: theft of trade secret, breach of
contract and insurance subrogation. The final investment reflects
the Company's 36.17% interest in the Company's previous manager,
JCML. As of 31 December 2015, seven of these investments remain
active.
Case summaries:
(MORE TO FOLLOW) Dow Jones Newswires
March 31, 2016 04:42 ET (08:42 GMT)
-- Case 1610 has resulted in a favourable arbitration award in
the amount of US$4.0 million. While JIL has recouped its US$4.0
million investment from the settlement, the Company is seeking to
recover further proceeds from its security interest in a revenue
stream to be generated from a US based coal mine. This security
interest served as a cross collateral hedge against unfavourable
litigation results. Market conditions for the coal industry remain
highly unfavourable. As such, the Company retained an industry
expert to provide a current valuation which is the value included
in the Company's NAV. The Company will continue to seek
opportunities to monetise its interest, although near-term market
conditions are expected to make this effort difficult.
-- Case 0608-S was deemed by the Company to retain no value and
was written off at 31 December 2015. This investment was assigned a
fair value of US$400,000 at 31 December 2014.
-- Case 1608-T involves a judgment on behalf of insurance
companies against a foreign government. In addition, a related
claim against a sovereign government is being pursued and is
scheduled for summary judgment in 2016. In 2014, we identified that
although the collection efforts may ultimately be successful,
timing and collection risk had increased and the fair value of the
investment was written down. Additional legal proceedings are
expected during 2016 that should provide more clarity on the future
of this investment.
-- Case 5009-S completed its trial by jury during 2015. Although
the plaintiff fully won on liability, the jury only awarded an
amount which will result in proceeds to the Company of
approximately US$2.0 million as compared to an investment of
approximately US$3.5 million. Both sides have filed post-trial
motions for a new trial with the plaintiff requesting a new trial
on damages and the defendant requesting a new trial on all issues.
These motions have yet to be ruled on by the trial court. We
believe there remains a possibility that a new trial on damages
will occur.
-- Case 1410 completed its trial during 2014 with a positive
ruling on liability but damages awarded were far less than
expected. Cross-appeals on liability and plaintiff's appeal on
damages were filed after the ruling. In early 2016, the plaintiff's
appeal received a favourable appeals court ruling overturning the
trial court's damages award. The Company is awaiting further action
by the trial court, including the possibility of a new award on
damages without a further trial.
-- Case 6609-S involves a large, multi-party pre-litigation
settlement opportunity that we believe has the potential to
generate significant proceeds for the Company. Settlement
negotiations for a portion of the opportunity continue. This
investment is being accounted for partially as an intangible asset
and partially as a contractual interest.
-- Investment 12013 involves a legal claim of misappropriation
of trade secrets. Its status is detailed above.
-- Investment in JCML reflects the Company's investment in its
previous manager. During 2015, JCML distributed cash and Company
stock to the Company with a total value of approximately US$5.4
million.
Outlook
We will continue to work with the Company's Board of Directors
to maximise shareholder value and returning capital to shareholders
in the most appropriate manner, following the completion of
investments.
Disclaimer on forward looking statements
This report contains forward looking statements, which are based
on the current expectations and assumptions of the Investment
Manager and involve known and unknown risks and uncertainties that
could cause actual results or performance to differ materially from
those expressed or implied in such statements. It is believed that
the expectations reflected in these statements are reasonable but
they may be affected by a number of variables that could cause
actual results or trends to differ materially. Each forward looking
statement speaks only as of the date of this report. Except as
required by the AIM Rules or otherwise by law, the Company and the
Manager expressly disclaims any obligation or undertaking to
release publicly any updates or revisions to any forward looking
statements contained herein to reflect any change in the Company's
or Manager's expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is
based.
Juridica Asset Management Limited
30 March 2016
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2015
The Directors present their report together with the audited
financial statements of Juridica Investments Limited (the
"Company") for the year ended 31 December 2015, with comparative
information for the year ended 31 December 2014.
Principal activities
The Company is an authorised closed-ended investment company
incorporated under The Companies (Guernsey) Law, 2008 (the "Law").
The Law does not make a distinction between private and public
companies. Shares in the Company were admitted to trading on AIM, a
market operated by the London Stock Exchange, on 21 December 2007.
The address of the Company's registered office is 11 New Street, St
Peter Port, Guernsey, GY1 2PF.
Corporate update
The investment objective of the Company had been to build a
diversified portfolio of investments in claims and to provide
Shareholders with an attractive level of dividends and capital
growth through investing directly and indirectly in litigation and
arbitration cases, claims and disputes. These investments have been
made predominantly in the United States. On 18 November 2015, the
Company announced that it would not make new investments (other
than for funding existing investments in the Company's portfolio
where such funding is reasonably required to realise maximum
shareholder value) but, instead, would seek to return capital to
shareholders in the most appropriate manner following the
completion of investments (the "run-off strategy").
Results and dividend
The results for the year are shown in the Statement of
Comprehensive Income on page 20. The Company declared a dividend of
5 pence per share on 18 November 2015. Accordingly, this dividend
was paid on 30 December 2015 to shareholders on the register at 27
November 2015. The dividend was funded by the US$28.0 million in
cash proceeds from settlements that were transferred to the Company
during the year.
Audit Committee
The Audit Committee consists of Richard Battey, Lord Daniel
Brennan and Kermit Birchfield. The Audit Committee is chaired by Mr
Battey, and meets at least once a year to review the financial
statements, audit timetable, and other risk management and
governance matters.
Statement of Directors' responsibilities in respect of financial
statements
The Directors are responsible for preparing financial statements
for each financial year which give a true and fair view, in
accordance with applicable Guernsey law and International Financial
Reporting Standards, of the state of affairs of the Company and of
the profit or loss of the Company for that period. In preparing
those financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable and prudent;
-- state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors confirm that they have complied with the above
requirements in preparing the financial statements.
The Directors are responsible for keeping proper accounting
records that disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with The Companies (Guernsey) Law,
2008. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
So far as the Directors are aware, there is no relevant audit
information of which the Company's Auditor is unaware, and each
Director has taken all the steps that he or she ought to have taken
as a Director in order to make himself or herself aware of any
relevant audit information and to establish that the Company's
Auditor is aware of that information.
The maintenance and integrity of the Company's website is the
responsibility of the Directors. The work carried out by the
Auditor does not involve consideration of these matters and,
accordingly, the Auditor accepts no responsibility for any changes
that may have occurred to the financial statements since they were
initially presented on the website. Legislation in the United
Kingdom and Guernsey governing the preparation and dissemination of
financial statements may differ from legislation in other
jurisdictions. To the best of our knowledge, and in accordance with
the applicable reporting principles, the financial statements give
a true and fair view of the assets, liabilities, financial
position, comprehensive income and cash flows of the Company,
although there is uncertainty around valuation of the Company's
investments in the absence of an established market. The Investment
Manager's report includes a fair review of the development and
performance of the business and the position of the Company,
together with a description of the principal opportunities and
risks associated with the expected development of the Company.
Furthermore, to the best of our knowledge and belief, this
annual report includes a fair review of the development and
performance of the business and the position of the Company as at
31 December 2015 together with a description of the principal risks
and uncertainties that the Company faces.
(MORE TO FOLLOW) Dow Jones Newswires
March 31, 2016 04:42 ET (08:42 GMT)
In accordance with The Companies (Guernsey) Law, 2008, each
Director confirms that there is no relevant audit information of
which the Company's Auditor is unaware.
Independent Auditor
The Auditor, PricewaterhouseCoopers CI LLP, have expressed their
willingness to continue in office and a resolution for their
re-appointment will be proposed at the forthcoming Annual General
Meeting.
Continuation and going concern
In accordance with the Company's Admission Document of 17
December 2007, the Directors convened an extraordinary general
meeting of the Company, on 14 November 2013, at which a resolution
was proposed (as required) that the Company be wound up
voluntarily. The resolution was not passed by the Company's
members. The Directors will propose to remove the requirement to
convene an extraordinary general meeting for the voluntary wind-up
of the Company every three years from the date of the original
meeting, at the Annual General Meeting on 3 May 2016.
Although the Company is in a run-off strategy, the Directors
have given consideration to the maturity of the Company's existing
portfolio, the performance of the portfolio to date, the prospects
of expected future cash flows, and existing cash reserves. In
addition, the Directors have reviewed the Company's budgets and
cash flows for the year ahead and, accordingly, are satisfied on
reasonable grounds that it is appropriate to prepare these
financial statements on a going concern basis.
