Omni Bridgeway Limited (OBL) Earnings Call Transcript & Summary

Well, I see it's 9:30, so good morning, ladies and gentlemen. Welcome to the Annual General Meeting of Omni Bridgeway Limited for 2022. My name is Michael Kay. I'm the Non-Executive Chairman of Omni Bridgeway Limited. I note we have a quorum present, and I hereby declare the meeting open. Voting at today's meeting will be by poll, which is now open. Before we commence with the formal business of this meeting, I'd like to take the opportunity to introduce you to my fellow directors: Andrew Saker, Managing Director and CEO and Chief Strategy Officer of the USA; Michael Bowen, Non-Executive Director; Karen Phin, Non-Executive Director; Christine Feldmanis, Non-Executive Director; and Raymond van Hulst, Executive Director, Managing Director and Chief Investment Officer of Europe, the Middle East and Africa. Our Global Chief Financial Officer, Guillaume Leger is here, as is Jeremy Sambrook, our company Secretary and Global General Counsel. The company's auditor is BDO. Ms. Melissa Reid from BDO is in attendance in person; and Mr. Glyn O'Brien from BDO is in attendance virtually and will be available to answer questions concerning the company's financial statements. Representatives from the company's share registry, Computershare, who are overseeing the registration process and who are responsible for the recording of all voting with respect to the meeting are also in attendance. Today's meeting is being held in Sydney for those wishing to attend in person and also virtually through an online meeting platform hosted by Computershare. This allows all shareholders and proxy holders to attend the meeting and provides the ability to ask questions and submit votes either on the floor, in person or online. Should we experience any technical issues, we may need to seek a short recess or an adjournment. If this should occur, we will advise accordingly. Please note the meeting is being recorded. Before we move to the formal matters in the notice of meeting, the CEO, Andrew Saker, and I will address the meeting, and I'll now deliver my address. The 2022 financial year was an important and successful year for the company in the execution of its long-term strategy to be recognized as the world's preeminent manager of legal assets. This year, we achieved all of our strategic goals, which we set ourselves and delivered upon the majority of -- the priority of further scaling our global platform. During the year, we did the following: we established a new five-year AUD 250 million institutional debt facility with a materially lower effective cost of capital, greater operational flexibility and a covenant package that allows us to manage our capital more effectively and efficiently. We launched an innovative fund focused on investing up to EUR300 million in global enforcements, which will increase our funds under management to approximately AUD 3 billion. We expanded our worldwide operations. We increased our senior executive presence in the U.S. We launched our Antitrust business in the U.S. and established a U.S. enforcement team. Very significantly, we executed our first secondary market transactions with the sale of two partial interests in investments. We anticipate that the secondary market transactions will become a more permanent feature of our income profile, which will ameliorate both the completion and duration risks and improve our liquidity. In addition, we achieved annual gross consolidated revenue of more than AUD 200 million for the third consecutive year, and we increased our annual commitments to over AUD 460 million per year, which is a growth of 12% over the previous year. The pleasing number of completions during the year have accelerated anticipated returns for the company's shareholders under the various Fund waterfall structures. This is a welcome development after the COVID-induced slowdowns in settlements and trials over the past 2.5 to 3 years. Implied embedded value increased by 28% during the year, and I think this demonstrates the distribution power of the global platform that Andrew and the management team have built. Our company is now the largest team for funding and management of legal risks in the world. Our boots on the ground approach in terms of sourcing and underwriting puts Omni Bridgeway at the forefront of this growing alternative asset class. We remain committed to the view that geographic and asset diversification mitigates the risk of increased competition or regulatory intervention arising in any one particular region. More importantly, in an industry that is still young and relatively immature, there is an opportunity to claim market dominance as a first mover and thereby build scale, scope and reputation across the globe. We've recently commenced operations in Uruguay and Montevideo. In the United States, in Minneapolis, Minnesota and Washington DC. We've expanded European locations to include Paris in France and Milan in Italy. We will continue to pursue promising new opportunities by expanding into additional locations in the Americas, Asia-Pacific and Europe, the Middle East and Africa. In FY '23, we're targeting an increase in funding commitments to between AUD 550 million to AUD 600 million, which will represent an increase in the range of 20% to 30% over the actual '22 number. This is consistent with our aspirational targets of having funds under management of AUD 5 billion by the '25 financial year and AUD 1 billion in annual commitments. In FY '23, we plan to assess the feasibility of launching two new funds, both structured in a similar manner with an emphasis on higher management fees and lower performance fees. The first fund will look to fill a gap in our suite of offerings where demand exists for funding, but does not meet the financial hurdles in our existing funds. We believe we can structure such a fund, whereby we can take advantage of an underserved part of the market without impacting margins or increasing our risk appetite. And the second fund, we're thinking about may be focused on investments with a positive ESG profile. The Board will continue to make capital allocation decisions that are appropriate for the circumstances within which Omni Bridgeway is operating, including the availability of franking credits, merger and acquisition opportunities, capital deployment requirements and to increase the asset base and the share price relative to the implicit value of