TIDMJIL
RNS Number : 1168J
Juridica Investments Limited
06 September 2016
Juridica Investments Limited
("Juridica," "JIL" or the "Company")
Results for six months ended 30 June 2016
Juridica, a provider of strategic capital for corporate legal
claims, declares a dividend of 32 pence per share and announces its
results for the six months ended 30 June 2016.
Financial highlights
-- Total comprehensive loss of US$27.2 million (2015: US$34.2
million) or 24.67 cents per ordinary share due principally to:
-- net unrealised loss of US$23.8 million generated from the
change in valuation of the Company's investments;
-- operating expenses of US$2.1 million;
-- realised loss of US$800,000 from the write-off of two investments; and
-- other net negative adjustments of US$500,000
-- Net asset value ("NAV") per share of US$0.7783 / 58 pence,
(31 December 2015: US$1.1432 / 77 pence) largely due to:
-- payment of the 8 pence per share dividend in June 2016 (US$0.1182 per share); and
-- total comprehensive loss of 19 pence per share (US$0.2467 per share)
-- Following a review of the cash needs of the business for the
run-off period and the July 2016 receipt of US$46.5 million from
case settlements, the Board has declared a dividend of 32 pence per
share at a total of approximately US$47 million
Investment portfolio and results
There were 13 active investments at 30 June 2016: five involve
pure litigation; four are in special purpose vehicles relating to
patent monetisation; and four either include residual assets
obtained as collateral, pre-litigation settlement opportunities, or
investments in other entities tied to litigation, (including the
Company's investment in its former Manager).
During the six-month period ended 30 June 2016 there were
settlements in the final two cases in the Company's large antitrust
and competition investment:
-- Case 5308-U - Settlement was reached during trial, generating
US$69.1m in gross proceeds and cost reimbursement. After reserving
for taxes and other contingencies, net proceeds of US$46.0m were
received in July 2016. Additional proceeds from the release of
excess reserves may be remitted to the Company once final tax
returns are filed by the counterparty to our investment (no later
than third quarter 2017).
-- Case 1008-A - A partial settlement was reached generating
approximately US$600,000 in gross proceeds. After reserving for
taxes and other contingencies, net proceeds of US$500,000 were
received by the Company in July 2016. Additional proceeds of
approximately US$1.0m are expected prior to 31 December 2017
Corporate run-off strategy
Further to the Company's announcement of 18 November 2015, the
Board has instructed its investment manager, Juridica Asset
Management Limited, to seek resolution and monetisation of all the
remainder of the Company's assets, where reasonably possible, prior
to 31 December 2017. In addition, subsequent to 30 June 2016, the
Company has completed the wind-up of the debt facility with Fields
Law Firm PLLC.
- 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.
This announcement contains inside information
For further information contact:
Juridica Asset Management Limited +1 (866) 443
Bill Yuen 1080
Cenkos Securities PLC - Nominated
Adviser and Joint Broker
Nicholas Wells +44 (0) 20
Camilla Hume 7397 8900
Investec Bank PLC - Joint Broker
Jeremy Ellis +44 (0) 20
Darren Vickers 7597 4000
Vistra Fund Services (Guernsey)
Limited - Company Secretary +44 (0) 14
Lisa Garnham 8172 6034
Bell Pottinger +44 (0) 20
Olly Scott 3772 2567
Chairman's statement
On behalf of the Board, I present the results of Juridica
Investments Limited ("JIL" or the "Company") for the six-month
period ended 30 June 2016.
Financial Results
In the first half of 2016, the Company's loss was US$27.2
million compared with US$34.2 million for the comparable period in
2015. The net asset value ("NAV") per share has fallen by US$0.3649
per share from US$1.1432 per share at 31 December 2015 to US$0.7783
per share at 30 June 2016 largely due to the revaluation of case
investments (US$0.2155 per share) and the payment of a dividend in
June 2016 (US$0.1182 per share).
Corporate Run-Off Strategy
The Board announced on 18 November 2015 that the Company 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 it would seek to return capital
to shareholders in the most appropriate manner, following the
completion of investments. In early 2016 the Board entered into an
agreement with the Company's investment manager, Juridica Asset
Management Limited ("JAML" or "Manager") for continued services for
a further two years until 31 December 2017. On that date the
Company is entitled to terminate these arrangements. This timing
reflected our view of the circumstances of the remaining portfolio.
Nevertheless we reiterate the approach set out in my statement in
the 2015 Annual Report that should circumstances involve the
continuation of any significant investments into 2018 then the
Company will make appropriate arrangements as required.
Further to this strategy, the Board has instructed JAML, to look
into the resolution and monetisation of the remaining litigation
assets as their circumstances reasonably permit, and for
non-litigation assets where reasonable, by on or about 31 December
2017. This decision was made after considering the timing and
expected value of the Company's remaining investments, the
realisation of the largest remaining case in the portfolio, and the
costs to continue operating the Company beyond 31 December 2017. As
a consequence of this decision, the Board, with input from the
Manager, has adjusted the values of certain remaining assets to
reflect the potential likelihood of monetising them where
reasonably possible by the end of 2017.
Lastly, and as previously announced in my 2015 year-end
statement, the Board and the Manager have agreed a programme of
cost reductions over and above the cuts to investment management
fees with target savings of US$900,000 for 2016 compared with 2015
and I expect that we will meet that target by the year end. Further
cost reductions will continue to be sought next year.
Investment Results
During the six-month period ended 30 June 2016 there were
settlements in the final two cases in the Company's large antitrust
and competition investment. Gross proceeds totalling US$69.7
million were generated from these combined settlements. Under the
terms of the related investment agreement, gross proceeds generated
from the investment are received and held by Fields Law Firm PLLC
that is the counterparty to the Company's investment. Deducted from
the gross proceeds are taxes and reserves required for certain
contingencies. The Company receives net proceeds at the end of each
calendar year, or earlier if approved by JIL and the counterparty.
Once final tax obligations are determined and once all
contingencies are cleared, any residual proceeds are transferred to
the Company. A total of US$46.5 million in net proceeds, after the
deductions for the above noted reserves (which were higher than we
expected), was transferred to the Company in July 2016 (and has
been included as a receivable in the Statement of Financial
Position at 30 June 2016). We believe additional proceeds from
these reserves may be released to the Company once actual tax
returns are filed (expected no later than third quarter 2017) and
again once all contingencies are cleared. An estimate for the
amount of excess reserves to be released to the Company are
included in the valuation for Investment 3608-A at 30 June
2016.
-- Case 5308-U: Settlement was reached during trial that
generated US$69.1 million in gross proceeds and cost reimbursement.
After reserving for taxes and other contingencies, net proceeds of
US$46.0 million were received by the Company in July 2016.
Additional proceeds from this settlement may be remitted to the
Company after filing of tax returns, which is expected no later
than third quarter 2017.
-- Case 1008-A: A partial settlement was reached generating
approximately US$600,000 in gross proceeds. After reserving for
taxes and other contingencies, net proceeds of US$500,000 were
received by the Company in July 2016. Additional net proceeds of
approximately US$1.0 million are expected prior to 31 December
2017. These returns represent the Company closing its investment in
this case as any further future returns are speculative, and when
off set against the cost of future commitments under the investment
agreement, make closure at this stage prudent and, the Board
believes, in the investors' interests.
