TIDMJIL
RNS Number : 3511M
Juridica Investments Limited
17 September 2012
Juridica Investments Limited
('Juridica' or the 'Company')
Half year results for the six months ended 30 June 2012
Juridica Investments Limited, (AIM: JIL) a leading provider of
capital to the law market, today announces its financial results
for the six months ended 30 June 2012.
Financial highlights and portfolio valuation
-- Dividend of GBP13.6 million (US$21.9million), or 13 pence per
share, to be paid on 4 January 2013 for shareholders on the
register at 21 December 2012
-- The above dividend is in addition to the special dividend of
GBP7.3 million (US$11.4 million), or 7 pence per share, that was
paid on 10 February 2012. With the payment of this dividend, the
Company will have paid total dividends of 20 pence per share during
the 12 month period ended January 31, 2013
-- Net Asset Value ("NAV") per share decreased 5.9% to US$2.0524
per share at 30 June 2012 from US$2.1820 per share at 31 December
2011. This decrease was primarily due to US$11.4 million in
dividends paid to shareholders in February 2012
-- Lifetime gross proceeds from investments at 31 December 2012
will total GBP53 million (US$85 million) which includes the
recently announced settlements of US$35.2 million from the
Company's antitrust and competition portfolio
-- Gross internal rate of return from the seven investments
which have reached completion is approximately 85%
-- Total comprehensive loss for the period of US$1.6 million
-- At 30 June 2012, the Company has invested or committed
approximately US$157.1 million in 23 cases across 18
investments
Lord Dan Brennan, Juridica's Chairman, said: "The results
announced today confirm our strategy of only investing in sound
cases that can generate significant returns for our investors over
the long term. We are now at a point where our portfolio continues
to mature and is now delivering significant dividends to
shareholders."
Operational highlights
-- During the six month period ended 30 June 2012, Juridica made
three supplemental investments of US$2.25 million in existing cases
that were beyond initial funding commitments to increase the
likelihood of greater potential return to the Company
-- For the six month period ended 30 June 2012, gross cash
receipts totalled approximately US$0.8 million from a partial
settlement of a case relating to one of its patent investments.
This particular investment also had a final settlement in September
2012 which will bring total proceeds from this investment to
approximately US$5.3 million from a total investment amount of
US$0.8 million
-- Recently announced settlements of US$35.2 million, from the
Company's antitrust and competition portfolio, will be received on
31 December 2012. These returns are in line with expectations, as
previously reflected in the unrealised profits of the Company
The full half year report can be downloaded at:
www.juridicainvestments.com
- Ends -
For further information, please contact:
Juridica Capital Management
Limited
Richard W. Fields +1 (866) 443-1080
Cenkos Securities
(Nominated Adviser and Broker)
Nicholas Wells
Camilla Hume +44 (0) 20 7397 8900
Peel Hunt LLP
(Joint Broker)
Guy Wiehahn
Emma Riza +44 (0)20 7418 8900
Pelham Bell Pottinger
David Rydell
Olly Scott +44 (0) 20 7861 3232
R.C. Auletta and Company (US +1 (212) 355 0400
media) rca@auletta.com
Richard Auletta
About Juridica Investments Limited
Juridica Investments is a leading provider of strategic capital
to the business community and the legal markets for corporate
claims. It invests directly and indirectly in a diversified
portfolio of corporate claims in litigation and arbitration.
Juridica is the premier source of value-added and direct financing
for large business claims in the United States and one of the
leading sources in the United Kingdom.
Our clients are Fortune 1000 companies, FT Global 500 companies,
inventors, major universities, and the leading law firms that
represent them. Juridica accepts only cases that have already been
carefully vetted and undertaken by leading lawyers.
Juridica works to make the legal system work better for business
claims. Juridica does not invest in speculative claims or claims
that have not demonstrated economic value and clear merits.
Juridica invests only in business claims, and does not invest in
class actions, personal injury, product liability, or mass tort
claims.
Our goal is to provide business clients with financial choices
that reduce risk and assist in maximizing claim value.
Juridica was established on 21 December 2007 as a limited
liability, closed-ended investment company registered in Guernsey.
It has over US$200 million of assets under management and is listed
on AIM, a market operated by the London Stock Exchange (AIM:
JIL).
The Company has appointed Juridica Capital Management Limited as
its exclusive investment manager to locate, evaluate and manage
direct and indirect investments in cases, claims and disputes.
This announcement contains forward looking statements, which are
based on the Board's current expectations and assumptions and
involve known and unknown risks and uncertainties that could cause
actual results, performance or events 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 which could cause
actual results or trends to differ materially. Each forward looking
statement speaks only as of the date of the particular statement.
Except as required by the AIM Rules or otherwise by law, the
Company 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
expectations with regard thereto or any change in events,
conditions or circumstances on which any such statement is
based.
Chairman's Statement
On behalf of the Board, I present the results of Juridica
Investment Limited's ("JIL" or the "Company") operations for the
six-month period ended 30 June 2012.
JIL focuses exclusively on business-to-business related claim
investments that include the following sectors: antitrust and
competition; intellectual property, particularly patents; and
general commercial litigation. The Company does not invest in
shareholder class actions, personal injury, product liability, or
mass tort claims.
We are the US market leaders in antitrust and competition cases.
This is the key sector of our investment portfolio because of our
confidence in expected returns, albeit the cases are complex and
are of longer duration. After the close of the reporting period
significant partial settlements were realized in three of the
Company's antitrust cases. We have reasonable grounds for
anticipating further substantial returns from these cases over the
next 18 months.
Dividends
The Board is pleased to announce that, given current portfolio
activity, it will pay a dividend of US$21.9 million or 13 pence per
share on 4 January 2013 to holders on record at 21 December 2012.
This dividend will be funded from approximately US$35.2 million in
cash proceeds from partial settlements that will be paid to the
Company on 31 December 2012. The Company, during the first quarter
of the period, paid a 7 pence special dividend consistent with the
Company's policy of returning actual net cash profits to
shareholders.
Operating Results
During the six month period ended 30 June 2012, the Company
received proceeds totalling approximately US$0.8 million related to
one partial settlement. Additional settlements occurred during July
and August 2012 that will provide to the Company approximately
US$35.2 million on 31 December 2012.
For the six-month period ended 30 June 2012, the Company
recorded a total comprehensive loss of US$1.6 million as compared
to total comprehensive income of US$16.1 million for the period
ended 30 June 2011. It is important to note that the variance in
total comprehensive income is primarily due to a significant
increase in the fair value change for the prior year six-month
period ended 30 June 2011 caused by favourable legal proceedings
that occurred during that period.
