Juridica Investments Regulatory News (JIL)

Juridica Investments Limited

("Juridica," "JIL," or the "Company")

Unaudited half-year results for the period ended 30 June 2015

Juridica, the leading provider of strategic capital for corporate legal claims, announces its financial results for the six months ended 30 June 2015.

Financial highlights from the statement of the JIL Chairman, Lord Brennan QC:

- Ends -

This document contains forward looking statements, which are based on Juridica Asset Management Limited's (JAML) current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. It is believed that the expectations reflected in these statements are reasonable, but they may be affected by a number of variables which could cause actual results or trends to differ materially. Each forward looking statement speaks only as of the date of this announcement. Except as required by the AIM Rules, the London Stock Exchange or otherwise by law, the Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward looking statements contained herein to reflect any change in the Company's or JAML's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

For further information contact:

About Juridica Investments Limited

Juridica Investments is a leading provider of strategic capital to the business community and the legal markets for corporate claims. It invests directly and indirectly in a diversified portfolio of corporate claims in litigation and arbitration. Juridica is one of the premier sources of value-added and direct financing for large business claims in the United States and one of the leading sources in the United Kingdom.

The Company's clients are Fortune 1000 companies, FT Global 500 companies, inventors, major universities, and the leading law firms that represent them. Juridica only accepts cases that have already been carefully vetted and undertaken by leading lawyers.

Juridica's capital enables the legal system to better address business claims. It does not invest in speculative claims or claims that do not demonstrate economic value and clear merits. Juridica invests only in business claims, and does not invest in class actions, personal injury, product liability, or mass tort claims. Juridica's investment strategy provides business clients with financial choices that reduce risk and assist in maximizing claim value.

The Company's goal is to provide business clients with financial choices that reduce risk and assist in maximising claim value.

Juridica was established on 21 December 2007 as a limited liability, closed-ended investment company registered in Guernsey. It has over US$200 million of assets under management. It was the pioneer in alternative litigation financing and the first closed-end fund of its kind ever listed on AIM, a market operated by the London Stock Exchange (AIM: JIL.L).

The Company has appointed Juridica Asset Management Limited as its exclusive investment manager to locate, evaluate and manage direct and indirect investments in cases, claims and disputes.

http://www.juridicainvestments.com 

JURIDICA INVESTMENTS LIMITED

HALF YEARLY REPORT AND UNAUDITED CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD FROM 1 JANUARY 2015 TO 30 JUNE 2015

CORPORATE INFORMATION

CHAIRMAN'S STATEMENT

On behalf of the Board, I present the results of Juridica Investments Limited ("JIL" or the "Company") for the six-month period ending 30 June 2015.

Financial highlights of the Company's performance during the period include:

The total comprehensive loss (largely a decrease in unrealised gains) and corresponding decrease in NAV per share was almost exclusively attributable to a disappointing development in Case 8008-L, which was one of three remaining cases comprising the Company's antitrust and competition portfolio. The Investment Manager discusses this development in detail in its report, including how the case was marked to fair value at reporting periods over time. A short summary of key points include:

Investment Valuation and Portfolio Activity

The methodology used to value the Company's investments is applied in a manner that follows International Financial Reporting Standards ("IFRS") fair value accounting rules and agrees with the views of our auditor.

The fair value of our remaining investment portfolio (excluding the US$2.3 million amortised value of a related intangible) is US$101.0 million, a reduction of US$49.1 million from the US$150.1 million fair value reflected at 31 December 2014.

The change in investment valuation of US$49.1 million reflects the following:

Operating Results

For the period, the Company reported a total comprehensive loss of approximately US$34.2 million as compared to total comprehensive income of approximately US$10.3 million for the six-month period ended 30 June 2014. The total comprehensive loss for the six-month period ending 30 June 2015 was due to a combination of the following factors:

New Investments

During the six-month period ended 30 June 2015, the Company made two new investments. The first investment is in a portfolio of patents in various technology industries. A settlement of an older case included as collateral for this investment resulted in proceeds to the Company that returned all of the Company's investment amount while maintaining its interest in the remaining underlying cases. The second investment involves a legal claim of misappropriation of trade secrets and is currently in the appeals process.

Outlook

The Board of the Company and the Investment Manager believe that the Company's current portfolio will continue to provide healthy returns to shareholders and has the potential to outperform its present NAV.

Although the first half of 2015 was disappointing due to the events surrounding case 8008-L, we are optimistic about the near-term and future prospects of the Company's portfolio. We believe the Company's portfolio will continue to see significant activity within the next 12 to 24 months. As has been the Company's practice in the past, in the event of a material result related to any of the Company's investments (including the upcoming trial for case 5009-S), the Company will report these results immediately.