Further details of the closing of the structures supporting the
antitrust and competition portfolio are set out in the subsequent
events note (Note 16) to these Financial Statements.
Investment Portfolio
The portfolio has been carefully reviewed in calculating the
Company's NAV. As to the litigation cases now reviewed, earlier
adverse decisions were reported in the last Annual Report; for
example, the decision on case 5009-S in late 2015. The SPV group of
investments are detailed in the Investment Manager's statement
which follows. As commercial investments they can be named.
There were 15 active investments in the period to 30 June 2016
(two of which were written off in the period), of which seven
involved litigation. Of the seven, four have had significant
adverse judicial decisions substantially affecting their NAV -
5009-S, 2709-E, 12013 and 1608-T. The first two are being appealed
and the third and fourth have been written off. One other, 1410, is
awaiting a rehearing on damages following a successful appeal. The
rehearing is before a judge alone and ought to occur this year or
next. Investment 114107 is proceeding and the NAV reflects the
prospective returns currently anticipated to be received by the
Company in addition to some settlement returns already received.
This investment is expected to complete this year or next. The
seventh, 3608-A, is our antitrust and competition investment which
had significant activity during the period as noted above.
Four investments are in special purpose vehicles ("SPV"). These
investments began in 2014.
As to ACK, after extensive investigation it was determined that
the inventions had no commercial value. The remaining investment is
a note given in respect of an equity entitlement. These matters
were resolved in the first half of this year.
As to Rich Media, 25 patent filings occurred in 2016. Further
development is planned with the inventor.
As to GrandiOS, no inventor is directly involved. 37 U.S.
domestic and 20 international patent filings have been made.
Marketing is continuing.
As to ProSports, 55 domestic and 13 international patent filings
have been made. A shareholder partner is the National Football
League Players Association ("NFLPA"). Marketing is underway.
These SPVs are commercial ventures and their NAVs reflect market
conditions and associated risks.
There are four remaining investments. Of them two, 7313 and
1610, are not in favourable circumstances as explained in the
Investment Manager's Report. The NAV of these investments as at
June 30, 2016, both as to litigation and other investments have
been adjusted applying fair value principles to prevailing
circumstances.
Dividend
During the six-month period ended 30 June 2016, an interim
dividend of 8 pence per share (US$13.0 million) was paid on 24 June
2016.
Following a review of the cash needs of the business for the
run-off period and the July 2016 receipt of US$46.5 million from
case settlements, the Board has declared a further dividend of 32p
per share (US$47.0 million) to shareholders on the Register at 16
September 2016.
Exchange Rate Movements
Since the vote by the UK on 23 June 2016 to leave the EU and
concerns about the future economic effect on the UK there has been
a fall in the value of the Sterling against the US Dollar. This has
been beneficial to the Company as its assets are almost entirely
denominated in US Dollars.
Conclusion
The two dividends this year of 8p and 32p total 40p.
The remaining investments have had a significant adjustment to
NAV. For the litigation cases this follows judicial outcomes and
for other investments this reflects commercial circumstances.
The Board appreciate that investors wish run-off to be effective
and efficient and your Board will seek to achieve this.
Lord Daniel Brennan QC
Chairman
6 September 2016
Investment Manager's Report
The Company began operations 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 17 of these investments have
come to full conclusion. Of the remaining 13 investments, seven
have had some return on the Company's investment (including the
Company's investment in JCML 2007 Limited ("JCML 2007"), its former
manager, either from settlements or other distributions, and still
remain active.
During the six-month period ending 30 June 2016, the Company has
moved forward with its strategy announced on 18 November 2015. The
strategy involves engaging in no new investments, ensuring its
existing investments are managed through to their conclusion, and
returning capital to shareholders in the most appropriate manner
("Run-Off Strategy"). To date, since the adoption of the Run-Off
Strategy, the Company has achieved the following:
-- Settlement in two cases generating US$69.7 million in gross
proceeds (US$46.5 million in net proceeds after reserving for taxes
and contingencies). The US$23.2 million in reserves held by the
counterparty to our investment were larger than expected and we
believe additional net proceeds will be released prior to 31
December 2017.
-- Dividend of 8 pence per share paid to shareholders on the Register at 27 May 2016.
-- Declaration of a dividend of 32 pence per share payable to
shareholders on the Register at 16 September 2016.
Further to the Company's Run-Off Strategy, the Board has
instructed us to seek resolution and monetisation of all the
remainder of the Company's assets, if possible by the end of
2017.
Financial Performance During 2016
The NAV per ordinary share decreased from US$1.1432 (77 pence
per share) as at 31 December 2015 to US$0.7783 (58 pence per share)
as at 30 June 2016. This decrease of 36.49 cents in NAV per
ordinary share was primarily attributable to the following:
-- Dividend declared on 19 May 2016 and paid on 24 June 2016 of
US$13.0 million or 11.82 cents per ordinary share (8 pence per
share).
-- Total comprehensive loss of US$27.2 million or 24.67 cents per ordinary share.
The Company's US$27.2 million total comprehensive loss for the
period ended 30 June 2016 was due to the net unrealised loss of
US$23.8 million generated from the change in valuation of the
Company's investments, a realised loss of US$800,000 associated
with the write-off of two investments, operating expenses of US$2.1
million and other net negative adjustments of US$500,000.
The Company's net unrealised loss from net reduction in the
valuation of the Company's investments of US$23.8 million was
attributable to the following:
-- US$18.7 million reduction in value associated with the
Company's contractual interests. This change was due to changes in
our expectations on probability of a successful resolution, changes
in quantum and timing of a successful resolution, and application
of additional risk factors on certain investments (principally the
patent SPVs) accounted for as contractual interests to incorporate
the potential of monetising these investments within a shortened
development period following the Board's instructions in accordance
with the Company's Run-Off Strategy. The risk factors associated
with monetising the investment within a shorter development period
may be adjusted in future reporting periods based on our ongoing
monetisation efforts.
-- US$3.4 million reduction in value associated with the
Company's debt securities consisting exclusively of our antitrust
and competition portfolio. This reduction is principally due to a
reduction in the amount of expected net proceeds from our antitrust
and competition portfolio.
-- US$1.7 million reduction in value associated with the
Company's equity investments. This change was partially due to
changes in our expectations on quantum and timing and application
of additional risk factors on one equity investment to incorporate
the potential of monetising this investment within a shortened
growth period following the Board's instructions in accordance with
the Company's Run-Off Strategy. The risk factors associated with
monetising the investment within a shorter growth period may be
adjusted in future reporting periods based on our ongoing
monetisation efforts.
Investment Results During 2016
Case 5308-U:
During the six-month period ended 30 June 2016, Case 5308-U
(which was one of the six underlying cases in our single antitrust
and competition investment) reached a final settlement generating
gross proceeds of US$69.1 million. As per the terms of the
Company's investment arrangement, the law firm that is counterparty
to this investment is required to set aside reserves for taxes and
contingencies resulting from the settlement or other matters
related to the investment. After netting out these reserves, which
were larger than we expected, a total of US$46.0 million was
delivered to the Company in July 2016 (and has been included as a
receivable in the Statement of Financial Position at 30 June 2016).