Net Asset Value
JIL's Net Asset Value ("NAV") per share decreased 5.9% to
US$2.0524 per share at 30 June 2012 from US$2.1820 per share at 31
December 2011. This decrease in NAV per share was primarily due to
the payment of US$11.4 million in dividends paid to shareholders in
February 2012.
New Investments
The Company made three supplemental investments in existing
cases that were beyond initial funding commitments. These
supplemental investments were made to increase the likelihood of
greater potential return to the Company.
Cash balances are maintained for operating expenses and the
existing commitments in the portfolio of cases.
Outlook
Based on the outlook provided by the Manager, we expect
significant activity during the next 18 months. This belief is
based on their review of presently scheduled trial dates, expected
final decisions following trial or arbitration, and appeals.
The directors thank investors for their continued
confidence.
Lord Daniel Brennan QC
Chairman
14 September 2012
Investment Manager's Report
Operating Highlights
During the first half of 2012, Juridica Investments Limited
("JIL" or "the Company") saw significant activity in several of its
investments, including one partial settlement, one successful
verdict, one judgment that was affirmed on appeals and advances in
settlement proceedings that has since led to additional returns in
July and August of 2012. In addition, this activity meets our
current belief that the majority of the Company's investments are
reaching their concluding phase.
For the six month period ended 30 June 2012, JIL received gross
cash receipts totalling approximately US$800,000 from a partial
settlement of a case relating to one of the Company's patent
investments. This particular investment also had a final partial
settlement in September 2012 which will bring total proceeds from
this investment to approximately $5.3 million from a total
investment amount of $800,000.
All proceeds received during the first half of 2012 relate to
gains that have been recognised as unrealised gains in the current
and prior periods.
During the six month period ended 30 June 2012, JIL's Net Asset
Value ("NAV") decreased to US$2.0524 per ordinary share (US$2.1820
per ordinary share at 31 December 2011). This decrease in NAV per
ordinary share was primarily due to the February 2012 dividend
payment totalling $11.4 million. Additional impact to NAV per
ordinary share resulted from the net impact of a comprehensive loss
of US$1.6 million plus changes in amounts relating to interests of
minority investors in certain assets.
The Company's comprehensive loss of US$1.6 million reflects the
following:
-- Unrealised loss of US$2.2 million from a net fair value
decrease in valuation of the Company's investment portfolio;
-- Gain of US$4.3 million relating to the acquisition of a
controlling interest in a previously held investment for no
additional cost; and
-- Fund operating expenses of US$3.7 million.
From inception to date, the Company's portfolio generated gross
cash proceeds of approximately US$49.5 million. Additional case
proceeds totalling approximately US$35.2 million were reached in
July and August of 2012. These proceeds will be paid to the Company
at the end of 2012. This will bring the total lifetime gross
proceeds to the Company to $85 million.
After providing for required reserves and Company operating
expenses, JIL has returned a total of $27 million to shareholders
in the form of $17 million in dividends and $10 million when it
acquired Company shares in its buyback program in September 2010.
With the full payment of the $22 million dividend declared by the
Company today, shareholders will have received a total of $49
million.
In more detail, the portfolio from inception to date has
performed as follows:
-- Seven investments reached completion with proceeds from the
underlying cases delivering a total of US$37.6 million in gross
proceeds representing a gross internal rate of return of
approximately 85.4% (as calculated from date of investment to date
of proceed return); and
-- Six cases, which are multi-defendant in nature, had partial
settlements or expense recoveries amounting to approximately
US$11.8 million, which amount will increase to $47.0 million with
the receipt of $35.2 million at year-end.
During the six month period ended 30 June 2012, JIL made
supplemental investments totalling US$2.25 million in three
investments originally funded during 2009. Two of these
supplemental investments provide for a substantial increase in
JIL's percentage interest in potential proceeds from the underlying
cases. The third supplemental investment enables the underlying
case to advance through additional legal effort that, if
successful, should provide for a greater amount of potential return
to the Company. These supplemental investments form part of the
additions figure included in these financial statements.
Portfolio Update
The Company currently has a total of 18 investments representing
23 different cases or legal actions. Since inception, the Company
has made 24 investments representing 30 different cases or legal
actions. The Company's current portfolio is diversified amongst
three primary groups: antitrust and competition; patent; and
commercial as noted in the following table:
Type of claim or litigation Cases Total Commitment Investments
----------------------------- ------ ----------------- ------------
Antitrust and competition 6 $96.9m 1
Patents 10 $37.3m 10
----------------------------- ------ ----------------- ------------
Commercial 7 $22.9m 7
----------------------------- ------ ----------------- ------------
Total 23 $157.1m 18
============================= ====== ================= ============
Antitrust and competition portfolio:
Five cases in the Company's antitrust and competition portfolio
involve violation of US or European antitrust law and three of
these cases also involve multi-defendant, price fixing cartels. In
one of our largest investments, one of the cartel cases involves
defendants that have already been found guilty of criminal
violations. The sixth case in this portfolio is a special situation
involving statutory claims and this case is also reaching
maturity.
The Company has contributed US$91.9 million (with an additional
commitment of US$5.0 million remaining) towards one investment
representing these six cases. This investment was structured as a
loan by the Company to Fields Sullivan PLLC ("FS") for the purpose
of funding six cases under a co-counsel agreement. The loan was
arranged such that any proceeds from these cases are used to make
payments on the note on 31 December of each year. From inception to
date, the cases within this antitrust portfolio have generated and
paid to JIL total cash proceeds of US$6.7 million consisting of two
partial settlements totalling $2.3 million and expense recovery
totalling $4.4 million. An additional $4.9 million in proceeds was
received in 2011 from a settlement and from cost recovery but these
proceeds are being held in reserve by FS to potentially fund
additional expenses related to the Company's investment in
antitrust and competition cases.
In July 2012, three cases in the Company's antitrust and
competition portfolio reached partial settlements that will, on 31
December 2012, provide for payment to JIL of approximately US$35.2
million. These returns are in line with expectations for these
cases as previously reflected in the unrealised profits of the
Company.
Also, in July 2012, one of the cases in this portfolio was
dismissed in favour of the defendant and is now on appeal. The
Manager expects that the appeal of the trial court's decision may
well be successful but will result in a delay of at least 12 to 18
months in the resolution of this case.