Approved by the Board of Directors on 30 March 2016 and signed
on their behalf:
RJ Battey
Director
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF
JURIDICA INVESTMENTS LIMITED
FOR THE YEAR ENDED 31 DECEMBER 2015
Report on the financial statements
We have audited the accompanying financial statements of
Juridica Investments Limited (the "Company") which comprise the
Statement of Financial Position as of 31 December 2015, the
Statement of Comprehensive Income, the Statement of Changes in
Equity and the Statement of Cash Flows for the year then ended and
a summary of significant accounting policies and other explanatory
information.
Directors' responsibility for the financial statements
The Directors are responsible for the preparation of financial
statements that give a true and fair view in accordance with
International Financial Reporting Standards and with the
requirements of Guernsey law. The Directors are also responsible
for such internal control as they determine is necessary to enable
the preparation of financial statements that are free from material
misstatement, whether due to fraud or error.
Auditor's responsibility
Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit in accordance
with International Standards on Auditing. Those Standards require
that we comply with ethical requirements and plan and perform the
audit to obtain reasonable assurance whether the financial
statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor's judgement, including
the assessment of the risks of material misstatement of the
financial statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal control
relevant to the entity's preparation and fair presentation of the
financial statements in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity's internal
control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting
estimates made by the Directors, as well as evaluating the overall
presentation of the financial statements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit
opinion.
Opinion
In our opinion, the financial statements give a true and fair
view of the financial position of the Company as of 31 December
2015, and of its financial performance and its cash flows for the
year then ended in accordance with International Financial
Reporting Standards and have been properly prepared in accordance
with the requirements of The Companies (Guernsey) Law, 2008.
Emphasis of Matter
Without qualifying our opinion, we draw your attention to Notes
2(d), 3 and 15(a) to the financial statements surrounding the fair
value of non-current assets. The financial statements include
non-current assets stated at their fair value of US$92,836,473. Due
to the inherent uncertainty associated with the valuation of such
non-current assets and the absence of a liquid market, these fair
values may differ from their realisable values, and the differences
could be material.
Report on other legal and regulatory requirements
We read the other information contained in the Annual Report and
consider the implications for our report if we become aware of any
apparent misstatements or material inconsistencies with the
financial statements. The other information comprises only the
Corporate Information, the Chairman's Statement, the Investment
Manager's report, the Directors' report, the Notice of Annual
General Meeting and the Form of Proxy.
In our opinion the information given in the Directors' report is
consistent with the financial statements.
This report, including the opinion, has been prepared for and
only for the Company's members as a body in accordance with Section
262 of The Companies (Guernsey) Law, 2008 and for no other purpose.
We do not, in giving this opinion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
PricewaterhouseCoopers CI LLP
Chartered Accountants
Guernsey, Channel Islands
30 March 2016
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2015
2015 2014
--------------- --------------
Notes US$ US$
INCOME
Dividend income 14(b) 5,369,711 -
Foreign exchange gain 805,211 -
6,174,922 -
--------------- --------------
EXPENSES
Management fees 14(a) 4,795,036 5,872,475
Performance fees 14(c) - 14,511,058
Due diligence and transaction
costs 2(e) 477,111 905,687
Directors' fees and expenses 14(f) 599,549 681,153
Audit fees 233,383 234,735
Legal and professional
expenses 212,109 1,063,460
Administration fees 14(e) 242,209 300,309
Foreign exchange loss - 306,002
Other expenses 498,813 476,305
7,058,210 24,351,184
--------------- --------------
INVESTMENT MOVEMENTS
Amortisation of intangible
assets 4 (829,070) (1,088,261)
Realised (losses)/gains
on financial assets and
financial liabilities at
fair value through profit
or loss 5 (369,946) 28,809,543
Movement in unrealised
loss on financial assets
and financial liabilities
at fair value through profit
or loss 5 (47,073,882) (8,365,538)
(48,272,898) 19,355,744
--------------- --------------
Loss for the year (49,156,186) (4,995,440)
=============== ==============
Total comprehensive loss
for the year (49,156,186) (4,995,440)
=============== ==============
Deficit per Ordinary Share 17
Basic Cents (44.49) (4.51)
Diluted Cents (44.31) (4.49)
The notes on pages 24 to 45 form an integral part of these
financial statements.
STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2015
2015 2014
------------ ------------
Notes US$ US$
ASSETS
Non-current assets
Intangible assets 4 2,058,796 2,647,866
Financial assets at fair
value through profit or loss 5 90,777,677 150,061,860
92,836,473 152,709,726
Current assets
Other receivables and prepayments 8 6,207,781 54,593,126
Cash and cash equivalents 27,384,242 27,962,963
33,592,023 82,556,089
TOTAL ASSETS 126,428,496 235,265,815
============ ============
EQUITY AND LIABILITIES
Equity
Treasury shares 13 (645,459) -
Reserves 13 126,783,917 184,158,780
Net assets attributable to ordinary
shareholders 126,138,458 184,158,780
Total equity 126,138,458 184,158,780
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------------ ------------
Current liabilities
Dividend payable 9 - 34,491,900
Financial liabilities at
fair value through profit
or loss 5 - 686,903
Performance fee payable 14(c) - 14,511,058
Other payables 10 290,038 1,417,174
Total liabilities 290,038 51,107,035
------------ ------------
TOTAL EQUITY AND LIABILITIES 126,428,496 235,265,815
============ ============
Number of ordinary shares
(excludes treasury shares) 110,340,019 110,701,754
Net asset value per ordinary
share 16 $1.1432 $1.6636
These financial statements were approved and authorised for
issue by the Board of Directors on 30 March 2016 and signed on its
behalf by:
RJ Battey
Director
The notes on pages 24 to 45 form an integral part of these
financial statements.
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2015
Reserves Treasury Total
Shares
------------- ---------- -------------
US$ US$ US$
Balance at 1 January
2014 223,646,120 - 223,646,120
Changes in equity
for 2014
Loss for the year (4,995,440) - (4,995,440)
Total comprehensive
loss (4,995,440) - (4,995,440)
Dividends declared (34,491,900) - (34,491,900)
Balance at 31 December
2014 184,158,780 - 184,158,780
============= ========== =============
Changes in equity
for 2015
Loss for the year (49,156,186) - (49,156,186)
Total comprehensive
loss (49,156,186) - (49,156,186)
Treasury shares
acquired - (645,459) (645,459)
Dividends declared 9 (8,218,677) - (8,218,677)
Balance at 31 December
2015 126,783,917 (645,459) 126,138,458
============= ========== =============
The notes on pages 24 to 45 form an integral part of these
financial statements.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2015
2015 2014
------------- -------------
US$ US$
Cash flows from operating activities
Loss for the year (49,156,186) (4,995,440)
Adjusted for:
Realised losses/(gains) on financial
assets and financial liabilities
at fair value through profit
or loss 369,946 (28,809,543)
Movement in unrealised losses
on financial assets and financial
liabilities at fair value through
profit or loss 47,073,882 8,365,538
Amortisation of intangible assets 829,070 1,088,261
Foreign exchange (gains)/losses (805,211) 306,002
Changes in working capital
Purchases of non-current assets
at fair value through profit or
loss (38,417,376) (12,817,386)
Settlement of non-current assets
and financial liabilities at fair
value through profit or loss 98,570,910 25,442,619
Increase in other receivables
and prepayments (697,681) (12,446)
(Decrease)/increase in other payables
and performance fee (15,555,250) 15,617,881
Net cash flow from operating activities 42,212,104 4,185,486
Cash flows from investing activities
Interest received - 353
Net cash outflow from investing
activities - 353
------------- -------------
Cash flows from financing activities
Dividends paid (42,710,577) (25,674,394)
Net cash flow from financing activities (42,710,577) (25,674,394)
------------- -------------
Net decrease in cash and cash
equivalents (498,473) (21,488,555)
Cash and cash equivalents at the
beginning of the period 27,962,963 49,972,981
Effect of foreign exchange rate
changes (80,248) (521,463)
Cash and cash equivalents at the
end of the period 27,384,242 27,962,963
============= =============
The notes on pages 24 to 45 form an integral part of these
financial statements.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2015
1. LEGAL FORM AND PRINCIPAL ACTIVITY
The Company is an authorised closed-ended investment company
incorporated under The Companies (Guernsey) Law, 2008 (the "Law").
The Law does not make a distinction between private and public
companies. Shares in the Company were admitted to trading on AIM, a
market operated by the London Stock Exchange, on 21 December 2007.
The address of the Company's registered office is 11 New Street, St
Peter Port, Guernsey, Channel Islands, GY1 2PF.