Additional proceeds may be delivered to the Company once actual tax
returns are filed (which is expected no later than third quarter
2017) and again once all contingencies are cleared. The expected
release of excess reserves is reflected in the remaining valuation
of our antitrust and competition investment. The final amount of
excess reserves that may be released could vary significantly from
the estimate we have developed.
Case 1008-A:
During the six-month period ended 30 June 2016, Case 1008-A
(which was one of the six underlying cases in our single antitrust
and competition investment) reached partial settlement. This
partial settlement generated gross proceeds in tranches, of which
US$850,000 has been determined and approximately US$600,000 has
been paid by the defendant. After providing for the appropriate
reserves (similar to those described above for Case 5308-U),
US$500,000 in net proceeds was delivered to JIL in July 2016 (and
has been included as a receivable in the Statement of Financial
Position at 30 June 2016). An additional payment from this case is
expected prior to the end of 2017 and is expected to provide in
excess of US$1.0 million in net proceeds (after deductions for
reserves for taxes and other contingencies).
Investment 12013:
Investment 12013 is an investment made during 2015 that involves
a legal claim of misappropriation of trade-secrets. The Company's
investment was used for funding an appeal which, during the fourth
quarter of 2015, was lost. A motion for reconsideration was denied
and in February 2016, the Plaintiff's petition for Writ of
Certiorari with the State Court of Appeals was denied. The
Plaintiff determined that an appeal to the US Supreme Court was not
viable and as a result, at 30 June 2016, the investment has been
written off. The Company invested US$250,000 into this case and
approximately US$95,000 of the Company's 2015 year-end NAV was
applicable to this investment.
Investment 1608-T:
Investment 1608-T is one of the Company's earliest investments
and involves a judgment on behalf of insurance companies against a
foreign government. 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. During the six-month period ended 30 June 2016,
the Company believed that a pending summary judgment ruling from
the United States Court of Federal Claims would grant the
Defendant's motion for summary judgement denying the Plaintiff's
claims. As such, at 30 June 2016, this investment was written off.
The Company invested US$500,000 into this case and approximately
US$450,000 of the Company's 2015 year-end NAV was applicable to
this investment. Subsequent to 30 June 2016, the Defendant's motion
for summary judgment was granted.
Other results:
In addition to the above activity, Case 2709-E generated a few
small settlements related to one of the patents in litigation. The
proceeds were reinvested into the case to further the legal
proceedings on the remaining patent. Lastly, approximately
US$40,000 in residual proceeds related to Case 8008-L and Case
5208-E were received by the Company during the six-month period
ended 30 June 2016.
Fair Value of Investments
The fair value of the Company's investments at 30 June 2016 was
US$25.2 million. From an accounting standpoint, 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 2015:
31 December Additions Net Proceeds Realised Fair 30 June
2015 During Attributable Losses Value 2016
Fair the Six-Month to the Attributable Change Fair
Value Period Six-Month to the During Value
Ended Period Six-Month the Six-Month
30 June Ended Period Period
2016 30 June Ended Ended
2016 30 June 30 June
2016 2016
$USM $USM $USM $USM $USM $USM
------------------ ------------ --------------- -------------- -------------- --------------- --------
Contractual
Interests:
includes
assets
from the
Company's
patent
and commercial
claims
portfolios 29.4 0.5 - (0.8) (18.7) 10.4
Debt Securities:
includes
assets
from our
antitrust
and competition
portfolio
(1) 55.4 5.0 (46.5) - (3.4) 10.5
Equity
Investments:
includes
assets
from our
patent
and commercial
claims
portfolios
as well
as other
investments
(2) 6.0 - - - (1.7) 4.3
------------------ ------------ --------------- -------------- -------------- --------------- --------
Total 90.8 5.5 (46.5) (0.8) (23.8) 25.2
(1) Additions within our antitrust and competition portfolio
were provided from a US$5 million clawback of prior year swap
payments as part of the facility between the Company and Fields Law
PLLC (see Note 6). Net proceeds generated during the six-month
period ended 30 June 2016 within our antitrust and competition
portfolio is reflected as a receivable in the financial statements.
Subsequent to 30 June 2016, US$46.5 million of the receivable was
received by the Company. As per the terms of the Company's
investment arrangement, the law firm that is counterparty to this
investment is required to set aside reserves for taxes and
contingencies resulting from the settlement or other matters
related to the investment. The reserves set aside from 2016
settlement were larger than we expected and we believe additional
proceeds may be delivered to the Company once actual tax returns
are filed (which is expected to occur no later than third quarter
2017) and again once all contingencies are cleared. The expected
release of excess reserves is reflected in the remaining valuation
of our antitrust and competition investment. The final amount of
excess reserves that may be released could vary significantly from
the estimate we developed.
(2) Equity investments exclude an intangible, with amortised
value of approximately US$1.7 million.
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.
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 generating either a settlement or trial
victory.
For the majority of the Company's litigation investments, 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. For certain of the Company's investments, we found it more
appropriate to value them by using discounted cash flow models
incorporating the various risks associated with the investment.
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).
In response to the Company's Run-Off Strategy, as part of us
reaching fair value assessment of the Company's investments, we
have considered the potential likelihood of monetising certain
investments within a shortened development period.
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.
Portfolio Update
As the Company's portfolio has progressed, it has evolved into
three types of investments: litigation related investments; SPV
related investments; and other investments. As such, our portfolio
update will be grouped in the same manner.
The summary of our investment holding at 30 June 2016 for each
of these groups is as noted on the following table, together with
the current concentration risk:
Portfolio category Number Fair value % of total
of active $USM NAV
investments
------------------------ ------------- ----------- -----------
Litigation investments 5 16.5 19.2%
SPV investments 4 5.7 6.6%
Other investments
(1) 4 4.6 5.4%
------------- ----------- -----------
Total 13 26.8 31.2%
============= =========== ===========
(1) Includes the Company's investment in JCML 2007. Also
includes an investment in which US$1.7 million of its fair value at
30 June 2016 is categorised as an intangible.
A total of US$143.8 million has been invested in the current
portfolio holdings (excluding any related transaction costs and
excluding the Company's investment in JCML 2007). The current
portfolio holdings (excluding the Company's investment in JCML
2007) have generated proceeds from partial settlement (net of
reserves for taxes and contingencies) totalling US$201.7 million
(including US$46.5 million that has been included as a receivable
in the Statement of Financial Position at 30 June 2016) and was
received in July 2016.
Litigation investments
A total of 5 investments in litigation remain active as of 30
June 2016.
Case summaries:
-- Investment 3608-A: This investment originally included six
cases of which five were related to antitrust and competition and
one was related to statutory claims against an international bank.
The investment was initiated in 2008 with terms that required
funding obligations by the Company through 2016 followed by an
annual option providing for the Company to extend the funding
obligation beyond 2016. At 30 June 2016, the Company declined to
exercise its option to continue funding the investment.
Under the terms of the investment agreement, gross proceeds
generated from the investment are received and held by the law firm
that is the counterparty to the Company's investment. Deducted from
the gross proceeds are taxes and reserves required for certain
contingencies. The Company receives net proceeds at the end of each
calendar year, or earlier if approved by JIL and the counterparty.