Patent portfolio:
The Company's patent portfolio includes nine cases involving
infringement of one or more patents by one or more defendants. As
of 30 June 2012, the Company has US$37.3 million invested in its
patent portfolio with an additional US$3.8 million remaining in
committed funds. Since the Company's inception, a total of US$13.1
million in gross proceeds has been generated from the Company's
patent portfolio. During the six month period ended June 2012,
approximately US$800,000 in gross proceeds was received from a
partial settlement in the Company's patent portfolio.
In June 2012, control of OTO Technologies LLC ("OTO") was
acquired as part of the re-negotiation of an existing investment
deal which resulted in the Company's interest in OTO increasing
from 35% to 85% for no additional consideration. This resulted in a
bargain purchase - a business combination in which the net fair
value of the identifiable assets acquired and liabilities assumed
exceeds the aggregate of the consideration transferred, the non-
controlling interests and the fair value of the previously held
equity interest. Accordingly the Company has recognised a gain on
bargain purchase of $4.3 million during the period.
The Company previously recognised its investment in OTO as an
Available for Sale Financial Asset. As at the date of acquisition,
this holding was treated as if it had been disposed and the assets
and liabilities of OTO have been consolidated. Previously
recognised unrealized losses amounting to $1.5 million have been
reclassified from other comprehensive income to profit or loss as a
result of the acquisition.
In Case 0108-S, the jury delivered a verdict in favour of the
plaintiff in the amount of $10 million. This was in line with the
Manager's expectation for the low end of the recovery range of this
case. Under the terms of the Company's investment agreement, the
Company is entitled to receive the first $8.0 million of recoveries
pari passu with the attorney's contingency fee of 21%. Thus, if the
verdict is entered by the court after further post-trial
proceedings and upheld on appeal, the Company will recover
approximately $8.0 million from its investment of $8.3million.
Again, significant uncertainty remains until judgment is entered
and appeals are completed unless the case is resolved earlier by
settlement.
In July 2012, two of the Company's patent investments went to
trial and verdicts for the plaintiff were rendered in both cases.
These cases are described in more detail below.
In Case 0409-C, the jury returned a verdict after trial in
favour of the plaintiff in the amount of $50 million. The Company
invested $4.8 million in this case and is entitled to receive the
first $3.0 million of cash proceeds from settlement or judgment
plus 49% of remaining proceeds. Further proceedings in this case
are scheduled for 18 September 2012, after which the court is
expected to decide remaining legal issues, including whether to
enter judgment for the plaintiff and the amount of such a judgment.
Significant uncertainty remains until judgment is entered and
appeals are completed unless the case is resolved earlier by
settlement. Nonetheless, the Manager views this development as a
positive milestone in the case.
In Case 7608-A, the jury returned a verdict in favour of the
plaintiff in the amount of $500,000. This was below the Manager's
expectations. The Company invested $2.0 million in this case and
previously received $1.2 million from settlements with other
defendants in this case. In the absence of further positive
developments in the case, the Manager does not expect that the
Company will receive additional proceeds in the case but this will
not be known until the case has fully-completed.
Commercial portfolio:
As of 30 June 2012, the Company's commercial portfolio consisted
of investments in seven cases that involve claims related to
commercial disputes including: theft of trade secret, breach of
contract and insurance subrogation. Included in the commercial
portfolio is an investment that, as previously disclosed, the
Company exercised its option to cease funding. The Company is
pursuing recovery of its investment amount from the parties
involved and has successfully defended a counter-claim by these
parties.
The portfolio also contains an investment involving a large,
multi-party pre-litigation settlement opportunity that we believe
has the potential to generate significant proceeds to the Company.
This investment is being accounted for as intellectual
property.
In one of these cases, which involved a judgment on appeal, the
appeals court earlier this year affirmed the trial court's
determination of liability, the jury's damages verdict in excess of
$25 million, and the ruling that the defendants are jointly and
severally liable for the damages. Claimants are now pursuing
collections efforts in the US and elsewhere. The Company invested
$1.0 million in the case in late 2010 and, if collection efforts
are successful as anticipated, the Company will receive a return of
at least $2.75 million, including the return of its investment.
As of 30 June 2012, the Company has US$22.9 million invested in
its commercial portfolio, with an additional US$1.5 million
remaining in committed funds. Since the Company's inception, a
total of US$29.8 million in gross proceeds has been generated from
the Company's commercial portfolio.
Other activity:
In August 2012, the non-controlling shareholder of 8% of the
interest in the Company's subsidiary, Riverbend Investments Limited
("Riverbend"), exercised its put option to sell back to the Company
the 8% non-controlling interest in Riverbend for a total sale price
of $6.7 million. As detailed further in Note 9 to these financial
statements, the fair value of the put option at 30 June 2012 was
assessed to be $6.6 million.
Valuation
The Manager values JIL's investments using valuation methods
that: (i) are recognised as standard within the industry; (ii) are
applied in a manner that follows International Financial Reporting
Standards' ("IFRS") fair value accounting rules; and (iii) agree
with the views of our auditors.
The method of applying fair value accounting is designed to show
the progression of a case towards its expected terminal value. 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 the legal
process. Our assumptions behind fair value accounting are revisited
on a bi-annual basis. If needed, we will rerun the investment's
valuation model and revise its expected future cash flow which we
then discount to the reporting date.
As of 30 June 2012, the Manager examined the valuation for all
of JIL's investments. In doing so, the following adjustments were
made to their individual valuations:
-- Valuation of the Company's contractual interests increased by
US$11.7 million reflecting the net of US$0.3 million in additional
investment funding, US$0.8 million reduction due to the return of
proceeds to JIL as a result of settlement activity, additional
US$10.5 million of contractual interests acquired upon acquisition
of a controlling interest in a previously held investment and
US$1.7 million net increase due to each investment's individual
change in fair value.
-- Valuation of the Company's available for sale debt securities
decreased by approximately US$1.3 million reflecting the $3.0
million in additional investment funding and a net $4.3 million
decrease in the fair value of the FS Facility. This decrease in
fair value of the FS Facility is primarily due to a delay in
expected timing of receipts of certain underlying cases.
-- Valuation of the Company's available for sale financial
assets decreased by US$3.2 million reflecting the reclassification
of an investment in which the Company had previously held a
minority interest and subsequently acquired a controlling interest
during the period amounting to US$3.7 million and an increase due
to changes in fair value of US$0.5 million.
Notable Activity
The following activity reflects advancement in JIL's portfolio.
One or more of these events may have a significant positive impact
on the Company's net asset value. It is possible that one or more
settlements may be concluded as a result of an award or judgment
prior to conclusion of a case that could result in net cash
proceeds to the Company in excess of 10% of its current net asset
value.
