L itig a tio n Ca pita l Ma na g e me nt L td 2018 F ull Ye a r - - PowerPoint PPT Presentation

L itig a tio n Ca pita l Ma na g e me nt L td 2018 F ull Ye a r Re sults Pre se nta tio n

20 Aug ust 2018

Pa tr ic k Molone y

Chie f E xe c utive Offic e r

2

I mpo rta nt I nfo rma tio n

No re c omme ndation, offe r, invitation or advic e

T his p re se nta tio n c o nta ins g e ne ra l info rma tio n a b o ut the a c tivitie s o f L itig a tio n Ca p ita l Ma na g e me nt L imite d (L

CA) whic h is c urre nt a s a t 20 Aug ust 2018. It is in summa ry fo rm

a nd d o e s no t p urp o rt to b e c o mp le te . I t p re se nts fina nc ia l info rma tio n o n b o th a sta tuto ry b a sis, p re p a re d in a c c o rd a nc e with Austra lia n a c c o unting sta nd a rd s whic h c o mp ly with I nte rna tio na l F ina nc ia l Re p o rting Sta nd a rd s (IF

RS) a s we ll a s info rma tio n

p ro vid e d o n a no n-I FRS b a sis. T his p re se nta tio n is no t a re c o mme nd a tio n o r a d vic e in re la tio n to L CA o r a ny p ro d uc t o r se rvic e o ffe re d b y L CA’ s sub sid ia rie s. T his p re se nta tio n is no t inte nd e d to b e re lie d up o n a s a d vic e to inve sto rs o r p o te ntia l inve sto rs, a nd d o e s no t c o nta in a ll info rma tio n re le va nt o r ne c e ssa ry fo r a n inve stme nt d e c isio n. It sho uld b e re a d in c o njunc tio n with L CA’ s o the r p e rio d ic a nd c o ntinuo us d isc lo sure a nno unc e me nts file d with the Austra lia n Se c uritie s E xc ha ng e , a nd in p a rtic ula r the Full Ye a r Re sults fo r the F ull Ye a r to 30 June 2018. T he se a re a lso a va ila b le a t http :/ / www.lc mfina nc e .c o m. I nve sto rs a nd p o te ntia l inve sto rs sho uld ma ke the ir

• wn ind e p e nd e nt a sse ssme nt o f the info rma tio n in this p re se nta tio n a nd o b ta in the ir
• wn ind e p e nd e nt a d vic e fro m a q ua lifie d a d vise r ha ving re g a rd to the ir o b je c tive s,

fina nc ia l situa tio n a nd ne e d s b e fo re ta king a ny a c tio n.

Disc laime r

No re p re se nta tio n o r wa rra nty, e xp re ss o r imp lie d , is ma d e a s to the a c c ura c y, a d e q ua c y o r re lia b ility o f a ny sta te me nts, e stima te s o r o p inio ns o r o the r info rma tio n c o nta ine d in this p re se nta tio n. T

• the ma ximum e xte nt p e rmitte d b y la w, L

CA, its sub sid ia rie s a nd the ir re sp e c tive d ire c to rs, o ffic e rs, e mp lo ye e s a nd a g e nts d isc la im a ll lia b ility a nd re sp o nsib ility fo r a ny d ire c t o r ind ire c t lo ss o r d a ma g e whic h ma y b e suffe re d b y a ny re c ip ie nt thro ug h use o f o r re lia nc e o n a nything c o nta ine d in o r

• mitte d fro m this p re se nta tio n. No

re c o mme nd a tio n is ma d e a s to ho w inve sto rs sho uld ma ke a n inve stme nt d e c isio n. I nve sto rs must re ly o n the ir o wn e xa mina tio n o f L CA, inc lud ing the me rits a nd risks invo lve d . I nve sto rs a nd p o te ntia l inve sto rs sho uld c o nsult with the ir o wn p ro fe ssio na l a d viso rs in c o nne c tio n with a ny inve stme nt d e c isio n in re la tio n to L CA se c uritie s.

F

• rward looking state me nts

T he info rma tio n in this p re se nta tio n is fo r g e ne ra l info rma tio n o nly. T

• the e xte nt tha t

c e rta in sta te me nts c o nta ine d in this p re se nta tio n ma y c o nstitute “fo rwa rd -lo o king sta te me nts” o r sta te me nts a b o ut “ future ma tte rs”, the info rma tio n re fle c ts L CA’ s inte nt, b e lie f o r e xp e c ta tio ns a t the d a te o f this p re se nta tio n. Sub je c t to a ny c o ntinuing

• b lig a tio ns und e r a p p lic a b le la w o r a ny re le va nt listing rule s o f the Austra lia n Se c uritie s

E xc ha ng e , L CA d isc la ims a ny o b lig a tio n o r und e rta king to d isse mina te a ny up d a te s o r re visio ns to this info rma tio n o ve r time . Any fo rwa rd -lo o king sta te me nts, inc lud ing p ro je c tio ns, g uid a nc e o n future re ve nue s, e a rning s a nd e stima te s, a re p ro vid e d a s a g e ne ra l g uid e o nly a nd sho uld no t b e re lie d up o n a s a n ind ic a tio n

• r

g ua ra nte e

• f

future p e rfo rma nc e . Fo rwa rd -lo o king sta te me nts invo lve kno wn a nd unkno wn risks, unc e rta intie s a nd o the r fa c to rs tha t ma y c a use L CA’ s a c tua l re sults, p e rfo rma nc e o r a c hie ve me nts to d iffe r ma te ria lly fro m a ny future re sults, p e rfo rma nc e o r a c hie ve me nts e xp re sse d o r imp lie d b y the se fo rwa rd - lo o king sta te me nts.