The investment objective of the Company had been to build a
diversified portfolio of investments in claims and to provide
Shareholders with an attractive level of dividends and capital
growth through investing directly and indirectly in litigation and
arbitration cases, claims and disputes. These investments have been
made predominantly in the United States. On 18 November 2015 the
Company announced that it would not make new investments (other
than for funding existing investments in the Company's portfolio
where such funding is reasonably required to realise maximum
shareholder value) but, instead, would seek to return capital to
shareholders in the most appropriate manner following the
completion of investments.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of
these financial statements are set out below. These policies have
been consistently applied to all the years presented, unless
otherwise stated.
(a) Basis of preparation
The financial statements of the Company have been prepared in
accordance with International Financial Reporting Standards
("IFRS") and all applicable requirements of The Companies
(Guernsey) Law, 2008. They have been prepared on a going concern
basis, under the historical cost convention as modified by the
revaluation of financial assets and financial liabilities at fair
value through profit or loss.
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires the Board of Directors to exercise its judgement in the
process of applying the Company's accounting policies. The areas
involving a degree of judgement or complexity, or areas where
assumptions and estimates are significant to the financial
statements are disclosed in Note 3.
There have been no new IFRS or IFRIC interpretations that are
effective for the first time for the financial year beginning 1
January 2015, which have not previously been adopted by the
Company.
For the financial year beginning 1 January 2013, the Company
early adopted IFRS 9 'Financial instruments', effective for periods
beginning on or after 1 January 2018.
The following IFRS standards or interpretations have been issued
but are not yet effective, and have not been adopted by the
Company:
-- IAS 1 'Presentation of Financial Statements', effective for
periods commencing on or after 1 January 2016. In this amendment
the IASB aims to improve presentation and disclosure in financial
reports;
-- Amendment to IAS 38 'Intangible Assets', effective for
periods commencing on or after 1 January 2016. In this amendment
the IASB has clarified that revenue is generally presumed to be an
inappropriate basis for measuring amortisation of intangible
assets; and
-- Annual Improvements 2014 Cycle, effective for periods
commencing on or after 1 January 2016.
The adoption of the above standards is not anticipated to have
any significant bearing on the Company's financial statements.
In accordance with the Company's Admission Document of 17
December 2007, the Directors convened an extraordinary general
meeting of the Company, on 14 November 2013, at which a resolution
was proposed that the Company be wound up voluntarily. The
resolution was not passed by the Company's members. The Directors
will propose to remove the requirement to convene an extraordinary
general meeting for the voluntary wind-up of the Company every
three years from the date of the original meeting, at the Annual
General Meeting on 3 May 2016.
(MORE TO FOLLOW) Dow Jones Newswires
March 31, 2016 04:42 ET (08:42 GMT)
Although the Company is under a run-off strategy, the Directors
have given consideration to the maturity of the Company's existing
portfolio, the performance of the portfolio to date, the prospects
of expected future cash flows, and existing cash reserves. In
addition, the Directors have reviewed the Company's budgets and
cash flows for the year ahead and, accordingly, are satisfied on
reasonable grounds that it is appropriate to prepare these
financial statements on a going concern basis. On this basis, the
Directors have continued to prepare the financial statements based
on the accounting policies previously adopted.
(b) Investment entity
The Company has multiple unrelated investors and indirectly
holds multiple investments through the subsidiary companies.
Ownership interests in the Company are in the form of redeemable
shares which are classified as equity in accordance with IAS 32 and
which are exposed to variable returns from changes in the fair
value of the Company's net assets. The Company has been deemed to
meet the definition of an investment entity per IFRS 10, and
therefore does not have to prepare consolidated financial
statements, as the following conditions exist:
(a) The Company has obtained funds for the purpose of providing
investors with investment management services.
(b) The Company's business purpose, which was communicated
directly to investors, is investing solely for returns from capital
appreciation and investment income.
(c) The performance of investments made through the Company are
measured and evaluated on a fair value basis.
(c) Geographical and segmental reporting
Since the Company is engaged in the provision of similar
products and services within a particular economic environment,
being subject to similar risks and returns, management considers
that the Company has only one business segment and geographical
focus, being investments in legal claims primarily in the United
States (US), and accordingly does not present additional business
and geographical segment information. The Investment Manager is
responsible for the investment decisions for the Company's entire
portfolio and considers the business to have a single operating
segment. The Investment Manager's asset allocation decisions are
based on a single, integrated investment strategy, and the
Company's performance is evaluated on an overall basis.
(d) Financial assets at fair value through profit or loss
(i) Contractual interests
Classification
Unless otherwise determined by the Company, investments in
claims will be categorised as contractual interests held at fair
value through profit or loss. These financial assets will initially
be measured as the cash sum provided to acquire an interest in a
plaintiff's claim or as the cash advanced to law firms under loan
agreements. Attributable due diligence costs are expensed when they
occur.
Recognition, derecognition and measurement
Subsequent measurement of contractual interests will be at fair
value utilising a fair value model developed by the Investment
Manager. The principal assumptions to be used in the fair value
model are as follows:
-- Estimated duration of each contractual interest; and
-- Best estimate of anticipated outcome.
Movement in fair value arising on all performing contractual
interests is recognised in the Statement of Comprehensive Income,
as determined by utilising the fair valuation model.
The fair valuation model is a way of calculating the fair value
of a financial asset or liability and of recognising the fair value
gains and losses in that period.
Fair value estimation
Fair value will be reviewed semi-annually on an individual case
basis. Events that will trigger changes to the fair value of each
contractual interest include the following:
-- Changes in general US dollar interest rate assumptions
(market assumption) and the time value of money;
-- Changes in any variable relating to a claim including:
assessment of probability of successful judgement; range of
settlement or award; expected timing until claim resolution; and
extrinsic risks related to a claim;
-- Successful judgement of a claim in which the Company has a contractual interest;
-- Unsuccessful judgement of a claim in which the Company has a contractual interest;
-- Outstanding appeals against both successful and unsuccessful judgements;
-- A contractual interest to be sold at a discount or to be
settled out of Court by a binding agreement;
-- Legal impediments to collectability of claims (in the US
Chapter 7 Bankruptcy or Chapter 11 Court Protection from
Creditors); and
-- A case is dismissed with prejudice (meaning, it can never be re-filed anywhere).
Partial settlement
Partial settlement of contractual interests occur when one or
more parties, but not all parties, involved in the matter agree to
terms on a settlement amount. Proceeds received by the Company are
allocated between return of original principal and any gain based
on the following process:
-- Proceeds are discounted at a rate equal to the Company's cost of equity;
-- This discounted value represents the portion of proceeds
attributable to a return of investment with the remainder
representing a gain associated with the partial settlement; and
-- The amount representing the gain is then compared against any
prior gain recognised on the portion of the proceeds attributed to
a return of investment (calculated by using the fair valuation
model) with the difference reflected as current year realised gain
or loss.
Full settlement
Full settlement of contractual interests occur when all parties
involved in the matter agree to terms on a settlement amount or the
full legal process has concluded with either proceeds being awarded
or dismissal (no proceeds awarded). Proceeds received by the
Company are first allocated to the return of any remaining
principal with the remainder allocated to gain. The amount
representing the gain is then compared against any prior gain
recognised on the portion of the proceeds attributed to a return of
investment (calculated by using the fair valuation model) with the
difference reflected as current year realised gain or loss.
(ii) Equity investments
Classification
The Company classifies its equity investments at fair value
through profit or loss at inception. These financial assets will
initially be measured as the cash sum provided to acquire the
investment. Attributable due diligence costs are expensed when they
occur.
Equity investments are intended to be held for an indefinite
period of time, and that may be sold in response to needs for
liquidity or changes in interest rates, exchange rates or equity
prices. The Company could be seen to have significant influence
over certain of its equity investments as a result of its stake in
each of those assets. If significant influence exists, that
investment, under IFRS, should be accounted for as an 'Associate'
and hence the equity accounting method should be applied. However,
the Board has taken the view that (a) there is no material
difference in accounting for these investments as associates and
accounting for them as financial assets at fair value; (b) there is
no material difference in the disclosure; and (c) the strategy of
the Company is to hold investments as part of an investment
portfolio with a view to the ultimate realisation of capital gains
rather than as a medium to carry out its own business, hence
accounting for these investments as non-current assets is the most
appropriate method.
Recognition, derecognition and measurement
Equity investments will initially be measured at cost and are
subsequently carried at fair value. Gains and losses arising from
changes in the fair value are recognised in the Statement of
Comprehensive Income.
Fair value estimation
The assessment of fair value is determined by the level of
assets of the investments (including intellectual property), the
quality of income and earnings and the present value of future cash
flows of the equity investments, discounted at the cost of equity.
The estimates and assumptions made by the Investment Manager in
determining this fair value have been outlined in Note 3.