the company. In the then present circumstances, in August, the Board decided not to pay a dividend for the FY '22 year. As shareholders will be aware, large parts of the global economy are having to contend with the emerging impacts of inflation. However, Omni Bridgeway is fortunate in that its pricing model provides a natural hedge against inflation. Typically, investment costs are passed on to the client who reimburses costs on successful completion of the investment. Further, where our return is structured as a multiple of costs, we receive a multiple of the costs, which are themselves impacted by inflation or where our return is structured as a percentage of the damages the award will take into account interest, which also ameliorates the impact of inflation. We're also protected against duration risk as our contracted returns reflect the time value of money. In these uncertain times, most commentators are saying the short- to medium-term outlook is one of declining economic growth or recession around the world. Omni Bridgeway as an alternative asset manager and an investor in litigation enforcement assets offers investors a model that is typically uncorrelated with economic cycles and macro events. In fact, demand for our capital increases as other capital sources become more restricted and as the number of insolvencies and general commercial disputes increase. To improve our efficiency and enhance our scalability, we've restructured our investment committees and restructured our operational functions into country or regional portfolios and expert practice areas. As well as efficiencies, we believe that by vetting potential investments through geographic and academic or practice specialization lenses, we will generate better risk-adjusted returns. We've also made important leadership appointments during the year, including Global Chief Financial Officer, Managing Directors and Co-Chief Investment Officers in Asia-Pacific and in the U.S.A. And we've appointed Global Heads of Portfolio Management, Marketing and Transformation as we build out our platform to support the global growth. Over the past five years, we've been undergoing a measured process of board renewal. And this last 12 months includes the retirement of two of our longer-serving directors. Mr. Hugh McLernon, one of the company's founders, who was an Executive Director, you will recall, retired at last year's AGM. Today, Michael Bowen retires as Non-Executive Director. Let me say that Michael's contribution to the Board and the development of the company from a virtual startup, the market cap was AUD 8 million when Michael started. It's 150x that now. So that's not a bad track record. From virtual startup through being one of the largest global asset managers so I think that -- well, it speaks for itself. Michael has always been fearlessly independent. His commercial acumen and legal skills have been invaluable throughout the journey. Michael, we're going to miss you, and not just the palpable value of your input, but also your contribution to the culture of the Board and the company itself. And on behalf of everyone at Omni Bridgeway, we thank you and we wish you well for life after OBL. Following Michael's retirement, the Board will comprise three Non-Executive Directors and two Executive Directors maintaining a majority independent board. As foreshadowed, we have commenced a search for an additional Non-Executive Director, and that person will be based in the U.K., Europe or the United States. This development reflects the ongoing transition of the company to operating predominantly in the Northern Hemisphere, where the largest legal asset markets are. And of course, as everyone knows, Andrew is resident in the U.S. as is Guillaume, our new CFO. We intend to add another Director, so that will be two new Directors from this region over the next 12 to 24 months once we get the one we're looking at now settled in. The company's remuneration report as shareholders may remember received a strike at the 2021 Annual General Meeting. As we said at the time, the strike was not, in fact, related to the remuneration report itself or to the company's remuneration practices, but rather based on shareholder feedback was a protest against a number of unconnected issues. We covered these issues in detail at last year's Annual General Meeting, and I'm not going to revisit them today. We encountered shareholder feedback and have sought to respond to the issues raised with an improved and continual focus on investor communications and disclosures, particularly as they relate to the intrinsic value of the business and its portfolio of legal assets. And since then, I note that the company's share price has materially appreciated by approximately 26% from the time of the 2021 Annual General Meeting and comparing that to the ASX 300, which has declined by approximately 1% during the same period. I believe this not only reflects the progress that has been made over the last 12 months, but also the market's recognition of the quality of the global platform that's being built and the uncorrelated nature of the assets we manage and invest in. With the funds management model we embarked on in 2017 now maturing, delayed by COVID, of course, we anticipate significant cash flows over the next few years as we complete the book of legal assets we've built. Moreover, we continue to see opportunities for material and substantial growth around the world as this young industry continues to mature and is more widely accepted by potential users. On behalf of the Board, our thanks to shareholders for their support and patience through COVID. The pandemic delayed the hearing of legal cases and therefore, our cash flows. While COVID is still among us, things are largely back to normal across the globe, and we now have the added benefit of an incipient secondary market to manage unforeseen duration risk. That changes our lives. To close on behalf of the Board, I want to thank Andrew and the management team and in fact, the whole Global Omni Bridgeway team for an excellent year of energy, achievement and innovation. I also express my thanks to my colleagues on the Board for their ongoing counsel and wise advice during the year. Omni Bridgeway is now a truly global organization, and it's clearly at the vanguard of the growth of the industry around the world. The future looks bright indeed. It's now my great pleasure to introduce our CEO, Andrew Saker.