Inve stme nt risk

Any inve stme nt in L CA se c uritie s is sub je c t to inve stme nt a nd

• the r kno wn a nd

unkno wn risks, so me o f whic h a re b e yo nd the c o ntro l o f L

• CA. Any fo rwa rd -lo o king

sta te me nts, o p inio ns a nd e stima te s in this p re se nta tio n a re b a se d o n a ssump tio ns a nd c o nting e nc ie s whic h a re sub je c t to c ha ng e witho ut no tic e , a s a re sta te me nts a b o ut ma rke t a nd ind ustry tre nd s, whic h a re b a se d o n inte rp re ta tio ns o f c urre nt ma rke t c o nd itio ns. F

• r e xa mp le , the fa c to rs tha t a re like ly to a ffe c t the re sults o f L

CA inc lud e , b ut a re no t limite d to , g e ne ra l e c o no mic c o nd itio ns in Austra lia , e xc ha ng e ra te s, c o mp e titio n in the ma rke ts in whic h L CA o p e ra te s o r ma y o p e ra te a nd the inhe re nt re g ula to ry risks in the b usine sse s o f L

• CA. Ne ithe r L

CA, no r a ny o the r p e rso n, g ive s a ny re p re se nta tio n, a ssura nc e o r g ua ra nte e tha t the o c c urre nc e o f the e ve nts e xp re sse d

• r imp lie d in a ny fo rwa rd -lo o king sta te me nts in this p re se nta tio n will a c tua lly o c c ur. I

n a d d itio n, p le a se no te tha t p a st p e rfo rma nc e is no g ua ra nte e o r ind ic a tio n o f future p e rfo rma nc e .

Jurisdic tion

T his p re se nta tio n d o e s no t c o nstitute a n o ffe r to issue o r se ll, o r so lic ita tio n o f a n o ffe r to b uy, a ny se c uritie s o r o the r fina nc ia l p ro d uc ts in a ny jurisd ic tio n. T he d istrib utio n o f this p re se nta tio n

• utsid e

Austra lia ma y b e re stric te d b y la w. Any re c ip ie nt o f this p re se nta tio n o utsid e Austra lia must se e k a d vic e o n a nd o b se rve a ny suc h re stric tio ns. T his p re se nta tio n ma y no t b e re p ro d uc e d o r p ub lishe d , in who le o r in p a rt, fo r a ny p urp o se witho ut the p rio r writte n p e rmissio n o f L CA. T his p re se nta tio n d o e s no t c o nstitute a n o ffe r to se ll, o r a so lic ita tio n o f a n o ffe r to b uy, a ny se c uritie s in the Unite d Sta te s. Any suc h se c uritie s ha ve no t b e e n, a nd will no t b e , re g iste re d und e r the U.S. Se c uritie s Ac t o f 1933 (Se c uritie s Ac t), o r the se c uritie s la ws o f a ny sta te o r o the r jurisd ic tio n o f the Unite d Sta te s a nd ma y no t b e o ffe re d o r so ld , d ire c tly o r ind ire c tly, in the Unite d Sta te s o r to , o r fo r the a c c o unt o r b e ne fit o f, p e rso ns in the Unite d Sta te s, e xc e p t in a tra nsa c tio n e xe mp t fro m, o r no t sub je c t to , re g istra tio n und e r the Se c uritie s Ac t a nd a p p lic a b le US sta te se c uritie s la ws.

3

Re sults Hig hlig hts

¹Running I RR fo r c o mple te d pro je c ts fo r 7 ye ars is 83%

Ro bust pe r fo r manc e in F Y18 is the r e sult o f the me tho do lo gy e mplo ye d by L CM o ve r past 3-5 ye ar s, inc luding r igo r

• us due dilige nc e , ac tive manage me nt o f inve stme nts and c o ntinuity o f the

te am.

F Y18 F Y17 Cha ng e

Pr

• fit/ (loss) be fo r

e tax

$12.0m ($2.9m) 518%

Statuto r y NPAT

$8.6m ($2.3m) 469%

Cash NPAT

$12.0m ($2.9m) 518%

Re tur n o n E quity

41%

• N/ A

IRR¹

80% 480%

ROIC

137% 276%

Gr

• ss Re ve nue

$29.2m $3.4m 754%

Capital de ploye d

$14.6m $7.2m 103%

Ne t asse t bac king pe r shar e (c e nts)

45.1 29.5 53%

Basic E ar nings pe r Shar e (c e nts)

15.24 (5.01) 404%

Pro je c t c o mple tio ns drive re c o rd re sults

Six L itig a tio n Pro je c ts c o mple te d, c o mpa re d to two in F Y17 Pro je c ts Co mple te d: re c e ive d $29.2m re ve nue c o ntrib uting $16.0m E BIT DA a t ROI C

• f 137%

Sta tuto ry NPAT

• f $8.6m a fte r pro viding fo r

de fe rre d ta x mo ve me nts o f $3.3m (e xpe nse ), c o mpa re d to a Sta tuto ry L

• ss in F

Y17 o f $2.3m a fte r de fe rre d ta x mo ve me nts o f $0.5m (b e ne fit) Pro c e e ds a re b e ing re inve ste d to drive future g ro wth. Ca pita l de plo ye d o f $14.6m during F Y18, c o mpa re d with $7.2m in F Y17 re pre se nting a n inc re a se o f 103% Ac tive ly pursuing o ptio ns fo r furthe r c a pita l to suppo rt g ro wth Ra ng e o f so urc e s inc lude ma na g e d funds, de b t a nd whe re a ppro pria te , a dditio na l e q uity