Settlement
When equity investments are sold or impaired, the movement in
fair value will be recognised in the Statement of Comprehensive
Income.
(iii) Debt securities
Classification
Debt security investments are classified at fair value through
profit or loss at inception. These financial assets will initially
be measured as the cash sum advanced to the law firm.
Recognition, derecognition and measurement
The debt security investments will initially be measured at cost
and are subsequently carried at fair value. Gains and losses
arising from changes in the fair value are recognised in the
Statement of Comprehensive Income.
Fair value estimation
Fair value is determined by the present value of future cash
flows, at the discount rate of the Company. The estimates and
assumptions made by the investment manager in determining this fair
value have been outlined in Note 3.
Settlement
When debt security investments are sold, the movement in fair
value will be recognised in the Statement of Comprehensive
Income.
(iv) Forward foreign currency contracts
Classification, recognition, derecognition and measurement
Forward foreign currency contracts are classified as financial
instruments at fair value through profit or loss at inception. They
will initially be measured at the contractual amount at the date
the contract is entered in to. Accordingly, only gains and losses
arising from changes in the fair value are recognised in the
Statement of Comprehensive Income.
Fair value estimation
Fair value is determined by the foreign currency exchange rate
prevailing at that date.
Settlement
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Settlement will occur at the date the contract is due to expire.
Gains and losses on the settlement of the contracts will be
recognised as realised gains or losses at this time in the
Statement of Comprehensive Income.
(e) Due diligence and transaction costs
The due diligence and transaction costs attributable to
investments in contractual interests, equity investments and debt
securities, and any other due diligence and transaction costs not
directly relating to an investment, have been expensed immediately
in the Statement of Comprehensive Income.
Due diligence and transaction costs associated with investments
characterised as intangible assets are expensed until such time as
the following has been affirmed: i) the technical feasibility of
completing the intangible so that it will be available for use or
sale; ii) the intention to complete the intangible asset and use or
sell it; iii) the ability to use or sell the intangible asset; iv)
how the intangible asset will generate probable future economic
benefits; v) the availability of adequate technical, financial and
other resources to complete the development and to use or sell the
asset; and vi) the ability to measure reliably the expenditure
attributable to the intangible asset during its development, at
which time they are capitalised as an intangible asset and held at
cost less accumulated amortisation and any impairment loss.
(f) Foreign currency
Functional and presentation currency
Items included in the financial statements are measured using
the currency of the primary economic environment in which the
entity operates (the "functional currency"). The functional
currency of the Company as determined in accordance with IFRS is
the United States Dollar ("US Dollar") because this is the currency
that best reflects the economic substance of the underlying events
and circumstances of the Company. The financial statements are
presented in US Dollars, the presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rate prevailing at the date of the
transaction. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at
year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognised in the Statement
of Comprehensive Income.
(g) Finance income
Finance income arising on cash and cash equivalents is
recognised in the Statement of Comprehensive Income on the
effective interest basis.
(h) Cash and cash equivalents
Cash and cash equivalents comprise of cash balances and deposits
held at banks with a maturity profile of 3 months or less.
(i) Taxation
The Company has obtained exempt company status in Guernsey. The
Company is, therefore, only liable to an annual exemption fee of
GBP1,200 (2014: GBP600). The Company's subsidiaries are subject to
income tax in their respective jurisdictions.
To the extent that any foreign withholding taxes or any form of
profits taxes become payable, these will be accrued on the basis of
the event that created the liability to taxation.
(j) Expenses
Expenses are accounted for on an accruals basis. Expenses for
monitoring claims will generally be paid by the Investment Manager
except in extraordinary circumstances approved by the Board of
Directors of the Company.
(k) Dividends
Dividends declared during the period will be disclosed directly
in equity via the Statement of Changes in Equity. A final dividend
proposed by the Board and approved by the shareholders prior to the
year end will be disclosed as a liability. Dividends proposed and
not approved will be disclosed in the Notes.
(l) Other receivables and prepayments
Other receivables and prepayments are recognised initially at
fair value and subsequently measured at cost less provision for
impairment.
(m) Other payables
Other payables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest rate method.
(n) Capital and reserves
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares are shown in
equity via the reserves as a deduction from the issue proceeds.
Where the Company purchases the Company's own equity share
capital (treasury shares), the consideration paid, including any
directly attributable incremental costs (net of income taxes) is
deducted from equity attributable to the Company's equity holders
until the shares are cancelled or reissued. Where such ordinary
shares are subsequently reissued, any consideration received, net
of any directly attributable incremental transaction costs and the
related income tax effects, is included in equity attributable to
the Company's equity holders.
(o) Intangible asset
Where the Company has entered into an agency agreement involving
licensing of intellectual property, the resulting transaction will
be categorised as an intangible asset (see Note 4). The cost of the
intangible asset will be capitalised once it is possible to
demonstrate that the intangible asset will generate probable future
economic benefit. Intangible assets will be held at cost less any
accumulated amortisation and any accumulated impairment losses.
Amortisation will be on a systematic basis over the asset's useful
life.
(p) Impairment of intangible assets
The carrying amounts of intangible assets are assessed on a
semi-annual basis to determine whether there is any indication of
impairment. If such indication exists, the Company estimates the
recoverable amount of the asset, being the higher of the asset's
net selling price and its value in use. Any impairment loss is
recognised for the amount which the asset's recoverable amount is
lower than its carrying value and the difference being taken to the
Statement of Comprehensive Income.
The Company first assesses whether objective evidence of
impairment exists. In assessing value in use, the estimated future
cash flows are discounted to their present value using the discount
rate that reflects current assessment of the time value of money
and the risks specific to the asset for which the estimates of
future cash flows have not been adjusted.
The amount of the loss is measured as the difference between the
asset's carrying amount and the present value of estimated future
cash flows. The carrying amount of the asset is reduced and the
amount of the loss is recognised in the Statement of Comprehensive
Income.
If, in a subsequent period, the amount of the impairment loss
decreases and the decrease can be related objectively to an event
occurring after the impairment was recognised, the reversal of the
previously recognised impairment loss is recognised in the
Statement of Comprehensive Income. In the year ended 31 December
2015 there were no impairments (2014: US$Nil).
(q) Share-based payments transactions
The Company engages in equity settled share-based payment
transactions in respect of the services received from one of its
Directors and from Cenkos Securities PLC ("Nominated Adviser and
Broker") as set out in the Company's Admission Document. The fair
value of the services received is measured by reference to the fair
value of the shares or share options granted on the date of the
grant. The fair value of the share options is recognised in the
Statement of Comprehensive Income over the period that the services
are received, which is the vesting period.
The fair value of the options granted is determined using the
Black-Scholes option pricing model, which takes into account the
exercise price of the option, the current share price, the risk
free interest rate, the expected volatility of the share price over
the life of the option and other relevant factors. Except for those
which include terms relating to market conditions, vesting
conditions included in the terms of the grant are not taken into
account in estimating the fair value.
Non-market vesting conditions are taken into account by
adjusting the number of shares or share options included in the
measurement of the cost of the services so that, ultimately, the
amount recognised in the Statement of Comprehensive Income reflects
the number of vested shares or share options. Where vesting
conditions are related to market conditions, the charges for the
services received are recognised regardless of whether or not the
market conditions-related vesting condition is met, provided that
the non-market vesting conditions are met.
(r) Earnings / deficit per share
The basic earnings / deficit per share value is calculated by
taking the total comprehensive income/loss for the period and
dividing it by the weighted average number of ordinary shares in
issue over the period. The diluted earnings per share figure is
calculated by adjusting the weighted average number of ordinary
shares outstanding to assume conversion of all dilutive potential
ordinary shares (see Note 17).
(s) Net asset value per share
Net asset value per share is calculated by taking the net assets
attributable to ordinary shareholders and dividing it by the number
of shares in issue at the year end (see Note 16).
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Investment Manager makes estimates and assumptions
concerning the future. The resulting accounting estimates will, by
definition, seldom equal the related actual results. The estimates
and assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities are
outlined below.
Critical accounting judgements in applying the Company's
accounting policies
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The Company makes investments in claims that may involve
litigation. The nature of the investments made by the Company
reduces by some predetermined amount the cost of litigating a
matter to a plaintiff and/or a law firm. A typical investment by
the Company will include cash and may also include cash commitments
subject to certain restrictions. In most arrangements, the Company
is paid only from proceeds generated from the litigation and any
related settlement or award. If a lawsuit fails to generate any
proceeds and all legal remedies are exhausted, the Company will
often not be entitled to reimbursement of the facility they
advanced to the counterparty for the specific claim. In these cases
the Company will write off their investment in the claim as a loss.
