This presentation was used to inform and educate hedge funds on TPLF a few years ago. The bottom fell out of most of the hedge funds that were in my pipeline so I decided not to quit my day job.

1. High Yield Litigation Bonds for
Mis-Sold PPI and MPPI
Capturing Growth in Adverse Times
On-line Informational Presentation
Ian Finlayson
Institutional Sales Manager
ADJUST
Law Capital
Chris Miller
Consultant / TPLF Investment Strategy
Presented By:

2. ADJUST
Law Capital
Background
 Between 2006 and 2011 numerous financial firms were fined
by the Financial Services Authority (FSA) for mis-sold PPI
 In April 2011, the Royal Courts of Justice imposed standards
requiring banks to compensate customers who were mis-sold
Payment Protection Insurance (PPI) retrospectively
 Claims for mis-sold PPI can be processed as far back as 6
years. MPPI can be processed as far back as 12 years
 On 9 May 2011, the British Bankers‟ Association (BBA) chose
not to appeal against the High Court‟s payment protection
insurance (PPI) judgment

3. ADJUST
Law Capital
Background
 The amount paid out for
mis-sold PPI since January
2011 is £5.9 Bn
 The FSA estimates that
issuers and advisers
overcharged customers by
more than £1.4 Bn a year
PPI Claims Paid (in Millions)
 Mis-selling happens in all countries – there are several,
interconnected reasons why the UK industry has been made
to pay so heavily for it
0
100
200
300
400
500
600
700
800

4. ADJUST
Law Capital
Common Examples of Mis-Sold PPI
The high court has ruled that PPI is mis-sold when
Claimant:
 Did not Understand The Terms
 Was Told It Was Compulsory
 Did Not Have a Full Time Job
 Had Certain Medical Conditions That Made Them
Exempt
 Was sold Under False Pretences
 Having to Opt OUT of the Policy (online)
 Was Already covered elsewhere
 Paid Up Front

5. ADJUST
Law Capital
Scale of the PPI Reclaim Market
 PPI Payments Hit over £1.9bn in 2011 according to FSA
 Following the High Court ruling
on 6 April 2011, Barclays,
Lloyds, HSBC, RBS and others
have collectively set aside over
£11Bn
 Almost two thirds of all the
disputes sent to the FOS relate
to mis-sold PPI
 Complaints totaled 85,562 between January and June - an
increase of 75% compared to the final six months of 2011
 Average payout per customer is £2,400

6. ADJUST
Law Capital
PPI complaints have increased substantially
following the April 2011 ruling…
Complaints to the Financial Ombudsman Service (FOS)
surged by 50% in first half of 2011, with PPI complaints
accounting for over 60% of total complaints in the period
0
50000
100000
150000
200000
250000
300000
350000
2007 2008 2009 2010 2011 2012 Q1 2013 est
Banking and Credit Investment and Pensions Insurance ex. PPI PPI

7. ADJUST
Law Capital
Third Party Litigation Funding (TPLF)
 Nothing new (Insurers, Banks, Unions, Legal Aid
Funds, etc.) In the US, banks, special TPLF funds and
hedge funds are investing substantial capital
 Australia has been using TPLF for over 15 years; the
UK since 2005; emerged as an asset class in the US in
1997 and has since become a growing phenomenon
for mass tort cases outside the US
 In 2004, nine lenders specializing in litigation loans to
tort plaintiffs formed a trade association known as the
American Third-Party Financing Association
 Today, basically all top law firms are using or
assessing external funding for litigation or arbitration

8. ADJUST
Law Capital
TPLF Has Entered the Mainstream
 The market in the US and UK for litigation financing is
estimated to exceed $1 billion in 2012 1
 TPLF is categorized as an “uncorrelated investment”
because the returns are not correlated to the price
movements of the stock, bond, commodity or traditional
markets
 Current economic conditions have provided fertile
ground for the growth of TPLF. Returns are typically high
regardless of the performance of traditional asset classes
 TPLF has emerged worldwide as a way to increase
access to justice, “level the playing field” and mitigate
the costs and risks involved in pursuing claims
1. N.Y.C. Bar Ass’n Comm. on Prof’l and Judicial Ethics, Formal Op. 2011-2 (2011)

9. ADJUST
Law Capital
Fund Strategy
 Adjust Law Capital aims to create a fund valued at
£200M+
 The Fund will enable Adjust Law Solicitors to acquire
and pursue 150K to 200K cases
 The average claim value of a case that Adjust Law
Solicitors will conduct is £4,000
 Each case has an average net return to Adjust Law
Solicitors of £3,500

10. ADJUST
Law Capital
Operating Structure
 All cases are screened by a Ministry of Justice (MoJ)
regulated claims referral company to ensure they meet
strict vetting criteria
 After The Event (ATE) insurance policy enables Adjust to
recover court fees, disbursements and other costs in the
rare event of a lost case
 No up front fee for client - client receives 100% of their
award in every single case
 Adjust Law Solicitors have developed a proprietary
software system that allows the practice to process a
large volume of cases in a rapid and cost efficient
manner