4

F ina nc ia l Re sults

5

L itig a tio n Pro je c t Co mple tio ns drive re c o rd re sults

Stro ng inc re a se in re ve nue b y 754% to $29.2m drive n b y the Co mple tio n o f 5 L itig a tio n Pro je c ts funde d dire c tly b y L CM Ca sh inc re a se d b y 640% to $13.8m fro m $1.9m in F Y17 fo llo wing pro je c t c o mple tio ns, e ve n a s c a sh wa s re inve ste d fo r future g ro wth Inc re a se in c a pita lise d L itig a tio n Inve stme nts re fle c ts a dditio na l inve stme nts ma de , o ffse t b y inve stme nts tha t we re re a lise d Stro ng inc re a se in b a la nc e she e t a nd sha re ho lde r’ s e q uity b y 53% to $25.4m with a 41% Re turn o n a ve ra g e e q uity – re fle c ts suc c e ssful a pplic a tio n o f L CM’ s me tho do lo g y

F Y18 F Y17 Cha ng e

Gro ss Re ve nue $29.2m $3.4m 754% L itig a tio n Inve stme nts de re c o g nise d $13.2m $1.2m 969%

Ne t Inc ome fr

• m L

itig a tion Pr

• je c ts

$16.0m $2.2m 633% Ne t Pr

• fit Be for

e T a x $12.0m ($2.9m) 518% Ope r a ting E xpe nse s / Inc ome r a tio 21% 124% (84% ) T

• ta l e quity

$25.4m $16.7m 53% Re tur n on e quity 41%

• Wor

king c a pita l r a tio 6.3:1 6.7:1 (6% ) NT A (c e nts pe r sha r e ) 18.6

• 0.003

7103% Ca sh $13.8m $1.9m 640% L itig a tion Inve stme nts Ca pita lise d (Inta ng ible a sse ts) $13.9m $12.5m 12% Inte r e st c ove r n/ a n/ a

• Ne t de bt/ e quity

nil nil

• Sha r

e pr ic e a s a t 30 June (c e nts) 0.70 0.48 46%

5

6

Ac c o unting T a x

Sta tutor y Annua l Re por t F Y18 ($m) F Y17 ($m)

Ne t pro fit/ (lo ss) Be fo re T a x 12.0 (2.9) Inc o me ta x e xpe nse / (b e ne fit) 3.3 (0.5)

NPAT 8.6 (2.3) Ba sic E PS (c e nts) 15.24 (5.01) Applic a ble T a x F Y18 ($m) F Y17 ($m)

Ne t pro fit/ (lo ss) Be fo re T a x 12.0 (2.9) Applic a b le T a x a t Sta tuto ry ra te o f 30% nil nil

NPAT 12.0 (2.9) Ba sic E PS (c e nts) 21.14 (6.01)

T a x lo sse s a re re c o g nise d in the de fe rre d ta x a sse t b y L CM o nly if it is pro b a b le tha t future ta xa b le a mo unts will b e a va ila b le to utilise tho se ta x lo sse s T he po te ntia l future ta x b e ne fit o f ta x lo sse s a rising fro m prio r ye a rs is $4,331,692 a s a t 30 June 2018 (2017: $7,100,444) T he de re c o g nitio n o f the de fe rre d ta x a sse t is a no n-c a sh ite m

L CM’s r e po r te d inc o me tax e xpe nse who lly c o mpr ise s mo ve me nts in de fe r r e d taxe s whic h pr imar ily r e late s to the de r e c o gnitio n o f tax lo sse s fr

• m pr

io r ye ar s.

6

7

Building Ba la nc e She e t Stre ng th

3.3 5.9 1.9 13.8 2015 2016 2017 2018

Ca sh a s a t 30 June

($ in millions)

7.4 5.6 16.7 25.4 2015 2016 2017 2018

Ne t Asse ts

($ in millions)

2.6 6.5 12.5 13.9 2015 2016 2017 2018

L ition Inve stme nts

($ in ll

3.5 4.7 7.2 14.6 2015 2016 2017 2018

T

• ta l Ca pita l

($ in millions)

T

• ta l Ca pita l De ploye d
• n L

itig a tion Inve stme nts

($ in millions)

7

Sig nific a nt inc re a se to c a sh b a la nc e a s L itig a tio n Pro je c ts ha ve Co mple te d F Y17 c a sh b a la nc e re sult o f IPO Co sts, c o sts invo lve d in b uilding the te a m a nd in mo ving L itig a tio n Pro je c ts to a n “o n b a la nc e she e t” funding mo de l T his g ro wth in to ta l c a pita l de plo ye d de mo nstra te s the inc re a se to the size o f L CM’ s po rtfo lio o f L itig a tio n Pro je c ts Sho ws the mo ve me nt o f L itig a tio n Pro je c ts thro ug h the Pipe line , to the sta g e o f b e ing funde d a nd ultima te ly to Co mple tio n Stro ng inc re a se in ne t a sse ts re fle c ts suc c e ssful re inve stme nt o f c a sh into pro fita b le L itig a tio n Inve stme nts

L itig a tion Inve stme nts Ca pita lise d

($ in millions)

8

0.6 1.6 3.4 27.1 2015 2016 2017 2018

Ca sh g e ne r a tion

($ in millions)

1 2.7 4.2 3.7 2015 2016 2017 2018

Ca sh use d in Ope r a ting a c tivitie s

($ in millions)

Co mple tio n o f L itig a tio n Pro je c ts drive s c a sh flo w

3.3 4.2 8.1 11.3 2015 2016 2017 2018

Ca sh use d in L itig a tion Inve stme nts

($ in millions)

