Welcome to the Litigation Capital Management Limited results presentation. Throughout today's recorded meeting, attendees will be in listen-only mode. Questions are encouraged. They can be submitted at any time using the Q&A tab situated on the right-hand corner of your screen. Just type your question and press Send. Before we begin, we'd like to submit the following poll, and I'm sure the company will be most grateful for your participation. I'll now like to hand over to the management team. David, Patrick, good morning to you both.
Good morning, everybody, and good evening to those who are joining in Australia. Patrick Moloney is my name. Most of you will know me as the CEO, and I'm joined by David Collins, the CFO. I will deal with the first part of our presentation as to where we're up to, and David will present with respect to financials. Investors will probably observe that this will be a slightly shorter presentation than we're used to giving. That is principally because of the position the company is in currently. We are very much focused upon management of the existing portfolio, and we are not taking on any new investments at this time. I want to start with performance.
What we're really seeing flowing through the financials of LCM now is the result of two large losses at trial, which have occurred, you know, in previous financial periods but are really being taken up in the financial accounts now, which David will talk to, but have really sort of impacted pretty significantly upon net assets. Those two large and rather concentrated investments which we're unsuccessful on have really driven that outcome in this financial period. That's really detracted from what we look at with LCM on a longer term basis, which is a historically very high-end performance in terms of win-loss ratio and the underlying financial metrics which came with that.
I'll talk a little bit about, you know, what maybe has interrupted that otherwise really strong performance. It's not really just LCM who's suffering in this market as well. I mean, I don't want to detract from presenting LCM's position here, but this is really a symptom that is, you know, flowing right across the whole sector at present. You know, we'll see one of our listed peers presently is suffering from a really concentrated position that it had invested in, which has recently been overturned on appeal.
You know, if I look at some of the non-listed peers that we have, you know, in all the markets in which we operate, including the U.K. and Asia and in the United Kingdom, we are seeing quite a bit of contraction in this industry. You know, largely that is a symptom of what LCM is really dealing with now. I want to now turn to, you know, the proactive actions that we have taken as management. As investors will know, we launched a strategic review in September of last year. That strategic review continues. The strategic review has identified a couple of opportunities, which we are currently working through. We are not at liberty, due to confidentiality obligations, really to go and delve into the detail of those opportunities.
There are two, at least two, real and tangible opportunities, which we are working on, together with our secured credit provider. In addition to that, we have secured covenant waivers, and those covenant waivers have allowed us to continue to operate, to continue to manage, and to continue to invest into the portfolios of investments that we currently manage. Not only have we secured covenant waivers, but we've secured an extension on our existing capital facility, so that we can do that. For my part, I've returned to a very hands-on position now, in terms of case management. I'm working closely with our investment managers in respect of each and every investment that we have as part of our portfolio.
As a consequence of that, we've had to make some fairly tough investment decisions, and we've had to re-underwrite the entire portfolio in terms of risk and in terms of prospects of success. In respect to undertaking that exercise, we have had to elect to not pursue certain investments, and we are working our way out of certain other of those investments. There's very much a rebalancing exercise going on. Now, that is not something that can be achieved quickly. It's something that is achieved over a period of time. We've seen some of the consequences in relation to that. One of those is the Gladstone class action, which we had discontinued our funding in some time ago now, but that is now hitting our balance sheet. David will talk more about that.
In addition to that, we've reduced our operating costs by about 50% so far, and we are really focused upon our core team of investment managers. That core team of investment managers was really responsible for our historic track record and performance. In terms of progress to date of that strategic review, it might seem to investors from the outside that not a lot is happening in respect of that. There is an enormous amount of work going on behind the scenes, an enormous amount of activity and cooperation between ourselves, our capital provider in respect of endeavoring to strike a balance between the interests of parties, including equity where we can seek to recapitalize LCM, and if not, we move into a process of runoff.