Good morning, everyone. I'd like to start by acknowledging the traditional custodians of the land on which we live, work and operate. We pay respects to their connections to the land, sea community and to elders, past, present and emerging. On behalf of the management team and staff, I would like to welcome you to the Annual General Meeting of Omni Bridgeway Limited for the financial year ended 30 June 2022. Firstly, I would also like to thank the Board for their support throughout the year. And secondly, I would like to acknowledge the contribution of our team at Omni Bridgeway towards the achievement of our strategic and operational goals during the course of the past year. As Michael mentioned, FY '22 was a transformational year as we successfully executed a number of important strategic priorities, including expanding our U.S. operations in geographic footprint, headcount and offering, refinancing our debt facilities to remove restrictive covenants and provide greater flexibility and additional liquidity for our fund management business, launching Fund 8, our new Global Enforcement Fund and achieving a record level of new commitments globally and specifically in the U.S. We implemented innovative risk management tools through insurance products. We enhanced liquidity through the secondary market sales and we refreshed our leadership team with the appointment of a new Global CFO and senior regional and global roles. This year was our third consecutive year of producing over AUD 200 million in gross income and revenue generated from a diverse range of sources across our funds. This confirms our views about the merits of the diversification strategy and the migration to a funds management platform, which we commenced in FY '16. With over 97% of our investments now financed from our funds, our transition to a fund manager is now complete. FY '22 saw a modest net profit after tax, which was a AUD 25 million turnaround from last year. We have maintained our long-term conversion rate of our estimated portfolio value to income of 15%, which we expect to remain at historic levels. In addition to new commitments and cash generation, the key drivers for our business include success rate and pricing. Omni Bridgeway has maintained a high success rate of 77% after withdrawals and over the last three years, achieved a ROIC of 107% and an IRR of 39%. These high-quality performance indicators surpass our peers and place Omni Bridgeway as one of the leaders in the industry. Notwithstanding the continuing challenges arising from the disruption of COVID, we delivered record annual commitments to investments, resulting in a 34% five-year compounded annual growth rate. This translated into a 35% increase in our portfolio value and a 28% year-on-year growth in the implied embedded value. In addition to the record new commitments made this financial year, the launch of Fund 8 and the refinancing of our bonds and notes, we achieved the following significant milestones. We undertook our first secondary market sales. These were sales to arm's length third parties that maximize the outcomes whilst preserving material amount of upside. Whilst we've historically incurred delays in completions and will inevitably continue to do so, we now expect secondary markets to provide an alternative to waiting for legal outcomes or settlements, which should improve liquidity and ameliorate duration risk. Secondly, we launched innovative risk management strategies using insurance structures to protect both the capital and profit associated with one of our Fund 1 investments. This will create opportunities for us to accelerate the realization of those investments through factoring sale or refinancing. In fact, we are now in advanced discussions relating to the sale of that asset, and we anticipate that closing before the end of this year. And finally, we distributed over AUD 100 million to investors in our funds that will accelerate the time at which shareholders will receive distributions under our first generation Fund Vehicles Fund 1, 2 and 3. During the first quarter of FY '23, we reported AUD 30 million income recognized from investment completions, AUD 69 million of commitments and a 4% growth in estimated