8

$27.1m c a sh g e ne ra te d b y inve stme nt a c tivitie s inc re a se d b y 694% to $27.1m (F Y17: $3.4m) Sta b le le ve l o f c a sh use d b y o pe ra ting a c tivitie s

9

Organic Cash Generation

With $27.1 million of cash generated by the completion of Litigation Projects in 2018, LCM

• rganically generated capital which permitted the growth and expansion of the business

and permitted the repayment of all borrowings

13.8

0.2 4.3 4.3 0.7 11.3 3.0 27.1

1.9

9

• Cash flows for Litigation Investments
• Cash flows for borrowings
• Cash flows for operating activities

10

L itig a tio n Pro je c t Po rtfo lio & Pipe line

11

Stro ng Pro je c t Po rtfo lio fo r F Y19 a nd F Y20

212 736 1139 330 167 169 55 2016 2017 2018

Gr

• ss Cla im Size

a s a t 30 June

($ in millions)

I F PA L CM - Co nditio na l L CM - Unc o nd itio na l

663 476 1139 330 330 55 55 F Y19 F Y20 F Y21 T

• ta l

F

• r

e c a st Pr

• je c t Comple tion

($ in millions by r e fe r e nc e to Gr

• ss

Claim Size )

I F PA L CM - Co nditio na l L CM - Unc o nd itio na l

F

• llo wing the c o mple tio n o f 6 L

itig a tio n Pro je c ts in F Y18, a s a t 30 June 2018 the re we re 14 L itig a tio n Pro je c ts in the po rtfo lio , 10

• f whic h a re fo re c a st to c o mple te this c o ming F

Y19 (1 o f whic h ha s a lre a dy c o mple te d a lb e it a n I F PA pro je c t) As a t 30 June 2018 L CM is ma na g ing a po rtfo lio with a n e stima te d a g g re g a te Gro ss Cla im Size o f c .$1,194m ($1,139m o f whic h it is funding dire c tly) I n a dditio n, L CM ha s c o nditio na lly a g re e d to fund 6 L itig a tio n Pro je c ts with a n a g g re g a te Gro ss Cla im Size o f $330m a nd a b udg e t o f $32m F

• r sing le c a se funding , L

CM re c e ive s the hig he r o f a multiple o f c a pita l inve ste d, o r a pe rc e nta g e o f the g ro ss pro c e e ds o f a ny a wa rd o r se ttle me nt o f the litig a tio n - the pe rc e nta g e is g e ne ra lly b e twe e n 20% a nd 40% a nd L CM is re imb urse d fo r a ll o f the c a pita l de plo ye d to fina nc e the litig a tio n

No te : I nte rnatio nal F inanc ing Partne r Arrang e me nt (IF

PA) re fe rs to Pro je c ts funde d b y a partne r and

manag e d b y L CM fo r a pe rfo rmanc e fe e . T he se lo we r marg in arrang e me nts will c e ase o nc e the final I PF A-funde d Pro je c ts c o nc lude , whic h is e xpe c te d during F Y19.

11

12

Dive rsity a nd E nha nc e d Orig ina tio n

28 53 24 20

Applic a tions by T ype in 2018

Cla ss Ac tio ns - 22.4% Co mme rc ia l - 42.4% I nte rna tio na l Arb itra tio n - 19.2% I nso lve nc y - 16%

T

• ta l a p p lic a tio ns inc re a se d b y 27.6% to 125 a p p lic a tio ns, c o mp a re d with 98 a p p lic a tio ns in F

Y17 No t o nly wa s the re a n inc re a se in numb e r o f o ve ra ll a pplic a tio ns b ut a lso a n inc re a se in q ua lity o f a pplic a tio ns b o th in size a nd a lso in a ntic ipa te d pro spe c ts o f suc c e ss Applic a tio ns a c ro ss a ll o f o ur ta rg e t a re a s inc luding 24 a pplic a tio ns in inte rna tio na l a rb itra tio n (e xpe c te d to b e a drive r o f g ro wth g o ing fo rwa rd) De mo nstra te s suc c e ss in imple me nta tio n o f ma rke ting / o rig ina tio n stra te g y

98 125 F Y17 F Y18

T

• ta l Applic a tions

12

13

L itig a tio n Pro je c t Pipe line to drive future g ro wth

125 27 6

T

• ta l

a pplic ations Pipe line pr

• je c ts

Conditional pr

• je c ts

Pipe line Pr

• g r

e ssion (numbe r

• f pr
• je c ts)

7 14 2 3 1

Pipe line by T ype (numbe r

• f pr
• je c ts)

Cla ss Ac tio ns - 25.9% Co mme rc ia l - 51.9% I nte rna tio na l Arb itra tio n - 7.4% I nso lve nc y - 11.1% Co rpo ra te Po rtfo lio - 3.7%

As a t 30 June 2018 the re we re 27 Pipe line Pro je c ts, whic h ha ve a n a g g re g a te Gro ss Cla im Size o f $2.4b a nd a n e stima te d a g g re g a te b udg e t o f $121m T he re a re 6 L itig a tio n Pro je c ts whic h a re sub je c t to a c o nditio na l funding a g re e me nt. T he se 6 c o nditio na l pro je c ts ha ve a n e stima te d a g g re g a te Gro ss Cla im Size o f C.$330m a nd a b udg e t o f $33m T he 6 c o nditio na l pro je c ts inc lude the first inte rna tio na l a rb itra tio n a nd the first c o rpo ra te po rtfo lio to b e funde d b y L CM 3 o f the c o nditio na l pro je c ts re la te to c la ims to b e b ro ug ht o utside o f Austra lia I nte rna tio na l a rb itra tio n is e xpe c te d to b e a ne w drive r o f g ro wth in F Y19, with 24 a pplic a tio ns fo r funding re c e ive d in F Y18 (19.2%)