That process is taking more time than what we would like, but it is necessary, and you know, we are pretty hopeful that that is gonna bring about a successful outcome whereby we inject additional capital into LCM, and we're able to start to rebuild LCM's balance sheet and its portfolio more widely. When we talk about that strategic review process, it's at an advanced stage. We hope to be able to engage more fully with the interested parties and be in a position where we can report back, you know, hopefully earlier than the end of the next quarter, but certainly by the end of the next quarter.
There's constructive dialogue and a significant degree of cooperation occurring between executives and the management team and our lenders throughout this process. I've got to say that, you know, there's a range of outcomes that could eventuate in respect of this, and we are, you know, reliant upon debt covenant waivers and a continuation of the debt facility, and that is something that represents some risk. So far, we've been working very cooperatively, and there's no indication whatsoever at this stage that capital will still not be forthcoming and debt covenant waivers will not be forthcoming, but it does represent risk.
In the absence of being able to negotiate an outcome with the introduction of capital that is satisfactory not only to the board, taking into account interests of equity participants, but also our lender, we will have to consider and probably move to a lean runoff model in respect of the existing portfolio. All of those options that we're looking at are not without risk, but I can say from my perspective and from the executive's perspective that we are pretty positive about what the opportunities are. We're now gonna move to financials, and then beyond financials, we wanna move as quickly as we can probably to Q&A, and I'll hand over now to David.
Good morning, everyone. I'm gonna start on slide seven, which just gives a summary of the investment activity in the period, and then that filters through to the P&L balance sheets and cash flow. I mean, as Patrick set out, the second half of the 2025 calendar year, which is the first half of our financial year, was a very challenging period for LCM. On the left-hand side, you can see we had four investments conclude in the period. There's one small win and then three losses. Additionally to that, we had an adverse cost order on the Queensland electricity claim that exceeded the level of ATE insurance protection that was in place. We announced that on the 24th of December. Furthermore, we had two other losses in the period, both of which are undergoing appeal.
Then post-period end, we've had one small win and two small losses as well. It's been a very challenging period for LCM. In this period, we're focusing on the second half of last calendar year, which is the first half of our financial year. Really, the 2025 calendar year in total was a very challenging period. On the right-hand side, you can see the position of the book now in terms of ongoing investments. 46 ongoing investments as at 31 December 2025. If we move now to the P&L on slide eight. Rather than talk through sort of line by line, if we just think at a high level. If you look about halfway down the P&L, you see the total income or total loss for this period, which was AUD -106 million.
As Patrick mentioned, that was driven really by two large losses. They were announced, I think, on the 15th of September and the 1st of October last year. Also the adverse cost loss, which we announced on the 24th of December. Of that AUD 106 million, I think about AUD 87 million or AUD 88 million of that is coming from those three cases. We had a number of small, smaller losses as well. The only other item that I would draw to your attention on the P&L above the total income result is the second line. Concluded investments, performance fees on third-party capital. You'll see that number is AUD -6.6 million in the period.
That is the performance fees that we had accrued for on the large Polish case, where we were anticipating earning performance fees on the Fund I capital that had been invested into that case. In light of the losses that we've suffered and the sort of deterioration in the performance of Fund I, we've effectively reversed the performance fees that were previously recognized. Now we do not anticipate earning performance fees on that investment, but we still anticipate LCM receiving its 25% share, which can be, you know, still a very material amount. As we go down the P&L, operating expenses you'll see have reduced significantly, AUD 6.1 million in the period.
As you recall, the operating expense run rate that LCM was on sort of prior to getting into this period of difficulty was around AUD 20 million per annum. The actions that we took, which Patrick alluded to in terms of reducing OpEx, brought that down to an annualized run rate of AUD 10 million per annum. If I break out the operating expenses, the underlying expenses there are around AUD 5 million for the first half. In line with that AUD 10 million prior guidance. We have had some exceptionals of AUD 1.1 million in the period. About half of that relates to essentially the redundancies that we implemented in the summer of last year, and most of that was simply paying people's notice periods.