-- One investment in the Company's commercial portfolio has
completed trial and the judge could enter a ruling at any time. Any
award will still be subject to appeal and any settlement resulting
therefrom is likely to be lower than the award.
-- Two antitrust cases that comprise part of the security for
the loan facility made to FS may complete or reach an advanced
stage prior to the end of the calendar year. In one of the
antitrust cartel cases, which are multi-defendant in nature, we
expect a series of settlements with individual defendants that may
occur over the next 12 months because all or part of the case is
expected to start trial by the end of Q2 2013. One such settlement
was reached in July 2012, which comprises a significant part of the
US$35.2 million payment that JIL will receive on 31 December 2012.
Both cases have significant damages claimed by their plaintiffs,
which if awarded by a jury, will be automatically trebled by the
court. A judgment in any of these cases would, of course, be
subject to appeal and possible reversal by one or more appellate
courts and appeals could result in a delay of several years prior
to collection or settlement. We expect that if any of these cases
is resolved by settlement the amount of settlement will be
substantially less than claimed damages and/or any judgment entered
by the trial court for each case. We also expect that if any of
these cases is settled prior to completion or a favourable jury
verdict is rendered and the trial court enters judgment, such a
result may have a significant positive impact on the Company's net
asset value.
Outlook
Given the uncertain nature of litigation in general and the
quantum of damages that trial juries may award, the Company's
portfolio has the characteristics to produce a wide range of
potential returns. This does not detract from our belief that JIL
has invested in an excellent, high quality portfolio of cases that
should, as a whole, produce healthy returns for our
shareholders.
We believe the Company's portfolio will continue to see
significant activity within the next 18 months. This expectation is
based on confirmed trial dates, expected final decisions following
trial or arbitration, and various other factors. Each of these
milestones, if successful, creates real incentives for defendants
to seek settlements. In addition, settlement discussions are
on-going for several investments.
As our current portfolio turns over, we remain committed to the
distribution of net profits from the Company.
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 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 Capital Management Limited
14 September 2012
Independent Review Report
Introduction
We have been engaged by the Company to review the unaudited
condensed consolidated set of financial statements in the
half-yearly financial report for the six months ended 30 June 2012,
which comprises the unaudited condensed consolidated statement of
comprehensive income, the unaudited condensed consolidated
statement of financial position, the unaudited condensed
consolidated statement of changes in equity, the unaudited
condensed consolidated cash flow statement and related notes. We
have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the condensed consolidated set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the Directors of the Company. The Directors
are responsible for preparing the half-yearly financial report in
accordance with the AIM Rules for Companies.
As disclosed in note 2, the annual financial statements of the
Company are prepared in accordance with International Financial
Reporting Standards ("IFRS"). The condensed consolidated set of
financial statements included in this half-yearly financial 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 consolidated financial statements in
the half-yearly financial 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.
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 consolidated 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.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements 2410, 'Review of half yearly
Financial Information Performed by the Independent Auditor of the
Entity' issued by the International Auditing and Assurance
Standards Board for use in the United Kingdom. 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
consolidated financial statements in the half-yearly financial
report for the six months ended 30 June 2012 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 4,
5, 6 and 7 to the unaudited condensed consolidated financial
statements. As indicated in Notes 4, 5, 6 and 7, the unaudited
condensed consolidated financial statements include non-current
assets stated at their fair value of US$200,924,784. Because of the
inherent uncertainty associated with the valuation of such
non-current assets and the absence of a liquid market, these fair
values may differ from their realisable values, and the differences
could be material.
PricewaterhouseCoopers CI LLP
Royal Bank Place
PO Box 321
1 Glategny Esplanade
Guernsey, GY1 4ND
Channel Islands
14 September 2012
Unaudited Condensed Consolidated Statement of Comprehensive
Income
For the period from 1 January 2012 to 30 June 2012
Notes For the period For the period
from 1 January from 1 January
2012 to 30 2011 to 30
June 2012 June 2011
---------------- ----------------
US$ US$
INCOME
Interest income 20,955 43,482
Gain on bargain purchase 15 4,329,188 -
Realised gain on contractual interests 5 - 1,201,793
Other income arising on contractual
interests 5 1,550,948 688,994
Other income arising on available
for sale debt securities 7 9,322,657 6,652,789
Previously recognised fair value
change in available for sale assets
reclassified as profit or loss 15 (1,484,513) -
13,739,235 8,587,058
---------------- ----------------
EXPENSES
Management fees 13(a) 2,218,736 2,220,934
Due diligence and transaction costs 191,878 3,274,087
Amortisation of intangible assets 4 291,903 -
Directors remuneration 13(f) 215,438 216,016
Audit fees 147,099 82,114
Legal expenses 124,508 178,100
Administration fees 213,978 156,723
Options and warrants costs 15,805 14,632
Foreign exchange loss / (gain) 4,822 (77,265)
Other expenses 287,579 283,994
3,711,746 6,349,335
---------------- ----------------
Profit for the period 10,027,489 2,237,723
Other comprehensive income:
Previously recognised fair value
change in available for sale assets
reclassified as profit or loss 15 1,484,513 -
Fair value change in available
for sale assets 6 506,669 1,254,257
Fair value change in available
for sale debt securities 7 (13,607,409) 12,609,540
Total comprehensive income/(loss)
for the period (1,588,738) 16,101,520
================ ================
Comprehensive income/(loss) attributable
to:
Equity shareholders (139,827) 15,373,500
Non-controlling interests (1,448,911) 728,020
(1,588,738) 16,101,520
================ ================
Earnings per Ordinary Share
Basic Cents (0.13) 14.68
Fully diluted Cents (0.13) 14.51
Unaudited Condensed Consolidated Statement of Financial
Position
As at 30 June 2012
30 June Audited
31 December
Notes 2012 2011
------------ -------------
US$ US$
Non-current assets
Intangible assets 4 2,866,227 1,757,832
Contractual interests 5 49,680,441 37,964,964
Available for sale financial
assets 6 4,288,976 7,440,753
Available for sale debt securities 7 144,089,140 145,370,653
200,924,784 192,534,202
------------ -------------
Current assets
Other receivables and prepayments 8 935,744 179,488
Cash and cash equivalents 23,909,596 43,014,566
24,845,340 43,194,054
------------ -------------
Total assets 225,770,124 235,728,256
------------ -------------
Current liabilities
Put option 9 2,131,221 150,681
Other payables 10 1,593,983 261,352
Total liabilities 3,725,204 412,033
------------ -------------
Net assets 222,044,920 235,316,223
============ =============
Capital and reserves
Special reserve 199,013,730 199,013,730
Other reserve 8,509,638 20,698,109
Revenue reserve 17,296,416 18,667,926
Treasury shares (9,925,024) (9,925,024)
214,894,760 228,454,741
Non-controlling interests 7,150,160 6,861,482
Total equity Shareholders' funds 222,044,920 235,316,223
============ =============
Number of ordinary shares 104,701,754 104,701,754
Net asset value attributable
to each ordinary share $2.0524 $2.1820
These half yearly unaudited condensed consolidated financial
statements were approved by the Board of Directors on 14 September
2012 and signed on its behalf by R J Battey.