Gr

• ss Cla im

Size Budg e t

Co nditio na l Pro je c ts $330m $33m Pipe line - Othe r $2.1b $88m

T

• ta l Pipe line

$2.4b $121m

13

¹%’ s re fle c t type o f pro je c ts as a pe rc e ntag e o f to tal no . o f pro je c ts ¹

14

I nve stme nt Po rtfo lio Dive rsific a tio n

Cla ss Ac tio ns a re c urre ntly a c o nside ra b le pro po rtio n o f o ur po rtfo lio b y Gro ss Cla im Size b ut we e xpe c t this to c ha ng e g o ing fo rwa rd a s o the r pa rts o f o ur po rtfo lio de ve lo p T he c urre nt b uo ya nt e c o no mic c o nditio ns me a n tha t Inso lve nc y L itig a tio n is no t c urre ntly a la rg e pa rt o f the po rtfo lio b ut this will c ha ng e with a n e c o no mic do wnturn (this pa rt o f the b usine ss is c o unte rc yc lic a l)

14

54% 34% 12%

Cur r e nt Commitme nts for F Y19 Cla ss Ac tio ns - $5.1m Co mme rc ia l - $3.3m I nso lve nc y - $1.2m

78% 19% 3%

Pr

• je c t T

ype by Gr

• ss Cla im Size for

F Y19 Cla ss Ac tio ns - $559m Co mme rc ia l - $136m I nso lve nc y - $23m

15

Upda te o n I nve stme nts

Ne w L itig a tion Pr

• je c ts

Dive r sifie d Por tfolio Gr

• wth Ar

e a s

12 ne w funding a g re e me nts e xe c ute d sinc e 1 July 2017 (6 c o nditio na l) Of the se 12 ne w L itig a tio n Pro je c ts:

• 3 a re inso lve nc y c a se s
• 5 a re c la ss a c tio ns
• 2 a re c o mme rc ia l c a se s
• 1 is a n inte rna tio na l a rb itra tio n
• 1 is a c o rpo ra te po rtfo lio
• 3 will b e b ro ug ht o utside o f

Austra lia

• F

irst funding a g re e me nt to fund a n inte rna tio na l a rb itra tio n

• F

irst funding a g re e me nt to fund a c o rpo ra te po rtfo lio

Ne w Cla ss Ac tions Quintis Cla ss Ac tion Disc ove r y Me ta ls Cla ss Ac tion

Ne w c la ss a c tio ns b ro ug ht o n b e ha lf

• f:
• Sha re ho lde rs in Quintis L

imite d

• Pe rso ns a ffe c te d b y

c o nta mina tio n fro m dre dg ing o f Gla dsto ne Po rt

• Inve sto rs who suffe re d lo ss b y

inve sting in a Ma na g e d Inve stme nt Sc he me Cla ss a c tio n b ro ug ht fo r sha re ho lde rs in Quintis L imite d is diffe re nt to the two o the r c la ss a c tio ns in this spa c e a nd inc lude s a c la im a g a inst E Y fo r a ne g lig e nt a udit. T his wa s the re sult o f c a re ful a nd c o nside re d c a se de ve lo pme nt o ve r a 12 mo nth pe rio d. Cla ss a c tio n fo r fo rme r sha re ho lde rs in Disc o ve ry Me ta ls a g a inst K PMG fo r a ne g lig e nt va lua tio n is tra c king we ll a nd ha s a me dia tio n in No v 2018 a nd a fina l he a ring in Ma rc h 2019.

15

16

Gro wth Stra te g y & Outlo o k

17

Gro wth Stra te g y

L CM’s busine ss is immine ntly sc alable – the te am ar e able to take o n a substantial numbe r

• f

additio nal c ase s witho ut a signific ant inc r e ase to c o r po r ate o ve r he ads.

Ba la nc e d por tfolio

T a rg e t L itig a tio n Pro je c ts whic h me e t F unding Crite ria a nd de live r a b a la nc e d po rtfo lio in te rms o f size , funding struc ture , a re a o f la w a nd g e o g ra phic a l re g io n.

F unding for Cor por a te s

L itig a tio n fina nc e to so phistic a te d c o rpo ra te s (inc luding b y po rtfo lio funding ). T his ma rke t is still ne w a nd la rg e ly unde r-de ve lo pe d. L CM ha s re c e ntly ne g o tia te d its first funding a g re e me nt fo r a c o rpo ra te a nd it is to fina nc e a po rtfo lio o f litig a tio n.

Inte r na tional Ar bitr a tion

24 a pplic a tio ns fo r funding fo r inte rna tio na l a rb itra tio n in F

• Y18. Stro ng g ro wth po te ntia l.

Inte r na tional e xpa nsion

L CM ha s ma de ste ps to o pe n a n o ffic e in Sing a po re whic h will b e a b a se fo r funding o f Pro je c ts in b o th Sing a po re a nd Ho ng K

• ng . F

unding o f Pro je c ts in the UK a nd o the r ma rke ts whic h me e t o ur c rite ria .