portfolio value to AUD 28.4 billion. Pleasingly, we have seen an acceleration of activity in the second quarter as the Northern Hemisphere has returned from summer holidays. In the last two months, we've made further commitments of AUD 84 million, resulting in a total of AUD 153 million of commitments for the financial year-to-date. Overall, the commitments made for the first five months of FY '23 represent 28% of our AUD 550 million FY '23 commitment target. Our current pipeline of agreed term sheets with clients represent approximately AUD 270 million of indicative opportunities across 36 investments. In June 2022, we launched our Fund 8 vehicle focused on investing up to EUR300 million in global enforcement opportunities. We have exchanged terms with multiple parties and expect the associated raise to be finalized in principle by the end of 2022. AUD 4 million of new investment commitments across 4 matters earmarked for this fund are being warehoused on our balance sheet. Further to this, we have 8 agreed term sheets representing AUD 33 million of indicative investment opportunities. It is with great pleasure that we advise the appointment of Hannah van Roessel as our Co-Chief Investment Officer for EMEA, effective in January 2023 and to be based in Amsterdam. Hannah has been with us for over nine years and will work with Raymond van Hulst in his capacity as Co-CIO of EMEA. Hannah brings with her extensive experience in global enforcement and more recently, establishing our U.S. capabilities from New York. Finally, as our Chairman noted, at today's AGM Non-Executive Director, Michael Bowen, will stand down from the Board after 21 years of service. I would like to join Michael and others in thanking Michael personally and on behalf of the entire team of Omni Bridgeway. Michael has been a wonderful contributor to the Board process, both fiercely independent and wonderfully strategic. It's unfortunate that we have lost him to Board process, but wonderful that we'll be able to call upon his corporate knowledge in his role as a partner of Thomson Geer. Now turning to the future; we perceive there will be opportunities for investments created by the prevailing macroeconomic conditions, both because of the demand for our capital when traditional sources of capital are constrained and because litigation risk is usually elevated during periods of economic stress. Whilst our underlying investments are uncorrelated, there is also a countercyclical trend. In terms of near cash -- near-term future cash generation, we anticipate most of our revenue will be created from completions in first-generation funds as we progress through the harvest phase. Our funded portfolio has AUD 3.6 billion of implied embedded value. If this was realized today in line with past performance, the provisional attribution to OBL reflected the funds distribution waterfalls is approximately AUD 1.2 billion before performance fees. The remaining AUD 2.4 billion is attributable to our external fund investors. In the absence of material delays in resolutions of matters or very significant increases in adverse outcomes, we're anticipating solid returns commencing in FY '23. At a group level, we have identified the key goals for FY '23 to include generating at least AUD 550 million in new commitments for investments, which is a 20% year-on-year growth. Extending Funds 4 and 5 by $1 billion and fully implementing Fund 8 to grow FUM to approximately AUD 4.5 billion. Continuing to innovate with new capital and risk management tools to enhance risk-adjusted returns and improve liquidity, exploring the launch of new funds, moving into new markets in Europe, the U.S. and Asia to maintain our competitive advantage and leadership role in the industry and exploring possible M&A opportunities that either complement or expand on our geographic footprint and capabilities. We are committed to delivering AUD 5 billion in funds under management and annual commitments of AUD 1 billion by FY '25 through disciplined management and financing of high-quality specialized investments in legal assets. And through the achievement of our goals, we're confident of creating value for our stakeholders. Thank you for your time today.