Unaudited Condensed Consolidated Statement of Changes in
Equity
For the period from 1 January 2012 to 30 June 2012
Special Other reserve Revenue Shares Non-controlling Total
reserve reserve held in interests
Treasury
------------ -------------- ------------- ------------ -------------
US$ US$ US$ US$ US$ US$
Balance at 1 January
2012 199,013,730 20,698,109 18,667,926 (9,925,024) 6,861,482 235,316,223
Changes in equity
for 2012
Profit for the period - - 10,083,909 - (56,420) 10,027,489
Reclassification
of fair value change
in available for
sale assets - 1,484,513 - - - 1,484,513
Fair value change
in available for
sale assets - 506,669 - - - 506,669
Fair value change
in available for
sale debt securities - (12,214,918) - - (1,392,491) (13,607,409)
Total comprehensive
income - (10,223,736) 10,083,909 - (1,448,911) (1,588,738)
Acquisition of
subsidiary - - - - 1,737,589 1,737,589
Put option provision - (1,980,540) - - - (1,980,540)
Share option payment
reserve - 15,805 - - - 15,805
Dividend paid - - (11,455,419) - - (11,455,419)
Balance at 30 June
2012 199,013,730 8,509,638 17,296,416 (9,925,024) 7,150,160 222,044,920
============ ============== ============= ============ ================ =============
Special Other reserve Revenue Shares Non-controlling Total
reserve reserve held in interests
Treasury
------------ -------------- ------------- ------------ -------------
US$ US$ US$ US$ US$ US$
Balance at 1 January
2011 199,013,730 (8,956,998) 12,449,510 (9,925,024) 1,935,785 194,517,003
Changes in equity
for 2011
Profit for the period - - 2,237,723 - - 2,237,723
Fair value change
in available for
sale assets - 1,254,257 - - - 1,254,257
Fair value change
in available for
sale debt securities - 11,881,520 - - 728,020 12,609,540
Total comprehensive
income - 13,135,777 2,237,723 - 728,020 16,101,520
Put option provision - 242,375 - - - 242,375
Share option payment
reserve - 14,632 - - - 14,632
------------ -------------- ------------- ------------ ---------------- -------------
Balance at 30 June
2011 199,013,730 4,435,786 14,687,233 (9,925,024) 2,663,805 210,875,530
============ ============== ============= ============ ================ =============
Unaudited Condensed Consolidated Cash Flow Statement
For the period from 1 January 2012 to 30 June 2012
For the For the
period from period from
1 January 1 January
2012 to 2011 to
30 June 30 June
2012 2011
------------- -------------
US$ US$
Cash flows from operating activities
Profit for the period 10,027,489 2,237,723
Adjusted for:
Gain on bargain purchase (4,329,188) -
Fair value change on contractual interests
and available for sale debt securities (10,873,605) (7,341,783)
Reclassification of previously recognised 1,484,513 -
fair value change on available for sale
financial assets
Amortisation of intangible assets 291,903 -
Realised gains on contractual interests - (1,201,793)
Increase in share option and warrant reserve 15,805 14,632
Interest income (20,955) (43,482)
Foreign exchange losses on non-operating 4,822 -
activities
Changes in working capital
Purchases of intangible assets, contractual
interests, available for sale financial
assets and available for sale debt securities (4,359,393) (6,844,302)
Settlement of contractual interests - 7,163,301
Decrease in trade and other receivables 49,372 338,907
(Decrease)/increase in trade and other
payables (70,860) 1,589,339
Cash balance acquired with subsidiary undertaking 114,351 -
Cash used in operations (7,665,746) (4,087,458)
Interest received 21,011 59,395
Net cash outflow from operating activities (7,644,735) (4,028,063)
------------- -------------
Financing activities
Dividend paid (11,627,550) -
Net cash flow from financing activities (11,627,550) -
------------- -------------
Net decrease in cash and cash equivalents (19,272,285) (4,028,063)
Cash and cash equivalent at the beginning
of the period 43,014,566 51,802,998
Effect of foreign exchange rate changes 167,315 (15,913)
Cash and cash equivalent at the end of
the period 23,909,596 47,759,022
============= =============
Notes to the Unaudited Condensed Consolidated Financial
Statements
For the period from 1 January 2012 to 30 June 2012
1. LEGAL FORM AND PRINCIPAL ACTIVITY
The Group consists of the Company which is a closed-ended
investment company incorporated under The Companies (Guernsey) Law,
2008 ("the Law") and its subsidiaries as detailed in note 3. 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 Bordeaux Court,
Les Echelons, St Peter Port, Guernsey, GY1 6AW. The condensed
consolidated 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 condensed consolidated financial statements
for the six months ended 30 June 2012 have been prepared in
accordance with International Accounting Standard 34: Interim
Financial Reporting ("IAS 34"). The condensed consolidated
financial statements should be read in conjunction with the annual
Financial Statements for the year ended 31 December 2011 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.
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 Group's accounting policies. The
accounting policies applied are consistent with those of the annual
financial statements for the year ended 31 December 2011, except
for those noted below.
Amendments to existing standards
The following new standards and amendments to standards are
mandatory for the first time for the financial year beginning 1
January 2012:
-- IFRS 7 (revised), 'Financial Instruments: Disclosures' -
effective for financial years beginning on or after 1 July
2011.
-- IAS 12 (revised), 'Income Taxes' - effective for financial
years beginning on or after 1 January 2012.
Adoption of the above standards and amendments have had no
material impact on the Group's consolidated results or
position.
Financial risk management
The Group's activities expose it to a variety of financial
risks. The main risks arising from the Group's financial
instruments are market risk, insurance risk, credit risk and
liquidity risk. These condensed consolidated interim financial
statements do not include all financial risk management information
and disclosures required in the annual financial statements and,
accordingly, they should be read in conjunction with the Company's
annual financial statements as at 31 December 2011.