Shares of the Company have recently been trading at a discount to the Company's NAV at 30 June 2015. The Investment Manager and the Board believe that there are reasonable grounds for anticipating further realisation of part of the carrying value of our investments into cash proceeds over the next 12 to 24 months. On reviewing these interim accounts, investors will be aware that several existing mature investments may have the potential to exceed their fair value. The Company experienced just such an event last year when one of the larger antitrust and competition cases settled and generated proceeds significantly greater than its fair value in the reporting period preceding the settlement.

In addition to our optimism surrounding the Companyns existing investment portfolio, we are seeing significant new investment opportunities. The Investment Manageriessurrounding the Companyns existing investment portfolio, we are seinvestment value exceeding US$60 million) includes several that have moved to an advanced stage of due diligence. These and other future potential investments, should we decide to invest in them, presents a significant opportunity for the Company to generate additional future returns to its shareholders.

We look forward to the continued development of the Company and its investments and thank our investors for their continued support.

Lord Daniel Brennan QC

Chairman

18 August 2015

INVESTMENT MANAGER'S REPORT

The Company began its 8th full year of operation in 2015. Since inception, the Company has made 30 investments (some of which have multiple underlying cases or other assets, some which have had supplemental investments, and three of which are related to the same underlying case).

A total of 14 of these investments have come to full conclusion and six have had some return on the Company's investment, either from settlements or other distributions, and still remain active.

We believe that a strong indicator of our success since inception is reflected in the combination of our cumulative cash dividends and our reported NAV. The cumulative cash dividend is an indication of our past investment performance while our NAV provides an indication of our discounted and risk adjusted future view of our current investment portfolio.

Although we are proud of our respectable life-to-date performance, we were greatly disappointed by the recent events surrounding one of six underlying cases in one of our larger investments. In particular, and during the six-month period ending 30 June 2015, case 8008-L lost a damages appeal in front of the Court of Appeals and then was denied an opportunity for further review by the US Supreme Court.

Case 8008-L had already delivered gross returns of US$89.7 million on a direct investment of US$26.0 million. Had the case survived the challenges it faced, we believed the case would have generated cash proceeds to the Company far in excess of its US$29.7 million contribution to the Company's year-end 2014 NAV. If the case had actually gone to trial and prevailed, damages could have exceeded US$500 million and would have automatically been trebled.

These very unexpected adverse rulings eliminated the prospects of any future receipts from this case and although we recognised the enhanced risk profile of case 8008-L in its valuation at 31 December 2014, these adverse rulings, and the removal of the risk weighted proceeds estimated for the case at 31 December 2014, had a significant impact on the Company's NAV at 30 June 2015.

Although the Company was negatively impacted by the events surrounding case 8008-L, during the first half of 2015, the Company realised gross cash proceeds of US$24.1 million from three of its patent investments.

· Case 0108-S was the first investment made by the Company in 2008. Two additional investments (0209-S and 0108-SD) relating to the same patent were subsequently made to enhance the Company's potential return. The underlying case involved the prosecution of a patent infringement claim that resulted in a favourable judgment after trial in excess of US$20 million. The investment underperformed our expectations in terms of both amount of damages and timing but still returned a modest cash profit of US$1.8 million. This return resulted from the Company being paid first money out and buying, at year-end 2014, the attorney's contingent fee receivable at discount after the case had already won key issues on appeal. The investment returned US$13.1 million early in this period on a total cash investment of US$11.3 million. Although this level of return was below our initial expectations, this case illustrates the approach we take to avoid losses in the portfolio through aggressive post-investment monitoring, restructuring and management.

· Case 0409-C settled after a successful jury verdict of $50 million in the client's favour. The jury verdict was returned in 2012 but a reasonable settlement offer was delayed because of remaining non-jury issues that the trial judge had not decided. After the successful jury verdict, the fair market value of this case was increased to reflect settlement expectations. The case returned US$9.7 million on an investment of US$4.5 million resulting in a cash realisation multiple of 2.16.

· Investment 114107 is a new investment involving five separate patent portfolios comprising several hundred patents. The Company invested US$1.3 million in this pool of patent assets. An early settlement has returned the Company's entire investment in the case while maintaining an interest in the remaining litigation.

During the six-month period ended 30 June 2015, US$4.7 million in cash proceeds were received from a dividend distribution made by the Company's former investment manager, JCML. An additional US$650,000 in Company stock was also distributed to the Company by JCML and returned to the Company's treasury. Both of these receipts reflect the Company's 36.17% holding of JCML and were included in the Company's year-end 2014 NAV.

During the first six-months of 2015, the Company made two new investments as follows:

Both of these new investments were made under our previously announced co-allocation policy with a third-party that provided us with significant capital to co-invest alongside the Company.