The Company is compensated for this risk through the return
structure built into the investment. The Company mitigates this
risk through the use of their Investment Manager which is
experienced in evaluating the investment worthiness of a particular
opportunity.
In the process of applying the Company's accounting policies,
which are described in Note 2, the Directors have reviewed the
Investment Manager's assessment of the fair value of contractual
interests including the probability of success on the merits of
each claim, likelihood of settlement and claim duration. This is
most evident in the assessment of the fair value applied to
contracts entered into by the Company, as disclosed in Note 5.
To determine the appropriate fair value to apply to each
contract, the Investment Manager follows a formal process of
developing a set of scenarios for each case and assigns
probabilities to each potential outcome. The probabilities are
phased based on the expected progression path of each particular
case. In addition, each potential successful scenario has a range
of likely settlement proceeds assigned to it as well as a most
likely resolution or settlement date. The scenarios not only
incorporate the merits of each particular case but also consider
known risks intrinsic to the particular matter, as well as general
risks found in any litigation matter.
The Investment Manager then runs a Monte-Carlo method analysis
which dictates that the Investment Manager runs algorithms that
rely on random sampling based on the variables within each scenario
and their related probabilities. The results of the analysis
provide expected outcomes and other statistical data which is used
to calculate the future valuation of each particular contractual
interest. A discount rate is then applied to the future value to
determine the current fair value.
Determining whether intangible assets are impaired requires an
estimation of the future cash flows of the intangible assets, and
the use of a suitable discount rate in order to calculate present
value. The carrying amount of the intangible assets is shown in
Note 4. As at 31 December 2015, no impairment has been
recognised.
4. INTANGIBLE ASSET
31 December 31 December
2015 2014
------------ ------------
US$ US$
Balance at start
of the year 2,647,866 3,496,127
Additions 240,000 240,000
Amortisation (829,070) (1,088,261)
Balance at end
of the year 2,058,796 2,647,866
============ ============
The Company's intangible asset comprises an investment
structured as an agency agreement. Additions to the intangible
asset during the first half of the year are deemed to have occurred
at 30 June 2015 and additions during the second half of the year
are deemed to have occurred at 31 December 2015. The Company
amortises the intangible asset on a diminishing balance basis at a
rate of 16.7 per cent every 6 months. The Directors consider that
the diminishing balance basis of amortisation most accurately
reflects the pattern in which the asset's future economic benefits
are expected to be consumed by JIL.
In addition, the Company purchased common and preferred stock
related to the intangible asset in 2012, which has been classified
as a financial asset at fair value through profit or loss (Note 5),
and purchased additional common and preferred stock of US$468,328
during the year ended 31 December 2015. As at 31 December 2015 a
cost of US$2,070,838 is deemed an appropriate approximation of fair
value (31 December 2014: US$1,602,510) for the financial asset. No
provision for impairment is deemed to be required.
5. FINANCIAL ASSETS AND FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT AND LOSS
31 December 2015
--------------------------------------------------------------------------------------
Balance Additions Disposal Movement Realised Balance
at proceeds in fair gains at 31
1 Jan value Dec 2015
2015
------------ ------------ ------------- -------------- ------------- ------------
Financial US$ US$ US$ US$ US$
assets
Contractual
interests 54,553,859 2,866,104 (24,117,413) (5,126,834) 1,259,583 29,435,299
Equity investments 12,963,078 468,328 - (7,481,110) - 5,950,296
Debt securities 82,544,923 35,000,000 (27,000,000) (35,152,841) - 55,392,082
Total 150,061,860 38,334,432 (51,117,413) (47,760,785) 1,259,583 90,777,677
============ ============ ============= ============== ============= ============
Financial
liabilities
Forward FX (686,903) - 1,629,529 686,903 (1,629,529) -
Total (686,903) - 1,629,529 686,903 (1,629,529) -
============ ============ ============= ============== ============= ============
31 December 2014
----------------------------------------------------------------------------------------
Balance Additions Disposal Movement Realised Balance
at proceeds in fair gains at
1 Jan value 31 Dec
2014 2014
------------ ------------ ------------- -------------- ------------- ------------
Financial US$ US$ US$ US$ US$
assets
Contractual
interests 47,153,900 10,679,065 - (3,279,106) - 54,553,859
Equity investments 12,855,971 1,250,000 - (1,142,893) - 12,963,078
Debt securities 129,337,700 1,000,000 (73,850,029) (1,422,965) 27,480,217 82,544,923
Forward FX 1,833,671 - (1,329,326) (1,833,671) 1,329,326 -
Total 191,181,242 12,929,065 (75,179,355) (7,678,635) 28,809,543 150,061,860
============ ============ ============= ============== ============= ============
Financial
liabilities
Forward FX - - - (686,903) - (686,903)
Total - - - (686,903) - (686,903)
============ ============ ============= ============== ============= ============
(a) Contractual interests
Contractual interests have been accounted for using the fair
value model. At 31 December 2015, the Company had investments in 10
contractual interests (31 December 2014: 12 contractual
interests).
Fair value movements of contractual interests are due to
amendments in estimated cash flows arising from changes in
expectations surrounding each case. The valuation of the Company's
contractual interests decreased by approximately US$25.1 million
reflecting the net of US$2.9 million in additional investment
funding, US$24.1 million of disposal proceeds, US$1.2million of
realised gains on disposals and US$5.1 million net decrease due to
each investment's individual change in fair value.
(b) Equity investments
The Company's equity investments include a holding in JCML. The
fair value of the Company's investment in JCML was assessed as at
31 December 2015 to be US$27,257 (31 December 2014: US$6,113,741).
This assessment of fair value is deemed appropriate given the
investment in the company, the level of assets, and the quality of
income and earnings and the projection of future cash flows. The
value as at 31 December 2014 reflected the performance fee income
to JCML to be distributed back to the Company. The valuation of the
Company's equity investments decreased by approximately US$7.0
million reflecting the net of US$0.5 million in additional
investment funding, and US$7.5 million net decrease in each
investment's individual change in fair value, primarily as a result
of the performance fee distribution by JCML.
(c) Debt securities
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Note 14(d) details arrangements between the Company and Fields
Law. The Loan and the Swap have been aggregated and treated as a
single claim asset. Returns on the Loan and the Swap are dependent
on returns in claims financed by Fields Law. In accordance with
provisions under the Swap, the Company added US$8.0 million in
investment to Fields Law to fulfil funding obligations outlined in
Note 14(d) through a partial clawback of Swap payments made by
Fields Law to the Company in 2015. An additional US$27.0 million
clawback of Swap payments was made during 2015 in order to enable
Fields Law to repay accrued interest and principal owed under the
Facility to the Company. No net financial or cash impact occurred
from this US$27.0 million clawback.
Fair value movements of debt securities are due to amendments in
estimated cash flows arising from changes in expectations
surrounding each investment. The valuation of the Company's debt
securities decreased by approximately US$27.2 million reflecting
the net of US$35.0 million in additional investment funding,
US$27.0 million of disposal proceeds, and a US$35.2 million
decrease in the fair value.
(d) Forward foreign currency contracts
The company held no forward foreign currency contracts at 31
December 2015 (31 December 2014: one). The contract held at 31
December 2014 was in place to settle declared dividend
distributions in Sterling, and were settled prior to payment of the
distributions in January 2015. The contract was matched to a
Sterling dividend liability of the same value (Note 9). On
settlement of the contract during 2015 the Company received
proceeds of approximately US$1.6 million, which is included as a
realised loss on the Statement of Comprehensive Income.
2014
------------
Contract Unrealised
Sell US$ Buy GBP date Maturity loss (US$)
----------- ----------- ------------ ------------ ------------
35,178,803 22,140,351 10 Nov 2014 14 Jan 2015 (686,903)
(686,903)
============
6. FAIR VALUE ESTIMATION
For instruments for which there is no active market and for
which reliable pricing sources cannot be obtained, the Company may
use internally developed models, which are usually based on
valuation methods and techniques generally recognised as standard
within the industry. Valuation models are used primarily to value
unlisted equity, debt securities and other debt instruments for
which markets are or have been inactive during the financial year.
Some of the inputs to these models may not be market observable and
are therefore estimated based on assumptions.
The carrying value less impairment provision of other
receivables and payables are assumed to approximate their fair
values.
IFRS 13 requires the Company to classify fair value measurements
using a fair value hierarchy that reflects the significance of the
inputs used in making the measurements. The fair value hierarchy
has the following levels:
-- Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).
-- Inputs other than quoted prices included within level 1 that
are observable for the asset or liability, either directly (that
is, as prices) or indirectly (that is, derived from prices) (level
2).
-- Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (level
3).