Once final tax obligations are determined and once all
contingencies are cleared, any residual proceeds are transferred to
the Company. Prior to 2016, four of the individual cases in this
investment had come to conclusion. During 2016, one of the
remaining two cases reached its final conclusion and the second
case reached partial settlement.
-- Case 5308-U began its trial in March 2016 and came to a
settlement in April 2016. Gross proceeds generated from the
settlement were US$69.1 million. Net proceeds, after above noted
reserves were made, of US$46.0 million were transferred to the
Company in July 2016 (and has been included as a receivable on the
Statement of Financial Position at 30 June 2016). The reserves held
by the counterparty to our investment were greater than we expected
and we believe additional proceeds may be delivered to the Company
once actual tax returns are filed (which is expected to occur no
later than third quarter 2017) and again after all contingencies
are cleared. An estimate for the amount of excess reserves to be
released to the Company are included in the valuation for
Investment 3608-A at 30 June 2016. The final amount of excess
reserves that may be released may vary from the estimate we have
developed.
-- Case 1008-A has reached partial settlement during 2016.
Although the case continues, the Company's decision to not exercise
its funding option eliminates the potential for the Company to
receive any additional proceeds from settlements occurring after 31
December 2016 (which were not deemed sufficient to justify the
additional funding requirements). A total of approximately
US$500,000 in net proceeds was transferred to the Company in July
2016 (and has been included as a receivable on the Statement of
Financial Position at 30 June 2016). We expect further net proceeds
related to this settlement, estimated to be in excess of US$1.0
million to be received no later than 31 December 2017.
-- Case 2709-E: This case originally consisted of three patents
against three defendants. After a protracted patent re-examination,
one patent was abandoned. During 2016, an unexpected event occurred
which severely impacted one of the remaining patents. This resulted
in settlement with the three defendants generating proceeds far
below our expectations. A Markman hearing on the remaining patent
completed just prior to 30 June 2016 with the plaintiff prevailing
on validity. However, the ruling makes it difficult for the
plaintiff to prove infringement. Full results of the Markman
hearing are currently being reviewed by plaintiff's counsel. The
parties have decided to submit remaining issues to the appeals
court for final resolution. Trial is currently scheduled for May
2017 but is likely to be delayed as the district court case will be
stayed pending appeal.
-- Case 5009-S: This case 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 filed post-trial motions
with the plaintiff requesting a new trial on damages and the
defendant for judgement to be entered in its favour as a matter of
law. These motions were decided in favour of the defendant;
however, the plaintiff has appealed this adverse decision of the
trial court. We believe there remains a possibility that a new
trial on damages will occur.
-- Case 1410: This case 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. Although risk remains, we believe
there is the possibility of a new award on damages without a
further trial.
-- Case 114107: This case consists of five separate patent
portfolios comprising several hundred patents related to
information technology. In 2015, and less than 60 days after making
the investment, a settlement occurred in two lawsuits that provided
excess collateral for the Company's investment. This settlement
returned all of the Company's investment in the case. Additional
proceeds are expected from activity with the new cases.
SPV investments
In early 2014, we identified a changing patent market whereby
value was maximised by developing operating entities around a
portfolio of patents. We identified several existing patent
investments in which the underlying patents were at risk of not
realising their full potential. Working with subject matter
experts, new inventions were developed with the intention of
obtaining patents, developing commercial applications, and
monetising each SPV through litigation or other commercial
strategies. These investments were funded through SPVs in order to
facilitate monetisation of each developed entity.
A total of four SPVs were created, funded, and remain active.
Three of these SPVs were developed around existing core patents.
The fourth SPV was developed in partnership with the NFLPA.
SPV summaries:
-- Rich Media: This investment originated with litigation
involving an underlying patent for which the Company previously has
received proceeds. In 2014, we began to develop 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, developed 25
additional inventions all of which were filed as patent
applications in early 2016. At 30 June 2016, no patents had yet
completed their review by the United States Patent and Trademark
Office ("USPTO"). We are working with the original inventor, who is
a well-known inventor in his field, to monetise the SPV.
-- ACK / Smooth3D: This investment consists of three components:
-- The investment originated with litigation that resulted in a
judgment of liability but low damages and which provided no
proceeds to the Company. During 2015, the case had progressed to
the point where we determined that there was no prospect of
generating any proceeds from the original litigation and no value
had been assigned to the litigation component.
-- As collateral for the Company's original investment in the
litigation, JIL received an equity interest in a company that has
developed energy-saving software for electrical motors. The
energy-saving software continues to be tested by a major industrial
conglomerate.
-- During the six-month period ended 30 June 2016, JIL exchanged
its equity interest in the company for a note subject to agreed
discounts if redeemed early. The redemption discounts have been
factored into the Company's reported NAV at 30 June 2016.
-- During 2014, we worked with the inventor of the patents that
were subject to the original litigation and other subject matter
experts to develop a portfolio of related inventions with the
intention of procuring patents. At 30 June 2016, it was determined
that the underlying inventions had no commercial value and all work
on these inventions has ceased.
-- GrandiOS: This investment consists of two components:
-- The investment originated with litigation surrounding core
computer technology. Although prior settlements have provided the
Company with some small return, during the six-month period ended
30 June 2016 we learned of new hurdles related to the original
litigation which we believe creates severe doubt on the ability of
the Company to generate any further proceeds. As such, the Company
has no longer assigned any value to the litigation component.
-- The original investment included an interest in certain
mobile phone related patents. In 2014, we worked with subject
matter experts to develop a portfolio of patents related to mobile
phone technology. As of 30 June 2016, a total of 37 patent
applications have been filed with the USPTO and 20 international
patent applications have been filed under the Patent Cooperation
Treaty ("PCT") which provides international protection. At 30 June
2016, a total of 10 patents have either been granted or been
allowed by the USPTO. We continue to market this developing
portfolio of patents and inventions to prospective buyers.
-- ProSports: This SPV was established to develop and monetise a
large portfolio of patents in the technology and sports market. The
Company has partnered with the NFLPA in this endeavour. As of 30
June 2016, a total of 55 patent applications have been filed with
the USPTO and 13 international patent applications have been filed
under the PCT. At 30 June 2016, a total of five patents have either
been granted or been allowed by the USPTO. We continue to market
this developing portfolio of patents and inventions to prospective
buyers.
Other investments:
The Company holds four active investments that are not directly
related to litigation and are not specific to a particular SPV.
These are detailed below:
-- Investment 7313: As part of the Company's 2014 revised patent
strategy, the Company acquired a 7.8% preferred ownership in
ipCreate, Inc. ("ipCreate") with an expectation to monetise this
investment as part of future capital raising by ipCreate. During
the six-month period ended 30 June 2016, events have indicated
enhanced risk to ipCreate successfully raising new funds. The
valuation of this investment at 30 June 2016 reflects this
increased risk. Events subsequent to 30 June 2016 indicate further
risk to ipCreate raising new funds. We will continue to monitor
these events closely. At 30 June 2016, this investment represented
US$700,000 of the Company's NAV.
