Table of Contents
Table of Contents 4
Highlights 6
Chairman’s and Chief Executive’s Review 7
Introduction 7
Financial Review 7
Dividend & Buyback 8
Annual General Meeting 8
Review of Activities 9
Introduction and Overview 9
Global Investment Environment 9
Livermore’s Strategy 11
Review of Significant Investments 12
Events after the Reporting Date 18
Litigation 18
Report of the Directors 19
The Board’s Objectives 19
The Board of Directors 19
Directors’ responsibilities in relation to the consolidated financial statements 20
Disclosure of information to the Auditor 21
Substantial Shareholdings 21
Corporate Governance Statement 22
Introduction 22
The Board Constitution and Procedures 22
Board Committees 22
Remuneration Committee 22
Audit Committee 22
Communication with Investors 23
Internal Control 23
Independence of Auditor 23
Annual Report 2011
4
Remuneration Report 24
Directors’ Emoluments 24
Directors’ Interests 24
Interests of Directors in share options 25
Share Option Scheme 25
Remuneration Policy 25
Review of the Business and Risks 27
Risks 27
Share Capital 27
Related Party Transactions 28
Report of the independent auditor to the members of Livermore Investments Group Limited 29
Consolidated Statement of Financial Position as at 31 December 2011 31
Consolidated Income Statement for the year ended 31 December 2011 32
Consolidated Statement of Comprehensive Income for the year ended 31 December 2011 33
Consolidated Statement of Changes in Equity for the year ended 31 December 2011 34
Consolidated Statement of Cash Flows for the year ended 31 December 2011 36
Notes on the Financial Statements 38
Shareholder Information 84
Registrars 84
Website 84
Direct Dividend Payments 84
Lost Share Certificate 84
Duplicate Shareholder Accounts 84
Notice of Annual General Meeting 85
Corporate Directory 88
5
Highlights
• Net Asset Value per share - USD 0 57 (December 2010: USD 0 50, June 2011: 0 57) - representing
a net increase of 14%
• NAV uplift driven by strong performance of credit portfolio (38% net performance) partially
offset by write downs on legacy private equity investments
• Successful value generation from investing in the US loan market
• Wyler Park property in Bern, Switzerland fully let
• No material developments in the private equity portfolio
• During 2011, the Company purchased 27,497,119 shares to be held in treasury
Annual Report 2011
6
Chairman’s and Chief Executive’s Review
Introduction
We are pleased to announce the consolidated financial results for Livermore Investments Group
Limited (“Livermore” or “the Company”) and its subsidiaries (together “the Group”) for the year
ended 31 December 2011
The year-end NAV was USD 0 57 per share (2010 NAV: USD 0 50 per share) Net profit for the year
was USD 5 4m (2010 Net Profit: USD 8 5m) The portfolio remained well diversified across sectors
and geographies with increased exposure to fixed income securities and senior secured loans as
compared to 2010
During the year, the Group performed well generating an increase of 14% on a NAV per share basis
The positive performance is attributed largely to the income from the US credit portfolio partly
offset by certain write-downs on legacy private equity investments Interest and dividend income
from the financial portfolio totalled USD 18 9m
Wyler Park, our investment property in Bern, Switzerland performed well, generating over CHF 5 4m
in net rent during the year All of the 39 apartments and commercial spaces are fully rented
There were no significant developments in the private equity portfolio during the year
Financial Review
The NAV of the Group at 31 December 2011 was USD 145 4m On a per share basis, NAV increased
by 14% Net profit during the year was USD 5 4m, which represents earnings per share of USD 0 02
Administrative expenses excluding provisions for legal and other matters were USD 5 3m (2010: USD
3 2m), representing 3 7% of the average NAV Administrative costs include USD 0 794m one-time
expense related to legal expenses in connection with the income received from the settlement of
the Uniplay litigation (note 30)
7
The overall change in the NAV is primarily attributed to the following:
31 December
2011
US $m
31 December
2010
US $m
Shareholders’ funds at beginning of year
Income from investments
Other income
Realised gains on investments
Loss on impairment on investments
Unrealised gains on investments
Unrealised exchange (losses) / gains
Administration costs including provisions for legal cases
Finance costs
Tax charge
Increase in net assets from operations
Purchase of own shares
Adjustments for share option charge
Shareholders’ funds at end of year
142 3
24 6
3 0
0 2
(9 9)
4 5
(0 2)
(5 0)
(5 3)
(1 7)
10 2
(7 1)
-
145 4
128 6
15 2
-
0 6
(6 3)
5 6
5 9
(1 0)
(3 5)
(0 8)
15 7
(2 0)
-
142 3
Net Asset Value per share
US $0 57
US $0 50
Dividend & Buyback
Given the discount between the market price and the NAV, the Board recommends continuing the
share buyback as the most efficient means to generate value for shareholders No dividend was
declared for the year ended 31 December 2011
During 2011, the Company purchased 27,497,119 shares to be held in treasury for a total cost of
USD 7 125m The total number of shares held in treasury at 31 December 2011 was 49,332,883
Following the year end the Company purchased 24,589,824 additional shares to be held in treasury
for a total cost of USD 5 926m The total number of shares held in treasury at the date of this report
is 73,922,707
Annual General Meeting
The Group’s Annual General Meeting will be held on 28 August 2012 The Notice for the meeting is
on page 85 of this report
The Chairman and CEO would like to thank the investment team for their performance
Richard B Rosenberg
Chairman
25 May 2012
Noam Lanir
Chief Executive Officer
Annual Report 2011
8
Review of Activities
Introduction and Overview
2011 was a challenging year with the European debt crisis taking a turn for the worse and the US
losing its coveted AAA rating from S&P The earthquake in Japan and tsunami in South East Asia
took further steam out of the global economy
Despite the significant challenges, Livermore generated a NAV/share increase of 14% Management
took advantage of the continued dislocation in market prices and availability of cheap leverage and
increased exposure to the US senior secured loan market which continued to exhibit very robust
performance
The year-end NAV was USD 0 57 per share (2010 NAV: USD 0 50 per share) The portfolio remained
well diversified across sectors and geographies with increased exposure to US senior secured loans
as compared to 2010
In 2011, the Group generated interest and dividend income of USD 18 9m and investment property
income of USD 5 7m The Group’s results (net income of USD 5 4m) relate mainly to gains and interest
and dividend income from fixed income securities, currency gains from the non-USD portfolio, and
income and valuation gains on its Wyler Park property in Switzerland At the same time the results
were negatively affected by impairments related to certain legacy investments and reclassification
of certain losses from reserves to income statement Administrative expenses excluding provisions
amounted to USD 5 3m Finance costs were USD 5 3m, of which USD 3 8m relates to the loan against
the Wyler Park property
The Group does not have an external management company structure and thus does not bear
the burden of external management and performance fees Further, the interests of Livermore’s
management are aligned with those of its shareholders as management members have a large
ownership interest in Livermore shares
Considering the strong liquidity position of Livermore, together with the robustness of its investment
portfolio and the alignment of management’s interest with those of its shareholders, management