The level in the fair value hierarchy within which the fair
value measurement is categorised in its entirety is determined on
the basis of the lowest level input that is significant to the fair
value measurement in its entirety. For this purpose, the
significance of an input is assessed against the fair value
measurement in its entirety. If a fair value measurement uses
observable inputs that require significant adjustment based on
unobservable inputs, that measurement is a level 3 measurement.
Assessing the significance of a particular input to the fair value
measurement in its entirety requires judgement, considering factors
specific to the asset or liability.
The determination of what constitutes 'observable' requires
significant judgement by the Company. The Company considers
observable data to be that market data that is readily available,
regularly distributed or updated, reliable and verifiable, not
proprietary, and provided by independent sources that are actively
involved in the relevant market.
Investments classified within level 3 have significant
unobservable inputs, as they trade infrequently. Level 3
instruments include equity investments. As observable prices are
not available for these investments, the Company has used valuation
techniques to derive their fair value.
The Company's investment in forward exchange contracts are
classified as level 2, all of the Company's other financial assets
and liabilities are classified as level 3.
There were no transfers between levels for the year ended 31
December 2015 (31 December 2014: Nil).
The Company has identified three key unobservable inputs to the
valuation model used in the valuation of investments held at fair
value through profit or loss: expected quantum, expected duration,
and cost of equity.
Expected quantum
The greater the quantum expected at conclusion, the greater the
valuation at any point in time. The reduction of the quantum
expected at conclusion, will reduce the valuation at any point in
time.
Expected duration
The greater the expected duration of an investment, the lower
the valuation at any point in time, other than at conclusion. The
reduction of the expected duration of an investment will increase
the valuation at any point in time, other than at conclusion.
Cost of equity
The Company's cost of equity is 11%. As the Company's cost of
equity decreases, the valuations at any point in time will
increase, other than at conclusion. As the Company's cost of equity
increases, the valuations at any point in time will decrease, other
than at conclusion.
The following table summarises the sensitivities:
Change in valuation
Unobservable Reasonable possible (due to +/- change
input shift (+/-) in input)
--------------- -------------------- --------------------
Quantum 10% 9.34% / (9.66%)
Timing 1 year (10.15%) / 2.08%
Cost of equity 3% (4.41%) / 4.70%
7. UNCONSOLIDATED SUBSIDIARY AND ASSOCIATE INVESTMENTS
The following subsidiary investments are held by the Company but
have not been consolidated, following the Investment Entities
exemption per IFRS 10 (see Note 2 (b)):
% Share holdings
Date Country 31 December 31 December
incorporated of incorporation 2015 2014
-------------------- ------------ ------------
JCML 2007 Limited 28-Nov-07 Guernsey 36.2% 36.2%
Riverbend Investments
Limited 08-Oct-08 Guernsey 100.0% 100.0%
GrandiOs Technologies,
LLC 25-Feb-09 United States 100.0% 100.0%
(since 26-Aug-14, formerly
OTO Technologies LLC)
Juridica Ventures
KFT 02-Mar-09 Hungary 100.0% 100.0%
Juridica Ventures
(US) Inc. 31-May-09 United States 100.0% 100.0%
Escon Capital, Inc. 26-Apr-10 United States 38.0% 38.0%
Spinal Spot LLC 28-Feb-11 United States 65.8% 65.8%
Spinal Ventures LLC 25-Mar-11 United States 100.0% 100.0%
Juridica Sports Technology
LLC 22-Apr-14 United States 100.0% 100.0%
ProSports Technologies,
LLC 22-Apr-14 United States 81.3% 65.0%
Juridica Kinetics,
LLC 13-May-14 United States 100.0% 100.0%
Smooth 3D IP, LLC 13-May-14 United States 76.2% 64.0%
Juridica RMIP Holdings,
LLC 31-Jul-14 United States 100.0% 100.0%
Rich Media Ventures,
LLC 31-Jul-14 United States 89.9% 100.0%
There are no outstanding commitments with these unconsolidated
subsidiaries at the year end, other than those disclosed in Note
11.
8. OTHER RECEIVABLES AND PREPAYMENTS
31 December 31 December
2015 2014
------------ ------------
US$ US$
Settlement proceeds 5,430,086 54,513,112
Management fees 719,549 -
Prepayments and accrued
bank interest 58,146 80,014
6,207,781 54,593,126
============ ============
9. DIVIDENDS
The following dividends were declared and paid during the
year:
Declaration Payment Dividend Total dividends
date date per share US$
18 November 30 December
2015 2015 5 pence 8,218,677
----------------
8,218,677
================
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At 31 December 2015, dividends totalling US$8,218,677 (31
December 2014: US$34,491,900) had been declared. No dividends
remained payable as at 31 December 2015 (31 December 2014:
US$34,491,900).
10. OTHER PAYABLES
31 December 31 December
2015 2014
------------ ------------
US$ US$
Payable on investment
purchases 28,735 111,679
Audit fees 196,495 99,679
Management fees - 1,114,196
Other creditors 64,808 91,620
290,038 1,417,174
============ ============
11. COMMITMENTS & GUARANTEES
Under the terms of some of its contracts, the Company provides a
line of credit to counterparties. As at 31 December 2015, the
maximum commitment under these lines of credit was US$7.3 million
(31 December 2014: US$18.1 million). A portion of commitment may be
fulfilled from investment returns.
12. FUNCTIONAL AND PRESENTATION CURRENCY / EXCHANGE RATES
The financial statements are presented in United States Dollar
("US$") which is also the Company's functional currency. The
following rate was applicable as at 31 December:
Closing rate
--------------------------
31 December 31 December
2015 2014
------------ ------------
US$ US$
British pounds
(GBP) 1.4734 1.5579
============ ============
13. CAPITAL AND RESERVES
Authorised share capital: Unlimited number of ordinary shares of
no par value ("shares").
Issued share capital: 110,701,754 shares as at 31 December 2015
(31 December 2014: 110,701,754 shares), of which 80,000,000 shares
were issued at a premium of GBP1 per share on admission, and a
further 30,701,754 shares issued at a premium of GBP1.14 on 6 April
2009.
Under a Share Buyback Programme, the Company acquired 6,000,000
shares at a price of GBP1.02 per share on 3 November 2010, and the
Company also received 126,607 of its own shares subsequent to an
in-specie dividend received from the previous Investment Manager,
JCML, on 27 November 2013. These shares were held in treasury,
however were subsequently sold for a premium at GBP1.39.
On 4 June 2015, the Company received 361,735 of its own shares
as a result of an in-specie dividend received from JCML at GBP1.16.
As at 31 December 2015, the number of shares held in treasury was
361,735 (31 December 2014: Nil) at a price of GBP1.16. Following
the year end, on 15 March 2016, the Board of Directors subsequently
agreed to cancel these treasury shares.
The Company's capital is represented by ordinary shares of no
par value and share premium. Each share carries one vote and is
entitled to dividends when declared. The relevant movements in
capital are shown on the statement of changes in equity through
reserves.
The Company has authority to make market purchases of up to
14.99 per cent of its own issued ordinary shares. This authority
was renewed at the annual general meeting of the Company held on 30
April 2014. A renewal of the authority to make purchases of
ordinary shares will be sought from Shareholders at each annual
general meeting of the Company. The timing of any purchases will be
decided by the Board.
14. RELATED PARTY TRANSACTIONS
Richard Battey, as investor representative and non-executive
director of the Company, is also a non-executive director of JCML.
The principal of JCML is Richard Fields, who owns 103,000 Ordinary
Shares in the Company (0.09 per cent equity interest) (2014:
257,545). JCML owns 118,254 Ordinary Shares in the Company (0.107
per cent equity interest) (31 December 2014: 1,118,254 shares). Mr
Fields is also sole beneficial owner of Juridica Asset Management
Limited ("JAML").
(a) Management fee
For the years ended 31 December 2015, and 31 December 2014, JAML
is entitled to a management fee of 2 per cent of the adjusted net
asset value of the Company.
The adjusted net asset value is the net asset value of the
Company at the relevant time will be calculated, after adding back
the estimated management fee paid and not taking into account any
liability of the Company for accrued performance fees and
after:
(i) deducting any unrealised gains on non-current assets; and
(ii) adding the amount of any write downs with respect to
contractual interests which have not been written off.
In the year ended 31 December 2015, JAML was entitled to
investment management fees totalling US$4,795,036 (31 December
2014: US$5,768,668), an amount of US$719,549 is due back to the
Company as at 31 December 2015 (31 December 2014: US$1,114,196
payable to JAML).