-- Investment in JCML 2007: At Admission, the Company acquired
15 per cent (subsequently diluted to 13.6 per cent) of JCML 2007
for US$2.9 million. In 2012, the Company acquired a further holding
in JCML 2007 for US$4.3 million, bringing its overall holding in
JCML 2007 to 36.17%. As a result of its interest in JCML 2007, the
Company is entitled to its percentage share of any performance fees
paid to JCML 2007 as well as its percentage share of any assets
distributed. In 2015, the Company received dividend income of
approximately US$5.4 million from a combination of performance fees
and a distribution of the Company's shares held by JCML 2007. No
further performance fees are expected to be earned by JCML 2007 and
at 30 June 2016, the value attributable to JIL's investment in JCML
2007 is based on the Company's share of Company stock still held by
JCML 2007 (US$32,000 at 30 June 2016).
-- Investment 1610: This investment began as an investment in
litigation which 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, and at year-end 2015, the Company retained
an industry expert to provide input into a current valuation. This
valuation, which considered factors related to the asset being a
functioning mine, has been adjusted by additional risk factors
(including the potential to sell the asset before market conditions
recover). At 30 June 2016, this investment represented US$180,000
of 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.
-- Investment 6609-S: This investment involves a large,
multi-party pre-litigation settlement opportunity. The investment
is now in the very late stages of development and the risk is still
binary. If a settlement is concluded, JIL is likely to receive
significant proceeds. If a settlement is not achieved the entire
value of the asset, carried in the NAV at US$3.7 million will be
written off. The ongoing costs associated with attempting to
complete this complex deal are modest. Settlement negotiations for
a portion of the opportunity continue. Given the complexity of the
matter, it is not possible to predict the likelihood of success
although outside counsel believes that a successful result is
possible. This investment is being accounted for partially as an
intangible asset and partially as an equity investment.
Outlook
We will continue to work with the Company's Board of Directors
to return capital to shareholders, 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 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 disclaim 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
6 September 2016
Independent Review Report
Introduction
We have been engaged by Juridica Investments Limited (the
"Company") to review the unaudited condensed set of financial
statements in the half yearly report for the six months ended 30
June 2016, which comprises the unaudited condensed statement of
comprehensive income, the unaudited condensed statement of
financial position as at 30 June 2016, the unaudited condensed
statement of changes in equity, the unaudited condensed cash flow
statement and related notes. We have read the other information
contained in the half-yearly report and considered whether it
contains any apparent misstatements or material inconsistencies
with the information in the unaudited condensed set of financial
statements.
Directors' responsibilities
The half-yearly report and unaudited condensed financial
statement is the responsibility of, and has been approved by, the
directors. The directors are responsible for preparing the half
yearly report in accordance with the AIM Rules for Companies which
require that the financial information must be presented and
prepared in a form consistent with that which will be adopted in
the Company's annual financial statements.
As disclosed in note 2, the annual financial statements of the
Company are prepared in accordance with International Financial
Reporting Standards. The unaudited condensed set of financial
statements included in this half yearly report has been prepared in
accordance with International Accounting Standard 34, "Interim
Financial Reporting".
Our responsibility
Our responsibility is to express to the Company a conclusion on
the unaudited condensed set of financial statements in the half
yearly report based on our review. This report, including the
conclusion, has been prepared for and only for the Company for the
purpose of the AIM Rules for Companies and for no other purpose. We
do not, in producing this report, 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.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements 2410, 'Review of Interim Financial
Information Performed by the Independent Auditor of the Entity'
issued by the International Auditing and Assurance Standards Board.
A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit
conducted in accordance with International Standards on Auditing
and consequently does not enable us to obtain assurance that we
would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the unaudited condensed set of financial
statements in the half yearly report for the six months ended 30
June 2016 is not prepared, in all material respects, in accordance
with International Accounting Standard 34 and the AIM Rules for
Companies.
Emphasis of Matter
Without qualifying our conclusion, we draw attention to Notes 6
and 7 to the unaudited condensed financial statements surrounding
the fair value of non-current assets. The unaudited condensed set
of financial statements includes non-current assets stated at their
fair value of US$26,838,452. Due to the inherent uncertainty
associated with the valuation of such non-current assets and the
absence of a liquid market, these fair values may differ from their
realisable values, and the differences could be material.
PricewaterhouseCoopers CI LLP
Chartered Accountants
Guernsey, Channel Islands
6 September 2016
The maintenance and integrity of the Juridica Investments
Limited website is the responsibility of the Directors; the work
carried out by us does not involve consideration of these matters
and, accordingly, we accept no responsibility for any changes that
may have occurred to the unaudited condensed financial statements
since they were initially presented on the website.
Legislation in Guernsey governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
UNAUDITED CONDENSED STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD FROM 1 JANUARY 2016 TO 30 JUNE 2016
1 January 1 January
2016 to 2015 to
30 June 30 June
2016 2015
-------------- -------------
Notes US$ US$
INCOME
Bank interest 1,029 -
Foreign exchange (loss)/gain (13,157) 912,559
(12,128) 912,559
-------------- -------------
EXPENSES
Management fees 12(a) 1,500,360 2,860,627
Due diligence and transaction
costs 29,696 332,101
Directors' fees and expenses 12(d) 210,824 352,820
Audit fees 106,456 134,556
Legal and professional
expenses 46,029 48,856
Administration fees 90,443 95,638
Other expenses 172,309 269,129
2,156,117 4,093,727
-------------- -------------
INVESTMENT MOVEMENTS
Amortisation of intangible
assets 5 (514,699) (441,311)
Realised (losses)/gains
on financial assets at
fair value through profit
or loss 6 (753,750) 1,280,975
Movement in unrealised
loss on financial assets
at fair value through profit
or loss 6 (23,783,610) (31,854,004)
(25,052,059) (31,014,340)
-------------- -------------
Loss for the period (27,220,304) (34,195,508)
============== =============
Total comprehensive loss
for the period (27,220,304) (34,195,508)
============== =============
Deficit per ordinary share
Basic Cents (24.67) (30.90)
Fully diluted Cents (24.57) (30.78)
The notes on pages 22 to 32 form an integral part of these
unaudited condensed financial statements.
UNAUDITED CONDENSED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2016
30 June 31 December
2016 2015
------------ ------------
Notes US$ US$
ASSETS
Non-current assets
Intangible assets 5 1,664,097 2,058,796
Financial assets at fair
value through profit
or loss 6 25,174,355 90,777,677
26,838,452 92,836,473
------------ ------------
Current assets
Other receivables and
prepayments 8 52,091,705 6,207,781
Cash and cash equivalents 7,095,461 27,384,242
59,187,166 33,592,023
------------ ------------
TOTAL ASSETS 86,025,618 126,428,496
============ ============
EQUITY AND LIABILITIES
Equity
Reserves 86,521,511 126,783,917
Treasury shares 13 (645,459) (645,459)
------------ ------------
Net assets attributable to
ordinary shareholders 85,876,052 126,138,458
Total equity 85,876,052 126,138,458
============ ============
Current liabilities
Other payables 9 149,566 290,038
Total liabilities 149,566 290,038
------------ ------------
TOTAL EQUITY AND LIABILITIES 86,025,618 126,428,496
============ ============
Number of ordinary shares
(excluding treasury shares) 13 110,340,019 110,340,019
Net asset value per ordinary
share $0.7783 $1.1432
These half yearly unaudited condensed financial statements were
approved by the Board of Directors on 6 September 2016 and signed
on its behalf by:
RJ Battey
Director
The notes on pages 22 to 32 form an integral part of these
unaudited condensed financial statements.
