Juridica Investments Regulatory News (JIL)

Juridica Investments Limited

('Juridica' or the 'Company')

Audited final results for the year ended 31 December 2011

STRONG RETURNS IN 2011; DIVIDEND OF 7.0 PENCE PER SHARE; PORTFOLIO MATURING

Juridica (AIM: JIL), a leading provider of capital to the law market, announces its audited financial results for the year ended 31 December 2011.

Financial highlights

§ Total comprehensive income up 520% to US$37.8 million (2010: US$9.0 million loss)

§ Gross cash proceeds up 159% to US$17.1 million (2010: US$6.6 million)

§ Total cash profit up 578% to US$12.9 million (2010: US$1.9 million)

§ Net Asset Value per share up 20.9% to US$2.25 / £1.42* (2010: US$1.86 / £1.17*)

§ Fully diluted earnings per share of 31.08c / 19.63p* (2010: loss of 7.0c / 4.42p*)

§ Dividend of 7p per share paid to shareholders on 10 February 2012

* Financial highlights exchange rate is £1.00 = US$1.5835 as of 17 April 2012

Operating highlights

§ The Company committed US$4.3 million in one commercial case in 2011 that has already completed trial. The judge's ruling is expected at any time. The case involves numerous claims including breach of fiduciary duty, misappropriation of trade secrets and interference with business opportunity

§ The Company also made an investment of US$6.5 million in a large, multi-party pre-litigation settlement opportunity in the commercial sector. The Manager believes this case has the potential to deliver substantial returns to the fund before the end of 2013 

§ Three patent cases received favourable rulings at their Markman hearings (where, pre-trial, the construction of patents is defined and determined)

Commenting on the results, Lord Daniel Brennan QC, Chairman of Juridica, said: "These are positive results and we look forward to a coming year of significant performance for our fund."

Richard Fields, Chairman and Chief Executive of Juridica Capital Management Limited, added: "Juridica has delivered a strong financial performance for 2011. And, as the average age of cases in the maturing portfolio is now 4.5 years, the likelihood of further recoveries in the near-term has increased. We have distributed profits to shareholders in line with the Company's dividend policy and these results underpin our belief in the quality of the Company's investment portfolio, which we expect will continue to deliver excellent returns to shareholders."

Upcoming events

§ Three antitrust cases comprising part of the security for the loan facility made to Fields Sullivan PLLC may complete or reach an advanced stage before the end of 2012. These cases have significant damages claimed by their plaintiffs, which if awarded by a jury, will be automatically trebled by the court. The Manager expects that if any of these cases are settled prior to completion, or a favourable jury verdict is rendered and judgment is entered by the trial court, such a result may have a significant positive impact on the Company's net asset value

§ Five cases related to the Company's patent portfolio have their trials scheduled within the next 12 months. Two of these cases have already generated several settlements from the defendant group with more expected

§ Six trials (including the five patent cases) and one Markman hearing are expected over the coming 14 months

§ Net cash profits from the fund will be distributed as dividends

Proceeds received since the Fund's inception

§ Gross cash proceeds since inception total US$48.4 million

§ Six investments have come to completion with settlements in the underlying cases delivering a total of US$32.3 million in gross proceeds, representing a blended internal rate of return of approximately 78% (as calculated from date of investment to date of proceed return)

§ Seven cases, which are multi-defendant in nature, had partial settlements or expense recovery, providing for gross proceeds of approximately US$16.1 million

§ US$1.5 million was repaid to the Company from the Fields Sullivan PLLC facility in 2009 as a key judicial decision resulted in the return of an insurance reserve in a UK investment

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About Juridica

Juridica is a leading provider of capital to the business community and the legal market. It invests directly and indirectly in a diversified portfolio of commercial claims and disputes. The Company's objective is to be the premier source of value-added and direct financing or large business claims, especially in the United States and the United Kingdom.

Our clients are Fortune 1000 companies, FT Global 500 companies, small businesses, inventors, major universities and the leading law firms that represent them. Juridica accepts only cases that have already been carefully vetted and accepted by qualified lawyers, does not invest in speculative cases and accepts only a small fraction of the cases reviewed.

The Company focuses exclusively on business-to-business related claim investments. It does not invest in shareholder class actions, personal injury, product liability, or mass tort claims.

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, select and manage direct and indirect investments in cases, claims and disputes.

For more information visit Juridica at http://www.juridicainvestments.com

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 which 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.

Chairman's Statement

On behalf of the Board, I am pleased to present the results of Juridica Investment Limited's ("JIL" or the "Company") operations for the year ended 31 December 2011.

JIL focuses exclusively on business-to-business related claim investments that comprise 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 and the potential for substantial returns. During the next 24 months, we expect this segment of the Company's overall portfolio to result in several settlements or concluded trials.

Operating Results

During the year ended 31 December 2011, the Company received gross proceeds totalling approximately US$17.1 million related to the complete settlement of a case, five partial settlements in cases with multiple defendants, recovery of expenses related to an antitrust case and a residual payment from a case that settled in 2009. Total cash profit based on these returns was approximately US$12.9 million with US$2.0 million being recognised in the reporting period as realised gain and US$10.9 million being recognised in the current and past reporting periods as unrealised gain.

These cash results support our view that the underlying cases for our investments have begun to reach maturity. Juridica Capital Management Limited ("JCML" or "the Manager") expects this trend to continue and believes the Company will see strong results during the coming two years.

Our overall results for the year ended 31 December 2011 compare favourably against our results for the year ended 31 December 2010. For the year ended 31 December 2011, the Company reported a total comprehensive income of approximately US$37.8 million as compared to a total comprehensive loss of approximately US$9.0 million for the year ended 31 December 2010.

The growth in total comprehensive income was primarily due to the increase in the carrying value of our investments in cases in accordance with International Financial Reporting Standards ("IFRS"). Our methodology used to value our investments was explained at length in my statement for the year ended 31 December 2010 and we continue to apply a consistent approach.

Net Asset Value

JIL's Net Asset Value ("NAV") per share increased to approximately US$2.25 per share at 31 December 2011 from approximately US$1.86 per share at 31 December 2010. This increase in NAV per share was primarily due to total comprehensive income of US$37.8 million during the year ended 31 December 2011.

Investment Portfolio Activity

As more fully described in the Investment Manager's Report, the Company's investments have had significant activity in their underlying cases with one investment coming to complete conclusion and five other investments having partial settlements.

The Company also had several investments for which the underlying case came to a major event for which the Company did not yet receive proceeds. Each of these investments either has upcoming legal proceedings that the Manager believes are likely to generate strong returns or has been awarded proceeds that have not yet been received.

Dividend

As a result of the Company's results for the year ended 31 December 2011, the Company paid a dividend on 10 February 2012 of 7 pence per share to shareholders on the Register at 13 January 2012. The Company remains committed to its existing dividend policy and will continue returning net cash profits from the fund to its shareholders. We remain of the view that it is not appropriate to take into account anticipated income in determining current dividends.