believes that the Group is well positioned to benefit from current market conditions
Global Investment Environment
In the first quarter of the year, economic growth continued worldwide although there were
considerable regional differences Emerging economies recorded the highest growth rates In the
euro area, particularly Germany, the recovery was supported by strong export and investment
activity In the US, by contrast, high energy prices weighed on sentiment and held back growth In
Japan, there was a significant decline in GDP as a result of the earthquake
In the second quarter, global economic recovery lost steam due to the delayed impact of energy
price increases in the first quarter and the major catastrophe in Japan which led to production
interruptions
Following a very weak second quarter, the global economy picked up slightly in the third quarter,
benefiting from the resumption of production following the earthquake disaster in Japan The decline
in commodity prices during the third quarter also had a positive effect In the euro area, on the
9
other hand, economic growth was weak and the European sovereign debt crisis turned for the worse
In the US, the political stalemate over the debt ceiling increase caused significant uncertainty and
subsequently led to the US losing its coveted AAA rating from S&P
Developments in the global economy were mixed in the fourth quarter GDP growth in the US was
stronger than in the previous quarter, which came as a positive surprise Output in Japan and the
euro area, on the other hand, slowed With regard to emerging economies, robust growth in China
and Russia stood in contrast to weaker results in India and Brazil, and in smaller Asian economies
The European sovereign debt crisis and the contagion effect on the banking sector and the global
economy pose significant risks to global growth Peripheral economies in Europe faced higher
interest costs and responded by undertaking austerity measures to reign in deficits and reduce debt
burdens Central bankers in the developed world continued to support the financial system and their
economies with conventional and unconventional policy tools
In equity markets, the US S&P 500 Index ended unchanged from the beginning of the year, whereas
the EuroStoxx 50 Index declined 17% and the Indian NIFTY 50 Index declined 24 5% in response to
the European sovereign debt crisis, slowing growth, and a decrease in risk appetite
2011 was a volatile year for the corporate credit market in the US While the S&P/LSTA Index saw
average monthly gains of 0 39% during the first seven months as demand for leveraged loans
increased, this trend was quickly reversed as concerns over the sovereign debt crisis in Europe,
fears of a global double-dip recession, and the U S central bank’s pledge to keep short-term rates
low through at least mid-2013, led to capital flight out of the leveraged loan market In late 2011,
investor sentiment improved once again and the loan index ended with a 1 5% gain for the year
Notwithstanding the market price swings, U S credit fundamentals continued to improve Since
June 2009, publicly-filing S&P/LSTA Index issuers generated average year-over-year EBITDA growth
of 16% The size of the so-called “maturity wall” in 2013 and 2014 continued to be reduced through
repayments and extensions During 2011, issuers in the S&P/LSTA Index had reduced loan maturities
due through 2014 by $131 5 billion Trailing 12 month default rates as measured by S&P/LSTA Index
hit a 54-month low of 0 17%, by principal amount
EURO ZONE: Real GDP increased by 1 4% overall in 2011 In the earlier part of the year, economic
recovery in the euro area continued, supported by global growth and strengthening domestic demand
Headline inflation rates rose significantly on the back of energy and commodity price movements
causing the European Central Bank (ECB) to increase rates by 0 5% between April and July 2011
However, concerns about the evolution of public finances in several euro area economies caused
severe tensions in financial markets resulting in tighter financial conditions, and deteriorating
economic confidence As a result, economic activity dampened during the second half of 2011
Contagion effect from the interplay between vulnerable public finances and the financial sector led
to funding and deleveraging pressures for euro area banks The ECB responded with several non-
standard policy measures including reactivation of the Securities Markets Programme, the launch of
a second covered bond purchase program and measures to provide liquidity in foreign currencies In
December the ECB adopted additional enhanced credit support measures, including the conduct of
two longer-term refinancing operations with a three-year maturity, increased collateral availability
and a reduction in the reserve ratio to 1% in order to mitigate the effects of strains in financial
markets on the supply of credit by ensuring that banks were not liquidity-constrained Interest rates
were also lowered by 0 5% by the ECB between November and December 2011 The EuroStoxx 50
Index declined by 17% during the year
Annual Report 2011
10
SWITZERLAND: The increasing deterioration in the international environment weighed heavily on
the Swiss economy Average annual GDP increased by 1 9%, after a rise of 2 7% in the previous year
While the first six months of 2011 saw dynamic economic development, growth slackened in the
second half of the year with a slight increase in the rate of unemployment in the last months of the
year The Swiss National Bank pursued an expansionary monetary policy throughout 2011 reducing
its target interest rate range from 0 0 – 0 75% to 0 0 – 0 25% in the latter half and set a minimum
exchange rate at CHF 1 20 per euro following a sharp overvaluation in the Swiss Franc The SMI
Index dropped 7 75% during the year and the 10 year Swiss Government bond yields dropped from
1 72% at the beginning of the year to 0 66% at the end of the year
INDIA: Global spillovers through trade and capital flow channels slowed India’s growth more
than anticipated The impact was exacerbated by high inflation, weaker currency, and domestic
factors, both cyclical and structural Industrial growth was adversely affected by contraction in
mining, deceleration in manufacturing and slowdown in construction activity These factors created
pressures on equity and currency markets The sharp depreciation of the rupee during August-
December 2011 contributed to the drying up of foreign equity inflows and in turn, further weakened
the Indian Rupee as well as impacted investment financing The NIFTY 50 Index declined by 24 5%
and the Indian Rupee depreciated from 44 7 per USD at the start of the year to 53 06 per USD at
the end of the year
Sources: International Monetary Fund (IMF), Swiss National Bank (SNB), European Central Bank (ECB), Reserve Bank of India
(RBI), Bloomberg
Livermore’s Strategy
The financial portfolio is focused on fixed income instruments which generate periodic cash flows
and include mainly exposure to senior secured and usually broadly syndicated US loans This part
of the portfolio is geographically focused on the US with some exposure to Europe and emerging
markets In addition, the financial portfolio would include investments in select deep value public
equities where management could exert influence
The remaining portfolio is focused on Switzerland and Asia with investments primarily in real estate
and select private equity opportunities Investments are focused on sectors that Management
believes will provide superior growth over the mid to long term with relatively low downside risk
Strong emphasis is given to maintaining sufficient liquidity and low leverage at the overall portfolio
level and to re-invest in existing and new investments along the economic cycle
11