Fair Value of Investments

The fair value of the Company's investments at 30 June 2015 was US$101.0 million. These investments are categorised as contractual interests, debt securities, or equity investments. These categories reflect the following changes from the carrying value as at 31 December 2014:

Valuation and Portfolio Performance

We believe that the current NAV of US$149.3 million, including cash and receivables of $46.3 and litigation assets and intangible assets valued at US$103.4 million, reflects the accounting fair market value of the Company. In earlier reports, we have discussed in great detail the accounting requirements of fair valuing our investments and the methodology we have followed in doing this. Still, it is worth noting here again.

We value JIL's investments using valuation and accounting methods that are applied in a manner that follows International Financial Reporting Standards' ("IFRS") accounting principles. In particular, we follow guidance provided by IFRS 13 in establishing the method of applying fair value accounting. Under this guidance, we develop a fair value of a case or investment by discounting its expected terminal value from its expected completion date. We determine our initial expectations on quantum and timing of case results by assigning a probability of various scenarios coming to fruition and applying risk factors that: i) are intrinsic to the specific case; and ii) reflect general risks within and outside of the legal process. Our assumptions behind an investment's fair value are revisited on a semi-annual basis (to coincide with the date of a Statement of Financial Position). If needed, we will re-run the investment's valuation model and revise its expected future cash flow which we then discount to the reporting date. The discount rate used for valuation purposes is the Company's cost of equity. All due diligence and transaction costs related to an investment are expensed.

Relative to the expectations we have at the time an investment is made, the investment itself is carried at any point in time at a discount to what we believe the investment will ultimately be worth. This is in part due to the timing discount we apply but is mostly attributable to the potential adverse actions that can arise in any litigation. Unlike an investment that is backed by a physical asset, litigation assets are subject to certain legal hurdles each of which has the potential to cause the litigation portion of any investment to be worthless. A key element in selecting investment worthy cases is the likelihood of a particular case overcoming any remaining hurdles and generating either a settlement or trial victory.

As part of our valuation process, we consider the current legal merits of each underlying case, the legal history of the case, the current legal environment, and any other factors we feel are relevant as of the date of our valuation. Working with the lawyers assigned to each case, we develop scenarios of potential outcomes, including the various situations that can generate outsized returns, moderate returns, or a complete loss, and assign each scenario a probability. The Monte Carlo simulation runs the statistically relevant number of iterations to provide us with an expected value and timing. These results are then discounted to the reporting date at the Company's cost of equity.

Of significance is the risk of loss that is assigned to each case. This must be considered given the typical binary characteristics of a legal case (i.e. win or lose). Because of this ever-present risk of loss (and to a lesser extent the impact of discounting), the accounting fair value of a particular case or investment is typically less than the expectation we hold should the case prevail, and in some instances, the actual outcome of the case may be significantly greater than its fair value for this reason. The Company experienced such an event last year when one of the larger antitrust and competition cases settled and generated proceeds significantly greater than its fair value in the reporting period preceding the settlement.

A few examples will illustrate the point.

As evidenced from the examples above, our accounting fair value is not intended to express our prediction about the ultimate outcome of any investment.

It must be emphasised again that any of our litigation assets that carry a value at a particular measurement date could become worthless, even a short period of time after our measurement date, if the case fails to overcome a particular set of hurdles. In some instances, and particularly for case 8008-L, incorporating a heightened risk of loss may be muted by the potential of the case to overcome its set of legal hurdles. For case 8008-L, the quantum of potential proceeds had the case overcome its hurdles were very large and thus retained value in the case, even with the heightened risk of loss.

As noted above, the valuation process is quite complex and considers all elements related to the case and its jurisdiction. Actions taken by the lawyers are done to best position the case to not only overcome any legal hurdles but also to maximise its potential return. To illustrate this point, we provide some key elements relative to case 8008-L. Each of these elements, and the related impact on expected proceeds and potential risk of loss were considered at each valuation date.

· Pre-2014 events:

o Selection of the case was based on its merits and the fact that eight defendants had pled guilty to violating the Sherman Act (specifically price fixing) and more than 20 executives from the defendant companies pled guilty or were indicted and later convicted. Additionally, under the Sherman Act, there is joint and several liability meaning that each defendant is potentially liable for the full amount of damages.

o Damages were divided into two groups specific to how the products were purchased (i.e. either purchased directly by the US companies or purchased by a foreign subsidiary of a US company).

o In pre-trial briefs, the trial judge ruled in favour of the plaintiffs regarding the scope of damages.

o Settlements occurred for all but the plaintiff with the largest claim.

o After completion of discovery and pre-trial motions, the sole remaining plaintiff elected to return to its home jurisdiction for trial.