Outlook

JCML believes several investments are likely to be completed this calendar year with several additional investments generating partial settlements.

Based on the outlook provided by JCML, the Board expects continued significant activity in our investment portfolio through 2012 and 2013. This belief is based on JCML's review of presently scheduled trial dates, expected final decisions following trial, and possible settlements in multiple cases that are in an advanced stage of development.

The directors thank investors for their continued confidence and welcome those new shareholders who have joined us in the past year and the past few months of 2012.

Lord Daniel Brennan QC

Chairman

18 April 2012

Investment Manager's Report

Operating Highlights

During the year ended 31 December 2011, Juridica Investments Limited ("JIL" or "the Company") saw acceleration in the portfolio's activity with one investment reaching full conclusion and five additional investments generating cash returns from partial settlements. In addition, several other cases have reached milestones that greatly increase the likelihood for near-term settlement activity.

We expect further milestones to be achieved over the next twelve months as the majority of the Company's investments are advancing toward their concluding phase. This is a significant change from prior years when several of the underlying cases were in protracted delay caused by the 2008 and 2009 economic downturn and systemic issues in the US judicial system with the result that the Company's holding period for its investments was extended. We expect the portfolio to generate significant cash returns over the next 24 months.

For the year ended 31 December 2011, JIL received gross cash receipts totalling approximately US$17.1 million. Included in this amount is US$4.5 million for the full settlement of a case relating to one of the Company's investments, US$12.5 million from partial settlements and expense recovery relating to five of the Company's investments and approximately US$50,000 in residual proceeds from a settlement that occurred in 2009. Total cash gain from these settlements was approximately US$12.9 million and calculated as follows:

This level of cash activity reconciles to the Consolidated Statement of Comprehensive Income as follows:

JIL's Net Asset Value ("NAV") increased from US$1.8578 per share at 31 December 2010 to US$2.2475 per share at 31 December 2011. This increase in NAV per share was primarily due to total comprehensive income of US$37.8 million during the year ended 31 December 2011. This income reflects the following:

§ Unrealised income of US$45.0 million from a net fair value increase in valuation of the Company's investment portfolio;

§ Realised gain on contractual interests of US$2.0 million; and

§ Fund operating expenses of US$6.3 million plus due diligence and transaction costs of US$2.9 million for total expenses of US$9.2 million. Included in the due diligence and transaction expense of US$2.9 million was an amount which relates to an investment that was pending as of 31 December 2010. This investment closed during the year ended 31 December 2011 and although in most of the Company's investments, all due diligence and transactions costs associated with an investment are capitalised as part of the investment, this particular investment was structured as an investment in intellectual property and IFRS accounting guidelines provided for only partial capitalisation. Although the partial capitalisation of this investment has slightly impacted the Company's reported NAV, the actual cash investment remained unchanged and the benefits of structuring the investment as intellectual property should generate greater net returns if the investment is successful.

Since 31 December 2010 the Company has invested in two additional cases. Firstly, the Company invested US$4.3 million in one case that involves numerous claims, including breach of fiduciary duty, misappropriation of trade secrets and interference with business opportunity. The case completed its bench trial in the first half of 2011 (trial before a judge and not a jury) and counsel for the plaintiff expects a decision at any time. Trial counsel in this case is one of the leading trial firms in the US which has invested substantially more than JIL in the case. Secondly, the Company invested US$6.5 million (with an additional US$800,000 remaining in committed funds) in an investment involving a large, multi-party pre-litigation settlement opportunity. US$1.8 million of this investment is reflected as an intangible asset, US$315,010 is reflected as available for sale financial asset and the remaining US$4.4 million included in 2011 and 2010 due diligence and transaction cost expense. Future investment by the Company into this opportunity is contingent on the investment achieving certain milestones.

From inception through to 18 April 2012 the Company's portfolio generated gross cash proceeds of US$48.4 million and from the associated gross profits, distributed to shareholders cash dividends of US$16.6 million. An additional US$1.5 million was repaid to JIL from the Fields Sullivan PLLC facility ("FS Facility") in 2009 because a key judicial decision resulted in the return of a required insurance reserve in a UK investment. Although the Company has written down the value of one of its investments, as discussed below, the Company has managed to avoid any realised losses in its portfolio to-date, reflecting our focus on underwriting to avoid the loss of investment capital.

In more detail, the portfolio since inception has performed as follows:

§ Six investments reached completion with settlements in the underlying cases delivering a total of US$32.3 million in gross proceeds representing a blended internal rate of return of approximately 78% (as calculated from date of investment to date of proceed return); and

§ Seven cases, which are multi-defendant in nature, had partial settlements or expense recoveries amounting to approximately US$16.1 million.

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 on the following table:

These groups have their own characteristics that drive our transaction structure and expectations.

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 cases in this portfolio all involve large amounts of claimed damages that are subject to trebling. Because of the size and complexity of these cases they typically take several years to reach conclusion. However, we believe the unique characteristics of antitrust and competition cases reduce the risk of loss and yet there exists the potential for returns significantly higher than the typical commercial dispute. 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$88.9 million (with an additional commitment of US$8.0 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. From inception to date, the cases within this antitrust portfolio have generated total cash proceeds of US$6.7 million consisting of two partial settlements totalling US$2.3 million and expense recovery totalling US$4.4 million. An additional US$4.9 million in proceeds was received 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.

The average age of the cases in the Company's antitrust and competition portfolio is, at the year end, 4.85 years.

Patent portfolio:

The typical case in the Company's patent portfolio involves infringement of one or more patents by one or more defendants. Investment in the Company's patent portfolio includes ten different cases involving dozens of patents. The majority of these underlying patents have already received favourable Markman rulings (where, pre-trial, the construction of patents are defined and determined) and several have trial dates scheduled within the next 18 months. The approaching trial dates serve as strong incentives for defendants to consider settlement.

As of 31 December 2011, the Company has invested US$33.1 million in its patent portfolio with an additional US$3.4 million remaining in committed funds. Of these active investments, US$6.0 million in gross proceeds was received during the year ended 31 December 2011 due to partial settlements. Since the Company's inception, a total of US$11.9 million in gross proceeds has been generated from the Company's patent portfolio.

As previously announced, one investment in our patent portfolio had one of its two underlying cases come to a complete conclusion. Although the jury found the defendants wilfully infringed on the plaintiff's patent, the amount of damages awarded was insufficient to generate proceeds for the Company. The sister case in this investment remains active and we believe will still generate a profit on the Company's investment.

Commercial portfolio:

As of 31 December 2011, 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. These cases are typically smaller and are resolved either through litigation or binding arbitration and are usually resolved in a much shorter timeframe than the cases in the Company's other portfolios. Of the completed cases in the portfolio, five of the six have come from this group with the other being a smaller patent investment.