We've also incurred a little over AUD 300,000, and that's the advisor fees on the strategic review that we're running. The underlying OpEx rate, you know, on an annualized basis is around AUD 10 million. As, again, as Patrick mentioned, the backup plan, if the strategic review does not produce a deal, is that we will go into a run off model and reduce the operating expenses further. If that is implemented, then we think the annual OpEx rate will come down to AUD 5 million. Effectively a quarter of what the company was operating at, call it 18-24 months ago. Yeah, looking down the P&L, very challenging period, and that's produced a large net loss in the period of AUD 108 million.
If I move now to the balance sheet. You can see the impact of that loss on net assets. Obviously this is what's driven the very meaningful drop in the share price. Net assets have fallen to around AUD 6 million in the period. At the bottom of that, of this slide, you can see the fair value multiple of invested capital, which is now 0.7 x the cash invested. I think the impact on net assets for LCM has been somewhat exaggerated by our move to fair value accounting. When I joined the company about 18-24 months ago, the fair value MOIC of the assets at that point in time was around 2.5 x cash invested.
Now, what we've experienced since is a lot of losses, and as you know, we now value cases that have lost and are under appeal at around 50% of cash invested. Therefore the quantum of capital invested into cases that are now under appeal is the reason why the fair value MOIC across the book is 0.7x. In general, you know, we've evolved our fair value accounting approach where now the approach is essentially that we don't recognize fair value uplift on cases prior to judgment. If you think about it, fair value accounting is trying to approximate the market value, and while the secondary market for selling litigation funding assets is relatively thin, there isn't really much evidence out there that you can sell cases prior to trial at a premium to cash invested.
We've sort of evolved our fair value accounting approach, and now we've got a, you know, a significant quantum of capital that are cases that are under appeal, and those are held at around 50% of cost. Then other pre-judgment cases, the general rule is that they will not be marked up until you've got a positive outcome in the case. That's the reason why the fair value multiple of invested capital has came down quite significantly, over the, let's say, the last 18 months. If I move now to the cash flow statement. The last 12 months for LCM have been really challenging, right? There's been a lot of cases that we were sort of hopeful and positive on that have lost. As a consequence of that, we haven't had much cash coming into the business.
You can see in the first half of our current financial year that we had cash generated from concluded investments of AUD 1.4 million. That's that small single win I mentioned earlier on. If you actually look over the calendar year, the twelve months to 31 December, the cash generated from concluded investments was only AUD 5 million over that entire period. That lack of cash coming into the business, while there's still a lot of cash going out into funding the existing investments, is the reason why the net debt of the company has grown so rapidly. You can see the net debt position is now AUD 92.4 million. If I was to give you that position as at today, 31 March, it's increased further to AUD 123 million.
The, you know, the balance sheet challenges that we are in simply reflect the equity and the debt position, right? Net assets is down to around AUD 6 million, while the net debt is now circa AUD 120 million. That's what we are trying to solve for via the strategic review. My last slide is the just to give you. It's a slide I showed, I think, six months ago and maybe even twelve months ago to give you a view of the concentration risk that sits within our balance sheet. This has been our main problem, large cases where a lot of capital was deployed that have unfortunately subsequently lost. This shows you the top 10 largest concentrations.
Just so that you understand the two columns on the right. The global capital invested, that is the sum of total capital invested being LCM shareholder capital, which is actually shown in the right-hand column, plus external fund capital where that's relevant. GAR 1 and GAR 2 are our two funds. When those funds are co-investing alongside our balance sheet, then the global capital invested will be greater than the shareholder capital invested. For this audience, our shareholders, it's the right-hand column which is of most interest because that identifies the shareholder capital invested into cases. You can see that most of the large cases we've now sort of had a result on, and several of them are under appeal. You can see that after sort of number four, there's a real drop-off of concentration risk for shareholders.
A lot of the challenges are somewhat behind us. I would say that the top three cases are all under appeal, and so there is still some value within our balance sheet attributed to those cases. It's around AUD 30 million. Hopefully most of those large lumps are now sort of in the rear view mirror, if that makes sense. With that, I'll hand back to Patrick for the outlook.