Fair value estimation
The Group's investments are categorised as level 3 within the
fair value hierarchy under IFRS 7 (as was the case at 31 December
2011). There have been no transfers between levels during the six
months to 30 June 2012.
Business combinations
Business combinations are accounted for using the purchase
method. The purchase method involves the recognition of the
acquiree's identifiable assets and liabilities, including
contingent liabilities, regardless of whether or not they were
recorded in the financial statements prior to acquisition. On
initial recognition, the assets and liabilities of the acquired
subsidiary are included in the consolidated statement of financial
position at their fair values, which are also used as the bases for
subsequent measurement in accordance with the Group's accounting
policies. Any excess of identifiable net assets over acquisition
cost is recognised in the Statement of Comprehensive Income
immediately after acquisition as a gain on bargain purchase.
3. SUBSIDIARIES
Date Incorporated Country of % Share
incorporation holdings
------------------- ---------------- ----------
8 October
Riverbend Investment Limited 08 Guernsey 92%
Juridica Ventures KFT 2 March 09 Hungary 100%
Juridica Ventures (US) Inc. 31 May 09 United States 100%
28 February
Spinal Spot LLC 2011 United States 52%
25 March
Spinal Ventures LLC 2011 United States 100%
25 February
OTO Technologies LLC 2009 United States 85%
During the period, the Group acquired a controlling stake in OTO
Technologies LLC, an entity in which the Group previously held a
35% stake. OTO Technologies LLC is the holding vehicle for one of
the Group's underlying investments. See note 15 for further
information.
4. INTANGIBLE ASSETS
30 June 31 December
2012 2011
---------- ------------
US$ US$
Balance at start of the period/year 1,757,832 -
Additions 1,400,298 1,757,832
Amortisation (291,903) -
---------- ------------
Balance at end of the period/year 2,866,227 1,757,832
========== ============
The Group amortises intangible assets on a straight line basis
over the life of the asset. The expected useful life of the Group's
intangible assets is three years from 31 December 2011. Additions
during the period are deemed to have occurred at 30 June 2012 and
will be amortised over the remaining useful life from 1 July
2012.
5. CONTRACTUAL INTERESTS
Balance Additions Disposal Fair value Fair value Realised Balance
at 1 proceeds movement movement gains at 30 June
January due to due to changes 2012
2012 effective in estimated
interest cash flows
----------- ----------- ------------- ----------- ---------------- ---------- ----------------
US$ US$ US$ US$ US$ US$ US$
Totals 37,964,964 10,970,219 (805,628) 3,937,470 (2,386,522) - 49,680,441
=========== =========== ============= =========== ================ ========== ================
Balance Additions Disposal Fair value Fair value Realised Balance
at 1 proceeds movement movement gains at 31 December
January due to due to changes 2011
2011 effective in estimated
interest cash flows
----------- ----------- ------------- ----------- ---------------- ---------- ----------------
US$ US$ US$ US$ US$ US$ US$
Totals 38,800,709 7,447,822 (10,482,868) 10,455,307 (10,219,216) 1,963,210 37,964,964
=========== =========== ============= =========== ================ ========== ================
Contractual interests have been accounted for using the
effective interest rate method of calculation. Effective interest
rates on these contractual interests range between 3.62 and 131.35
per cent at 30 June 2012 (31 December 2011: between 3.62 and 131.35
per cent). At 30 June 2012, the Company had investments in 14
contractual interests (31 December 2011: 13 contractual
interests).
The Group had one partial settlement during the reporting period
of US$0.8 million. Of this amount, US$0.4 million has previously
been recognised and US$0.4 million is recognised in the current
period as fair value movements due to effective interest rate
change and changes in estimated cash flows.
Fair value movements of contractual interests are due to
amendments in estimated cash flows arising from changes in
expectations surrounding each case. Further explanation on fair
value movements is found within the "Valuation" section of the
Investment Manager's Report and is detailed in the accounting
policies of the Group's financial statements for the year ended 31
December 2011.
During the period, the Group acquired a controlling interest in
an existing investment (see note 15) which itself has an interest
in a contractual interest. Upon consolidation, this contractual
interest was deemed to have been acquired for consideration equal
to its fair value at the acquisition date, being $10,504,424, which
is included in additions in the above table.
6. AVAILABLE FOR SALE FINANCIAL ASSETS
30 June 31 December
2012 2011
------------ ----------------
US$ US$
Balance at start of the period/year 7,440,753 9,217,177
Additions 1,027 3,177,536
Disposal proceeds (3,659,473) -
Fair value movement 506,669 (4,953,960)
Balance at end of the period/year 4,288,976 7,440,753
============ ================
The Group's Available for Sale Financial Assets include a
holding in Juridica Capital Management Limited ("JCML"). The fair
value of the Company's investment in JCML was assessed as at 30
June 2012 to be US$2,281,209 (31 December 2011: US$2,281,209). This
assessment of JCML is deemed appropriate given its investment in
the Group, its level of assets (including intellectual property),
and the quality of its income and earnings, based on the minimal
change to the circumstances surrounding JCML.
During the period, the Group acquired a controlling interest in
an entity that had previously been recorded as an Available for
Sale Financial Asset. At the date of acquisition, this investment
was treated as being disposed of at its carrying value of
$3,659,473 and the acquired entity's assets and liabilities have
been fully consolidated. Any previously recognised fair value
gains/losses have been reclassified from other comprehensive income
to profit or loss. See note 15 for further information.
7. AVAILABLE FOR SALE DEBT SECURITIES
Balance Drawdown Repayment Fair value Fair value Realised Balance
at 1 January movement movement gains at 30 June
2012 due to due to changes 2012
effective in estimated
interest cash flows
-------------- ---------- ------------ ----------- ---------------- --------- ----------------
US$ US$ US$ US$ US$ US$ US$
Totals 145,370,653 3,003,239 - 9,322,657 (13,607,409) - 144,089,140
============== ========== ============ =========== ================ ========= ================
Balance Drawdown Repayment Fair value Fair value Realised Balance
at 1 January movement movement gains at 31 December
2011 due to due to changes 2011
effective in estimated
interest cash flows
-------------- ---------- ------------ ----------- ---------------- --------- ----------------
US$ US$ US$ US$ US$ US$ US$
Totals 95,086,748 7,183,788 (6,602,829) 14,095,964 35,606,982 - 145,370,653
============== ========== ============ =========== ================ ========= ================
Note 13(e) details arrangements between the Company and Fields
Sullivan PLLC ("FS"). The Loan and the Swap have been aggregated on
consolidation and treated as a single claim asset. Return on the
Loan and the Swap are dependent on returns in claims financed by
FS.