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. As explained more fully in Note 5, this investment is being accounted for as intellectual property and required significant development efforts of which only a portion is allowed to be capitalised as part of the cost of investment as of 31 December 2011.

As of 31 December 2011, the Company has invested a total of US$20.9 million in its commercial portfolio, with an additional US$800,000 remaining in committed funds. The Company had one investment in the commercial portfolio come to completion in 2011 that returned US$4.5 million in proceeds from a US$2.5 million investment. In another case, an additional US$4.7 million was awarded but not yet collected during the year ended 31 December 2011. This case is comprised of two different legal actions and also includes the potential sale of a property with mineral rights. The proceeds awarded relate to one element of the investment and will return most of the Company's investment once the US$4.7 million is collected. We expect the remaining elements of the case to resolve favourably and generate a profit on the investment in line with our investment objectives. Another of the Company's investments in its commercial portfolio has already completed its trial and counsel for the plaintiff expects a decision by the judge at any time.

Since the Company's inception, a total of US$29.8 million in gross proceeds has been generated from the Company's commercial portfolio.

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 31 December 2011, 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 decreased by US$800,000 reflecting the net of US$7.4 million in additional investment funding, US$10.5 million reduction due to the return of proceeds to JIL as a result of settlement activity, US$300,000 net increase due to each investments individual change in fair value, and US$2.0 million in realised gains.

§ Valuation of the Company's available for sale debt securities increased by approximately US$50.3 million reflecting the net of US$7.2 million due to additional funding into the FS Facility, US$6.6 million reduction due to the return of proceeds to JIL from the FS Facility as a result of settlement activity and return of costs, and US$49.7 million net increase in the fair value of the FS Facility. The net increase in the fair value of the FS Facility is primarily due to: i) a significant positive adjustment in a case due to the reversal of a prior adverse ruling; and ii) a significant positive adjustment in a second case due to recent activity that has increased our expectation for its terminal value. Both cases are security for the FS Facility.

§ Valuation of the Company's available for sale financial assets decreased by US$1.8 million reflecting the net of US$3.2 million in additional funding for investments and US$5.0 million decrease due to the net change in the individual investment's fair value.

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 or 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 a ruling could be entered by the judge at any time. Any award will still be subject to appeal and any settlement resulting therefrom is likely to be lower than the award.

§ Three additional 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. One case completed its trial in 2011 although legal proceedings remain. In one of the antitrust cartel cases, which is multi-defendant in nature, we expect a series of settlements with individual defendants that may occur over the next 12 to 24 months. All three 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 judgment is entered by the trial court, such a result may have a significant positive impact on the Company's net asset value.

§ During 2011, threepatent cases received favourable rulings at their Markman hearing. In addition, five cases related to the Company's patent portfolio have their trials scheduled within the next twelve months. Two of these cases have already generated several settlements from the defendant group with more expected.

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 see significant activity within the next 24 months. This expectation is based on confirmed trial dates, expected final decisions following trial or arbitration, and the determination of Markman hearings. Each of these milestones, if successful, creates real incentives for defendants to seek settlements. In addition to the notable activity disclosed above, the following schedule reflects activity on the Company's investments:

Trials and arbitration

§ Four trials scheduled for 2012

§ Two trials scheduled for first half of 2013

Markman hearings in patent cases

§ One Markman hearing scheduled for second half of 2012

In addition to the above, settlement discussions are on-going for several investments.

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 which 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

18 April 2012

Directors' Report

The Directors present their report together with the audited consolidated financial statements of Juridica Investments Limited (the "Company") and its subsidiaries (together the ''Group'') for the year ended 31 December 2011, with comparative figures for the year ended 31 December 2010.

Principal activities

The Company is an authorised closed-ended investment company incorporated under The Companies (Guernsey) Law, 2008 ("the Law"). The Law does not make a distinction between private and public companies. Shares in the Company were admitted to trading on AIM, a market operated by the London Stock Exchange, on 21 December 2007. The address of the Company's registered office is Bordeaux Court, Les Echelons, St Peter Port, Guernsey, GY1 6AW.

Investment objective and policy

The investment objective of the Company is to build a diversified portfolio of investments in claims and to provide Shareholders with an attractive level of dividends and capital growth through investing directly and indirectly in litigation and arbitration cases, claims and disputes. These contractual interests have been made predominantly in the United States although the Company may make investments outside of the United States in jurisdictions where such investments are lawful and permitted under local law and rules on professional ethics.

Results and dividend

The results for the year are shown in the consolidated statement of comprehensive income on page 15. On 4 January 2012, the Directors announced a special dividend of 7 pence per share which was paid on 10 February 2012 to shareholders on the register at 13 January 2012.

Statement of directors' responsibilities in respect of financial statements

The Directors are responsible for preparing financial statements for each financial year which give a true and fair view of the state of affairs of the Group and of the consolidated statement of comprehensive income for that period in accordance with The Companies (Guernsey) Law, 2008. In preparing these financial statements, the Directors are required to:

§ select suitable accounting policies and then apply them consistently; 

§ make judgements and estimates that are reasonable and prudent;

§ state whether applicable accounting standards have been followed subject to any material departures disclosed and explained in the financial statements; and

§ prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The Directors confirm that they have complied with the above requirements in preparing the financial statements.

The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements have been properly prepared in accordance with The Companies (Guernsey) Law, 2008. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The maintenance and integrity of the Company's website is the responsibility of the Directors. The work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. Legislation in the United Kingdom and Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

To the best of our knowledge, and in accordance with the applicable reporting principles, the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and comprehensive income of the Group, although there is uncertainty around valuation of the Group's contractual interests in the absence of an established market. The Investment Manager's report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group.

Furthermore, to the best of our knowledge and belief, this annual report includes a fair review of the development and performance of the business and the position of the Group together with a description of the principal risks and uncertainties that the Group faces.

In accordance with The Companies (Guernsey) Law, 2008, each Director confirms that there is no relevant audit information of which the Group's auditor is unaware. Each Director also confirms that they have taken all steps they ought to have taken as a Director to make themselves aware of any relevant audit information and to establish that the Group's auditor is aware of that information.

Independent Auditors 

The auditors, PricewaterhouseCoopers CI LLP, have expressed their willingness to continue in office and a resolution for their re-appointment will be proposed at the forthcoming Annual General Meeting. 

Approved by the Board of Directors on 18 April 2012.

Richard Battey

Director

Independent Auditors' Report

We have audited the accompanying consolidated financial statements (the "financial statements") of Juridica Investments Limited which comprise the consolidated statement of financial position as of 31 December 2011, the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated cash flow statement for the year then ended and a summary of significant accounting policies and other explanatory notes.