· 2014 events:

o Case was set for trial in March 2014 but just prior to trial, the defendants tried for a third time to limit the scope of damages. This was seen as a last ditch attempt given that the defendants had lost the issue on two prior occasions in the case.

o In a highly unusual procedural move, the trial judge reversed the previous judge's ruling and limited the scope of damages which put the remaining plaintiff's claim in jeopardy.

o Plaintiff immediately appealed trial court's ruling which was viewed by experts as an incorrect ruling. The appellate court, in a very unusual action affirmed the trial court ruling without briefing or hearing.

o The US Department of Justice sought leave to intervene on the basis that the appellate court's ruling was wrong; did not follow the court's own procedural rules; and threatened to undermine criminal enforcement of US antitrust laws and the convictions of the defendants in this very case.

o A series of complex procedural motions and letters were filed which ultimately resulted in the appellate court vacating its own ruling and the matter was put over for full merits briefing and argument in Q4 of 2014.

o Of concern was that the appellate panel, which is supposed to be randomly assigned, was the same panel that originally ruled against the plaintiff. This same panel again ruled against the plaintiff.

o Given the procedural violations, the plaintiff requested an "en-banc review" which is a review by the entire panel of judges from the Court of Appeals. This motion was pending at year-end.

· 2015 events:

o The request for an en-banc rehearing was denied in Q1 2015. This decision was in direct conflict with an appellate ruling in one of the criminal cases on the same issues in the same case, but in a different federal circuit.

o Notwithstanding the traditional high hurdle for US Supreme Court review, all parties felt this case had distinguishing factors that made review much more likely than the norm. This belief was based on: (i) the direct conflict in the appellate courts involving the very same issue in the same cartel case; (ii) procedural violations had occurred during the appellate review and its appeal; (iii) the potential impact the decision would have on US trade policy and criminal enforcement of antitrust laws; (iv) broad support from corporate, political and legal authorities for the case to be heard; and (v) one of the top US Supreme Court practitioners was hired for the appeal.

o Shortly prior to 30 June 2015, the US Supreme Court denied the plaintiffs request to review the case.

While our valuation process considers all risks, including the relevant risk of loss, if a particularly large case, even one which had previously generated significant cash returns, no longer possesses the ability to generate future expected cash returns, the impact on the Company's NAV can be significant. This is evidenced by the current period impact of case 8008-L on the Company's NAV.

Portfolio Historical Performance

From inception to 30 June 2015, the Company's portfolio has generated net cash proceeds of approximately US$222.5 million (excluding proceeds generated from the Company's investment in its former manager, JCML).

The portfolio since inception has performed as follows:

• 14 investments (three of which were related to the same underlying case) have reached completion with proceeds from the underlying cases delivering a total of US$67.2 million in gross proceeds representing a blended internal rate of return of approximately 28.5% (as calculated from the date of investment to the date of return).

• Five investments (excluding the Company's investment in JCML) that have produced returns still remain active even though some settlements have been reached. One of these investments is our large antitrust and competition investment that originally consisted of six cases and now has two active cases remaining. Three of these investments are part of our patent portfolio and consist of investments with litigation elements and patent sale or licensing elements. The final investment with a partial settlement was part of our commercial portfolio and currently consists of an asset sale element. Total net proceeds from active investments with partial settlements are approximately US$155.3 million.

Concentration Risk and Size of Existing Portfolio

After deploying most of the available capital from our initial offering (save for operating reserves) the Company raised capital from a smaller second round of funding in 2009. This enhancement to our available capital was also deployed relatively quickly. The initial pool of assets acquired in 2008 and 2009 was largely focused on antitrust and competition with that portfolio's initial funding commitment comprising 41.9% of the gross capital raised. Since its initial funding, over US$148.0 million of proceeds (net of taxes, reserves, and direct reinvestment) has been generated from the antitrust and competition portfolio. The fair value of this portfolio currently comprises approximately 35.2% of the Company's current NAV.

The decision to invest a large portion of the Company's capital in antitrust and competition cases was intentional and seen by us as appropriate for a new fund investing in, and indeed creating, a new asset class. With hindsight, that decision has proven to be appropriate as it was a major contributor in enabling the Company to return almost US$100 million in cash profits to shareholders in the form of dividends beginning in 2009 and continuing through the first quarter of 2015 when the Company distributed US$34.5 million to shareholders in dividends.

The obvious downside risk to this concentration can be seen from the current period impact of case 8008-L on the Company's NAV, notwithstanding the extraordinary returns that had already been generated from the case.

Overall the concentration risk in the three portfolio groups is highlighted in the table below:

1 Number of active investments include some of which have multiple underlying cases or other assets, and some which have had supplemental investments.