Review of Significant Investments
Name
Wyler Park*
SRS Charminar
Montana Tech Components
Other Real Estate Assets
Total
* Net of related loan
Book Value
US $m
38 2
14 6
3 6
1 5
57 9
Wyler Park – Switzerland
Wyler Park is a top quality mixed-use property located in Bern, Switzerland It has over 16,800 square
meters of commercial space, 4,100 square meters of residential space, and another 7,800 square
meters available for additional commercial development The commercial part is leased entirely to
SBB (AAA rated), the Swiss national transport authority wholly owned by the Swiss Confederation,
and serves as the headquarters of their Passenger Traffic division The commercial lease is Swiss
inflation rate – adjusted and ends in 2019 with two 5 year extension periods thereafter The annual
rental income from the commercial area of the project is CHF 4 26m (USD 4 54m)
Following the successful development of 39 residential apartments, management rented out all of
the apartments The entire property is fully rented The annual rental income from the residential
area is about CHF 1 1m (USD 1 17m)
Livermore is the sole owner of Wyler Park through its wholly owned Swiss subsidiary, Livermore
Investments AG The loan outstanding on the project is CHF 79m (USD 84 3), which is a non-recourse
loan to Livermore Investments AG backed only by this property The loan matures in July 2014 The
valuation of the property as of year-end 2011 is CHF 114 9m (USD 122 5m) and of year end 2010
was CHF 111 17m (USD 119 0m)
Management continues to evaluate the potential development of the additional commercial
development rights of 7,800 square meters attached to the property
SRS Charminar – India
Livermore invested USD 20m in 2008 in a leading Indian Real Estate company, in association with
SRS Private and other investors as part of a total investment of USD 154m
The investment in the investee company was in the form of compulsorily convertible debt and
included a put option, which can be exercised if the investee company does not have an IPO within
3 years or if certain terms in the agreement are not met The put option is secured by land which
was valued at around USD 1 3 billion at the time of investment and guarantees a minimum return
of approximately 30% IRR if exercised
Annual Report 2011
12
As reported previously, the Manager (Infinite India Limited) for this investment served a put option
exercise notice to the promoters in 2009 Following a dispute on the grounds of the put option
notice between the promoters and the fund, the parties agreed to invoke arbitration to be held in
Mumbai
On 14 August 2009, the arbitration process was completed and the arbitrator ruled in favour of
investors The award entitles the investors to investment plus interest amounting to 30% IRR until
14 August 2009 and 18% IRR thereafter
Meanwhile, the investors have filed and won an interim order for injunction against the promoters
and the company to prohibit sales, transfer or encumbering of the assets of the company Thereafter,
the promoters have filed against the arbitral award and the injunction order As at 31 December
2011 there was no change in the status of this case
On January 13, 2011 the Company Law Board (“CLB”) passed an order and allowed Infrastructure
Leasing & Financial Services Limited (“IL&FS”) to become 80% shareholder and control the
management of the company After the reporting period, the Manager has reported a finalization of
settlement negotiations with IL&FS and the investee company which is subject to certain court and
regulatory approvals
Due to the legal complexity and the receipt of the regulatory and court approvals required for the
implementation of the proposed settlement as well as the various counterparties involved, the
outcome remains uncertain
The carrying amount of the investment is based on discounted expected cash flows and was reduced
to USD 14 7m (2010: USD 17 8m) The accrued interest up to February 2009 was reversed during the
period ended 30 June 2011 (notes 13 and 25)
Montana Tech Components (“MTC”) - Europe
Montana Tech Components AG is a leading components manufacturer in the fields of Aerospace &
Industrial Components, Metal Tech and Micro Batteries
The Aerospace Components business segment manufactures specialized components for Airbus and
Boeing and is the market leader The facilities are currently located in the US and in Switzerland
with a new low cost facility in Romania recently built-out The company has a large market share in
the US with Boeing and in Europe with Airbus The build-out of the Romanian facility was completed
as planned The certification process with Airbus was concluded in significant areas
The Micro Batteries business is a market leader in hearing aid batteries and rechargeable batteries
with a strong brand (VARTA Micro Power) VARTA has formed a significant joint venture with the
Volkswagen group to develop batteries for hybrid cars
Metal Tech business segment operates in a niche area and is a market leader in an otherwise highly
fragmented industry This business segment produces tools for identification and marking of steel
products
Due to an excellent market position, ongoing expansion and productivity-enhancing measures,
MTC increased turnover by 12% in 2011 to EUR 395m as compared to EUR 351m in 2010 EBITDA
increased 21% to EUR 54m (2010: EUR 45m) and EBIT increased 34% to EUR 37m (2010: EUR 28m)
The Company’s equity capital increased to EUR 225m (2010: EUR 152m)
13
In January 2011, MTC accomplished a capital increase in the amount of EUR 46m In May 2011, MTC
raised another EUR 15m through the issue of a convertible bond The funds were partly utilized
to repay the convertible debt due in August 2011 and to purchase shares held by non–controlling
shareholders in the Romanian subsidiary
Livermore and certain other minority shareholders in MTC have raised concerns about related
party transactions between MTC and its majority shareholder as well as the unequal treatment of
minority shareholders by the Board of MTC Livermore is pursuing an activist role in order to increase
transparency, ensure equal treatment of minority shareholders, and potentially gain representation
on the Board of MTC During the year, Livermore along with certain other shareholders of MTC filed
and won a legal case against MTC related to an incorrect grant of discharge to the directors of MTC
during MTC’s annual general meeting Livermore and certain other shareholders have filed another
case against MTC and its Board of Directors concerning an incorrect allocation of shares in the
recent capital increase The matter is currently pending in court in Switzerland
Private Equity Funds
The other private equity investments held by the Group are incorporated in the form of Managed Funds
(mostly closed end funds) mainly in the emerging economies of India and China The investments
of these funds into their portfolio companies were mostly done in 2008 and 2009 Overall, during
2011 the investment environment relating to most funds was challenging and the Group expects
that material exits of portfolio companies should materialize between 2013 and 2015 Except
for distributions of USD 0 585m from Blue Ridge Capital and USD 0 102m from Da Vinci fund no
material exits occurred during the reported period
The following summarizes the book value of the private equity funds as of year-end 2011
Name
India Blue Mountains (India)
SRS Private (India)
Evolution Venture (Israel)
Elephant Capital (India)
Da Vinci (Russia)
Blue Ridge Capital (China)
Panda Capital (China)
Other investments
Total
Book Value
US $m
5 1
2 6
1 6
1 5
1 1
1 0
0 7
0 5
14 1
India Blue Mountains: India Blue Mountains is a leading hotel and hospitality development fund that is
developing 4 star and 5 star hotels in India The fund has acquired land and is in the process of developing