Directors' responsibilities

The Directors are responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards and with the requirements of Guernsey law. The Directors are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' responsibilities

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the Group as of 31 December 2011, and of the financial performance and cash flows of the Group for the year then ended in accordance with International Financial Reporting Standards and have been properly prepared in accordance with the requirements of The Companies (Guernsey) Law, 2008.

Emphasis of Matter

Without qualifying our opinion, we draw attention to Notes 2(d), 2(e), 2(f), 3 and 18(a) to the consolidated financial statements. As indicated in Notes 2(d), 2(e), 2(f), 3 and 18(a), the consolidated financial statements include non-current assets stated at their fair value of US$192,534,202. 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.

Report on other Legal and Regulatory Requirements

We read the other information contained in the Annual Report and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the financial statements. The other information comprises only the Corporate Information, the Chairman's Statement, the Investment Manager's Report, the Directors' Report and the Notice of Annual General Meeting.

In our opinion the information given in the Directors' Report is consistent with the financial statements.

This report, including the opinion, has been prepared for and only for the Company's members as a body in accordance with Section 262 of The Companies (Guernsey) Law, 2008 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

PricewaterhouseCoopers CI LLP

Chartered Accountants

Guernsey, Channel Islands

18 April 2012

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2011

Consolidated Statement of Financial Position

For the year ended 31 December 2011

These consolidated financial statements were approved by the Board of Directors on 18 April 2012 and signed on its behalf by R J Battey.

Consolidated Statement of Changes in Equity

For the year ended 31 December 2011

Consolidated Cash Flow Statement

For the year ended 31 December 2011

Notes to the Consolidated Financial Statements

For the year ended 31 December 2011

1. LEGAL FORM AND PRINCIPAL ACTIVITY

The Group consists of the Company, which is an authorised closed-ended investment company incorporated under The Companies (Guernsey) Law, 2008 ("the Law"), and its subsidiaries as detailed in Note 4. 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.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

a) Basis of Preparation

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards ("IFRS") and all applicable requirements of The Companies (Guernsey) Law, 2008. They have been prepared on a going concern basis, under the historical cost convention as modified by the revaluation of contractual interests. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires the Board of Directors to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements are disclosed in Note 3. 

i) Standards, amendments and interpretations effective on or after 1 January 2011 and adopted by the Group

The Group has adopted the following new and amended IFRSs as of 1 January 2011:

§ IAS 24 (revised), 'Related party disclosures' - the amendment clarifies the definitions of a related party, clarifying in which circumstances persons and key management personnel affect related party relationships of an entity.

§ IAS 32 (revised), 'Financial Instruments: Presentation' - classification of rights issues.

§ Amendments resulting from the May 2010 Annual Improvements to IFRSs.

Adoption of the above standards and amendments have had no material impact on the Group's consolidated financial statements.

ii) Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group

§ IFRS 9, 'Financial instruments'. Effective 1 January 2015.

§ IFRS 10, 'Consolidated financial statements'. Effective 1 January 2013.

§ IFRS 12, 'Disclosures of interests in other entities'. Effective 1 January 2013.

§ IFRS 13, 'Fair value measurement'. Effective 1 January 2013.

§ IAS 1 (revised), 'Presentation of Financial Statements'. Effective 1 July 2012.

§ IAS 12 (revised), 'Income taxes'. Effective 1 January 2012.

§ IAS 27 (revised), 'Separate Financial Statements'. Effective 1 January 2013.

§ IAS 28 (revised), 'Investments in Associates and Joint Ventures'. Effective 1 January 2013.

§ IAS 32 (revised), 'Financial Instruments: Presentation'. Effective 1 January 2014.

Adoption of the above standards and interpretations are not expected to have a material impact on the Group's financial statements.

Other standards in issue but not yet effective which are not relevant to the Group have not been listed above.

b) Consolidation

The consolidated financial statements comprise the financial statements of Juridica Investments Limited and its subsidiary undertakings as stated in Note 4.

Subsidiaries

Subsidiaries are all entities (including special purpose entities) over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are no longer consolidated from the date that control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group.

Inter-company transactions, balances and unrealised gains/losses on transactions between group companies are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Non-controlling interests

Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Group's equity therein. The Group applies a policy of treating transactions with non-controlling interests as transactions with parties external to the Group.

c) Geographical and segmental reporting

Since the Group is engaged in the provision of similar products and services within a particular economic environment, being subject to similar risks and returns, the management considers that the Group has only one business segment and geographical focus, being investments in legal claims primarily in the United States (US), and accordingly does not present additional business and geographical segment information. The Investment Manager is responsible for the investment decisions for the Group's entire portfolio and considers the business to have a single operating segment. The Investment Manager's asset allocation decisions are based on a single, integrated investment strategy, and the Group's performance is evaluated on an overall basis.

d) Contractual interests

Classification

Unless otherwise determined by the Group, investments in claims will be categorised as contractual interests. Contractual interests will initially be measured as the cash sum provided to acquire an interest in a plaintiff's claim or as the cash advanced to law firms under loan agreements ("Qualifying Agreements"). Attributable due diligence costs are capitalised into the cost of the contractual interest.

Recognition, derecognition and measurement

The contractual interests will initially be measured as the sum provided to acquire an interest in a plaintiff's claim or as the cash advanced to law firms under Qualifying Agreements plus due diligence and transaction costs.

Interest on performing contractual interests will be recognised using the effective interest rate method as shown in Note 6. No interest will be recognised on non-performing contractual interests.

Subsequent measurement of contractual interests will be at fair value utilising a fair value model developed by the Investment Manager. The principal assumptions to be used in the fair value model are as follows:

§ Estimated duration of each contractual interest;

§ Best estimate of anticipated outcome; and

§ Effective interest rate on nominal value of each contractual interest.

Interest income arising on all performing contractual interests is recognised in the consolidated statement of comprehensive income within other income, using the effective interest rate method.

The effective interest rate method is a way of calculating the amortised cost of a financial asset or liability and of allocating the interest income or interest expense over the relevant period. In the case of assets this rate is the internal rate of return of the expected cash inflows and outflows over the expected duration of the claim which takes the contract's initial value to the expected pay out over the expected duration of the claim. The application of the method has the effect of recognising estimated income and expense on the instrument over the period to maturity or repayment.

In calculating effective interest, the Group estimates cash flows (using projections based on litigation experience) considering all contractual terms of the contractual interest and the likely outcome of the case. The Group adjusts the carrying amount of the contractual interest to reflect actual and revised estimated future cash flows at each reporting date whenever it revises its cash flow estimates. The entity recalculates the carrying amount by computing the present value of estimated future cash flows at the contractual interest's original effective interest rate. The adjustment is recognised in the consolidated statement of comprehensive income within other income arising on contractual interests. This impact on contractual interests is reflected in Note 6.