If we look now at, you know, what management is focused on looking forward, it's really proactively looking at what happened in the last 12 months and making sure that we, you know, manage going forward to avoid the concentration risk that has perpetuated previously. We've increased the vigor with which we are managing these investments. Most of that is really done on a hands-on basis by me supervising that very closely. We have continued to secure the support from our lender. If we just think about, you know, what that relationship is, the lender's collateral in respect of this is the portfolio which we are managing. We really are sort of both looking at the same outcome here, which is continuing to manage these investments closely, continuing to fund these investments closely through to a successful outcome.
Finally, you know, we're very focused in respect of bringing the strategic review to a conclusion. There is meaningful interest in a capital transaction that could change the way the company looks and the way that the company operates through the injection of additional capital. We're working sort of very closely with all interested parties to achieve that outcome. I think from there, what we'll do is we will sort of move on to questions which investors might have, and that might be the best way to sort of work through specific issues that we might need to discuss.
That's great, Patrick. David, thank you very much indeed for updating investors on this agenda. Please do continue to submit your questions just using the Q&A tab on the right-hand corner of the screen. Just while Patrick and David take a couple of moments just to review your questions, I'd just like to remind you that a recording will be available post today's call. David, as you can see, you've had a number of questions from investors both ahead of today's event and during the presentation. Thank you to everybody for your engagement. If I may just hand back to you, David, and we'll pick up from you then. If I could ask you to read the questions, that'd be great.
We've got a number of pre-submitted questions which we will start with. The first two are from sort of long-term shareholders, basically saying what's sort of gone wrong over the last 12 months with cases losing and the drop-off versus the historic win rate. Patrick, I don't know if you want to respond to those.
Yes. Look, I think it's, you know, really we had the outcome of a number of investments which were unsuccessful over the last 12-month period. Really that is a reflection of investing in concentrated investments, you know, which were invested in many, many years before that. I think it's probably not the right thing to say, you know, what has happened in the last 12 months. These. You know, to use an expression, the die was cast for a long time in respect of these investments. Some of those we had to make a tough decision in relation to, such as the Gladstone class action. You know, we're genuinely sort of working very hard now and very focused upon the management of the existing portfolio through to conclusion.
You know, I think that's the way that we look at the last 12-month period.
The next question is: Is there a backup plan in case Northleaf withdraws support? What I'd say on that is Northleaf to date have continued to provide us funding. They've provided us with covenant waivers, and it's really not in their interest at all to withdraw support, right? They're interested in recovering the value of their debt. To date, they've behaved in the way that we would expect. They've continued to provide funding. In terms of backup plan, you know, if the strategic review does not produce new capital, then the plan is to, as we described earlier, move into a, what we call a lean runoff model, where we will take the operating expenses down by another 50%. The annual burn rate on OpEx will be around AUD 5 million.
Again, in that scenario, we would, c an't speak for Northleaf, but we believe they would continue to provide funding to allow the cases to run off through to conclusion. The only point that we would need to reiterate is in that scenario, we would obviously still be reliant on securing future debt covenant waivers from Northleaf. That's important to remember. That would be, you know, that's our current position in terms of the backup plan. The next question is. What is the value added stemming from the assistance of Luminis Partners and what are the costs associated with their services? Patrick, maybe you can take the value added, and then just on the costs.
I think I mentioned in the slides earlier on that to date or in the period, we've paid AUD 300,000 , and that's essentially their fees for managing the strategic review. Sorry, Patrick.
Yes. I think there's two issues there in relation to Luminis Partners. The first one is, you know, Luminis Partners have identified two prospective capital partners here who we are engaged with and who, you know, our lender is engaged with currently. It's really about just moving that forward to consummate, if we can, a transaction which will be for the advantage of all stakeholders. In relation to any retainer, we aren't paying Luminis a retainer in respect of this. We did in the early stages of this. It's really just a success fee which is determinative of a transaction occurring.
Yep. The next question is: What was the rationale for introducing fair value accounting, and basically it sort of identifies the challenges of using that accounting approach to reflect economic reality. I think. Look, the industry has moved to fair value accounting, and the difficulty that you need to sort of remember is the nature of our investments, right? They are binary investments, which means they can either produce a zero or a very big number. I mean, LCM has made north of 8x capital on some of its capital invested, on some of its historic investments. It can produce a very wide range of outcomes. The difficulty with any set of financial statements for a litigation funder is that for each investment, you have to put a single value on that asset at the balance sheet date.