2 Excludes the Company's investment in JCML.

3 Commercial portfolio fair value includes an investment in which US$2.3 million of its fair value is categorised as an intangible.

The cash summary at 30 June 2015 for each of these groups (excluding the Company's investment in JCML) is as noted on the following table:

1 Cumulative Net Proceeds Generated refers to partially settled investments and completed investments from inception until 30 June 2015. Additional proceeds have been generated within the antitrust and competition portfolio and the patent portfolio and have been used to fulfil funding requirements for cases within each portfolio.

2 Amount Invested in Current Portfolio Holdings reflects cash investment as at 30 June 2015 (excludes any related transaction costs) by JIL for the current investment holdings in each portfolio. Antitrust and competition portfolio reflects advances under the Facility net of repayment totalling US$13.2 million and US$8.0 million in funding from the related swap instrument.

3 Commitment Available for Current Portfolio Holdings reflects remaining funding commitment (as of 30 June 2015) by JIL for the current investment holdings in each portfolio. A portion of the commitment related to the antitrust and competition portfolio may be fulfilled from portfolio returns.

Outlook

Based on our knowledge from managing the Company's investments, we remain optimistic about the potential future performance of the portfolio.

In addition to our optimism surrounding the Company's existing investment portfolio, we are seeing investment opportunities that are much more diverse than that which is in the existing portfolio. We believe that a more diverse portfolio will produce more predictable cash flows and dividends to shareholders.

We would like to thank investors for their continued support. 

Disclaimer on Forward Looking Statements

This report contains forward looking statements, which are based on the current expectations and assumptions of the Investment Manager and involve known and unknown risks and uncertainties that could cause actual results or performance to differ materially from those expressed or implied in such statements. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a number of variables that could cause actual results or trends to differ materially. Each forward looking statement speaks only as of the date of this report. Except as required by the AIM Rules or otherwise by law, the Company and the Manager expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward looking statements contained herein to reflect any change in the Company's or Investment Manager's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Juridica Asset Management Limited

18 August 2015

INDEPENDENT REVIEW REPORT

Introduction

We have been engaged by Juridica Investments Limited (the "Company") to review the unaudited condensed set of financial statements in the half yearly report for the six months ended 30 June 2015, which comprises the unaudited condensed statement of comprehensive income, the unaudited condensed statement of financial position as at 30 June 2015, the unaudited condensed statement of changes in equity, the unaudited condensed cash flow statement and related notes. We have read the other information contained in the half-yearly report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the unaudited condensed set of financial statements.

Directors' responsibilities

The half-yearly report and unaudited condensed financial statement is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half yearly report in accordance with the AIM Rules for Companies which require that the financial information must be presented and prepared in a form consistent with that which will be adopted in the Company's annual financial statements.

As disclosed in note 2, the annual financial statements of the Company are prepared in accordance with International Financial Reporting Standards. The unaudited condensed set of financial statements included in this half yearly report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting".

Our responsibility

Our responsibility is to express to the Company a conclusion on the unaudited condensed set of financial statements in the half yearly report based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the AIM Rules for Companies and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the International Auditing and Assurance Standards Board. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the unaudited condensed set of financial statements in the half yearly report for the six months ended 30 June 2015 is not prepared, in all material respects, in accordance with International Accounting Standard 34 and the AIM Rules for Companies.

Emphasis of Matter

Without qualifying our conclusion, we draw attention to Notes 5 and 6 to the unaudited condensed financial statements surrounding the fair value of non-current assets. The unaudited condensed set of financial statements includes non-current assets stated at their fair value of US$101,027,874. Due to the inherent uncertainty associated with the valuation of such non-current assets and the absence of a liquid market, these fair values may differ from their realisable values, and the differences could be material.

PricewaterhouseCoopers CI LLP

Chartered Accountants

Guernsey, Channel Islands

18 August 2015

The maintenance and integrity of the Juridica Investments Limited website is the responsibility of the Directors; the work carried out by us does not involve consideration of these matters and, accordingly, we accept no responsibility for any changes that may have occurred to the unaudited condensed financial statements since they were initially presented on the website.

Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

UNAUDITED CONDENSED STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD FROM 1 JANUARY 2015 TO 30 JUNE 2015

The notes on pages 21 to 29 form an integral part of these unaudited condensed financial statements.

UNAUDITED CONDENSED STATEMENT OF FINANCIAL POSITION AS AT 30 JUNE 2015

These half yearly unaudited condensed financial statements were approved by the Board of Directors on

18 August 2015 and signed on its behalf by:

RJ Battey

Director

The notes on pages 21 to 29 form an integral part of these unaudited condensed financial statements.