UNAUDITED CONDENSED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIOD FROM 1 JANUARY 2016 TO 30 JUNE 2016
Note Reserves Treasury Total
shares
------------- ---------- -------------
US$ US$ US$
Balance at 1 January
2016 126,783,917 (645,459) 126,138,458
Changes in equity
for 2016
Loss for the period (27,220,304) - (27,220,304)
Total comprehensive
loss (27,220,304) - (27,220,304)
Dividend declared 15 (13,042,102) - (13,042,102)
Balance at 30 June
2016 86,521,511 (645,459) 85,876,052
============= ========== =============
Reserves Treasury Total
shares
------------- ---------- -------------
US$ US$ US$
Balance at 1 January
2015 184,158,780 - 184,158,780
Changes in equity
for 2015
Loss for the period (34,195,508) - (34,195,508)
Total comprehensive
loss (34,195,508) - (34,195,508)
Treasury shares acquired - (645,459) (645,459)
Balance at 30 June
2015 149,963,272 (645,459) 149,317,813
============= ========== =============
The notes on pages 22 to 32 form an integral part of these
unaudited condensed financial statements.
UNAUDITED CONDENSED CASH FLOW STATEMENT
FOR THE PERIOD FROM 1 JANUARY 2016 TO 30 JUNE 2016
1 January 1 January
2016 to 2015 to
30 June 30 June
2016 2015
Notes US$ US$
Cash flows from operating
activities
Loss for the period (27,220,304) (34,195,508)
Adjusted for:
Realised losses/(gains) on
financial assets at fair
value
through profit or loss 6 753,750 (1,280,975)
Movement in unrealised loss
on financial assets
at fair value through profit
or loss 6 23,783,610 31,854,004
Dividend proceeds received
as treasury shares - (645,459)
Amortisation of intangible
assets 5 514,699 441,311
Foreign exchange losses/(gains) 13,157 (912,559)
Bank interest (1,029) -
Changes in working capital
Purchases of non-current
assets at fair value
through profit or loss (5,498,656) (10,345,110)
Additions to intangible assets 5 (120,000) (120,000)
Net settlement of non-current
assets at fair value
through profit or loss 517,162 69,844,145
Decrease/(increase) in trade
and other receivables 8 136,757 (131,939)
Decrease in other payables 9 (113,697) (15,454,145)
Net cash flow from operating
activities (7,234,551) 39,053,765
Cash flows from investing
activities
Interest received 1,029 -
Net cash flow from investing 1,029 -
activities
Cash flows from financing
activities
Dividend paid 15 (13,042,102) (34,491,900)
Net cash flow from financing
activities (13,042,102) (34,491,900)
Net (decrease)/increase in
cash and cash equivalents (20,275,624) 4,561,865
Cash and cash equivalents
at 1 January 27,384,242 27,962,963
Effect of foreign exchange
rate changes (13,157) 912,559
Cash and cash equivalents
at 30 June 7,095,461 33,437,387
The notes on pages 22 to 32 form an integral part of these
unaudited condensed financial statements.
NOTES TO THE UNAUDITED CONDENSED FINANCIAL STATEMENTS
FOR THE PERIOD FROM 1 JANUARY 2016 TO 30 JUNE 2016
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 condensed
interim financial statements have been reviewed, not audited.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of
the financial statements are set out below:
Basis of Preparation
These half yearly unaudited condensed financial statements ("the
condensed financial statements") for the six months ended 30 June
2016 have been prepared in accordance with International Accounting
Standard 34: Interim Financial Reporting ("IAS 34"), and on a going
concern basis. The condensed financial statements should be read in
conjunction with the annual financial statements for the year ended
31 December 2015 which have been prepared in accordance with
International Financial Reporting Standards ("IFRS"), issued by the
International Accounting Standards Board ("IASB"), interpretations
issued by the International Financial Reporting Interpretations
Committee ("IFRIC") and applicable legal and regulatory
requirements of Guernsey Law.
The following IFRS standards became effective for periods
commencing on or after 1 January 2016:
-- IAS 1 'Presentation of Financial Statements' - Disclosure Initiative (Amendments to IAS 1)
-- Clarification of Acceptable methods of Depreciation and
Amortisation (Amendments to IAS 16 and IAS 38)
-- IFRS Annual Improvements Cycle 2012- 2014
However, these have had no material impact on the presentation
of the financial statements.
Accounting policies
The preparation of financial statements in conformity with IAS
34 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
accounting policies applied are consistent with those of the annual
financial statements for the year ended 31 December 2015.
Financial risk management
The Company's activities expose it to a variety of financial
risks. The main risks arising from the Company's financial
instruments are market risk, insurance risk, credit risk and
liquidity risk. These condensed financial statements do not include
all financial risk management information and disclosures required
in the annual financial statements and, accordingly, should be read
in conjunction with the Company's annual financial statements for
the year ended 31 December 2015.
Fair value estimation
The Company's investments are categorised as level 3 within the
fair value hierarchy under IFRS 13 (as was the case at 31 December
2015). There have been no transfers between levels during the six
months to 30 June 2016. Further details are presented in Note
7.
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, the 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 Manager is responsible for the
investment decisions for the Company's entire portfolio and
considers the business to have a single operating segment. The
Manager's asset allocation decisions are based on a single,
integrated investment strategy, and the Company's performance is
evaluated on an overall basis.
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.
3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The 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
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 Manager who 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
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 7.
To determine the appropriate fair value to apply to each
contract, the Manager follows a formal process of developing a set
of scenarios for each case and assigns probabilities to each
potential outcome. The probabilities are 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.
For certain of the Company's investments, the Manager determines
fair value by developing a discounted cash flow model incorporating
various risk factors such as: quantum risk; timing risk; execution
risk; and for certain investments, consideration of monetising an
investment within a shortened development period (following the
Company's intention to seek resolution and monetisation of the
remaining investments if possible by the end of 2017).
4. UNCONSOLIDATED SUBSIDIARY INVESTMENTS
The following subsidiary investments are held by the Company but
have not been consolidated, following the adoption of the
investment entities exemption per IFRS 10.
% Share holdings
Date incorporated Country 30 June 31 December
of incorporation 2016 2015
JCML 2007 Limited(#) 28-Nov-07 Guernsey 36.2% 36.2%
Riverbend Investments
Limited 08-Oct-08 Guernsey 100% 100%
GrandiOs Technologies, United
LLC 25-Feb-09 States 100% 100%
Juridica Ventures
KFT 02-Mar-09 Hungary 100% 100%
Juridica Ventures United
(US) Inc. 31-May-09 States 100% 100%
Escon Capital, United
Inc.(#) 26-Apr-10 States 38% 38%
United
Spinal Spot LLC 28-Feb-11 States 65.8% 65.8%
Spinal Ventures United
LLC 25-Mar-11 States 100% 100%
Juridica Sports United
Technology LLC 22-Apr-14 States 100% 100%
ProSports Technologies, United
LLC 22-Apr-14 States 81.3% 81.3%
Juridica Kinetics, United
LLC* 13-May-14 States 100% 100%
Smooth 3D IP, United
LLC* 13-May-14 States 100% 76.2%
Juridica RMIP United
Holdings, LLC 31-Jul-14 States 100% 100%
Rich Media Ventures, United
LLC 31-Jul-14 States 86.6% 89.9%
Juridica Holdings, 15-Jun-16 United 100% -
LLC States
There are no outstanding commitments with these unconsolidated
subsidiaries at the period end, other than those disclosed in Note
10.