11. ADJUST
Law Capital
Transaction Structure
Claimants
Assets
Purchased
Funding
Claims
Settlements
£ Return
£££
Litigation
MoJ Compliant
Claims Registrant
Adjust Law
Solicitors
Adjust Law Capital
Fund
Claim Assets >£800M
InvestorInvestor Investor
Adjust Law Capital
Fund
Adjust Law Capital
Fund
£200M+
Adjust Law Capital
Fund
Claim Assets >£800M

12. ADJUST
Law Capital
Risk Factors
Risk Mitigant
Validity of Claim/ Win Rate All claims purchased from MoJ regulated claims
management company (CMCs); all cases meet
strict vetting criteria. Win-rate = 98%
Possible obstacles to
recovering award
To maintain compliance with the FSA banks
have collectively set aside over £11bn in
provisions for those who were mis-sold PPI
Reduction in claims due to
either competition with
CMCs or self processing of
claims
Complaints are mounting against many CMCs
that are not regulated by the MoJ and many
have been forced to shut down. Less than 50%
of claimants self process claims
Expense of Lost Cases/
Negative Returns
After-the-Event Insurance eliminates any
negative return due to any lost cases

13. ADJUST
Law Capital
Efficiency
 Average duration of 9
months to judgment
 Trial costs cause last
minute settlements
 Use of mediation
increases probability of
early settlement
 Use of MoJ registered CMCs and Adjust Law Solicitors‟
bespoke software ensures a 98% win rate
 ATE Insurance mitigates loss

14. ADJUST
Law Capital
Total Settlement
= £7,700
Investor
Adjust Law Capital Fund
Appellant
Investment example
of £10M
Adjust acquires and processes
10,000 pre validated PPI Claims
Cases at a cost of
< £1,000 each;
£600.00 to purchase claim
£400.00 for processing
fees, e.g: Court Filings & Brief
to Senior Counsel
Average Claim
£4,200.00
Adjust Law has 98%
Win Rate
Solicitors
Professional
Indemnity
covers
investment
capital
ATE
Insurance
covers court
fees in the
event of a
lost case
Claimant Paid Out
From Successful Claim
100% of initial claim
£4,200.00
Adjust Law Solicitors
Court awarded legal
costs to Adjust Law
Group average
£3,500.00 per claim
Claimant
Invested capital
£I,000.00
Int @ 9.1%pa £91.00
TOTAL: £1,091.00
100% of initial claim paid. No
Upfront fees or success fees.
£4,200.00Balance = £2,410.00
Less Ave Costs; £2150.00
Per Case Profit = £260.00
Example Investment Flow
£1,091.00 X 10,000 Cases
= £10,910,000.00

15. ADJUST
Law Capital
Example of £10M Investment
(Not Compounded)
Year 1 Year 2 Year 3 Year 4 Year 5 ROI
Guaranteed 6.60% 10,660,000 10,660,000 10,660,000 1,980,000
Quarterly 8.70% 10,870,000 10,870,000 10,870,000 10,870,000 10,870,000 2,610,000
Annual 9.10% 10,910,000 10,910,000 10,910,000 10,910,000 10,910,000 2,730,000
£0 £500,000 £1,000,000£1,500,000£2,000,000£2,500,000£3,000,000
Guaranteed 6.60%
Quarterly 8.70%
Annual 9.10%
1,980,000
2,610,000
2,730,000

16. ADJUST
Law Capital
Guaranteed 6.60%
Quarterly 8.70%
Annual 9.10%
£2,113,555
£5,175,665
£5,456,948
0
2
4
6
8
10
12
14
16
Year 1 Year 2 Year 3 Year 5
Guaranteed 6.60% 10,660,000 11,363,560 12,113,555
Quarterly 8.70% 10,870,000 11,815,690 12,843,655 15,175,665
Annual 9.10% 10,910,000 11,902,810 12,985,966 15,456,948
£Millions
Example of £10M Investment
(Compounded)

17. ADJUST
Law Capital
The Firm
 Offices in Liverpool and Manchester
 Regulated by the Solicitors Regulation Authority (SRA)
 Incorporated May „06; bought out by the current
directors in ‟09
 Specialist in securing successes against high street
lenders, including Lloyds Banking Group, Barclays,
HSBC, Santander, RBS Group, and sub-prime lenders
and finance houses such as Welcome
 Significant experience operating in Mis-Sold PPI market,
settled 541 cases by early May 2011 with 539 having
successful outcomes for claimants

18. ADJUST
Law Capital
The Board
Colin Downie has 17 years of post qualification experience as a
solicitor in private practice. He trained with Pannone Solicitors in
Manchester and after qualification has gained considerable
experience in a wide variety of litigation and as an advocate. Mr
Downie is the Chief Executive Officer of Adjust.
Mike Wilson qualified in 2001 having trained with Paul Rooney &
Co, a leading litigation practice. He worked with Colemans
Solicitors in Manchester specialising in personal injury claims and
has worked closely with Colin Downie since 2003.
David Brown has practised in law since 1994 and in that time has
gained considerable experience and expertise in different areas of
litigation. He has brought multi Claimant proceedings in consumer
credit cases against a wide variety of banks and has represented
Government agencies in litigation proceedings.