UNAUDITED CONDENSED STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD FROM 1 JANUARY 2015 TO 30 JUNE 2015

The notes on pages 21 to 29 form an integral part of these unaudited condensed financial statements.

UNAUDITED CONDENSED CASH FLOW STATEMENT FOR THE PERIOD FROM 1 JANUARY 2015 TO 30 JUNE 2015

The notes on pages 21 to 29 form an integral part of these unaudited condensed financial statements.

NOTES TO THE FINANCIAL STATEMENTS

1. LEGAL FORM AND PRINCIPAL ACTIVITY

The Company is an authorised closed-ended investment company incorporated under The Companies (Guernsey) Law, 2008 ("the Law"). The Law does not make a distinction between private and public companies. Shares in the Company were admitted to trading on AIM, a market operated by the London Stock Exchange, on 21 December 2007. The address of the Company's registered office is 11 New Street, St. Peter Port, Guernsey, Channel Islands, GY1 2PF. The condensed interim financial statements have been reviewed, not audited.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of the financial statements are set out below. 

Basis of Preparation

These half yearly unaudited condensed financial statements ("the condensed financial statements") for the six months ended 30 June 2015 have been prepared in accordance with International Accounting Standard 34: Interim Financial Reporting ("IAS 34"), and on a going concern basis. The condensed financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2014 which have been prepared in accordance with International Financial Reporting Standards ("IFRS"), issued by the International Accounting Standards Board ("IASB"), interpretations issued by the International Financial Reporting Interpretations Committee ("IFRIC") and applicable legal and regulatory requirements of Guernsey Law.

The IFRS Annual Improvements Cycle 2011-2013, became effective for periods beginning on or after 1 July 2014, however have no material impact on the presentation of the accounts. There are no new IFRSs adopted during the period.

Accounting policies

The preparation of financial statements in conformity with IAS 34 requires the use of certain critical accounting estimates. It also requires the Board of Directors to exercise its judgement in the process of applying the Company's accounting policies. The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2014.

Financial risk management

The Company's activities expose it to a variety of financial risks. The main risks arising from the Company's financial instruments are market risk, insurance risk, credit risk and liquidity risk. These condensed financial statements do not include all financial risk management information and disclosures required in the annual financial statements and, accordingly, should be read in conjunction with the Company's annual financial statements for the year ended 31 December 2014.

Fair value estimation

The Company's investments are categorised as level 3 within the fair value hierarchy under IFRS 13 (as was the case at 31 December 2014). There have been no transfers between levels during the six months to 30 June 2015.

Geographical and segmental reporting

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

3. UNCONSOLIDATED SUBSIDIARY INVESTMENTS

The following subsidiary investments are held by the Company but have not been consolidated, following the adoption of the investment entities exemption per IFRS 10.

There are no outstanding commitments with these unconsolidated subsidiaries at the period end, other than those disclosed in Note 9.

4. INTANGIBLE ASSET

The Company's intangible asset comprises an investment structured as an agency agreement. Additions to the intangible asset during the period are deemed to have occurred at 30 June 2015. The Company amortises the intangible asset on a diminishing balance basis at a rate of 16.7 per cent every 6 months. The Directors consider that the diminishing balance basis of amortisation most accurately reflects the pattern in which the asset's future economic benefits are expected to be consumed by the Company.

In addition, the Company purchased common and preferred stock related to the intangible asset in 2012, at a cost of US$1,602,510, and additional preferred stock in 2015 at a cost of US$318,328. The preferred stock has been classified as a financial asset at fair value through profit or loss (Note 5). As at 30 June 2015 a cost of US$1,920,838 is deemed an appropriate approximation of fair value (31 December 2014: US$1,602,510) for the financial asset. No provision for impairment is deemed to be required.

5. FINANCIAL ASSETS AND FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT AND LOSS

(a) Contractual interests

Contractual interests have been accounted for using the fair value model. At 30 June 2015, the Company had investments in 11 contractual interests (31 December 2014: 12 contractual interests).

The Company had two contractual interests (one of which consisted of three related investments) that came to full settlement during the period, and two new contractual interest investments. Fair value movements of contractual interests are due to amendments in estimated cash flows arising from changes in expectations surrounding each case.

(b) Equity investments

The Company's equity investments include a holding in JCML 2007 Limited ("JCML"). The fair value of the Company's investment in JCML was assessed as at 30 June 2015 to be US$548,317 (31 December 2014: US$6,113,741). This assessment of fair value is deemed appropriate given the investment in the company, cash and Company stock distribution received by the Company from JCML during the six-month period ended 30 June 2015, remaining level of assets, and the expected value of future income and earnings and the projection of future cash flows.