(#) JCML 2007 Limited and Escon Capital, Inc. are not
subsidiaries however, Juridica Investments Limited has a
significant interest in them.
* The Smooth 3D IP, LLC was 100% owned by Juridica Kinetics, LLC
as from 30 June 2016.
Juridica Holdings LLC, a Delaware limited liability company
formed and registered on 15 June 2016, is 100% owned by JIL. Its
only asset is a $7.25M Note received in exchange for the shares of
AC Kinetics.
5. INTANGIBLE ASSET
30 June 31 December
2016 2015
---------- ------------
US$ US$
Balance at start of the period/year 2,058,796 2,647,866
Additions 120,000 240,000
Amortisation (514,699) (829,070)
Balance at end of the period/year 1,664,097 2,058,796
========== ============
The Company's intangible asset comprises an investment
structured as an agency agreement. Additions to the intangible
asset during the period are deemed to have occurred at 30 June
2016. The Company amortises the intangible asset on a diminishing
balance basis at 25 per cent every 6 months as from 1 January 2016
so that the balance is US$Nil by 31 December 2017 (at 16.7 per cent
every 6 month until 31 December 2015).
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 the
Company.
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 6),
and purchased additional common and preferred stock of US$468,328
during the year ended 31 December 2015. As at 30 June 2016,
US$2,070,838 is deemed an appropriate approximation of fair value
(31 December 2015: US$2,070,838) for the financial asset.
6. FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT AND LOSS
30 June 2016
--------------------------------------------------------------------------------
1 Jan Additions Disposal Movement Realised 30 Jun
2016 proceeds in fair losses 2016
value
------------ ----------- ------------- ------------- ---------- -----------
Financial US$ US$ US$ US$ US$ US$
Assets
Contractual
interests 29,435,299 471,881 - (18,711,891) (753,750) 10,441,539
Equity investments 5,950,296 - - (1,717,480) - 4,232,816
Debt securities 55,392,082 5,000,000 (46,537,843) (3,354,239) - 10,500,000
Total 90,777,677 5,471,881 (46,537,843) (23,783,610) (753,750) 25,174,355
============ =========== ============= ============= ========== ===========
31 December 2015
--------------------------------------------------------------------------------
1 Jan Additions Disposal Movement Realised 31 Dec
2015 proceeds in fair gains 2015
value
------------ ----------- ------------- ------------- ---------- -----------
Financial US$ 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
============ =========== ============= ============= ========== ===========
a) Contractual interests
Contractual interests have been accounted for using the fair
value model. At 30 June 2016, the Company had investments in 7
contractual interests (31 December 2015: 10 contractual
interests).
Fair value movements of contractual interests are due to
amendments in estimated cash flows arising from changes in
expectations surrounding each case. Realised gains or (losses) due
to the full completion of cases with proceeds, if any, are first
being allocated to the return of any remaining principal. Any
remaining proceeds are then compared against any prior gain or loss
recognised with the difference reflected as current period/year
realised gain or loss.
b) Equity investments
The Company's equity investments include a holding in JCML 2007.
The fair value of the Company's investment in JCML 2007 was
assessed as at 30 June 2016 to be US$32,000 (31 December 2015:
US$27,257). This assessment of fair value is deemed appropriate
given the investment in the company in prior years, remaining level
of assets, and the expected value of future income and earnings and
the projection of future cash flows.
c) Debt securities
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 PLLC ("Fields Law"). In
accordance with provisions under the Swap, proceeds previously paid
by Fields Law to Riverbend Investments Limited ("Riverbend") can be
clawed back by Fields Law if needed to meet funding obligations
within the antitrust and competition portfolio. During the period,
a clawback of US$5.0 million was paid to Fields Law and the
disposal proceeds amounted to US$46.5 million. Fair value movements
of debt securities are due to amendments in estimated cash flows
arising from changes in expectations surrounding each investment.
The fair value at 30 June 2016 includes an estimate of reserves
that may be released by Fields Law after filing of tax returns
(expected to be no later than third quarter 2017) and again after
all contingencies are cleared. To the extent a settlement in an
underlying case generates proceeds in excess of the total prior
unrealised gain, a realised gain equal to the excess will be
reflected in the financial statements. At completion of the
investment, any residual unrealised gain or loss will be
reclassified to a realised gain or loss.
d) Forward foreign currency contracts
The Company held no forward foreign currency contracts at 30
June 2016 (31 December 2015: None).
7. 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 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 securities, the Company has used valuation
techniques to derive their fair value.
There were no transfers between levels for the period ended 30
June 2016 (31 December 2015: None).
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, other than at conclusion. The lower
the quantum expected at conclusion, the lower the valuation at any
point in time, other than at conclusion.
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. In
response to the Company's intention to monetise all remaining
investments if possible by the end of 2017, the risk of resolving
an investment within a shortened development period has been
incorporated into the expected duration input for certain
investments.
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 valuation at any point in time will decrease, other
than at conclusion.
The following table summarised the sensitivities:
Reasonable Change in valuation
Unobservable possible (due to +/- change
input shift (+/-) in input)
--------------- ------------- --------------------
Quantum 10% 8.72% / (9.20%)
Duration 1 year (15.15%) / 2.88%
Cost of equity 3% (0.82%) / 0.87%
8. OTHER RECEIVABLES AND PREPAYMENTS
30 June 31 December
2016 2015
------------- ------------
US$ US$
Settlement proceeds 51,450,767 5,430,086
Management fees 479,339 719,549
Prepayments and accrued
bank interest 161,599 58,146
52,091,705 6,207,781
============= ============
9. OTHER PAYABLES
30 June 31 December
2016 2015
--------------- ------------
US$ US$
Payable on investment
purchases 1,960 28,735
Audit fees 92,803 196,495
Other creditors 54,803 64,808
149,566 290,038
=============== ============
10. COMMITMENTS & GUARANTEES
Under the terms of some of its contracts, JIL provides a line of
credit to counterparties. As at 30 June 2016, the maximum
commitment under these lines of credit was US$28,000 (31 December
2015: US$7.3 million).
11. FUNCTIONAL AND PRESENTATION CURRENCY / EXCHANGE RATES
The financial statements are presented in United States Dollar
("US$") which is also the Company's functional currency. The
following exchange rate was applicable as at 30 June 2016:
Closing rate
----------------------
30 June 31 December
2016 2015
-------- ------------
US$ US$
British pounds
(GBP) 1.3264 1.4734
======== ============
12. RELATED PARTY TRANSACTIONS
a) Management fee
Previously, JAML was 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 and will be calculated, after accruing
for the annual management fee but 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.
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 as stated
above have been altered to state that from 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. Management fees for the period
ended 30 June 2016 are US$1,500,360 (30 June 2015: US$2,860,627).
In compliance with the management agreement, management fees paid
during 2015 (which was based on adjusted net asset value at 31
December 2014) was trued up against actual adjusted net asset value
at 31 December 2015 and resulted in a receivable from JAML of which
US$479,339 remains at 30 June 2016 (31 December 2015: US$719,549).