Well, thanks very much, Andrew. And ladies and gentlemen, we'll now deal with the formal business as set out in the Notice of Meeting. And at the close of the formal business, my fellow Directors and I will answer any general inquiries from the floor or via the online platform. And please note, as this is a shareholders' meeting, only those with a yellow or green card may ask questions. The notice of meeting has been made available to all shareholders and all Directors. The only items on the agenda are the 7 items in the notice of meeting following the withdrawal of Resolution 4. And I believe Secretary Resolution 8 is now withdrawn as well. Thank you. In order to participate online, please consult the online meeting guide, which has been made available to all shareholders. Proxy holders will need to register using a username and password, which will have been provided by Computershare prior to the meeting. Prior to voting on a resolution, I will allow an opportunity for shareholders to ask questions pertaining to the applicable resolution. [Operator Instructions] Shareholders are requested to confine questions to matters relevant to the particular item of business. Please note that your questions may be moderated or if we receive multiple questions on the one topic that'll be amalgamated and responded to together. For procedural efficiency, I request that all general questions be left until the formal part of the meeting has been concluded. Secretary, I believe the company did not receive any written questions prior to the meeting. At the conclusion of the meeting, any votes you have placed will automatically be submitted. If you require assistance during the meeting, please refer to the online meeting guide for instructions to contact Computershare support. Please refer to the total number of proxies received. They're on the screen. The proxies are available for inspection. The minutes of the last Annual General Meeting of the company held on 30 November '21, are available from the Company Secretary if any shareholder wishes to inspect them. A table the financial statements of the company for the year ending 30 June '21, together with the Directors' declaration, the Directors' report and the auditor's report. Are there any questions on the financial statements or are there any questions for the auditors in relation to the conduct of the audit? Any questions online? If there are no questions in relation to the annual financial statements, I'll now proceed on the basis that the meeting has received the financial statements, and we'll move on to the resolutions to be put to shareholders today. Resolution 1 relates to the remuneration report. The remuneration report relating to Directors and Executives' remuneration in the financial year ended 30 June '22 must be submitted for adoption by resolution of shareholders. The remuneration report is in the Annual Report, and I confirm the company has received valid proxies in relation to Resolution 1 as shown on the screen. All discretionary votes in favor of the Chair will be voted in favor of the resolution and the directors recommend that shareholders vote in favor of this resolution. I move Resolution 1 as displayed on the screen. Just display that on the screen. Oh, it's above. Thank you. Are there any questions in relation to resolution 1? Any questions online, Secretary? If there are no further questions, I now put the resolution to a vote, and I'll pause for a moment to allow that voting to occur. Based on the number of proxies received from shareholders in favor of adopting the remuneration report and the number of shares held by those in attendance at the meeting, resolution will be, in fact, approved by poll and Resolution 8 will accordingly not be put to the meeting. Resolution 2 relates to the reelection of Karen Phin as a Director of the company. Ms. Phin was reelected by shareholders of the 2020 Annual General Meeting. In accordance with the ASX Listing Rules, Ms. Phin must retire at this Annual General Meeting, and she seeks reelection by the shareholders as a Director. Ms. Phin has been Non-Executive Director since 25 August 2017, and she brings self-evidently a wealth of commercial experience with a track record of building successful businesses. Karen's experience and credentials are set out in the notice of meeting, and I confirm that the company has received valid proxy votes in relation to resolution 2 is displayed on the screen. All discretionary votes in favor of the Chair will be voted in favor of the resolution. And I confirm that the Board, excluding Ms. Phin, supports the election and recommends that shareholders vote in favor. And I move Resolution 2 as displayed on the screen. Are