Fair value movements of available for sale debt securities are
due to amendments in estimated cash flows arising from changes in
expectations surrounding each investment. Further explanation on
fair value movements is found within the "Valuation" section of the
Investment Manager's Report.
8. OTHER RECEIVABLES AND PREPAYMENTS
30 June 31 December
2012 2011
-------- ------------
US$ US$
Settlement proceeds 805,628 -
Debtors 22,645 39,540
Prepayments and accrued bank interest 107,471 139,948
-------- ------------
935,744 179,488
======== ============
9. PUT OPTION
In October 2009, the Company sold 8% of the interest in its
subsidiary, Riverbend Investments Limited, to an unaffiliated party
(see Note 3). As part of this transaction, the Company issued a put
option to the buyer providing him with the ability to sell back the
shares to the Company at a value based on a predetermined
formula.
The put option has an increasing strike price based on the
number of days from the date of sale of the interest until the
third anniversary of the date of sale. On the third anniversary of
the date of sale, the put option will have a strike price of
US$7,000,000 and will expire on the following day.
The Company has fair valued the strike price of the put option
by calculating the present value of its maximum stated value from
the third anniversary of the date of sale to 30 June 2012. This
fair value is reflected in these financial statements partly as to
non-controlling interests and the balance is reflected as a current
liability, with an offset to equity.
30 June 31 December
2012 2011
---------- ------------
US$ US$
Stated strike price value of put option
at expiration date ("Stated Value") 7,000,000 7,000,000
========== ============
Proportion of fair value of Stated Value
recognised as a liability 2,131,221 150,681
Proportion of fair value of Stated Value
recognised as a non-controlling interest 4,496,631 5,889,052
Total fair value of maximum Stated Value
at end of period/year 6,627,852 6,039,733
========== ============
In August 2012, the Put Option was exercised for a total sale
price of $6,743,157.
10. OTHER PAYABLES
30 June 31 December
2012 2011
---------- ------------
US$ US$
Audit fees 117,795 173,926
Case additions 547,855 36,889
Case proceeds payment obligation 887,629 -
Other creditors 40,704 50,537
---------- ------------
1,593,983 261,352
========== ============
The Group has entered into an agreement whereby it has agreed to
pay a proportion of case proceeds arising from a particular case
investment to a third party in return for that third party managing
that particular case investment on behalf of the Group. The amount
due to the third party will depend on the value of the proceeds
that the Group will receive and, accordingly, the liability has
been measured at fair value in line with the Group's fair value
assessment of the particular case investment. This liability is
shown as case proceeds payment obligation in the above table.
11. COMMITTMENTS & GUARANTEES
Under the terms of some of its contracts, JIL provides a line of
credit to counterparties. As at 30 June 2012, the maximum
commitment under these lines of credit was US$ 10.6 million (31
December 2011: US$ 12.3 million).
12. FUNCTIONAL AND PRESENTATION CURRENCY / EXCHANGE RATES
The financial statements are presented in United States Dollar
("US$") which is also the Company's functional currency. The
following exchange rate was applicable as at 30 June 2012.
Closing rate
----------------------
30 June 31 December
2012 2011
-------- ------------
US$ US$
Great Britain pounds (GBP) 1.5706 1.5540
======== ============
13. RELATED PARTY TRANSACTIONS
Richard Battey, as investor representative of JIL, is a director
of Juridica Capital Management Limited ("JCML"). The principal of
JCML is Richard Fields, who acquired 50,000 Ordinary Shares in the
Company (0.0625 per cent equity interest) as reimbursement of
100,000 pounds sterling of pre IPO costs.
(a) Management fee
The Company is managed by JCML, an investment management company
incorporated in Guernsey in which the Company holds a 13.8 per cent
equity interest (31 December 2011: 15 per cent). Under the terms of
the Management Agreement, the Company appointed JCML as an
Investment Manager to provide management services to the Company.
The Investment Manager receives a fee based on the adjusted net
asset value of the Company, payable quarterly in advance using the
annual rate of 2.5 per cent. The adjusted net asset value is the
net asset value of the Company at the relevant time, 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 investments;
(ii) adding the amount of any write downs with respect to
investments which have not been written off; and
(iii) deducting the value of the Company's investment in
JCML.
In the period to 30 June 2012, investment management fees
totalling US$2,218,736 (30 June 2011: US$2,220,934) were paid to
JCML. As at 30 June 2012, there was an investment management fee
prepayment of US$67,836 (31 December 2011: US$122,982).
(b) Investment in Juridica Capital Management Limited
The Company acquired 15 per cent of JCML on Admission (see Note
6). An impairment review has been performed as part of the fair
value assessment and an impairment review will be carried out on a
semi-annual basis.
JCML acquired 1.5 million shares in the Company on Admission and
acquired a further 153,507 shares under the terms of the placing
effective on 6 April 2009 at a price of GBP1.14. As announced on 28
July 2009 these shares have been sold to certain employees of the
Investment Manager.
As previously disclosed, the Group has provided various amounts
to entities that are ultimately owned and controlled by JCML for
the purpose of structuring certain of the Group's investments.
Those entities are Turtle Bay Technologies Limited, Eleven
Engineering Game Control LLC, Intravisual Inc. and Minkus
Electronic Display Systems Inc.
Summaries of transactions with the above-mentioned entities are
detailed in the below tables:
30 June 30 June
2012 2011
-------- --------
US$ US$
Additions in the period 257,000 -
Proceeds in the period 805,628 383,901
30 June 31 December
2012 2011
-------- ------------
US$ US$
Commitments outstanding at the end of the
period/year 417,973 161,435
Receivables due to the Group at the end 805,628 -
of the period/year
Fair value of associated investments at
the end of the period/year 571,601 1,525,239
(c) Performance fee
The Investment Manager is entitled to a performance fee based on
the adjusted net asset value (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 will equal 20 per cent of the
annualised increase in the net asset value between a hurdle rate of
8 per cent and 20 per cent, furthermore a fee of 35 per cent of the
increase over a hurdle of 20 per cent and 40 per cent and 50 per
cent of the same increase over a hurdle of below 40 per cent. The
fees are subject to a high water mark such that no performance fee
will be paid if the performance of the Company does not exceed the
net asset value at the end of the previous year in which the
performance fee was paid. Payment of the performance fee is subject
to the condition set out in (d), below.