(c) Debt securities

Note 11(c) details arrangements between the Company and Fields Law. The Loan and the Swap have been aggregated and treated as a single claim asset. Returns on the Loan and the Swap are dependent on returns in claims financed by Fields Law. Under the terms of Swap, proceeds previously paid by Fields Law to Riverbend Investments Limited ("Riverbend") can be clawed back by Fields Law if needed to meet funding obligations within the antitrust and competition portfolio. During the period, a clawback of US$8 million was paid to Fields Law.

Fair value movements of debt securities are due to amendments in estimated cash flows arising from changes in expectations surrounding each investment.

(d) Forward foreign currency contracts

The Company has no forward foreign currency contracts at 30 June 2015. The contract held at 31 December 2014 was in place to settle declared dividend distributions in Sterling, and was settled prior to payment of the distributions in January 2015.

6. FAIR VALUE ESTIMATION

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

The carrying value less impairment provision of other receivables and payables are assumed to approximate their fair values.

IFRS 13 requires the Company to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:

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

Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors specific to the asset or liability.

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

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

The Company's investments in forward exchange contracts are classified as level 2, all of the Company's other financial assets and liabilities are classified as level 3.

There were no transfers between levels for the period ended 30 June 2015 (31 December 2014: None).

The Company has identified three key unobservable inputs to the valuation model used in the valuation of investments held at fair value through profit or loss: expected quantum, expected duration, and cost of equity.

Expected quantum

The greater the quantum expected at conclusion, the greater the valuation at any point in time, other than at conclusion. The lower the quantum expected at conclusion, the lower the valuation at any point in time, other than at conclusion.

Expected duration

The greater the expected duration of an investment, the lower the valuation at any point in time, other than at conclusion. The shorter the expected duration of an investment, the greater the valuation at any point in time, other than at conclusion.

Cost of equity

The Company's cost of equity is 11%. As the Company's cost of equity decreases, the valuations at any point in time will increase, other than at conclusion. As the Company's cost of equity increases, the valuation at any point in time will decrease, other than at conclusion.

The following table summarised the sensitivities:

7. OTHER RECEIVABLES AND PREPAYMENTS

8. OTHER PAYABLES

9. COMMITMENTS & GUARANTEES

Under the terms of some of its contracts, JIL provides a line of credit to counterparties. As at 30 June 2015, the maximum commitment under these lines of credit was US$9.7 million (31 December 2014: US$18.1 million).

10. FUNCTIONAL AND PRESENTATION CURRENCY / EXCHANGE RATES

The financial statements are presented in United States Dollar ("US$") which is also the Company's functional currency. The following exchange rate was applicable as at 30 June 2015:

11. RELATED PARTY TRANSACTIONS

Richard Battey, as investor representative and non-executive director of the Company, is also a non-executive director of JCML. The principal of JCML is Richard Fields, who owns 103,000 Ordinary Shares in the Company (0.09 per cent equity interest) (31 December 2014: 257,545). JCML owns 118,250 Ordinary Shares in the Company (0.107 per cent equity interest) (31 December 2014: 1,118,250 shares). Mr Fields is also sole beneficial owner of Juridica Asset Management Limited ("JAML").

(a) Management fee

JAML is entitled to a management fee of 2 per cent of the adjusted net asset value of the Company.

The adjusted net asset value is the net asset value of the Company at the relevant time and will be calculated, after accruing for the annual management fee but not taking into account any liability of the Company for accrued performance fees, and after:

(i) deducting any unrealised gains on non-current assets; and

(ii) adding the amount of any write downs with respect to contractual interests which have not been written off.

Management fees for the period ended 30 June 2015 are US$2,860,627 (30 June 2014: US$2,260,692), and the amount which remains payable to JAML as at 30 June 2015 is US$230,376 (31 December 2014: US$1,114,196).

(b) Performance fee

Under the terms of the Management Agreement, JCML, as Investment Manager, was entitled to a performance fee based on the adjusted net asset value ("ANAV") (being the NAV of the Company before taking into account any performance fee payable less any unrealised gains on investments plus the value of any write downs in any investments that have been written down but not written off) of the Company. The performance fee payable was for an amount equal to the sum of: (i) 20 per cent of the amount by which the ANAV exceeded a 8 per cent annually compounding hurdle but was less than an amount equal to a 20 per cent annually compounding hurdle; (ii) 35 per cent of the amount by which the ANAV exceeded a 20 per cent annually compounding hurdle but was less than an amount equal to a 40 per cent annually compounding hurdle; and (iii) 50 per cent of the amount by which the ANAV exceeded a 40 per cent annually compounding hurdle. Any performance fee obligation to JCML is determined on 31 December of each year.