three hotels in prime areas of Mumbai, Pune and Goa All hotels will be managed by the Accor Group
Annual Report 2011
14
(Novotel brands) Accor has also invested equity and holds a 26% stake in all of the hotels
The Pune hotel is being built on a land area of 70,200 sq ft with a total built-up area of 338,692 sq
ft The hotel will be a Novotel brand hotel with 223 rooms and two floors have been earmarked for
commercial office space Construction of the structure is nearing completion
The Mumbai hotel is on a 82,609 sq ft land site with a built-up area of 550,217 sq ft The hotel
will be a Novotel brand hotel with 543 rooms The hotel is close to the Mumbai airport with an
unusually high frontage area of 38 meters on one of Mumbai’s main arterial roads During the year,
the contract with the general contractor was terminated due to delays caused by the contractor
The existing loan facility was repaid and a bridge loan due in February 2012 was undertaken This
bridge loan has been partly paid down and the remaining extended until July 2012 The manager is
currently in process of syndicating a new construction loan
For the Goa hotel, land measuring 20 acres was purchased at Majorda beach in Goa having 200
meters of sea front with a white sandy beach from nearly 40 parcels of land Notification of the land
for settlement is a government process and it has not been concluded so far despite expectations
and is currently pending with the Town Planning department
SRS Private Fund: SRS Private is a private equity fund focused on real estate in India The fund has
invested in residential and commercial projects as well as directly in certain real estate companies
The assets are primarily located in and around major cities of India such as Mumbai and Hyderabad
Evolution Venture: Evolution is an Israel focused Venture Capital fund It invests in early stage
technology companies Its investments include a carrier-class Mobile Broadband Wireless (MBW)
Wi-Fi solutions company, a language enhancement products company, a software company operating
in the digital radio market, a software test tool developer, and a virtualization technology company
Elephant Capital: India-focused private equity fund, which is AIM quoted (formerly called Promethean
India plc) (Ticker: ECAP) Its portfolio investments to date include a leading tiles manufacturer
in India, an established automotive components manufacturer, a hospitality company with luxury
hotels in top Indian cities, a media business with an exclusive content library, a clinical research
organization, a m-commerce player, and an online venture to distribute cricket related content
During the period, an investment of GBP 3m was made into a leading independent provider of
aviation maintenance, repair and overhaul service in India
As of August 2011, the NAV of the fund was 51 pence Additional information about the fund is
available at www elephantcapital com
Da Vinci: The fund is primarily focused on Russia and CIS countries The fund has made five
investments 70% of the fund is invested in RTS, the leading Russian stock exchange, and a leading
Eastern European software company In 2011, RTS merged with MiCex stock exchange to form the
largest financial exchange in Russia and distributed a dividend from the partial exit The leading
Eastern European software company filed for an initial public offering during the year and was listed
on a US stock exchange in February 2012 The fund expects to exit the investment in the Eastern
European software company over the next year
Blue Ridge: Blue Ridge is a China focused private equity fund The fund has made investments in
six portfolio companies Portfolio companies include a distressed real estate turnaround company,
a plastic and chemicals manufacturer, a higher education company, an innovative bio-pesticide
company, a software company specializing in Oil & Gas applications and a refinery In 2011, the fund
has realized partial exits from the plastic and chemicals manufacturer and the distressed real estate
turnaround company at valuations higher than cost
15
Panda Capital: Panda Capital is a China-based private equity fund focused on early-stage industrial
operations in China and Taiwan, which represent strong growth opportunities The fund has invested
in a bamboo based flooring manufacturer, a lens moulding company, an electronic components
manufacturer, an FDA approved wound healing cream producer, and an outdoor media company
The fund’s main investment is in a bamboo flooring company in China, which provides an innovative
low cost alternative to hardwood flooring in shipping containers The manager is in the process
of building up operational capacity for product manufacturing This investment could generate
attractive returns once the shipping industry recovers from the current downturn
Financial portfolio and trading activity
The Group manages a financial portfolio valued USD 75m (net of leverage) as at 31 December 2011,
which is invested mainly in fixed income securities The recovery of the US and emerging economies
witnessed through 2010 continued in 2011 and has led to improvements in the credit quality and
overall strength of Livermore’s credit portfolio
Fixed Income:
During 2011 the Group almost doubled its exposure to the US syndicated loan market mainly through
investment into US Collateralized Loan Obligations (CLO) mostly of 2006 and 2007 issues These are
managed portfolios invested into diversified pools of senior secured floating rate loans and financed
with long term financing pre-fixed at the respective pre-crisis levels On absolute and relative value
basis the loan market continued to offer remarkable value as an undervalued, diversified inflation
linked asset class with a senior secured claim on the borrower and with overall low volatility and
low correlation to equity markets New issue loans offered high spreads (including Libor floors) of
400-600 bps over the average cost of the respective CLO Fund’s liabilities New issue credit quality
was also attractive, especially compared to the pre-crisis vintages That allows CLO managers to
reinvest their prepayment proceeds in higher spread, better quality new issue loans
The fundamentals of the US corporate credit market continued to show improvement during 2011
Trailing 12 month default rate for the S&P/LTSA index was 0 54% for the year and corporate earnings
and balance sheets continued to improve during the period Since June 2009 the publicly filing of
S&P/LTSA index issuers have generated year on year EBITDA growth of 16% Despite improving
fundamentals, the European debt crisis, fears of a double dip recession and the market volatility that
followed after the first quarter caused market value swings in the prices of loans Following a rise in
first quarter and a decline in second and third quarters, the S&P/LTSA index of issuers managed to
gain 1 5% for the year These price swings generated good entry points for CLO managers within the
reinvestment period, which resulted in additional cushion build up for those positions, as reflected
in the improving over collateralization tests
During 2011, the Group increased its exposure to performing CLOs at lower than current market
prices and at modelled IRRs of over 20% The CLO portfolio has performed extremely well on
account of low default rates and improving credit fundamentals of their underlying loans which is
evident by lower weighted average rating factor (WARF) levels in our deals At the end of 2011 all of
our US investments were passing their coverage tests (thereby making dividend distributions), which
outperformed the general market average During 2011, the portfolio generated dividend income of
USD 22 2m and a total of USD 38 8m since inception