I think the challenges that come from that is what we've experienced in the last 12 months, where you put what you believe may be a conservative value on the investment, and certainly much lower than the potential win if the case is successful. Nonetheless, if you have a bad outcome, you have to write that investment off entirely. You know, in my view, the use of fair value accounting in the sector is going to be this continuous evolution and toning, you know, honing the model over time. As I say, probably one of the big learnings for us over the last 12 months or so is really thinking about cases that are pre-judgment or pre-trial, you know, should you really be marking those up really at all.
I don't think there's much evidence in the secondary market of cases being sold at a premium to cash invested. There's one transaction that I can recall where a book of cases were sold at a premium, but there was a back-end guarantee associated with that deal, and therefore the upfront price is, in my opinion, somewhat artificial. We have sort of learned and evolved the model but, you know, and I think with fair value accounting it's gonna be something continuous. The main challenge just comes back to, in this sector, particularly single case funding, you know, the range of outcomes is so wide, and yet at each balance sheet date, we're required to put a singular value on each investment.
I think in other sectors, you probably don't get anything like that range of outcomes, and therefore the impact of fair value accounting can look more pronounced for a litigation funder if you have a bad run of case outcomes. The next question is: Do investment managers have personal stakes in the company? How high are those relative to their salaries? I mean, as you know, I think Patrick has around a 10% shareholding in the company. The chairman of the company has a 5% shareholding, which, you know, he's acquired with his own money in the market. So there was strong alignment. Then there are some of the longer serving staff also have, you know, shareholdings that are meaningful relative to their salaries.
There has been a lot of sort of staff buy-in to LCM and, you know, therefore staff also participating in the difficulties that shareholders have faced over the last 12 months. The next one is, I'll give this for you, Patrick. The question is: Given the company is trading at a low valuation, can the board give shareholders comfort that transaction capital raise or sale of the business will be conducted on terms that reflect the economic value of the litigation portfolio and that minority shareholders will be treated fairly?
Look, there's no doubt that we as a board at LCM are highly focused upon all of the stakeholders involved in the company, and that includes equity participants. When we start talking about valuation, this really sort of swings right back into what David was saying about ascribing a fair value to the book, and that's really what we're talking about here, is what is the true value of the underlying portfolio here. That is a very, very difficult thing to put one's finger on. Now, if you look at some of the transactions which are listed there and rolled up into that question, you know, would a capital raise be done at a value? I mean, a capital raise would now be done at what I think shareholders would perceive to be an undervalue of the book.
The reality is that the shares are trading on the public market and, you know, shareholders are making a decision about what they regard as being the value of this company. You know, what assurance I can give is the board is highly focused upon making sure that equity participants and, you know, a larger part of the board are equity holders as well, will be treated fairly.
The next one is, can you confirm LCM still writing more cases such as Cadence Minerals? Patrick.
We're not entering into any new financial commitments at present. If we look at Cadence was an investment that we entered into and signed a funding agreement more than 12 months ago. We've just issued a funding confirmation notice in respect of that investment. It's a fund two investment, and it was entered into quite some time ago.
Yeah. On slide seven, where we said there's 46 ongoing investments as of 31 December 2025, Cadence is in there. It was sort of undergoing due diligence, sort of at that period of time. Next question is, with the sort of utilization of the credit facility, how long can LCM keep meeting its ongoing financial commitments? That's back to really what we were saying earlier on. Our lender, Northleaf, has behaved very, very professionally with us during this challenging period. We announced that we upsized the facility from $75 million to $100 million, and they've also provided covenant waivers. Again, it's not in their interest to sort of stop. They're interested in preserving the value of their debt.