17

18

I nte rna tio na l E xpa nsio n - F ra me wo rk

18

As fo re sha do we d in L CM’ s pre vio us c o mpa ny a nno unc e me nt, c o nside ra tio n o f inte rna tio na l e xpa nsio n

• ppo rtunitie s will:

L e ve ra g e pro ve n c o re c a pa b ilitie s in o rig ina tio n a nd due dilig e nc e Allo w dive rsific a tio n o f o ur inve stme nt po rtfo lio Suppo rt furthe r g ro wth pla ns a nd b ro a de n po o l o f ta le nt to o rig ina te a nd e xe c ute pro je c ts Attra c tive inte rna tio na l ma rke ts ha ve the fo llo wing c ha ra c te ristic s: L e g a l fra me wo rks a nd jurisdic tio ns with simila r fo unda tio ns to Austra lia n la w Ma turing a nd g ro wing re c o g nitio n o f litig a tio n fina nc e a s a c o rpo ra te fina nc e a nd risk ma na g e me nt to o l Jurisdic tio ns ha ve in pla c e suita b le fra me wo rks a nd rule s fo r the re so lutio n o f inte rna tio na l a rb itra l dispute s

19

I nte rna tio na l E xpa nsio n – UK Oppo rtunity

19

L CM is re c e iving a n inc re a se d numb e r o f a pplic a tio ns fo r inte rna tio na lly b a se d pro je c ts. A sig nific a nt numb e r

• f the se a re in the UK

. L CM’ s initia l re spo nse wa s to re ta in a Que e ns Co unc il in the Unite d K ing do m suc h tha t we ha d a n e xpe rie nc e d so urc e o f a dvic e in the re le va nt jurisdic tio n to ma na g e the due dilig e nc e pro c e ss. T ha t ha s b e e n a nd re ma ins a va lua b le re so urc e to the b usine ss Mo re re c e ntly, we ha ve b e e n inve stig a ting a mo re pe rma ne nt pre se nc e in tha t re g io n to no t o nly a ssist in due dilig e nc e , b ut a lso pro vide pro je c t o rig ina tio n. T ha t pro c e ss c o ntinue s In line with L CM’ s me a sure d a ppro a c h in e nte ring the Inte rna tio na l Arb itra tio n spa c e , ha ving e xpe rie nc e d inte rna tio na l litig a tio n funding pra c titio ne rs is a pre c o nditio n fo r L CM to c o nside r inte rna tio na l e xpa nsio n L CM ha s ide ntifie d so me hig hly e xpe rie nc e d pra c titio ne rs who a re c a pa b le o f le a ding a no rthe rn he misphe re b a se d te a m. Pre limina ry disc ussio ns ha ve c o mme nc e d a nd a re o ng o ing . T he se pro fe ssio na ls a re we ll kno wn to L CM, the y ha ve a stro ng pre se nc e in the litig a tio n fina nc ing se c to r a nd b ring with the m a tra c k re c o rd in

• rig ina tio n o f la rg e a nd c o mple x tra nsa c tio ns

Give n tha t litig a tio n funding re ma ins a n e me rg ing ma rke t wo rldwide , L CM is fo rtuna te to b e in a po sitio n to c o nside r future o ppo rtunitie s with e xpe rie nc e d o pe ra to rs

20

Risk Ma na g e me nt

Str ic t c ase se le c tio n pr

• c e ss has unde r

pinne d a str

• ng ave r

age ROIC o f 138% sinc e 2012.

• 1. Pre limina ry due dilig e nc e b y the inve stme nt ma na g e r
• 2. I

nve stme nt c o mmitte e re vie w

• 3. Bo a rd re vie w a nd a ppro va l
• 4. Co nditio na l fina nc ing a g re e me nt
• 5. Additio na l due dilig e nc e
• 6. Unc o nditio na l fina nc ing a g re e me nt

L CM o nly e nte r s into funding agr e e me nts in r e latio n to appr

• ximate ly 5% o f the applic atio ns it r

e c e ive s.

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21

I ndustry Re g ula tio n

T wo inde pe nde nt inq uirie s this ye a r into L itig a tio n F unding a nd Cla ss Ac tio ns

Vic to ria n L a w Re fo rm Co mmissio n Inq uiry wa s in fa vo ur o f the re g ula tio n o f litig a tio n funde rs T he Austra lia n L a w Re fo rm Co mmissio n Inq uiry re c o mme nda tio ns will no t b e kno wn until De c e mb e r 2018 b ut a re like ly to inc lude : L ic e nsing fo r litig a tio n funde rs a s a b e spo ke lic e nc e until supe rvisio n o f ASIC; Allo wing fo r c o nting e nc y fe e s to b e c ha rg e d b y la wye rs in c la ss a c tio ns Me a sure s fo r the ma na g e me nt o f c o mpe ting c la ss a c tio ns L CM’ s vie w is to suppo rt the lic e nsing o f litig a tio n funde rs a s to do so will furthe r le g itimise the industry, c re a te a b a rrie r to e ntry a nd in re spe c t to ASX liste d funde rs, c re a te o nly a minima l a dditio na l c o mplia nc e re q uire me nt T he intro duc tio n o f c o nting e nc y fe e s fo r c la ss a c tio ns is unlike ly to de tra c t fro m L CM’ s b usine ss a s it wo uld b e fo r c la ss a c tio ns o nly, ta ke up b y pla intiff firms is like ly to b e lo w a nd the re will b e o ppo rtunitie s to “g o b e hind” the se firms to pro vide funding to the m. T ha t vie w is to ta lly suppo rte d b y the US ma rke t, whe re c o nting e nc y fe e s

• r da ma g e s b a se d c ha rg ing ha s b e e n pa rt o f the le g a l la ndsc a pe fo r ma ny ye a rs a nd the litig a tio n fina nc e

industry is thriving

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22

Outlo o k

Ca pita l Ma na g e me nt

During Q1 F Y18, L CM e nte re d into a fa c ility whic h pro vide d $4m o f de b t c a pita l, whic h wa s re pa id in full during the ye a r fro m o rg a nic a lly g e ne ra te d re ve nue L CM is e ng a g e d in disc ussio ns a nd ne g o tia tio ns with a numb e r o f c a pita l pro vide rs fo r a dditio na l c a pita l Ra ng e o f so urc e s inc lude ma na g e d funds, de b t a nd whe re a ppro pria te , a dditio na l e q uity Additio na l c a pita l will e na b le L CM to ta ke a dva nta g e o f o ppo rtunitie s a va ila b le a nd inc re a se the size o f the L itig a tio n Pro je c ts it c a n fina nc e