(b) Investment in JCML 2007 Limited
The Company acquired 15 per cent of JCML on Admission, which was
subsequently diluted to 13.6 per cent by the exercise of share
options by certain of JCML's employees. In 2012, the Company
acquired a further holding in JCML, taking the Company's overall
holding in JCML to 36.17 per cent. An impairment review of JCML has
been performed as part of the fair value assessment and continues
to be carried out on a semi-annual basis. The Company received
dividend income from JCML during the year of US$5,369,711 (2014:
US$Nil).
(c) Performance fee
Under the terms of the Management Agreement, JCML, as former
Investment Manager, was entitled to a performance fee based on the
adjusted net asset value ("ANAV") (being the NAV of the Company
before taking into account any performance fee payable less any
unrealised gains on investments plus the value of any write downs
in any investments that have been written down but not written off)
of the Company. The performance fee payable was for an amount equal
to the sum of: (i) 20 per cent of the amount by which the ANAV
exceeded a 8 per cent annually compounding hurdle but was less than
an amount equal to a 20 per cent annually compounding hurdle; (ii)
35 per cent of the amount by which the ANAV exceeded a 20 per cent
annually compounding hurdle but was less than an amount equal to a
40 per cent annually compounding hurdle; and (iii) 50 per cent of
the amount by which the ANAV exceeded a 40 per cent annually
compounding hurdle.
The performance fee was subject to a high water mark such that
no performance fee will be paid if the performance of the Company
does not exceed the ANAV at the end of the previous year in which
the performance fee was paid.
As at 31 December 2015, the ANAV was below the high water mark
established at year end 2014 (as adjusted for results occurring in
2015) and no performance fee is payable for the year ended 31
December 2015. As at 31 December 2014, the minimum hurdle rate had
been achieved on investments attributable to JCML, resulting in a
performance fee payable to JCML of US$14,511,058, of which US$Nil
remained payable at the year end (31 December 2014: US$14,511,058).
JCML will continue to be entitled to a performance fee in the
future in respect of investments made prior to the termination of
its appointment on 31 December 2013.
JAML replaced JCML as Investment Manager with effect from 1
January 2014. For financial periods following this date, any
performance fee payable on investments will be calculated based on
the date on which investments were made, and attributable to JCML
for investments held at 31 December 2013, and to JAML for all new
investments. JAML will become entitled to a performance fee of 20
per cent of the annualised increase in the adjusted net asset value
over the hurdle rate. As at 31 December 2015, this hurdle rate had
not been achieved on investments attributable to JAML.
(d) Facility agreement and collateral account
The Company has entered into a facility agreement (the
"Facility") with which it agrees to loan to Fields Law, a law firm
in which Richard Fields is a partner, money for funding cases in
which Fields Law is to act under a Co-counsel Agreement. Prior to
adopting its run-off strategy, the Company expected to enter into
loan arrangements with other law firms (which may include other law
firms established by the Principal of the Company) on terms and
conditions similar to those contained in the Facility. The Facility
available to Fields Law will be for up to approximately 50 per cent
of the net proceeds of the capital raised by the Company less any
loans made to other law firms.
The Facility will remain outstanding and available until the
earlier of (i) the termination of the Management Agreement with
JAML, (ii) the date on which Richard Fields ceases to own a
controlling interest in Fields Law, (iii) the winding up of the
Company, (iv) an event of default of the Facility documents, or (v)
ten years from Admission. Under the Facility, drawdowns may be
requested by Fields Law from time to time up to the maximum
principal amount but subject always to approval by the Company in
its sole discretion.
No more than US$10 million may be drawn down in respect of the
same case investment, unless otherwise approved by the Company.
(e) Administration fees
(MORE TO FOLLOW) Dow Jones Newswires
March 31, 2016 04:42 ET (08:42 GMT)
The Company has an administration agreement with Orangefield
Legis Fund Services Limited (the "Administrator"). Fees payable to
the Administrator for the year were US$242,209 (31 December 2014:
US$300,309), of which US$36,372 remained payable as at 31 December
2015 (31 December 2014: US$33,920).
(f) Directors' fees and expenses
31 December 31 December
2015 2014
------------ ------------
Directors' remuneration US$ US$
Lord Daniel Brennan (GBP187,500
per annum) 284,813 299,156
Richard Battey (GBP75,000
per annum) 113,925 119,663
Kermit Birchfield 125,000 125,000
------------ ------------
523,738 543,819
Director expenses 75,811 137,334
599,549 681,153
============ ============
No pension contributions were paid or were payable on behalf of
the Directors.
Lord Daniel Brennan has an interest in 447,817 shares (31
December 2014: 447,817 shares) under a Share Option Agreement,
details of which were disclosed in the Admission Document. Lord
Brennan can exercise these share options at any time up until 17
December 2017. The other Directors have no beneficial interest in
the share capital of the Company.
(g) Eleven Engineering Game Control LLC
The Company has provided a loan of US$575,000 to Eleven
Engineering Game Control LLC, a company ultimately owned and
controlled by JCML (31 December 2014: US$575,000). As at 31
December 2015 no further facility remains available to be drawn (31
December 2014: US$Nil). Interest will be accrued at a rate of 10%
per annum, and the loan and interest are repayable on Eleven
Engineering Game Control LLC's receipt of net recoveries.
(h) Escon Capital Inc.
The Company has an interest of 38% (31 December 2014: 38%) in
the voting common stock and 100% of the issued preference shares of
Escon Capital, Inc. ("Escon"), a Delaware corporation of which
Kermit Birchfield and Richard Fields are directors.
During the year ended 31 December 2015, Kermit Birchfield
received a director's fee of US$50,000. During the year ended 31
December 2014, Mr Birchfield received a director's fee of
US$50,000, and Mr Fields received an employment fee of
US$12,000.
(i) Special purpose vehicles
As compensation for providing management services, Kermit
Birchfield receives a fee from each of Smooth 3D IP, LLC, Rich
Media Ventures, LLC, and GrandiOs Technologies, LLC. For the year
ending 31 December 2015, Mr Birchfield received fees totalling
US$67,500 for provision of these services (2014: US$Nil).
15. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
(a) Investment risk
There is no established market for the Company's assets. The
Investment Manager's assessment of the quantum and timing of
returns is subjective and based on the Investment Manager's
experience and due diligence. The estimates of the outcome and
financial effect on the Company of the assets are determined by the
judgement of the Investment Manager. In coming to its best estimate
of fair value, the Investment Manager has estimated the
probability, timing and quantum of particular outcomes.
(b) Cash flow and fair value interest rate risk
Interest rate risk arises from the effects of fluctuations in
the prevailing levels of market interest rate on the fair value of
financial assets and liabilities and future cash flows. The Company
holds fixed and variable rate interest securities that expose the
Company to fair value interest rate risk. For 2015, debt securities
were fixed at a regular interest rate of 13.5%, until 15 December
2014 when the relevant interest rate was increased to 15.0%.
The Company is exposed to interest rate risk related to its cash
balances. The Company does not actively manage this risk.
2015
Fixed Variable Non-interest Total
interest interest bearing
----------- ----------- ------------- ------------
US$ US$ US$ US$
Assets
Intangible assets - - 2,058,796 2,058,796
Contractual interests - - 29,435,299 29,435,299
Equity investments - - 5,950,296 5,950,296
Debt securities 55,392,082 - - 55,392,082
Other receivables and
prepayments - - 6,207,781 6,207,781
Cash and cash equivalents - 27,384,242 - 27,384,242
Total assets 55,392,082 27,384,242 43,652,172 126,428,496
----------- ----------- ------------- ------------
Liabilities
Other payables - - (290,038) (290,038)
Total liabilities - - (290,038) (290,038)
----------- ----------- ------------- ------------
Total exposure to interest
sensitivity 55,392,082 27,384,242 43,362,134 126,138,458
=========== =========== ============= ============
2014
------------------------------------------------------
Fixed Variable Non-interest Total
interest interest bearing
----------- ----------- ------------- -------------
US$ US$ US$ US$
Assets
Intangible assets - - 2,647,866 2,647,866
Contractual interests - - 54,553,859 54,553,859
Equity investments - - 12,963,078 12,963,078
Debt securities 82,544,923 - - 82,544,923
Other receivables
and prepayments - - 54,593,126 54,593,126
Cash and cash equivalents - 27,962,963 - 27,962,963
Total assets 82,544,923 27,962,963 124,757,929 235,265,815
----------- ----------- ------------- -------------
Liabilities
Dividend payable - - (34,491,900) (34,491,900)
Forward FX contract - - (686,903) (686,903)
Other payables - - (1,417,174) (1,417,174)
Performance fee - - (14,511,058) (14,511,058)
Total liabilities - - (51,107,035) (51,107,035)
----------- ----------- ------------- -------------
Total exposure to
interest sensitivity 82,544,923 27,962,963 73,650,894 184,158,780
=========== =========== ============= =============
At 31 December 2015, if variable interest rates had moved by 75
basis points with all other variables remaining constant, the
change in net assets attributable to holders of ordinary shares for
the year would amount to approximately +/- US$205,382 (31 December
2014: +/- US$209,722), arising substantially from the cash and cash
equivalents. No interest was receivable on the collateral cash
deposit.