The excess spread of these CLOs, namely the difference between the interest income generated by a
CLO’s assets and the cost of financing through its liabilities as well as certain fees (which are locked-
in at closing), increased substantially from original levels Volatility in loan prices provided a good
entry point for CLO’s within their reinvestment period to build additional par and increase coverage
Annual Report 2011
16
ratios This combination of improving coverage ratios and increasing excess spread availability also
continued in 2011 and led to increased payments to CLO income notes Furthermore, the cushions
built up within the portfolios are expected to insulate the portfolio from moderate potential future
credit losses, implying that performance should remain strong even in the absence of a significant
improvement in macroeconomic conditions, so long as another dramatic fundamental downturn
or financial market crisis is avoided Overall the performance of this asset class during the 2008
financial crisis and thereafter has been remarkable Investors may be hard stretched to find an asset
class that exhibited comparable performance over this time period
During 2011 management concentrated on purchases of income notes in the secondary market as
the IRRs and cash on cash returns offered better economics than primary market offerings At the
same time, management followed closely the development of the US CLO primary market Total new
issuance of US cash flow CLOs in 2011 was 12 3b, up from 3 6b in 2010 However, management was
of the opinion that liability spreads did not come in enough to generate sufficiently sustainable
long term arbitrage and attractive equity returns However, as both US interest rates and corporate
defaults are expected to remain low in the medium term and loan spreads are forecast to remain
wide by historical standard we believe that the environment should remain attractive for investments
in CLO income notes As liability spreads tightened during Q1 2012 and secondary market prices
increased offering lower returns, the investment team is evaluating investing in primary issue CLOs
with the aim of acquiring a controlling or significant equity stake
While management maintains a positive view, mid-long term performance may be negatively
impacted by a pull back into a substantial double dip recession in US and/or Europe involving a
spike in defaults Despite positive developments in the overall health of the US economy in 2011 we
acknowledge the potential headwinds posed by continued weakness in the US housing market, high
unemployment and the continued EU sovereign debt crisis as well the headwinds the economy may
face in 2013 relating to the possible austerity measures following the US debt ceiling discussions
Public Equities:
Babylon Ltd (“Babylon”): Babylon is an International Internet company based in Israel and listed on
the Tel-Aviv Stock Exchange (TASE: BBYL) It is a leading translation and language tools provider
and its language translation software product is a recognized name in the industry The company
generates revenues through Search and Advertising, Online Sales, Corporate Sales, and Telesales As
of 31 Dec 2011, Livermore’s investment in Babylon was valued at USD 6 6m During the year, market
value gains and dividend income from Babylon totalled USD 2 5m
Babylon has achieved strong growth in its Search and Advertising business since 2009 In 2011,
total revenues increased 95% to USD 61 9m as compared to the previous year and profit before tax
increased by 56% year-on-year to USD 9 2m In the last quarter of 2011, Babylon’s revenues and
profit before tax increased 140% and 247% to USD 21 9m and USD 5 2m respectively as compared
to the third quarter In the first quarter of 2012, Babylon’s revenues increased 229% to USD 30m
and net profit rose 233% to USD 4m as compared to the corresponding quarter in the previous year
Noam Lanir, the majority shareholder of the Group, is also a major shareholder in Babylon (note 34)
17
The following is a table summarizing the financial portfolio as of year-end 2011
Name
Investment in the loan market through CLOs
Corporate bonds
Babylon
Hedge Funds
Other Public Equities
Total
Total net of leverage
Book Value
US $m
53 8
28 9
6 6
5 0
2 1
96 4
75 0
Events after the reporting date
In January 2012, Livermore agreed to settle its guarantee to a financing bank in relation to
its investment in DTH Boom The settlement amount is fully provided for in the 2011 financial
statements Please refer to note 35 for further details
After the reporting period, the Manager of SRS Charminar has reported a finalization of settlement
negotiations with IL&FS and the investee company which is subject to certain court and regulatory
approvals Please refer to note 5 for further details
After the reporting date and prior to publishing this report, Livermore had acquired an additional
1 039m shares of Babylon Ltd
Following the year end the Company purchased 24,589,824 additional own shares to be held in
treasury for a total cost of USD 5 926m
Litigation
At the time of this Report, there is one matter in litigation against the Group Further information
is provided in note 36 to the consolidated financial statements
Annual Report 2011
18
Report of the Directors
The Board’s objectives
The Board’s primary objectives are to supervise and control the management activities, business
development, and the establishment of a strong franchise in the Group’s business lines Measures
aimed at increasing shareholders’ value over the medium to long-term, such as an increase in NAV
are used to monitor performance
The Board of Directors
Richard Barry Rosenberg (age 56), Non-Executive Director, Chairman of the Board
Richard joined the Group in December 2004 He became Non-Executive Chairman on 31 October
2006 He qualified as a chartered accountant in 1980 and in 1988 co-founded the accountancy
practice SRLV He has considerable experience in giving professional advice to clients in the leisure
and entertainment sector Richard is a director of a large number of companies operating in a
variety of business segments
Menachem Marder (age 59), Non-Executive Director (resigned at 3 April 2012)
Menachem joined the Group in September 2009 He brings with him a profound background of
accounting and business experience Menachem is a Certified Public Accountant, and was the
founder and senior manager of the accounting firm Shlomo Ziv and Partners (BDO) In addition
to his work with Livermore, Menachem, through his company, Mimtar Business Consulting LTD,
provides business, economic, managerial and financial consultancy to a wide range of firms with a
specialization in company turn arounds and mergers and acquisitions Menachem earned an MBA
with a major in Finance from Tel Aviv University, and holds a BA in Economics and Accounting from
Tel Aviv University Menachem is a director of a large number of companies operating in a variety
of business segments
Noam Lanir (age 45), Founder and Chief Executive Officer
Noam founded the Group in July 1998, to develop a specialist online marketing operation Noam
has led the growth and development of the Group’s operations over the last fourteen years which
culminated in its IPO in June 2005 on AIM He is also a major benefactor of a number of charitable
organisations Prior to 1998, Noam was involved in a variety of businesses mainly within the
online marketing sector He is also the major shareholder of Babylon Ltd, an International Internet
Company listed on the Tel Aviv Stock Exchange
Ron Baron (age 44), Executive Director and Chief Investment Officer
Ron was appointed as Executive Director and Chief Investment Officer on 10 August 2007 Ron
has wide investment and M&A experience From 2001 to 2006 Ron served as a member of the
management at Bank Leumi, Switzerland and was responsible for portfolio management activity