Stro ng g ro wth e xpe c te d

10 L itig a tio n Pro je c ts e xpe c te d to b e c o mple te d in F Y19 3 L itig a tio n Pro je c ts e xpe c te d to c o mple te in F Y20 b ut L CM e xpe c ts this numb e r will g ro w a s the po rtfo lio b uilds into tha t pe rio d 6 L itig a tio n Pro je c ts (c o nditio na l) e xpe c te d to c o mple te in F Y21 E nc o ura g ing Pipe line o f 27 L itig a tio n Pro je c ts, 6 o f whic h a re sub je c t to a c o nditio na l funding a g re e me nt – will drive L CM’ s ne xt sta g e o f g ro wth L CM will c o ntinue to a pply its me tho do lo g y o f rig o ro us due dilig e nc e , a c tive c a se ma na g e me nt a nd c o ntinuity

• f the te a m

L CM a ims to furthe r de ve lo p a nd dive rsify its po rtfo lio o f L itig a tio n Pro je c ts E xplo ring o ptio ns fo r inte rna tio na l e xpa nsio n in Sing a po re a nd Ho ng K

• ng , with a Sing a po re b ra nc h o ffic e

e xpe c te d to b e c o mple te d b y e nd o f CY18. In re la tio n to the Asia n e xpa nsio n, a ll Risk Ma na g e me nt fo r the po rtfo lio a nd T re a sury func tio ns fo r L CM will re ma in with He a d Offic e in Austra lia a t this time

22

23

Appe ndix 1 – I ndustry & Co mpa ny Ove rvie w

23

24

I ndustry Ove rvie w

Wha t is litig a tio n fina nc ing ?

L itig a tio n fina nc ing invo lve s the fina nc ing o f third pa rtie s’ le g a l c la ims in e xc ha ng e fo r re c e iving a sha re o f a mo unts re c o ve re d fro m tho se c la ims L itig a tio n fina nc ing sta rte d in Austra lia in the 1990s a s fina nc ing fo r liq uida to rs o f inso lve nt c o mpa nie s to b ring c la ims ve ste d in the liq uida to rs o r in tho se c o mpa nie s

I ndustry g ro wth

L itig a tio n fina nc ing c o ntinue s to ha ve sig nific a nt g ro wth a nd e xpa nsio n b e yo nd inso lve nc y c la ims to c o mme rc ia l c la ims a nd c la ss a c tio ns Ong o ing g ro wth o f the Austra lia n litig a tio n fina nc ing ma rke t is like ly to b e fo ste re d b y the pro hib itive c o st o f la rg e sc a le litig a tio n, the de sire to a vo id sig nific a nt risks a nd the re c o g nitio n o f the va lue o f pro fe ssio na l ma na g e me nt o f litig a tio n whic h fina nc ie rs pro vide

L CM’ s po int o f vie w

Suc c e ssful litig a tio n fina nc ing re q uire s e xpe rtise in so urc ing suita b le L itig a tio n Pro je c ts, a sse ssing L itig a tio n Pro je c ts o n the ir le g a l me rits a nd ma na g ing c a sh flo w le ve ls o ve r va rying time pe rio ds. Stro ng re fe rra l ne two rks a re a n a dva nta g e in so urc ing ne w L itig a tio n Pro je c ts

24

25

Ove rvie w o f L CM

Our Str e ng ths Ba c kg r

• und

E sta blishe d pla ye r with r e c og nise d c a pa bility a nd ne twor k

• E

sta b lishe d in 1998 a nd liste d o n the ASX in De c e mb e r 2016 (ASX: L CA)

• L

CM wa s o ne o f the pio ne e rs in litig a tio n fina nc ing , whic h wa s first de ve lo pe d in Austra lia

• L

CM ha s a n e sta b lishe d ne two rk fo r the re fe rra l o f L itig a tio n Pro je c ts within the le g a l pro fe ssio n a nd with inso lve nc y pra c titio ne rs

Str

• ng tr

a c k r e c or d a nd suc c e ss r a te

• L

CM ha s a 20 ye a r tra c k re c o rd in litig a tio n fina nc ing - invo lve d in o ve r 54 L itig a tio n Pro je c ts c o ve ring a ppro xima te ly 198 c a se s

• 83% o f L

CM’ s L itig a tio n Pro je c ts ha ve b e e n pro fita b le

• T

he ma jo rity o f L CM’ s L itig a tio n Pro je c ts ha ve re a c he d se ttle me nt (a ppro xima te ly 95% suc c e ss ra te )

• T

he a ve ra g e time to c o mple tio n is 27 mo nths

• T

he CE O o f L CM, Pa tric k Mo lo ne y, ha s b e e n with L CM sinc e 2003 a nd ha s o ve r 25 ye a rs e xpe rie nc e a s a c o mme rc ia l litig a to r

L itig a tion Pr

• je c t se le c tion

a nd a c tive ma na g e me nt

• L

CM a pplie s a rig o ro us se le c tio n c rite ria inc luding its five ke y pilla rs o f litig a tio n fina nc ing :

1.

Cle a r le g a l princ iple s

2.

Do c ume nta ry e vide nc e

3.