there any questions? Any questions online? Thank you. If there are no questions, I will now put the resolution to a vote, and I'll pause for a moment to allow that to occur. We now move to Resolution 3. Resolution 3 relates to the issue of tranche to deferred consideration to the sellers of the European Omni Bridgeway business. The company is seeking shareholder approval under Resolution 3 for the issue of up to 4.833910 shares to the sellers in satisfaction of Tranche two deferred consideration of EUR9.066 million. I confirm that the company has received valid proxy votes in relation to resolution 3, as displayed on the screen. All discretionary votes in favor of the Chair will be voted in favor of the resolution, and I confirm the Board supports the issue of Tranche 2 deferred consideration to the sellers and recommends that shareholders vote in favor of this resolution. Are there any questions? No questions online. Okay. If there are no further questions, we'll put this resolution to a vote, and I will pause again to allow people to vote. Resolution 4, as stated in our announcement to the ASX in 16 November 2022, the Board has withdrawn Resolution 4, noting the notice of meeting was published prior to the applicable reference period for the determination of whether a market value compensation amount was payable. As no such amount is due and payable hence the withdrawal of Resolution 4. Resolution 5 relates to an increase in Non-Executive Directors' fees. Resolution 5 seeks shareholder approval to amend the aggregate cap of Non-Executive Directors' fees to AUD 950,000 per annum. The aggregate cap was last approved to AUD 700,000 per annum at the 2015 Annual General Meeting. As you heard, Michael Bowen is imminently retiring in fact, today and the intention is to appoint one Director fairly immediately, and then a second Director from the Northern Hemisphere, where the average cost is greater for Directors and the company is seeking an increase in the aggregate amount of fees available to be paid to Non-Executive Directors of that AUD 250,000. And I confirm the company has received valid proxies in relation to the resolution as displayed on the screen. And all discretionary votes in favor of the Chair will be voted in favor of the resolution. Resolutions recommend -- the Directors recommend that the shareholders vote in favor of this resolution. And I move the resolution as displayed. Are there any questions? No questions. I will now put the Resolution to a vote. Resolution 6 relates to the approval of indemnified persons, deeds of indemnity, insurance and access and Resolution 6 seeks shareholder approval for the indemnified person, deeds of indemnity, insurance and access. I confirm that the company has received valid proxy votes in relation to that resolution as displayed on the screen. All discretionary votes in favor of the Chair will be voted in favor of the resolution. And the Directors' recommend that shareholders vote in favor of the resolution. And I move Resolution 6 as displayed on the screen. Are there any questions? If there are no further questions, I now put the Resolution to a vote. Resolution 7. Resolution 7 relates to the proportional takeover provisions and it seeks shareholder approval to renew the proportional takeover provisions in the constitution. The proportional takeover provisions provide that the company can refuse to register shares acquired under a proportional takeover bid unless an approving resolution is passed by voters. The proportional takeover provisions will cease to have an effect on 14 February 2023. Accordingly, the Directors request that shareholders approve the renewal of those provisions for a further three years. I confirm that the company has received valid proxy votes in relation to Resolution 7 as displayed on the screen. And all discretionary votes in my favor will be voted in favor of the Resolution and the Directors recommend that shareholders vote in favor. I move the Resolution as displayed on the screen. Are there any questions in relation to Resolution 7? There are no questions. I now put that Resolution to a vote. Okay. As it wasn't necessary to put Resolution 8 to the meeting that actually concludes the formal items on the agenda. Can I ask all votes now to be finalized as the poll will be closing shortly? And can I ask Computershare to collect any votes within the room, and we'll take a short break while that happens. As all the votes have now been collected, I'll now close the meeting and the poll. The announcement of the results of the Resolutions conducted by the poll will be notified to the ASX and will be placed on the Omni Bridgeway website shortly following the close of the meeting.