Prior to this he spent five years as a commercial lawyer at Kantor, Elhanani, Tal & Co Law Offices in
Tel Aviv, Israel, advising banks and large corporations on corporate transactions, including buy-outs
and privatisations Ron has over 10 years of experience as an investment manager with particular
focus on the US credit market He holds an MBA from INSEAD Fontainebleau and a LLB (LAW) and
BA in Economics from Tel Aviv University
The Directors shall retire from office at the third Annual General Meeting after that at which they
were last elected, and if they so wish, offer themselves up for re-election to the Board Subject to
the BVI Companies Act and the Articles, the Directors to retire by rotation at the Annual General
19
Meeting in every year shall be in addition to any Director who wishes to retire and not to offer himself
for reappointment, any Director required to retire under the Company›s Articles The interests of the
Directors and their related companies in the shares and options over shares in the Company are as
shown under the Remuneration Report section Details of the Directors’ remuneration and service
contracts also appear under the Remuneration Report section
On 3 April 2012, Mr Menachem Marder, a non-executive director resigned from his position as a
non-executive director of the Company No replacement has been appointed as a non-executive
director at the date of this report
The Directors submit their annual report and audited consolidated financial statements of the Group
for the year ended 31 December 2011
Directors’ responsibilities in relation to the consolidated financial statements
The Directors are responsible for preparing the Annual Report and the consolidated financial
statements in accordance with applicable law and International Financial Reporting Standards as
adopted by the European Union
The Directors are required to prepare consolidated financial statements for each financial year
which give a true and fair view of the financial position of the Group, and its financial performance
and cash flows for that period In preparing these consolidated financial statements, the Directors
are required to:
• Select suitable accounting policies and then apply them consistently;
• Make judgments and estimates that are reasonable and prudent;
• State whether applicable accounting standards have been followed, subject to any material
departures disclosed and explained in the financial statements;
• Prepare the consolidated financial statements on the going concern basis unless it is
inappropriate to presume that the Group will continue in business
The Directors are responsible for keeping proper accounting records that are sufficient to show and
explain the Group’s transactions, and at any time enable the financial position of the Group to be
determined with reasonable accuracy and enable them to ensure that the consolidated financial
statements comply with the applicable law and International Financial Reporting Standards as
adopted by the European Union They are also responsible for safeguarding the assets of the
Group and hence for taking reasonable steps for the prevention and detection of fraud and other
irregularities
The Directors are responsible for the maintenance and integrity of the corporate and financial
information included on the Group’s website Legislation in the British Virgin Islands governing
the preparation and dissemination of financial statements may differ from legislation in other
jurisdictions
Annual Report 2011
20
Disclosure of information to the Auditor
In so far as the Directors are aware:
•
there is no relevant audit information of which the Company’s auditor is unaware; and
•
the Directors have taken all steps that they ought to have taken to make themselves aware of
any relevant audit information and to establish that the auditor is aware of that information
Substantial Shareholdings
As at 26 April 2012 the Directors are aware of the following interests in 3 per cent or more of the
Company’s issued ordinary share capital:
Number of Ordinary
Shares
% of issued ordinary
share capital
% of voting
rights*
Groverton Management Ltd
154,412,173
50 77
67 08
RB Investments GmbH
Bank Leumi Swiss
Bank Hapoalim Luxembourg
13,915,419
12,481,937
10,773,015
Merrill Lynch Pierce, Fenner & Smith, Inc
9,329,051
Everest Fund Management Ltd
8,770,000
4 58
4 10
3 54
3 07
2 88
6 04
5 42
4 68
4 05
3 81
* after consideration of treasury shares (note 15)
Save as disclosed in this report and in the remuneration report, the Company is not aware of any
person who is interested directly or indirectly in 3 per cent or more of the issued share capital of
the Company or could, directly or indirectly, jointly or severally, exercise control over the Company
Details of transactions with Directors are disclosed in note 34 to the consolidated financial
statements
21
Corporate Governance Statement
Introduction
The Company recognises the importance of the principles of good Corporate Governance and the
Board is pleased to accept its commitment to such high standards throughout the year As an AIM
quoted company, Livermore is not required to follow the provisions of the UK Corporate Governance
Code – June 2010 (“the Code”) However, the Company is keen to adopt and promote the provisions
of that Code Up to 31 December 2011 the Board has adopted several provisions of the Code, some
of which have not yet been fully implemented
The Board Constitution and Procedures
The Company is controlled through the Board of Directors, which currently comprises one Non-
Executive Director and two Executive Directors The Chief Executive’s responsibility is to focus on
co-ordinating the company’s business and implementing group strategy
A formal schedule of matters is reserved for consideration by the Board, which meets approximately
four times each year The Board is responsible for implementation of the investing strategy as
described in the circular to shareholders dated 6 February 2007 and adopted pursuant to shareholder
approval at the Company’s EGM on 28 February 2007 It reviews the strategic direction of the Group,
its codes of conduct, its annual budgets, its progress towards achievement of these budgets and any
capital expenditure programmes In addition, the Directors have access to advice and services of
the Company Secretary and all Directors are able to take independent professional advice if relevant
to their duties The Directors receive training and advice on their responsibilities as necessary All
Directors, in accordance with the Code, submit themselves to re-election at least once every three
years
Board Committees
The Board delegates clearly defined powers to its Audit and Remuneration Committees The minutes
of each Committee are circulated by the Board
Remuneration Committee
The Remuneration Committee comprises of the Non-Executive Chairman of the Board and a Non-
Executive Director Following the resignation of one of the Non-Executive Directors, this committee
has one member until a new Non-Executive Director is appointed The Remuneration Committee
considers the terms of employment and overall remuneration of the Executive Directors and key
members of Executive management regarding share options, salaries, incentive payments and
performance related pay The remuneration of Non-Executive Directors is determined by the Board
Audit Committee
The Audit Committee comprises of the Non-Executive Chairman of the Board and a Non-Executive
Director and is chaired by the Chairman of the Board The duties of the Committee include monitoring
the auditor’s performance and reviewing accounting policies and financial reporting procedures
Following the resignation of one of the Non-Executive directors, this committee has one member
until a new Non-Executive Director is appointed