While we can't speak for them, certainly my expectation is that the funding, as it's required, will continue to be provided. So we don't foresee any sort of hard stop. The only qualification I can put to that is that that's not within our control. That is entirely their decision, but it's not in their interest to stop funding. The next case is, during the recent earnings call, you mentioned the case that was lost on the 1st of October 2025, the so-called Polish case. Can you tell us more about it? How do you evaluate the probability to overturn it? Historically, such appeals were not largely successful. So what I'd say on that, yes, we announced that on the first of October.
It probably doesn't make sense for us to publicly talk about our strategy in terms of pursuing that appeal. We are following the procedures and seeking permission to appeal on that case. Therefore, rather than talk about it publicly, that's probably the most that we can say. Regarding the losses under appeal, how are you feeling about the prospects for those appeals? Patrick.
Look, I think generally, it's challenging. We've had a couple of meetings now in respect of those.
Sorry, David, there is a little bit of lag on Patrick's line. Just bear with us one second.
Yeah.
Patrick, can you hear us there?
I can, yeah.
Okay. We're just getting a dip in your connection coming through. Just bear with us for two seconds. I'm just going to bring you back in. Thank you. Ladies and gentlemen, just bear with us for just two seconds. Thank you very much indeed. Thank you, Patrick. I'll just request control there, and I'll just bring you back through. Okay. Can you hear us there, Patrick?
I certainly can hear you.
Yeah. Thank you.
Can you hear me?
Carry on, sir. Thank you. I don't know if you wanna just repeat that question, David. Thank you.
Yeah. There was a question around appeals and how we're feeling about those appeals. Look, all appeals have their difficulties associated with them. It's always you're in a much better position if you can be successful at first instance. All that said, you know, we recently concluded the appeal hearing in respect of one of those appeals very recently. We felt pretty good about the way that was received by the court. You know, it's not particularly helpful for me to make predictions about what they'll be just based upon feedback from the bench and the judges that heard that appeal. We're still feeling pretty good about that.
The next case question is, looking at some of your larger case wins like GreenX or the two arbitration wins, have there been any recent developments? Patrick.
I think when we look at GreenX, I think the last development that we had was our success. Has that dropped out again?
I'm gonna keep your camera down, Patrick. Do bear with us 30 seconds, and we'll just bring you back in. Thank you, Patrick. I'll just request control one more time, and then I might just keep your camera off for the purposes of the Q&A. Thank you. Hi, Patrick. Can you hear us? I'm just gonna keep your camera off for the time being, but can you hear us okay? I'm just gonna take your camera, David, down as well, just for uniformity. Just bear with me one second. Patrick, can you hear us in the room? Can you hear us there, Patrick?
Do you want me to take the question?
Yeah, please. If you could just in the meantime.
Yeah.
I'll try and bring Patrick through. Thank you.
Yeah. There was a question on GreenX in terms of, you know, update on recent developments. I think we put out an announcement fairly recently, I can't remember the exact date. On the GreenX case, as many of you will recall, we have two awards. One is under the Energy Charter Treaty, and one is under the Australia-Poland Bilateral Investment Treaty. That's important because to avoid payment, Poland needs to defeat the two awards via the set-aside proceedings, which is a bit like an appeal, but typically set-asides have a very low success rate. The ECT award set-aside took place, I think it was September of last year in Singapore. The you know, the judgment, if you like, has been handed down on that, and we were successful or our plaintiff was.
Our client was successful in that instance. Poland is seeking to appeal that decision. That will be the last stage of that procedure. I think our expectation is that that will conclude probably around Q3. We're very confident that will resolve favorably. There is also a set-aside procedure for the Australia-Poland Bilateral Investment Treaty award, which I understand is taking place in London in October. Again, you know, on our side, we are very confident that that will resolve in our favor. We have had positive developments there on that. Patrick, are you back?
I can hear you.
Yeah.
My screen looks different, but if you can hear me, that's fine.
Yeah. Did you want.
We've taken the cameras off there, Patrick, so we can hear you now, so please go ahead. Thank you.
Yeah. Did you wanna add anything to that, Patrick, on GreenX?