This receivable is being offset against the agreed 2016 management
fee of US$3,000,000. The total resulting net management fee that
will be paid to JAML during 2016 will be US$2,280,451.
Mr Fields is the sole beneficial owner of JAML.
b) Performance fee
No performance fee was payable to JCML 2007 for the period ended
30 June 2016 (31 December 2015: Nil).
The principal of JCML 2007 is Richard Fields, who owns 103,000
Ordinary Shares in the Company (0.09 per cent equity interest) (31
December 2015: 103,000). JCML 2007 owns 118,254 Ordinary Shares in
the Company (0.107 per cent equity interest) (31 December 2015:
118,254 shares).
Richard Battey, as investor representative and non-executive
director of the Company, is also an unpaid non-executive director
of JCML 2007.
c) Facility agreement and collateral account
The Company entered into a facility agreement (the "Facility")
with which it agrees to loan to Fields Law, a law firm in which
Richard Fields is a partner, money for funding cases in which
Fields Law is to act under a Co-counsel Agreement. Prior to
adopting its Run-Off Strategy, the Company expected to enter into
loan arrangements with other law firms (which may include other law
firms established by the Principal of the Company) on terms and
conditions similar to those contained in the Facility. The Facility
available to Fields Law was for up to approximately 50 per cent of
the net proceeds of the capital raised by the Company less any
loans made to other law firms.
In August 2016, the Facility was terminated by agreement between
the Company and Fields Law. See Note 16 for more details.
d) Directors' fees and expenses
Fees and expenses are attributable to the Directors of the
Company as follows:
30 June 30 June
2016 2015
-------- --------
US$ US$
Directors' remuneration
Lord Daniel Brennan 88,761 151,468
Richard Battey 34,574 60,587
Kermit Birchfield 38,702 62,500
-------- --------
162,037 274,555
Director expenses 48,787 78,265
210,824 352,820
======== ========
No pension contributions were paid or were payable on behalf of
the Directors. Effective from 1 January 2016, the Chairman's fee
was reduced to GBP90,000 per annum (up to 31 December 2015: GBP
187,500 per annum) and the Directors fees were reduced to GBP50,000
each per annum. Richard Battey's fee prior to the change was
GBP75,000 per annum and Kermit Birchfield's fee amounted to USD
125,000 per annum until 31 December 2015.
Lord Daniel Brennan has an interest in 447,817 shares (31
December 2015: 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.
e) Escon Capital Inc.
The Company has an interest in 38% (31 December 2015: 38%) of
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 period ended 30 June 2016, Kermit Birchfield received
a director's fee of US$25,000 from Escon Capital Inc. (31 December
2015: US$50,000).
f) 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 2007 (31 December 2015: US$575,000). As at 30
June 2016 no further facility remains available to be drawn (31
December 2015: US$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.
g) g) 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 period
ending 30 June 2016, Mr Birchfield received fees totalling
US$45,000 for provision of these services (2015: US$67,500). Lord
Daniel Brennan is an unpaid director of ProSports Technologies,
LLC.
13. CAPITAL AND RESERVES
Authorised share capital: Unlimited number of ordinary shares of
no par value ("shares").
Issued share capital: 110,701,754 shares as at 30 June 2016 (31
December 2015: 110,701,754 shares), of which 80,000,000 shares were
issued at a premium of GBP1 per share on admission, and a further
30,701,754
shares issued at a premium of GBP1.14 on 6 April 2009. On 4 June
2015, the Company received 361,735 of its own shares as a result of
an in-specie dividend received from JCML 2007 at GBP1.16.
On 15 March 2016, the Board of Directors approved the
cancellation of the 361,735 treasury shares. As at 30 June 2016 the
formal documentation to complete this process remained
outstanding.
The Company's capital is represented by ordinary shares of no
par value and share premium which are included in the reserves
figure on the statement of changes in equity. Each share carries
one vote and is entitled to dividends when declared. The Treasury
shares have no right.
The Company has authority to make market purchases of up to
14.99 per cent of its own issued ordinary shares. This authority
was renewed at the annual general meeting of the Company held on 10
May 2016.
A renewal of the authority to make purchases of ordinary shares
will be sought from Shareholders at each annual general meeting of
the Company. The timing of any purchases will be decided by the
Board.
14. SEASONALITY
The Company's operations are not affected by seasonality or
cyclicality and as such they have no impact on the unaudited
condensed financial statements.
15. DIVIDENDS
The following dividends were paid during the period:
Declaration Payment Dividend Total dividends
Date date per share US$
19 May 2016 24 June 2016 GBP0.08 13,042,102
----------------
13,042,102
================
16. SUBSEQUENT EVENTS
The following events occurred subsequent to 30 June 2016:
-- The Company received US$46.5 million in cash from settlements
that occurred in Case 5308-U and Case 1008-A. At 30 June 2016, this
value was reflected as a receivable.
-- Following the period end, management understand that
Investment 7313, which reflects the Company's ownership in
ipCreate, may be at further risk due to ipCreate's failure to raise
incremental capital and changes in management. The Company will
continue to closely monitor the status. At 30 June 2016, this
investment represented approximately US$700,000 of the Company's
NAV.
-- On 25 August 2016, the consolidated loan agreement ("CLA")
between the Company and Fields Law and the swap agreement (the
"Swap") between Riverbend and Fields Law were terminated by
agreement and by completion of the following transactions:
-- Riverbend returned US$11,124,194.89 to Fields Law under the
Swap, which is the amount remaining available from prior Swap
payments made by Fields Law to Riverbend, and paid Fields Law
US$14,306,940.85 pursuant to its obligations under the Swap.
Following these payments, the Swap was terminated by agreement
between Riverbend and Fields Law, except that Riverbend remains
entitled to amounts that Fields Law may receive that constitute
"Relevant Revenues" as defined in the Swap and the CLA (subject to
any reduction on account of any tax liability of Fields Law) and to
previously made reserves from Relevant Revenues that become
available for release. Fields Law is permitted to retain cash
reserves from settlement proceeds for the purpose of paying US
Federal and state taxes on proceeds generated from the anti-trust
and competition portfolio. Fields Law is currently expected to
release excess tax reserves no later than third quarter 2017, when
it expects to file its US Federal and state tax returns for its tax
year 2016.
-- Fields Law paid the amounts received from Riverbend to the
Company in satisfaction of the remaining unpaid interest and
outstanding principal in respect of the CLA. Following the
payments, the CLA was terminated by agreement between the Company
and Fields Law, except that an escrow account with an initial
balance of US$3.0 million, owned by the Company, will be maintained
in order to provide a reserve for certain contingency expenses
which may become payable by Fields Law in addition to those
described above. Any balance in the escrow account will be released
from the escrow arrangements no later than 30 September 2021, and
possibly 30 September 2020 if Fields Law receives all remaining
settlement proceeds attributable to Case 1008-A in 2016.
-- The Board declared a dividend payment of 32 pence per share
(amounting to US$47.0 million) payable to shareholders on the
Register on 16 September 2016.
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR AKADKPBKDNCK
(END) Dow Jones Newswires
September 06, 2016 11:15 ET (15:15 GMT)
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