Annual Report 2011
22
Communication with Investors
The Directors are available to meet with shareholders throughout the year In particular the Executive
Directors prepare a general presentation for analysts and institutional shareholders following the
interim and preliminary results announcements of the Company The chairman, Richard Rosenberg,
is available for meetings with shareholders throughout the year The Board endeavours to answer
all queries raised by shareholders promptly
Shareholders are encouraged to participate in the Annual General Meeting at which the Chairman
will present the key highlights of the Group’s performance The Board will be available at the
Annual General Meeting to answer questions from shareholders
Internal Control
The Board is responsible for ensuring that the Group has in place a system of internal controls and
for reviewing its effectiveness In this context, control is defined in the policies and processes
established to ensure that business objectives are achieved cost effectively, assets and shareholder
value safeguarded and that laws and regulations are complied with Controls can provide reasonable
but not absolute assurance that risks are identified and adequately managed to achieve business
objectives and to minimise material errors, frauds and losses or breaches of laws and regulations
The Group operates a sound system of internal control, which is designed to ensure that the risk of
mis-statement or loss is kept to a minimum
Given the Group’s size and the nature of its business, the Board does not consider that it is necessary
to have an internal audit function An internal audit function will be established as and when the
Group is of an appropriate size
The Board undertakes a review of its internal controls on an ongoing basis
Independence of Auditor
The Board undertakes a formal assessment of the auditor’s independence each year, which includes:
•
a review of non-audit related services provided to the Company and related fees;
• discussion with the auditor of a written report detailing all relationships with the Company and
any other parties which could affect independence or the perception of independence;
•
a review of the auditor’s own procedures for ensuring independence of the audit firm and
partners and staff involved in the audit, including the rotation of the audit partner;
• obtaining written confirmation from the auditors that they are independent;
•
a review of fees paid to the auditor in respect of audit and non-audit services
23
Remuneration Report
The Directors’ emoluments, benefits and shareholdings during the year ended 31 December 2011
were as follows:
Directors’ Emoluments
Each of the Directors has a service contract with the Company
Date of
agreement
Fees
US $000
Benefits
US $000
Reward
payments
US $000
Share options
expense
US $000
Total
Emoluments
2011
US $000
Total
Emoluments
2010
US $000
Richard Barry
Rosenberg
10/06/05
Noam Lanir
10/06/05
Ron Baron
01/09/07
Menachem
Marder*
23/09/09
72
400
350
-
-
45
-
-
-
-
500
-
4
-
-
-
76
445
850
-
83
445
350
-
The dates are presented in day / month / year format
* Menachem Marder resigned on 3 April 2012
Directors’ Interests
Interests of Directors in ordinary shares
Notes
As at 31 December 2011
As at 31 December 2010
Noam Lanir
Ron Baron
a)
b)
Number of
Ordinary Shares
Percentage of
ordinary share
capital
Number of
Ordinary Shares
Percentage of
ordinary share
capital
154,412,173
50 773%
154,412,173
50 773%
13,915,419
4 576%
13,915,419
4 576%
Richard Barry Rosenberg
15,000
0 005%
15,000
0 005%
Notes:
a) Noam Lanir is interested in his ordinary shares by virtue of the fact that he owns directly or
indirectly all of the issued share capital of Groverton Management Limited
b) On 16 April 2007, a loan of USD 5m was provided to RB Investments GMBH, a company owned by
Ron Baron to purchase Livermore shares The loan was renewed during the year ended 31
December 2010, and bears an annual interest rate of 6 month USD LIBOR plus 0 25%
Annual Report 2011
24
Interests of Directors in share options
No of options at
31 December 2011
Date of grant
Exercise
price, GBP
Exercise
Price**,
US $
Vesting period
of options
Noam Lanir
10,000,000
19/07/06
0 78
1 21
One to three years*
Richard Barry Rosenberg
500,000
150,000
75,000
13/05/08
19/07/06
07/12/05
0 30
0 78
0 71
0 47
1 21
1 10
One to three years*
One to three years*
One to three years*
* The options normally vest in three equal tranches, on the first, second and third anniversary of
the grant
The options are exercisable up to 10 years after the date of grant No options were exercised during
the year ended 31 December 2011
** The exercise prices as per the share option scheme are quoted in British Pounds The indicative equivalent
USD amounts shown in the table above are based on the exchange rates as at 31 December 2011
Share Option Scheme
The Company’s remuneration committee (the “Committee”) is responsible for administering the
Share Option Scheme Options to acquire Shares in the Company may be granted under the Share
Option Scheme to any employee or director of the Company or member of the Group
The option exercise price per Ordinary Share is determined by the Committee but will be no less than
market value of the Ordinary Shares on the dealing day immediately preceding the date of grant The
options are subject to continuous service conditions but are not subject to any performance criteria
The Share Option Scheme will terminate ten years after it was adopted by the Company, or earlier
in certain circumstances
Remuneration Policy
The Group’s policy has been designed to ensure that the Group has the ability to attract, retain
and motivate executive directors and key management personnel to ensure the success of the
organization
The following key principles guide its policy:
• policy for the remuneration of executive directors will be determined and regularly reviewed
independently of executive management and will set the tone for the remuneration of other
senior executives
the remuneration structure will support and reflect the Group’s stated purpose to maximize
long-term shareholder value
the remuneration structure will reflect a just system of rewards for the participants
the overall quantum of all potential remuneration components will be determined by the exercise
•
•
•
25
of informed judgement of the independent remuneration committee, taking into account the
success of the Group and the competitive global market
a significant personal shareholding will be developed in order to align executive and shareholder
interests
the assessment of performance will be quantitative and qualitative and will include exercise of
informed judgement by the remuneration committee within a framework that takes account of
sector characteristics and is approved by shareholders
the committee will be proactive in obtaining an understanding of shareholder preferences
remuneration policy and practices will be as transparent as possible, both for participants and
shareholders
the wider scene, including pay and employment conditions elsewhere in the Group, will be
taken into account, especially when determining annual salary increases
•
•
•
•
•
Annual Report 2011
26
Review of the Business and Risks
Risks
The Board considers that the risks the Shareholders face can be divided into external and internal
risks
External risks to shareholders and their returns are those that can severely influence the investment
environment within which the Group operates, and include economic recession, declining corporate
profitability, rising inflation and interest rates and excessive stock-market speculation
The Group’s portfolio is exposed to interest rate changes, credit risk, liquidity risk and volatility
particularly in the US, EU, Switzerland and India In addition, the portfolio is exposed to currency