As at 30 June 2012, the hurdle rate was not achieved and,
therefore, no performance fee was paid or payable for the period
(30 June 2011: US$Nil, 31 December 2011: US$Nil). However, the
current net asset value (unadjusted) is greater than the minimum
hurdle rate as at 30 June 2012. To the extent that this net asset
value is realised, a performance fee may become payable.
(d) Trust account
Of the performance fee, 50 per cent of any payment within the
first four years from the date of admission will be retained by the
Company in a trust account. During that period if, at any given
year end, the annualised increase in net asset value of the Company
is less than 8 per cent, the Company may claw back 20 per cent of
the difference between the actual net asset value and the net asset
value assuming an 8 per cent increase from the net asset value for
the previous period. As at 30 June 2012, the balance in the trust
account was US$Nil (31 December 2011: US$Nil).
(e) Facility agreement and Collateral Account
The Group has entered into a facility agreement (the "Facility")
with which it agrees to loan to Fields Sullivan PLLC ("FS"), a law
firm in which Richard Fields is a partner, money for funding cases
in which FS is to act under a Co-counsel Agreement. The Group
expects to enter into loan arrangements with other law firms (which
may include other law firms established by the Principals) on terms
and conditions similar to those contained in the Facility. The
Facility available to FS will be for up to approximately 50 per
cent of the net proceeds of the capital raised by the Group 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, (ii)
the date on which Richard Fields ceases to own a controlling
interest in FS, (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 FS
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$10 million may be drawn down in respect of the
same case investment, unless otherwise approved by the Group.
(f) Directors' remuneration
30 June 30 June
2012 2011
-------- --------
US$ US$
Lord Daniel Brennan 118,170 118,583
Richard Battey 47,268 47,433
Kermit Birchfield 50,000 50,000
-------- --------
215,438 216,016
======== ========
No pension contributions were paid or were payable on behalf of
the Directors.
Lord Daniel Brennan has an interest in 447,817 shares under a
Share Option Agreement, details of which were disclosed in the
Admission Document. The fair value of these options was determined
as of the grant date to be US$139,138, which is to be provided for
over the vesting period of the options of 5 years. As at 30 June
2012, a provision of US$130,944 (31 December 2011: US$115,138) has
been made for these options.
The other Directors have no beneficial interest in the share
capital of the Company.
(g) Cenkos Warrant
Cenkos Securities plc has an interest in 800,000 shares under a
Deed of Warrant Grant at a price of 130p exercisable until 21
December 2012. These were fair valued as of the grant date at
US$246,906 and a full provision has been made for this in the
financial statements.
(h) Escon Capital Inc.
The Group has an interest in 38% (31 December 2011: 24%) of the
voting common stock and 100% of the issued preference shares of
Escon Capital Inc., a Delaware corporation of which Kermit
Birchfield and Richard Fields are directors.
14. SEASONALITY
The Company's operations are not affected by seasonality or
cyclicality and as such they have no impact on the unaudited
condensed consolidated financial statements.
15. BUSINESS COMBINATIONS
Subsidiary acquired Principal activity Date of acquisition Proportion
of shares acquired
OTO Technologies LLC Investment holding 25 June 2012 85%
OTO Technologies LLC ("OTO") was acquired as part of the
re-negotiation of an existing investment deal which resulted in the
Group's interest in OTO increasing from 35% to 85% for no
additional consideration. This resulted in a bargain purchase - a
business combination in which the net fair value of the
identifiable assets acquired and liabilities assumed exceeds the
aggregate of the consideration transferred, the non-controlling
interests and the fair value of the previously held equity
interest. Accordingly the Group has recognised a gain on bargain
purchase of $4,329,188 during the period.
The Group previously recognised its investment in OTO as an
Available for Sale Financial Asset. As at the date of acquisition,
this holding was treated as if it had been disposed and the assets
and liabilities of OTO have been consolidated. Previously
recognised unrealised losses amounting to $1,484,513 have been
reclassified from other comprehensive income to profit or loss as a
result of the acquisition.
Identifiable net assets at the date of acquisition of OTO were
as follows:
US$
Contractual interests 10,504,424
Cash at bank 114,351
Other liabilities (4,896)
-----------
10,613,879
===========
The fair value of non-controlling interests in OTO at the date
of acquisition was assessed to be $1,737,589, based on the
non-controlling interests' proportional share of the fair value of
OTO's identifiable net assets.
16. SUBSEQUENT EVENTS
In July 2012, two of the Company's patent investments went to
trial and verdicts for the plaintiff were rendered in both cases.
These cases are described in more detail below:
-- In Case 0409-C, the jury returned a verdict after trial in
favour of the plaintiff in the amount of $50 million. The Company
invested $4.8 million in this case and is entitled to receive the
first $3.0 million of cash proceeds from settlement or judgment
plus 49% of remaining proceeds. Further proceedings in this case
are scheduled for 18 September 2012, after which the court is
expected to decide remaining legal issues, including whether to
enter judgment for the plaintiff and the amount of such a judgment.
Significant uncertainty remains until judgment is entered and
appeals are completed unless the case is resolved earlier by
settlement. Nonetheless, the Manager views this development as a
positive milestone in the case.
-- In Case 7608-A, the jury returned a verdict in favour of the
plaintiff in the amount of $500,000. This was below the Manager's
expectations. The Company invested $2.0 million in this case and
previously received $1.2 million from settlements with other
defendants in this case. Absent further positive developments in
the case, the Manager does not expect that the Company will receive
additional proceeds in the case but this will not be known until
the case has fully-completed.
Also, in July 2012, one of the cases in the Group's antitrust
and competition portfolio was dismissed in favour of the defendant
and is now on appeal. The Manager expects that the appeal of the
trial court's decision may well be successful but will result in a
delay of at least 12 to 18 months in the resolution of this
case.
In August 2012, the Put Option (see Note 9) was exercised for a
total sale price of $6,743,157.
Additional case proceeds totalling approximately US$35.2 million
were reached in July and August of 2012. These proceeds will be
paid to the Company at the end of 2012.
In September 2012, the Directors announced a dividend of 13
pence per share which will be paid on 4 January 2013 to
shareholders on the register at 21 December 2012.
In accordance with the Group's accounting policies, the
above-mentioned subsequent events have not been adjusted for in
these unaudited condensed consolidated financial statements since
they are not considered to be indicative of conditions that existed
at the end of the period. The impact of these events will be
considered and incorporated within the year-end financial
statements.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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