Fair value estimation

Fair value will be reviewed semi-annually on an individual case basis. Events that will trigger changes to the fair value of each contractual interest include the following:

§ Changes in general US dollar interest rate assumptions (market assumption);

§ Changes in any variable relating to a claim including: assessment of probability of successful judgement; range of settlement or award; expected timing until claim resolution; and extrinsic risks related to a claim;

§ Successful judgement of a claim in which the Group has a contractual interest;

§ Unsuccessful judgement of a claim in which the Group has a contractual interest;

§ Outstanding appeals against both successful and unsuccessful judgements;

§ A contractual interest is to be sold at a discount or to be settled out of Court by a binding agreement;

§ Legal impediments to collectability of claims (in the US Chapter 7 Bankruptcy or Chapter 11 Court Protection from Creditors); and

§ A case is dismissed with prejudice (meaning, it can never be re-filed anywhere).

Partial settlement

Partial settlement of contractual interests occur when one or more parties, but not all parties, involved in the matter agree to terms on a settlement amount. Proceeds received by the Group are allocated between return of original principal and any gain based on the following process:

§ Proceeds are discounted back to the original investment date at a discount rate equal to the internal rate of return of the most recent valuation;

§ This discounted value represents the portion of proceeds attributable to a return of investment with the remainder representing a gain associated with the partial settlement; and

§ The amount representing the gain is then compared against any prior gain recognised on the portion of the proceeds attributed to a return of investment (calculated by using the effective interest rate method up to the date at which settlement is obtained plus any fair value movement due to changes in estimated cash flows previously recognised) with the difference reflected as current year realised gain or loss.

Full settlement

Full settlement of contractual interests occur when all parties involved in the matter agree to terms on a settlement amount or the full legal process has concluded with either proceeds being awarded or dismissal (no proceeds awarded). Proceeds received by the Group are first allocated to the return of any remaining principal with the remainder allocated to gain. The amount representing the gain is then compared against any prior gain recognised on the portion of the proceeds attributed to a return of investment (calculated by using the effective interest rate method up to the date at which settlement is obtained plus or minus any fair value movement due to changes in estimated cash flows previously recognised) with the difference reflected as current year realised gain or loss.

e) Available for sale financial assets

Classification

Available for sale financial assets are those intended to be held for an indefinite period of time, and that may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices. The Group could be seen to have significant influence over certain of its available for sale financial assets as a result of its stake in each of those assets. If significant influence exists, that investment, under IFRS, should be accounted for as an 'Associate' and hence the equity accounting method should be applied. However, the Board have taken the view that (a) there is no material difference in accounting for these investments as associates and accounting for them as financial assets at fair value through profit and loss; (b) there is no material difference in the disclosure; and (c) the strategy of the Group is to hold investments as part of an investment portfolio with a view to the ultimate realisation of capital gains rather than as a medium to carry out its own business, hence accounting for these investments as available for sale is the most appropriate method.

Recognition, derecognition and measurement

Regular purchases and sales of available for sale financial assets are recognised on the trade date, being the date on which the Group commits to purchase or sell the asset.

Available for sale investments will initially be measured at cost and are subsequently carried at fair value. Gains and losses arising from changes in the fair value are recognised in equity and other comprehensive income. When available for sale investments are sold or impaired, the accumulated fair value adjustments recognised in equity will be recycled through the consolidated statement of comprehensive income. The estimates and assumptions made by the investment manager in determining this fair value have been outlined in Note 3.

f) Available for sale debt securities

Available for sale debt securities entered into by the Group will initially be measured as the cash sum advanced to a law firm plus due diligence and transaction costs. Attributable due diligence and transaction costs are capitalised into the amount advanced. Subsequent measurement is at fair value with the movement due to effective interest recognised in the consolidated statement of comprehensive income and the fair value movement recognised in equity and other comprehensive income. The estimates and assumptions made by the investment manager in determining this fair value have been outlined in Note 3.

g) Due diligence and transaction costs

The due diligence and transaction costs attributable to investments in contractual interests, available for sale financial assets or available for sale debt securities, or amendments thereto, have been capitalised into the cost of that investment. Any other due diligence and transaction costs not directly relating to an investment have been expensed immediately in the consolidated statement of comprehensive income.

Due diligence and transaction costs relating to a potential investment in a contractual interest that has not been consummated by the end of the reporting year is expensed in the consolidated statement of comprehensive income. If the potential investment is completed in a subsequent year, the due diligence and transaction costs previously expensed are reversed and capitalised into the cost of the contractual interest.

Due diligence and transaction costs associated with investments characterized as intellectual property is expensed until the point in time which: i) the technical feasibility of completing the intangible so that it will be available for use or sale; ii) the intention to complete the intangible asset and use or sell it; iii) the ability to use or sell the intangible asset; iv) how the intangible asset will generate probable future economic benefits; v) the availability of adequate technical, financial and other resources to complete the development and to use or sell the asset; and vi) the ability to measure reliably the expenditure attributable to the intangible asset during its development.

h) Foreign currency

Functional and presentation currency

Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (''the functional currency''). The functional currency of the Group as determined in accordance with IFRS is the United States Dollar ("US Dollar") because this is the currency that best reflects the economic substance of the underlying events and circumstances of the Group. The consolidated financial statements are presented in US Dollars, the presentation currency.

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the consolidated statement of comprehensive income.

i) Interest income

Interest income arising on cash and cash equivalents is recognised in the consolidated statement of comprehensive income on the effective interest basis.

j) Cash and cash equivalents

Cash and cash equivalents comprise of cash balances and deposits held at banks with a maturity profile of 3 months or less.

k) Taxation

The Company has obtained exempt company status in Guernsey. The Company is, therefore, only liable to an annual exemption fee of £600. The Company's subsidiaries are subject to income tax in their respective jurisdictions.

To the extent that any foreign withholding taxes or any form of profits taxes become payable, these will be accrued on the basis of the event that created the liability to taxation.

l) Expenses

Expenses are accounted for on an accruals basis. Expenses for monitoring claims will generally be paid by the Investment Manager except in extraordinary circumstances approved by the Board of Directors of the Company.

m) Dividends

Dividends paid during the period will be disclosed directly in equity via the consolidated statement of changes in equity. A final dividend proposed by the Board and approved by the shareholders prior to the period end will be disclosed as a liability. Dividends proposed and not approved will be disclosed in the notes as commitments.

n) Other receivables and prepayments

Other receivables and prepayments are recognised initially at fair value and subsequently measured at cost, less provision for impairment.

o) Other payables

Other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method.

p) Capital and reserves

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares are shown in equity via the special reserve as a deduction from the proceeds.