Not really. I think you summed it up there. Look, we've got a very strong judgment in respect to the set-aside at first instance in Singapore. We would be confident that that will be upheld when that is appealed. We expect that that second appeal will be heard, and probably the judgment delivered at or about the same time as the set-aside application will be heard for the first time in the London courts. At that stage, we'll be in a position where we can start to enforce at least that side of the judgment, and hopefully that will bring about a resolution.
Okay. The next question is: Do you expect the case won on the 10th of March to be accretive to your historic MOIC? Patrick?
Look, I think if you look at our running MOIC, there is a slide in respect to this. I think we are running now at about 1.7x MOIC over the last 15 years. If you look at, if you just go back about sort of 12-18 months, we were running a MOIC of about 2.4x, 2.3x, 2.4x. You can see that, you know, that's really a reflection of the losses that we've sustained in the last sort of 12 months or so.
If you think about, you know, David's comments earlier in relation to fair value accounting and the current fair value uplift is 0.7, it kind of coincides, you know, with our running track record over the last 15 years.
The next question is: Have you been required to present your grounds for appeal on the cases that have lost to Northleaf? Does their leniency reflect their confidence in committing further money to those appeals? Obviously, the discussions that we have with Northleaf, it's not just the cases that are under appeal. We, you know, we're in discussions with them around the entire book, and we have their support. There's nothing in terms of those specific cases that is, you know, that is gonna influence Northleaf's behavior. We expect them to continue providing funding to all of the cases in the book. Will shareholders be able to participate in any capital raise? I would just say let's see where we get to. The strategic review has been running, you know, since, I think, fifteenth of September.
We're publishing our results today, the 31st of March. I think that's the last day as an AIM-listed business that we could publish our financial statements for the period. We were hoping to be able to give you a meaningful update on the progress of the strategic review. We pushed it so late because we were hoping to be able to give you a meaningful update on the progress of the strategic review. I think in Patrick's slides, he said that we hope to be able to give you a further update in the second quarter. At that point in time, we'll be able to set out more detail on whether or not there is an equity raise and shareholders' ability to participate in that. But again, as Patrick reiterated earlier, we are interested and focused as a board on trying to protect minority shareholders' interests.
We just need to keep qualifying that statement with we aren't entirely in control of the ball because of the situation with our lender and our reliance on them to continue providing debt covenant waivers. Let's see. Some of these questions are similar to what we've had before. There's a lot of hypothetical questions around an equity raise, which I would just refer you to my prior answer. Has LCM now fully concluded the re-underwrite of its existing case portfolio or is more work being done to reevaluate the prospects of its current cases? Patrick, do you wanna respond to that one?
There's no question that we have undertaken a full re-underwriting of the entire portfolio. I need to stress that is an ongoing process. We do that on a quarterly basis. We look at developments, and we continue to underwrite the risk associated with these investments. The second thing I would add to that is, in circumstances where, you know, you change your view about prospects when you're underwriting, re-underwriting the risk associated with these, it doesn't mean that the only option you've got available to you is to cease funding and therefore crystallize a balance sheet loss in respect to that investment. It's often the case that we will start to negotiate our way out of those.
In respect of some of those investments where we don't have sufficient commitment to, you know, want to invest the full length right through to a contested hearing, we have engaged in a process of trying to manage our way out of that through a negotiated outcome.
The next question says, "In my view, one of the biggest problems of LCM is limited disclosure, especially on the expected pipeline of future verdicts. Are you planning to change anything in your communication in that regard?" What I would say in terms of future verdicts is we've gone through a period where a lot of capital invested has concluded and, you know, unfortunately a lot of that capital has lost. If I look at the rest of the book now, the rest of the book is relatively young, so I don't expect certainly over the course of this calendar year for there to be the level of conclusions that will be anything like what we experienced in the 2025 calendar year. That's probably the first point.
The second point I would say is one of the things that's really hard in this sector is predicting duration, because the legal process is always, I would say, always delays. You always start out these investments and the lawyers tell you 2-3, you know, 2-3 years and it'll all be done. We'll be in a trial in 18-24 months. That just never happens. The you know, the cases are always delayed. You always get trials being pushed back, etc. Duration is a common problem for funders to manage. Therefore it's very difficult for us to say to you exactly this is what's going to conclude in the period.