Ab ility to re c o ve r

4.

Co st/ b e ne fit a na lysis

5.

Ac tive litig a tio n pro je c t ma na g e me nt

• Onc e a L

itig a tio n Pro je c t ha s pa sse d this initia l se le c tio n c rite ria , L CM the n a pplie s a n e sta b lishe d inve stme nt a ppro va l pro c e ss¹ to ma na g e a nd mitig a te the risks a sso c ia te d with its L itig a tio n Pro je c ts

F ully fina nc e d litig a tion

• All b ut o ne Pro je c t is fully funde d b y L

CM

¹Mo re info rma tio n o n L CM’ s inve stme nt a ppro va l pro c e ss c a n b e se e n in Slide 20

25

26

Re ve nue Mo de l

Ho w do e s L CM g e ne ra te its inc o me ?

L CM’ s inc o me is g e ne ra te d fro m the suc c e ssful fina nc ing a nd ma na g e me nt o f L itig a tio n Pro je c ts L CM’ s inc o me mo de l is re fle c te d in e a c h litig a tio n fina nc ing a g re e me nt it e nte rs into with its c lie nts. A typic a l litig a tio n fina nc ing a g re e me nt pro vide s fo r the fo llo wing : a ) L CM me e ts a ll o r pa rt o f the c o sts o f the litig a tio n, whic h c a n inc lude so lic ito rs’ fe e s, b a rriste rs’ fe e s, c ha rg e s o f liq uida to rs, c ha rg e s o f inde pe nde nt e xpe rts a nd Co urt fe e s; a nd/ o r b ) L CM pro vide s a n inde mnity to the litig a nts(s) in fa vo uro f the de fe nda nt, in the e ve nt tha t the ir litig a tio n is unsuc c e ssful In re turn, L CM re c e ive s a pe rc e nta g e o f the re c o ve re d a mo unts plus re pa yme nt o f a ll c o sts. T he pe rc e nta g e L CM re c e ive s will va ry b e twe e n 15% a nd 40% de pe nding o n the le ve l o f fina nc ing pro vide d K e y drive rs o f L CM’ s inc o me inc lude the size , the numbe ra nd the pr

• fita bility o f e a c h o f the L

itig a tio n Pro je c ts tha t L CM fina nc e s

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27

Bo a rd o f Dire c to rs

Dr David King - Non- E xe c utive Chair man

• Appo inte d a s a Dire c to r o f L

CM o n 9 Oc to b e r 2015 (i.e . o n inc o rpo ra tio n) a nd wa s a ppo inte d a s a Dire c to r o f L CM L itig a tio n in F e b rua ry 2014

• Wa s a fo unde r a nd no n-e xe c utive dire c to r o f Sa pe x L

td, Ga s2Grid L td a nd E a ste rn Sta r Ga s L td.

• Da vid is a F

e llo w o f the Austra lia n I nstitute o f Co mpa ny Dire c to rs, a F e llo w o f the Austra la sia n institute o f Mining a nd Me ta llurg y a nd a F e llo w o f the Austra lia n I nstitute o f Ge o sc ie ntists. He is a lso the No n-e xe c utive Cha irma n o f Ce llmid L td a nd Afric a n Pe tro le um Co rpo ra tio n L td, a nd a no n- e xe c utive dire c to r (fo rme rly Cha irma n) o f Ga lile e E ne rg y L td.

Patr ic k Molone y – Chie f E xe c utive Offic e r

• Appo inte d a s a Dire c to r o f L

CM o n 9 Oc to b e r 2015 (i.e . o n inc o rpo ra tio n) a nd wa s a ppo inte d a s a Dire c to r o f L CM L itig a tio n in June 2003

• Pa tric k wa s pre vio usly the princ ipa l o f Mo lo ne y L

a wye rs, whic h he e sta b lishe d in 2003 a nd spe c ia lise d in c o mme rc ia l litig a tio n ha ving a dive rse c lie nt b a se . Pa tric k ha s a c te d in mo re tha n 200 c o mme rc ia l litig a tio n c a se s fo r c lie nts in the Distric t Co urt o f NSW, the Supre me Co urt o f NSW, the F e de ra l Co urt o f Austra lia a nd the Hig h Co urt o f Austra lia

• Pa tric k wa s a dmitte d to pra c tic e la w in 1996

Ste ve n Mc L e an – Non- E xe c utive Dir e c tor

• Appo inte d a s a Dire c to r o f L

CM o n 9 No ve mb e r 2015

• Ste ve n ha s a n inve stme nt b a nking b a c kg ro und, with o ve r 20 ye a rs’ e xpe rie nc e , c o mme nc ing with

E rnst & Yo ung Co rpo ra te F ina nc e b e fo re mo ving to J.P. Mo rg a n b o th in Austra lia a nd E uro pe

• Ste ve n ha s le d e q uity tra nsa c tio ns whic h ha ve ra ise d in e xc e ss o f A$50b n fo r c o rpo ra te s a c ro ss

va rio us c o untrie s inc luding Austra lia , USA, UK , Switze rla nd, F inla nd, Ho lla nd, Austria , F ra nc e , Russia , Sing a po re a nd Be rmuda

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28

E : pmo lo ne y@ lc mfina nc e .c o m P: +61 2 8098 1390 Pa tric k Mo lo ne y L itig a tio n Ca pita l Ma na g e me nt L imite d Chie f E xe c utive Offic e r

L itig a tion Ca pita l Ma na g e me nt L imite d

Suite 12.06, L e ve l 12 T he Chifle y T

• we r

2 Chifle y Sq ua re Sydne y NSW 2000 www.lc mfina nc e .c o m

Co nta c t De ta ils

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