A performance fee was payable to JCML of US$14,511,058 for the year ended 31 December 2014. As at 30 June 2015 no performance fee remained payable (31 December 2014: US$ nil. JCML will continue to be entitled to a performance fee in the future in respect of investments made prior to the termination of its appointment on 31 December 2013. Any future performance fee will be subject to a high water mark such that no performance fee will be paid if the performance of the Company does not exceed the NAV at the end of the previous year in which the performance fee was paid.

JAML replaced JCML as Investment Manager with effect from 1 January 2014. For financial periods following this date, any performance fee payable on investments will be calculated based on the date on which investments were made, and attributable to JCML for investments held at 31 December 2013, and to JAML for all new investments. JAML will become entitled to a performance fee of 20 per cent of the annualised increase in the adjusted net asset value over the higher of the calculated hurdle rate or the established high water mark. Any performance fee obligation to JAML is determined on 31 December of each year. 

(c) Facility agreement and collateral account

The Company has entered into a facility agreement (the "Facility") with which it agrees to loan to Fields Law, a law firm in which Richard Fields is a partner, money for funding cases in which Fields Law is to act under a Co-counsel Agreement.

The Facility will remain outstanding and available until the earlier of (i) the termination of the Management Agreement with JAML, (ii) the date on which Richard Fields ceases to own a controlling interest in Fields Law, (iii) the winding up of the Company, (iv) an event of default of the Facility documents, or (v) ten years from Admission. Under the Facility, drawdowns may be requested by Fields Law from time to time up to the maximum principal amount but subject always to approval by the Company in its sole discretion.

No more than US$10 million may be drawn down in respect of the same case investment, unless otherwise approved by the Company.

(d) Investment in JCML 2007 Limited

The Company acquired 15 per cent of JCML on Admission, which was subsequently diluted to 13.6 per cent by the exercise of share options by certain of JCML's employees. In 2012, the Company acquired a further holding in JCML, taking the Company's overall holding in JCML to 36.2 per cent. An impairment review of JCML has been performed as part of the fair value assessment and will be carried out on a semi-annual basis.

(e) Directors' fees and expenses

Fees and expenses are attributable to the Directors of the Company as follows:

No pension contributions were paid or were payable on behalf of the Directors. The Directors' remuneration was payable as at 30 June 2015.

Lord Daniel Brennan has an interest in 447,817 shares (31 December 2014: 447,817 shares) under a Share Option Agreement, details of which were disclosed in the Admission Document. Lord Brennan can exercise these share options at any time up until 17 December 2017.

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

(f) Escon Capital Inc.

The Company has an interest in 38% (31 December 2014: 38%) of the voting common stock and 100% of the issued preference shares of Escon Capital Inc. ("Escon"), a Delaware corporation of which Kermit Birchfield and Richard Fields are directors.

Kermit Birchfield and Richard Fields each receive a fee from Escon. Mr Birchfield receives a director's fee of US$50,000 per annum, and Mr Fields receives an employment fee of US$12,000.

(g) Eleven Engineering Game Control LLC

The Company has provided a loan of US$575,000 to Eleven Engineering Game Control LLC, a company ultimately owned and controlled by JCML (31 December 2014: US$575,000). As at 30 June 2015 no further facility remains available to be drawn (31 December 2014: US$Nil). The loan is repayable on Eleven Engineering Game Control LLC's receipt of net recoveries.

12. CAPITAL AND RESERVES

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

Issued share capital: 110,340,019 shares as at 30 June 2015 (31 December 2014: 110,701,754 shares), of which 80,000,000 shares were issued at a premium of £1 per share on admission, and 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, and the Company also received 126,607 of its own shares subsequent to an in-specie dividend received from the previous Investment Manager, JCML, on 27 November 2013. These shares were held in treasury, however were subsequently sold for a premium at £1.39. On 4 June 2015, the Company received 361,735 of its own shares as a result of an in-specie dividend received from JCML at £1.16, and held in treasury. As at 30 June 2015, the number of shares held in treasury was 361,735 (31 December 2014: nil) at a price of £1.16.

The Company's capital is represented by ordinary shares of no par value and share premium which are included in the reserves figure on the statement of changes in equity. Share premium as at 30 June 2015 is US$202,846,946 (31 December 2014: US$202,846,946). Each share carries one vote and is entitled to dividends when declared.

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 20 April 2015. 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.

13. SEASONALITY

The Company's operations are not affected by seasonality or cyclicality and as such they have no impact on the unaudited condensed financial statements.

14. DIVIDENDS

The following dividends were paid during the year:

One forward currency exchange contract was taken out at the date of declaration of dividends to manage the exposure to fluctuations in foreign currency exchange rates, as detailed in Note 5(d).

15. SUBSEQUENT EVENTS

There have been no material events subsequent to the date of this report which require disclosure.