(c) Credit risk
The Company is exposed to credit risk, which is the risk that a
counterparty will be unable to pay amounts in full when they fall
due.
The Company has in place various policies and procedures to
guide the Investment Manager's evaluation and management of
investment opportunities and, particularly, the credit risk
associated with investment counterparties (law firms and claim
interest holders) and investments. The policies include Investment
Restrictions (which contain prohibitions on pursuing investments
with certain kinds of claims and claim holders, those being
prosecuted by certain law firms, and those where collection,
counterparty or compliance risk is significant), Investment
Policies (which contain guidelines for diversification of the
Company's portfolio based on certain claimholder characteristics,
jurisdiction(s) involved, prosecuting law firm, claim size and
investment structure), and Investment Process Guidelines (which
define the due diligence, investment and investment monitoring
processes to be followed by the Investment Manager in claim
evaluation, valuation and investment completion). Collectively,
these Investment Parameters are designed to guide the investment
opportunity analysis so to limit credit, collection and portfolio
concentration risks associated with Company investments. In
addition, the Investment Manager has, pursuant to its own
Underwriting Guidelines, developed and implemented systems and
procedures to analyse and (pursuant to investment contracts) manage
credit risk associated with Company investments.
The main concentration to which the Company is exposed arises
from the Company's loan to Fields Law. The Company is also exposed
to counterparty credit risk on trading contractual interests, cash
and cash equivalents and other receivables.
In accordance with the Company's policy, the Investment Manager
monitors the Company's credit position on a daily basis, and the
Board of Directors reviews it on a quarterly basis.
(MORE TO FOLLOW) Dow Jones Newswires
March 31, 2016 04:42 ET (08:42 GMT)
The Company is also exposed to material credit risk in respect
of the contractual interests and cash and cash equivalents. The
credit risk of the cash and cash equivalents is mitigated as all
cash is placed with reputable banking institutions with a sound
credit rating. The maximum credit risk exposure represented by
total assets is as stated in the Statement of Financial Position
which amounted to US$126,428,496 (31 December 2014:
US$235,265,815).
(d) Concentration risk
The Company has sought to minimise concentration risk by
investing in a diverse portfolio of contractual interests through a
number of different law firms, including interests in antitrust,
patent, property damage, insurance subrogation, shareholder
dispute, contract claim and arbitration cases.
The Company further sought to minimise concentration risk by
utilising a variety of Investment Parameters which are designed to
guide the investment opportunity analysis so as to minimise,
amongst other things, concentration risk. These Investment
Parameters are further detailed in Note 15(c).
As the Company will no longer make new investments in line with
the run-off strategy, the level of concentration of investments
will increase as investments in the existing portfolio mature.
(e) Liquidity risk
The Company is exposed to liquidity risk. The contractual
interests are acquisition of claims, as well as loans to lawyers to
fund participation in claims on a contingency fee basis, and
therefore require significant capital contribution with little or
no immediate return and no guarantee of return or repayment. The
market for such contractual interests is not active. In the opinion
of the Directors the current liquidity risk at 31 December 2015 is
low as cash and cash equivalents exceed unmatched liabilities or
other contractual commitments.
Maturity analysis 2015
---------------------------------------------------
< 3 months < 6 months < 12 months Total
----------- ----------- ------------ -----------
US$ US$ US$ US$
Other payables
Investment purchases
payable 28,735 - - 28,735
Audit fees 196,495 - - 196,495
Sundry creditors 64,808 - - 64,808
290,038 - - 290,038
----------- ----------- ------------ -----------
290,038 - - 290,038
=========== =========== ============ ===========
Maturity analysis 2014
---------------------------------------------------
< 3 months < 6 months < 12 months Total
----------- ----------- ------------ -----------
US$ US$ US$ US$
Dividends payable 34,491,900 - - 34,491,900
Performance fee
payable 14,511,058 - - 14,511,058
Other payables
Management fee
payable 1,114,196 - - 1,114,196
Investment purchases
payable 111,679 - - 111,679
Audit fees 99,679 - - 99,679
Sundry creditors 91,620 - - 91,620
1,417,174 - - 1,417,174
----------- ----------- ------------ -----------
50,420,132 - - 50,420,132
=========== =========== ============ ===========
(f) Capital risk management
The capital of the Company is represented by the net assets
attributable to holders of ordinary shares. The Company's
objectives when managing this risk are to safeguard the Company's
ability to continue as a going concern in order to provide returns
for shareholders and benefits for other stakeholders and to
maintain a strong capital base to support the development of the
investment activities of the Company.
The Company is closed-ended and therefore the capital risk is
reduced as shareholder funds are locked in until the closure of the
Company. The level of capital funding is monitored by the Board of
Directors, who will ensure adequate solvency is in place prior to
making distributions.
(g) Foreign currency risk
Foreign currency risk is the risk that the value of a financial
instrument will fluctuate because of changes in foreign exchange
rates.
The Company's policy, generally, is not to manage exposure to
foreign exchange movements (both monetary and non-monetary) by
entering into any foreign exchange hedging transactions. However,
the Company did enter into a forward currency contract, maturing 14
January 2015, to lock in the US dollar equivalent of the dividends
declared during the year, which were paid to shareholders on 14
January 2015. The Directors considered that this was a prudent step
in order to mitigate the cash flow impact of adverse exchange rate
fluctuations on the amount of the dividends, which were declared in
GBP.
The Company holds assets denominated in currencies other than
the US dollar, the functional currency. It is therefore exposed to
currency risk, as values of the assets denominated in other
currencies will fluctuate due to changes in exchange rates. The
Company may hedge future investment opportunities in the functional
currency.
As at 31 December 2015, a proportion of the net financial
assets/(liabilities) of the Company are denominated in currencies
as follows:
2015 2014
------------ ------------
US$ US$
USD 126,255,337 171,286,979
GBP (116,879) 12,871,801
126,138,458 184,158,780
============ ============
At 31 December 2015, if exchanges rates had moved by 5% with all
other variables remaining constant, the change in net assets
attributable to holders of ordinary shares for the year would
amount to approximately +/- US$5,844 (31 December 2014: +/-
US$611,121). Management assesses the risk of exposure to the
general banking system, and specific banks, and invests cash in US
government securities when there is perceived risk to
principal.
(h) Fair value estimation
The fair value of financial assets and liabilities that are not
traded in an active market is determined by using valuation
techniques. See Note 6 for further details.
The carrying value less impairment provision of other
receivables and payables is assumed to approximate their fair
value. The fair value of financial liabilities for disclosure
purposes is not discounted as the Company does not expect there to
be any material differences.
16. NET ASSET VALUE ATTRIBUTABLE TO EACH ORDINARY SHARE
The net asset value attributable to each ordinary share is
calculated by dividing the net asset value attributable to ordinary
shareholders of US$126,138,458 (31 December 2014: US$184,158,780)
by the 110,340,019 ordinary shares in issue at 31 December 2015 (31
December 2014: 110,701,754), and excludes those shares held in
treasury as at 31 December 2015.
17. DEFICIT PER SHARE
Basic and diluted deficit per share is calculated by dividing
the Total Comprehensive Loss for the Year of US$49,156,186 (2014:
US$4,995,440) by the weighted average number of ordinary shares
during the year.
For basic deficit per share, the weighted average number of
ordinary shares excludes treasury shares for the period in which
they are held in treasury during the year. The basic weighted
average number of ordinary shares for the year is 110,493,632
(2014: 110,701,754).
The diluted deficit per share figure is calculated by adjusting
the basic weighted average number of ordinary shares outstanding to
assume conversion of all dilutive potential ordinary shares under
the Share Option Agreement (see Note 14(f)). The diluted number of
ordinary shares for the year is 110,941,449 (2014:
111,149,571).
18. SUBSEQUENT EVENTS
On 8 February 2016, the Company entered into an amended
management agreement with JAML. Under the terms of the amendments
the existing arrangements for management fees to JAML have been
altered to state that from the 1 January 2016, the Company will pay
US$3,000,000 in management fees for the year ending 31 December
2016, and US$1,750,000 in management fees for the year ending 31
December 2017.
On 15 March 2016, the Board of Directors agreed to cancel
361,735 of shares held in treasury.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EAPDFDDPKEEF
(END) Dow Jones Newswires
March 31, 2016 04:42 ET (08:42 GMT)
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