I now invite shareholders to ask any general questions. Two questions. That livens up the meeting. Yes, madam. Just -- the people online won't be able to hear if you don't have a microphone.

I'm just saying, as I was leaving to come here, I just briefly heard this half a sentence that the government has to refund some sort of COVID fines that happened. So can you expand on that? And how has your company been involved in any of these COVID-class actions or class actions relating to COVID around the world? Just wondering.

Do you like to take that one, Andrew?

Sure. We haven't been involved at all with respect to the refund of those fines that were imposed in New South Wales. In relation to other COVID-related class actions, we haven't been involved with any of those either in Australia or globally. We have some claims that are claims against insurance companies that are on behalf of specific parties that relate to COVID-related issues.

Okay. So I guess the other thing is do you anticipate any class actions from the COVID issue at all? Because I know that in October, towards the end of October in New York, there was a class action where they -- workers who were sacked because they didn't want to tack the COVID vaccine. And now that they had to be what's the word the judge used? Anyway, the employee have to rehire them and pay back all this salaries and whatever because of that. So what is your awareness of this sort of class action cases around the world?

We're aware of them. We're not participating in any of them.

My question is probably to Raymond. Given the increasing globalization of the company, could you comment on currency and how you see it -- how we're looking at it and perhaps how you're thinking about it for the future.

Well, you're talking about foreign exchange risk. That might be a better one for Guillaume, I think, who's the CFO.

Yes, we are looking at the risk related to foreign currency. It hasn't been very large to-date, but we are looking increasingly at this as we grow and are exposed to currencies around the world.

Andrew, when utilizing secondary market transactions, what sort of returns are you sacrificing by doing so?

There's always a discount to the absolute return that we'll be able to achieve if we wait for duration. But it's usually on a net present value basis. We will assess the risks of the individual investment and ensure that what we're trying to achieve is the optimum IRR outcome, but there is definitely a discount. They do vary, and it's hard to tell because the two that we have sold, we haven't actually completed yet, so we don't know. It might be zero. If we lost the case, you've sacrificed nothing and, in fact, just mitigated the completion risk. If they succeed to the fullest extent possible, then we have definitely incurred a discount from the absolute return but achieved an NPV gain.

And so a follow-on from that, what sort of returns is the counterparty looking for when they take on that investment themselves?

Look, they do vary. They're mature investments, but they are still risky investments as litigation risks. So one would anticipate that they're targeting somewhere in the mid-teens and above as a type of IRR type return.

It's a much lower IRR than you're typically after, and that's because they've got increased data points around that to make those decisions at that point in time.

Later in that case -- in the case cycle -- the duration is much shorter. Yeah, correct.

I think the other thing is, and Andrew will jump in if I get this wrong. But the other thing is -- as we saw last through COVID, duration is a risk for us and the ability to have these markets to manage that duration risk and our cash flow is terribly important as a risk mitigant for the business. And if you're going to have a viable secondary market, everybody needs to get a bit of a win. But we have quite -- or a very sophisticated fair value model, and we use that model and we have a view about the returns that we want to get. And then, of course, it gets down to a negotiation with the counterparty who've got their own view. That sort of cover it. Yes, ma'am, we just need the microphone, sorry.

I'm just wondering, with terms of the cases that go to court, has the efficiency or proficiency rate improved, like as they're getting the cases to judgment quicker, to conclusion, is it happening now at all?

I'll give that one to you, Andrew.

Sure. So what we have seen during the course of COVID was a slowdown in some jurisdictions, but not in all jurisdictions. But what we've seen since in the last couple of years since COVID issues have relaxed is an acceleration of the process. It hasn't returned fully to 100%, but it is getting close. There is still a bottleneck that needs to be worked through.

Yeah, I understand that. That's what I'm asking is like in some cases can take like five, six years, are they being quicker than to say instead of five, six years. Can the cases be solved or come to a conclusion between the two parties sooner? Do you get that sort of a feeling or awareness?

Necessarily, no. I think there's been an appetite to engage now that courts have reopened because the pressures for settlement have increased. But there hasn't been a wholesale change in approach that we've seen a reduction in duration.

Okay. Another question is about the dividend. When -- at what point do you see that you can start to distribute it again?

Well, I think as I said, I think in my speech, there's various ways we can deal, we can manage our capital. One might be a dividend, another one might be a buyback. And also another good use of capital might be investing in our new funds. So depending on those waterfalls and the cash flows that come in because to your point about completions, they can be lumpy because the defendants essentially decide when they want to resolve the matter unless it goes to court. And then you can have appeals as well. So depending on our secondary market sales, the way we're managing our liquidity. But certainly, the Board is acutely aware that we need to manage our capital efficiency. And part of that is the way we've developed our second and third generation funds and also the new finance facility with a counterparty, which gives us much more freedom in terms of how we deal with spare cash.

Does that cover it Andrew? All right. Okay. Any questions online?

There are no online questions.

All right. Well, look, thank you very much for attending, everybody. It's great after two years of virtual meetings to see people in person. And so we'll close and please join us for a cup of tea and a chat afterwards. Thank you, and good morning.