Where any group company purchases the Company's equity share capital (treasury shares), the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the Company's equity holders until the shares are cancelled or reissued. Where such ordinary shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity attributable to the Company's equity holders.

q) Share-based payments transactions

The Company engages in equity settled share-based payment transactions in respect of the services received from one of its Directors and from Cenkos Securities PLC ("Nominated Adviser and Broker") as set out in the Company's Admission Document. The fair value of the services received is measured by reference to the fair value of the shares or share options granted on the date of the grant. The fair value of the share options is recognised in the consolidated statement of comprehensive income over the period that the services are received, which is the vesting period. The fair value of the options granted is determined using the Black-Scholes option pricing model, which takes into account the exercise price of the option, the current share price, the risk free interest rate, the expected volatility of the share price over the life of the option and other relevant factors. Except for those which include terms to market conditions, vesting conditions included in the terms of the grant are not taken into account in estimating the fair value.

Non-market vesting conditions are taken into account by adjusting the number of shares or share options included in the measurement of the cost of the services so that, ultimately, the amount recognised in the consolidated statement of comprehensive income reflects the number of vested shares or share options. Where vesting conditions are related to market conditions, the charges for the services received are recognised regardless of whether or not the market conditions-related vesting condition is met, provided that the non-market vesting conditions are met.

r) Impairment of assets

The carrying amounts of assets are assessed on a semi-annual basis to determine whether there is any indication of impairment. If such indication exists, the Group estimates the recoverable amount of the asset, being the higher of the asset's net selling price and its value in use. Any impairment loss is recognised for the amount which the asset's recoverable amount is lower than its carrying value and the difference being taken to the consolidated statement of comprehensive income.

The group first assesses whether objective evidence of impairment exists. The criteria that the Group may use to determine that there is objective evidence of an impairment loss include:

§ Significant financial difficulty of the obligor;

§ A breach of contract, such as a default or delinquency in interest or principal payments;

§ The group, for economic or legal reasons relating to the borrower's financial difficulty, granting to the borrower a concession that the lender would not otherwise consider;

§ It becomes probable that the borrower will enter bankruptcy or other financial reorganisation; or

§ Observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, including: (i) adverse changes in the payment status of borrowers in the portfolio; and (ii) National or local economic conditions that correlate with defaults on the assets in the portfolio.

The amount of the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the contractual interest/available for sale debt securities' original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the consolidated statement of comprehensive income.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor's credit rating), the reversal of the previously recognised impairment loss is recognised in the consolidated statement of comprehensive income.

In the year ended 31 December 2011 there were no impairments (2010: US$ Nil).

s) Earnings per share

The basic earnings per share value is calculated by taking the total comprehensive income/loss for the period and dividing it by the weighted average number of ordinary shares in issue over the period. The fully diluted earnings per share figure is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares.

t) Net asset value per share

Net asset value per share is calculated by taking the total equity shareholders' funds and dividing it by the number of shares in issue at the period end.

u) Put option

The put option is carried at fair value, which is assessed by considering the present value of the redemption amount (see Note 11).

v) Intangible assets

Where the Group has entered into an agency agreement involving licensing of intellectual property, the resulting transaction will be categorised as intangible assets (see Note 5). The cost of intangible assets will be capitalised once it is possible to demonstrate that the intangible assets will generate probable future economic benefit. Intangible assets will be held at cost less any accumulated amortisation and any accumulated impairment losses. Amortisation will be on a systematic basis over the assets' useful life.

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

The Investment Manager makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are outlined below.

Critical accounting judgements in applying the Group's accounting policies

The Group makes investments in claims that may involve litigation. The nature of the investments made by the Group reduces by some predetermined amount the cost of litigating a matter to a plaintiff and/or a law firm. A typical investment by the Group will include cash and may also include cash commitments subject to certain restrictions. In most arrangements, the Group is paid only from proceeds generated from the litigation and any related settlement or award. If a lawsuit fails to generate any proceeds and all legal remedies are exhausted, the Group will often not be entitled to reimbursement of the facility they advanced to the counterparty for the specific claim. In these cases the Group will write off their investment in the claim as a loss. The Group is compensated for this risk through the return structure built into the investment. The Group mitigates this risk through the use of their Investment Manager which is experienced in evaluating the investment worthiness of a particular opportunity.

In the process of applying the Group's accounting policies, which are described in Note 2, the Directors have relied upon the Investment Manager's assessment of contractual interests including the probability of success on the merits of each claim, likelihood of settlement and claim duration. This is most evident in the assessment of the effective interest rate applied to contracts entered into by the Group, as disclosed in Note 6.

To determine the appropriate effective interest rate to apply to each contract, the Investment Manager follows a formal process of developing a set of scenarios for each case and assigns probabilities to each potential outcome. The probabilities are phased based on the expected progression path of each particular case. In addition, each potential successful scenario has a range of likely settlement proceeds assigned to it as well as a most likely resolution or settlement date. The scenarios not only incorporate the merits of each particular case but also consider known risks intrinsic to the particular matter, as well as general risks found in any litigation matter.

The Investment Manager then runs a Monte-Carlo method analysis which dictates that the Investment Manager runs algorithms that rely on random sampling based on the variables within each scenario and their related probabilities. The results of the analysis provide expected outcome and other statistical data which is used to calculate the future valuation of each particular contractual interest. An effective interest rate is then derived based on the level of investment and the determined future value.

Determination of functional currency

The determination of the functional currency of the Group is critical since recording of transactions and exchange differences arising therefrom are dependent on the functional currency selected. As described in Note 2, the Directors have considered those factors described therein and have determined that the functional currency of the Group is the United States Dollar (US$).

4. SUBSIDIARIES

5. INTANGIBLE ASSETS

The Group's Intangible Assets comprises of an investment structured as an agency agreement. The cost of the Group's investment as at 31 December 2011 was US$1,757,832 (31 December 2010: US$NIL). In addition, the Company had purchased common and preferred stock related to the intangible assets as at 31 December 2011 of US$315,010 (31 December 2010: US$NIL) which have been classified as available for sale financial assets (note 7).

The Intangible Assets are expected to have a useful life of three years from the start of the available for use period. This period has been set to start from the 31 December 2011 and no amortisation has been recognised at the date of these accounts.

6.  CONTRACTUAL INTERESTS

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 31 December 2011 (31 December 2010: between 3.62 and 131.35 per cent). At 31 December 2011, the Group had investments in 13 contractual interests (31 December 2010: 14 contractual interests).

The Group had one contractual interest that came to full settlement during the year and had partial settlements in four contractual interests. In addition, approximately US$50,000 was received as residual proceeds from an investment that settled in 2009. Total realised profit for the period ended 31 December 2011, based on investment cost (for the fully settled contractual interest) and apportioned investment cost (for the partially settled contractual interest), was US$6,259,984. Of this amount, US$1,525,494 was previously recognised and US$2,771,280 is currently recognised as unrealised income through fair value movements due to effective interest rate change and changes in estimated cash flows. A total of US$1,963,210 is therefore recognised as a net gain for the year to 31 December 2011.

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.