I mean, we revisit our financial assumptions every six months, and it's a continual process of the investment managers telling us, "Oh, that one's been delayed by another six months. That one's been delayed by another 12 months." It's just a common issue in the litigation sector, and therefore it is very difficult for us to give you know, an accurate sort of timeline in terms of expectation of investments maturing.
I'd just add to that, if we were to give estimates, they would be persistently wrong because, you know, we are trying to predict one of two outcomes here, either a negotiated outcome between two commercial parties over which we don't have control, or alternatively, we're trying to predict the, you know, the period in which a judgment will be delivered on the assumption that that judgment is successful. Now, judges can take anywhere from three months to two years to deliver a judgment in respect of that, and we would get two days' notice or maybe only a day's notice in respect of that. So if you look at our listed peers, none of our listed peers make forecasts in respect of individual investments for single case investments.
For the reasons we just described, it's very difficult if not impossible for us to do that in any sort of meaningful way.
I think there's some questions that are probably not appropriate for us to comment on. Probably the last question is, how have discussions been with investors in Fund I and Fund II, and what's the hurdle rate before performance fees become payable again? Patrick, do you wanna pick up on the discussions and then I can pick up on the sort of hurdle rate point?
Look, we are in constant dialogue with the LPs who are investing in the funds. You know, they have probably not been as impacted in the same way as equity investors because of concentration.
You know, that said, I think that our LP investors are pretty anxious in the same way that we are to you know try and negotiate a situation where you know fresh capital could be injected into this business such that we you know have the confidence that we can say with conviction that we will be able to meet our co-funding commitment with them. You know, I think that they're very supportive of us, but at the same time you know like equity investors would you know like to see more progress in respect of the process that we're undertaking, the strategic review. We are really you know we're pushing that as hard as we can.
Just on the performance fees. To date, LCM has received $29 million of performance fees from Fund I. We have disclosed there's a contingent liability that there is a clawback on those performance fees, and therefore we've disclosed a contingent liability of potentially, call it $12 million-$17 million repayable of those performance fees. That will depend on how the remainder of the cases in Fund I play out. I would say, for Fund I, I would certainly wouldn't expect more performance fees from here. For Fund II, it's still relatively early days in Fund II, so we haven't received any performance fees to date or booked anything. It will depend on how the cases in the book play out in terms of the potential performance fees.
Just as a reminder, the performance fees that we earn. LCM doesn't receive a management fee from the funds. It receives a 25% performance fee on the third party profits, if you like, on fund asset profits, and that's up to a 20% IRR for the fund investors. Above a 20% IRR, it's potentially a 35% performance fee. That's the mechanism in terms of how it works. For Fund II, it's still relatively early days. Thanks.
That's great. David, Patrick, thank you very much indeed. As we come up to the hour, thank you once again to everybody for your engagement as well this morning. David, Patrick, I'll shortly redirect investors on the call to provide you with their thoughts, their expectations, and give you their feedback. Before doing so, I just wondered, Patrick, if I may just come back to you for a couple of closing comments.
Yeah, look, I think, you know, we are grateful to be through 2025 as a calendar year. It's been a very difficult year for LCM and LCM's performance. We, you know, as a company and as a board are very focused upon bringing this strategic review to a conclusion, and we feel optimistic about that. There is real opportunity there to really recapitalize LCM and allow it to go forward for the benefit of all shareholders. You know, we're as impatient as you are about that process, but you know, we are seeing some tangible steps forward in respect of that. I just finally say, we're not reticent to update the market. We're just constrained by confidentiality obligations whilst that process is on foot. It's been pretty difficult for us to actually update equity investors.
As soon as we're in a position to do so, we will.
That's great. David Patrick, thank you once again for updating investors. If I could please ask investors not to close this session, as we'll now redirect you for your feedback. On behalf of the management team of LCM, we'd like to thank you very much indeed for attending today's presentation and wish you all a good rest of