7. AVAILABLE FOR SALE FINANCIAL ASSETS

The Group's Available for Sale Financial Assets include a holding in Juridica Capital Management Limited ("JCML"). The fair value of the Group's investment in JCML was assessed as at 31 December 2011 to be US$2,281,209 (31 December 2010: US$2,575,963). 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 and the projection of future cash flows.

8. AVAILABLE FOR SALE DEBT SECURITIES

Note 15(i) details arrangements between the Group and Fields Sullivan PLLC ("FS"). The Loan and the Swap have been aggregated on consolidation and treated as a single claim asset. Returns on the Loan and the Swap are dependent on returns in claims financed by FS.

The Group had settlement and other revenue related activity totalling US$6.6 million generated from its available for sale debt securities. All of this revenue was previously recognized as unrealised income in current and prior years through fair value movements due to effective interest rate change and changes in estimated cash flows.

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.

9. FAIR VALUE ESTIMATION

For instruments for which there is no active market and for which reliable pricing sources cannot be obtained, the Group may use internally developed models, which are usually based on valuation methods and techniques generally recognised as standard within the industry. Valuation models are used primarily to value unlisted equity, debt securities and other debt instruments for which markets are or have been inactive during the financial year. Some of the inputs to these models may not be market observable and are therefore estimated based on assumptions.

The carrying value less impairment provision of other receivables and payables are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

IFRS 7 requires the Group to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:

§ Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).

§ Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2).

§ Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).

The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability.

The determination of what constitutes 'observable' requires significant judgement by the Group. The Group considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

The following table analyses within the fair value hierarchy the Group's financial assets and liabilities (by class) measured at fair value:

Investments classified within level 3 have significant unobservable inputs, as they trade infrequently. Level 3 instruments include equity securities. As observable prices are not available for these securities, the Group has used valuation techniques to derive the fair value.

There were no transfers between levels for the year ended 31 December 2011 (31 December 2010: Nil).

The following table presents the movement in level 3 instruments by class of financial instrument:

10. OTHER RECEIVABLES AND PREPAYMENTS

11. PUT OPTION

In October 2009, the Group sold 8% of the interest in its subsidiary, Riverbend Investments Limited, to an unaffiliated party. As part of this transaction, the Group issued a put option to the buyer providing him with the ability to sell back the shares to the Group 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 Group 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 31 December 2011. The resulting amount is reflected on the books as a non-current liability with an offset to equity.

12. OTHER PAYABLES

13. DUE DILIGENCE AND TRANSACTION COSTS

The Group, through its Investment Manager, will often incur costs related to potential investments that remain pending as of the end of the reporting year. In accordance with the Group's accounting policies (Note 2), if a potential investment is not recognised by the end of the reporting year, all due diligence and transaction costs incurred are to be expensed in the consolidated statement of comprehensive income. If the potential investment is completed in a subsequent year, the due diligence and transaction costs previously expensed are reversed and capitalised into the cost of the contractual interest. In some instances, spending on potential investments may continue for more than a year. As at 31 December 2011, the cumulative amount of due diligence and transaction costs that relate to pending deals was US$0.4 million (2010: US$2.9 million).

One investment by the Group has been characterized as intellectual property for which only certain due diligence and transaction costs can be capitalized.

14. COMMITTMENTS & GUARANTEES

Under the terms of some of its contracts, JIL provides a line of credit to counterparties. As at 31 December 2011, the maximum commitment under these lines of credit was US$12.3 million (31 December 2010: US$12.3 million).

On 4 January 2012, the Directors announced a special dividend of 7 pence per share which was paid on 10 February 2012 to shareholders on the register at 13 January 2012.

15. RELATED PARTY TRANSACTIONS

Richard Battey, as investor representative, 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 Group is managed by JCML, an investment management company incorporated in Guernsey in which the Group holds a 15 per cent equity interest. Under the terms of the Management Agreement, the Company appointed Juridica Capital Management Limited 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 year to 31 December 2011, investment management fees totalling US$4,441,868 (31 December 2010: US$4,805,281) were paid to JCML. As at 31 December 2011, there was an investment management fee debtor of US$122,982 (31 December 2010: US$100,551).

b) Investment in Juridica Capital Management Limited

The Company acquired 15 per cent of JCML on Admission (see Note 7). 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.

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 adjusted 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 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 31 December 2011, the minimum hurdle rate (which is based on the adjusted net asset value) was not achieved. Therefore, no performance fee was paid or payable for the year ended 31 December 2011 (31 December 2010: US$ Nil). However, the current net asset value (unadjusted) is greater than the minimum hurdle rate as at 31 December 2011. To the extent that this net asset value is realised, a performance fee will 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 31 December 2011, the balance in the trust account was US$Nil (31 December 2010: US$Nil). The initial four-year period expired on 21 December 2011.

e) Turtle Bay Technologies Limited

On 20 November 2008 the Group agreed to provide US$1.475 million to a US LLC. US$525,000 of this was paid to Turtle Bay Technologies Limited, a company ultimately owned and controlled by JCML, for services provided by the US LLC to Turtle Bay Technologies Limited.

f) Eleven Engineering Game Control LLC

In August 2009, the Company agreed to provide US$817,500 to Eleven Engineering Game Control LLC, a company ultimately owned and controlled by JCML.

g) Intravisual Inc.

In January 2010, the Company agreed to provide US$500,000 to Intravisual Inc., a company ultimately owned and controlled by JCML

h) Minkus Electronic Display Systems Inc.

In June 2010, the Company agreed to provide US$250,000 to Minkus Electronic Display Systems Inc., a company ultimately owned and controlled by JCML.

i) Facilityagreement and collateral account

The Company 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 Company.

j) Directors'remuneration

No pension contributions were paid or were payable on behalf of the Directors.

Lord Daniel Brennan has an interest in 416,140 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 31 December 2011, a provision of US$115,138 (31 December 2010: US$85,876) has been made for these options.

The other Directors have no beneficial interest in the share capital of the Company.

k) Cenkoswarrant

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 (31 December 2010: US$246,906) and a full provision has been made for this in the financial statements.

l) EsconCapital Inc.

The Group has acquired 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.

16. FUNCTIONAL AND PRESENTATION CURRENCY / EXCHANGE RATES

The financial statements are presented in United States Dollar ("US$") which is also the Group's functional currency. The following rate was applicable as at 31 December 2011:

17. CAPITAL AND RESERVES

Authorised share capital: Unlimited number of ordinary shares of no par value ("Shares").

Issued share capital: 104,701,754 Shares as of 31 December 2011 (31 December 2010: 104,701,754 Shares), of which 80,000,000 Shares were issued at a premium of £1 per Share on admission with a further 30,701,754 Shares issued at a premium of £1.14 on 6 April 2009. Under a Share Buyback Programme, the Company acquired 6,000,000 Shares at a price of £1.02 per share on 3 November 2010. These Shares are held in treasury. As at 31 December, the number of Shares held in treasury amounted to 6,000,000 (2010: 6,000,000).

The Company's capital is represented by ordinary shares of no par value and share premium. Each share carries one vote and is entitled to dividends when declared. The relevant movements on capital are shown on the consolidated statement of changes in equity through the special reserve.

The Company has authority to make market purchases of up to 14.99 per cent of its own issued ordinary shares. This authority was renewed at the annual general meeting of the Company held on 8 June 2011. A renewal of the authority to make purchases of ordinary shares will be sought from Shareholders at each annual general meeting of the Company. The timing of any purchases will be decided by the Board.

18. FINANCIAL RISK AND INSURANCE RISK MANAGEMENT OBJECTIVES AND POLICIES

The Group's activities expose it to a variety of financial risks and insurance risk.

The Group's overall risk management programme seeks to maximise the return derived for the level of risk to which the Group is exposed and seeks to minimise potential adverse effects on the loss of capital is limited to the fair value.

The management of these risks is carried out by the Investment Manager under policies approved by the Board of Directors. The Board provides written principles for overall risk management, as well as written policies covering specific areas such as foreign exchange risk, interest rate risk, credit risk and investment of excess liquidity.

The Group uses different methods to measure and manage the various types of risk to which it is exposed. These methods are explained below.

a) Investment risk

There is no established market for the Group's assets. The Investment Manager's assessment of the quantum and timing of returns is subjective and based on the Investment Manager's experience and due diligence. The estimates of the outcome and financial effect on the Group of the assets from which respective effective interest rates are derived is determined by the judgement of the Investment Manager. In coming to its best estimate of the effective interest rates on the assets, the Investment Manager has estimated the probability, timing and quantum of particular outcomes. The respective effective interest rates on contractual interests are then derived as the mean internal rate of return from a Monte-Carlo simulation of expected outcomes.

b) Foreign Currency Risk

Foreign currency risk is the risk that the value of a financial instrument will fluctuate because of changes in foreign exchange rates.

The Group's policy is not to manage the Group's exposure to foreign exchange movements (both monetary and non-monetary) by entering into any foreign exchange hedging transactions.

The Group holds assets denominated in currencies other than the US dollar, the functional currency. It is therefore exposed to currency risk, as values of the assets denominated in other currencies will fluctuate due to changes in exchange rates. The Group may hedge future investment opportunities in the functional currency.

As at 31 December 2011, a proportion of the net financial assets of the Group are denominated in currencies as follows:

At 31 December 2011, if exchanges rates had moved by 5% with all other variables remaining constant, the change in net assets attributable to holders of ordinary shares for the year would amount to approximately +/- US$269,541 (31 December 2010: +/- US$250,592). Management assesses the risk of exposure to the general banking system, and specific banks, and invests cash in US government securities when there is perceived risk to principal.

c) Cash flow and fair value interest rate risk

Interest rate risk arises from the effects of fluctuations in the prevailing levels of market interest rate on the fair value of financial assets and liabilities and future cash flows. The Group holds fixed and variable rate interest securities that expose the Group to fair value interest rate risk.

The Group is exposed to interest rate risk related to its cash balances. The Group does not actively manage this risk as it invests only in low risk securities. 

At 31 December 2011, if interest rates had moved by 75 basis points with all other variables remaining constant, the change in net assets attributable to holders of ordinary shares for the year would amount to approximately +/- US$110,235 (31 December 2010: +/- US$22,133), arising substantially from the cash and cash equivalents.

d) Credit risk

The Group is exposed to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when they fall due.

The Group has in place various policies and procedures to guide the Investment Manager's evaluation and management of investment opportunities and, particularly, the credit risk associated with investment counterparties (law firms and claim interest holders) and investments. The policies include Investment Restrictions (which contain prohibitions on pursuing investments with certain kinds of claims and claim holders, those being prosecuted by certain law firms, and those where collection, counterparty or compliance risk is significant), Investment Policies (which contain guidelines for diversification of the Group's portfolio based on certain claimholder characteristics, jurisdiction(s) involved, prosecuting law firm, claim size and investment structure), and Investment Process Guidelines (which define the due diligence, investment and investment monitoring processes to be followed by the Investment Manager in claim evaluation, valuation and investment completion). Collectively, these Investment Parameters are designed to guide the investment opportunity analysis so to limit credit, collection and portfolio concentration risks associated with Group investments. In addition, the Investment Manager has, pursuant to its own Underwriting Guidelines, developed and implemented systems and procedures to analyse and (pursuant to investment contracts) manage credit risk associated with Group investments.

The main concentration to which the Group is exposed arises from the Group's loan to FS. The Group is also exposed to counterparty credit risk on trading contractual interests, cash and cash equivalents and other receivables.

In accordance with the Group's policy, the Investment Manager monitors the Group's credit position on a daily basis, and the Board of Directors reviews it on a quarterly basis.

The Group is also exposed to material credit risk in respect of the contractual interests and cash and cash equivalents. The credit risk of the cash and cash equivalents is mitigated as all cash is placed with reputable banking institutions with a sound credit rating. The maximum credit risk exposure represented by total assets is as stated in the consolidated statement of financial position which amounted to US$235,728,256 (31 December 2010: US$198,763,275).

e) Liquidity Risk

The Group is exposed to liquidity risk. The contractual interests are acquisition of claims, as well as loans to lawyers to fund participation in claims on a contingency fee basis, and therefore require significant capital contribution with little or no immediate return and no guarantee of return or repayment. The market for such contractual interests is not active. In the opinion of the Directors the current liquidity risk at 31 December 2011 is low as cash and cash equivalents exceed unmatched liabilities or other contractual commitments.

f) Concentration risk

The Group seeks to minimise concentration risk by investing in a diverse portfolio of contractual interests through a number of different law firms, including interests in antitrust, patent, property damage, insurance subrogation, shareholder dispute, contract claim and arbitration cases. Further information regarding portfolio diversification can be found in the Investment Manager's Report.

The Group further seeks to minimise concentration risk by utilising a variety of Investment Parameters which are designed to guide the investment opportunity analysis so as to minimise, amongst other things, concentration risk. These Investment Parameters are further detailed in Note 18(d).

g) Capital risk management

The capital of the Company is represented by the net assets attributable to holders of ordinary shares. The Company's objectives when managing is to safeguard the Company's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain a strong capital base to support the development of the investment activities of the Group.

The Company is closed-ended and therefore the capital risk is reduced as shareholder funds are locked in until the closure of the Company.

h) Fair value estimation

The fair value of financial assets and liabilities that are not traded in an active market is determined by using valuation techniques.

The carrying value less impairment provision of other receivables and payables is assumed to approximate their fair value. The fair value of financial liabilities for disclosure purposes is not discounted as the Group does not expect there to be any material differences.

19. SUBSEQUENT EVENTS

On 4 January 2012, the Directors announced a special dividend of 7 pence per share which was paid on 10 February 2012 to shareholders on the register at 13 January 2012.