risks as some of the underlying portfolio is invested in assets denominated in non-US currencies
while the Company’s functional currency is USD Investments in certain countries such as India
and China are exposed to governmental and regulatory risks The SRS Charminar investment is
specifically subject to regulatory and legal risks as well as currency risk
The mitigation of these risks is achieved by investment diversification, both by sector and by
geography The Group also engages from time to time in certain hedging activities to mitigate these
risks
Internal risks to shareholders and their returns are related to Portfolio risks (investment and geography
selection and concentration), balance sheet risk (gearing) and/or investment mismanagement risks
The Group’s portfolio has a significant exposure to senior secured loans of mainly US companies and
therefore has a concentration risk to this asset class
A periodic internal review is performed to ensure transparency of Group activities and investments
All service providers to the Group are regularly reviewed The mitigation of the risks related to
investments is effected by investment restrictions and guidelines and through reviews at Board
Meetings
As the portfolio of the Company is invested in non USD currencies (mainly EUR, CHF and INR), it is
exposed to movements in these currencies
On the asset side, the Group’s exposure to interest rate risk is limited to the interest bearing
deposits and portfolio of bonds and loans in which the Group invests
Management monitors liquidity to ensure that sufficient liquid resources are available to the Group
The Group’s credit risk is primarily attributable to its fixed income portfolio, which is exposed to
corporate bonds with a particular exposure to the financial sector and to US senior secured loans
Share Capital
There was no change in the authorised share capital during the year to 31 December 2011 The
authorised share capital is 1,000,000,000 ordinary shares with no par value
27
Related party transactions
Details of any transactions of the Group with related parties during the year to 31 December 2011
are disclosed in note 34 to the consolidated financial statements
By order of the Board of Directors
Chief Executive Officer
25 May 2012
Annual Report 2011
28
Report of the independent auditor to the
members of Livermore Investments Group
Limited
Report on the Consolidated Financial Statements
We have audited the accompanying consolidated financial statements of Livermore Investments
Group Limited (the ‘’Company’’) and its subsidiaries (together with the Company, ‘’the Group’’),
which comprise the consolidated statement of financial position as at 31 December 2011 and the
consolidated statements of income statement, of comprehensive income, of changes in equity, and
of cash flows for the year then ended, and a summary of significant accounting policies and other
explanatory notes
Board of Directors’ Responsibility for the Consolidated Financial Statements
The Board of Directors is responsible for the preparation of consolidated financial statements that
give a true and fair view in accordance with International Financial Reporting Standards as adopted
by the European Union (EU) and for such internal control as the Board of Directors determines is
necessary to enable the preparation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on
our audit We conducted our audit in accordance with International Standards on Auditing Those
Standards require that we comply with ethical requirements and plan and perform the audit to
obtain reasonable assurance as to whether the consolidated financial statements are free from
material misstatement An audit involves performing procedures to obtain audit evidence about the
amounts and disclosures in the consolidated financial statements The procedures selected depend
on the auditor’s judgment, including the assessment of the risks of material misstatement of the
consolidated financial statements, whether due to fraud or error In making those risk assessments,
the auditor considers internal control relevant to the entity’s preparation of the consolidated financial
statements that give a true and fair view in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the entity’s internal control An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by the Board of Directors as well
as evaluating the overall presentation of the consolidated financial statements
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion
Opinion
In our opinion, the consolidated financial statements give a true and fair view of the financial
position of the Group as at 31 December 2011 and of its financial performance and its cash flows
for the year then ended in accordance with International Financial Reporting Standards as adopted
by the EU
29
Emphasis of matter
We draw attention to Note 5 to the consolidated financial statements which describe the uncertainty
related to the outcome of the legal case in India relating to the investment of the Group through SRS
Charminar Investments Ltd, in a leading Indian Real Estate company Our opinion is not qualified
in respect of this matter
Other Matter
This report, including the opinion, has been prepared for and only for the Company’s members as a
body and for no other purpose We do not, in giving this opinion, accept or assume responsibility
for any other purpose or to any other person to whose knowledge this report may come to
Augoustinos Papathomas
Certified Public Accountant and Registered Auditor
for and on behalf of
Grant Thornton (Cyprus) Ltd
Certified Public Accountants and Registered Auditors
Nicosia
Date: 25 May 2012
Annual Report 2011
30
Livermore Investments Group Limited
Consolidated Statement of Financial Position as at 31 December 2011
Note
2011
US $000
2010
US $000
Assets
Non-current assets
Property, plant and equipment
Available- for-sale financial assets
Financial assets at fair value through profit or loss
Investment property
Deferred tax
Current assets
Trade and other receivables
Available- for-sale financial assets
Financial assets at fair value through profit or loss
Cash at bank
Total assets
Equity
Share capital
Share premium and treasury shares
Other reserves
Retained earnings
Total equity
Liabilities
Non current liabilities
Bank loans
Derivative financial instruments
Current liabilities
Bank overdrafts
Short term bank loans
Trade and other payables
Provisions for legal and other cases
Current tax payable
Derivative financial instruments
Total liabilities
Total equity and liabilities
Net asset valuation per share
3
5
6
9
12
13
5
6
14
15
15
17
18
19
20
21
35
22
18
81
88,752
3,029
122,518
488
214,868
8,655
12,833
31,318
2,060
54,866
181
68,436
4,607
119,018
1,799
194,041
10,131
20,554
41,041
3,294
75,020
269,734
269,061
-
196,727
606
(51,896)
145,437
-
203,852
(4,308)
(57,252)
142,292
84,316
5,143
89,459
19,306
8,935
1,961
1,142
122
3,372
34,838
84,722
5,470
90,192
13,289
17,128
1,159
1,585
163
3,253
36,577
124,297
269,734
126,769
269,061
Basic and diluted net asset valuation per share (US $)
23
0 57
0 50
These consolidated Financial Statements were approved by the Board of Directors on 25 May 2012
The notes on the following pages form part of these consolidated financial statements
31
Livermore Investments Group Limited
Consolidated Income Statement for the year ended 31 December 2011
Investment income
Interest and dividend income
Investment property income
Loss on investments
Gain from investment in associate
Gross profit
Other income
Administrative expenses
Operating profit
Finance costs
Finance income
Profit before taxation
Taxation charge
Profit for the year
Earnings per share
Note
2011
US $000
2010
US $000
25
26
27
28
29
30
31
31
32
18,891
5,684
(10,247)
-
14,328
3,000
(5,051)
12,277
(5,294)
-
6,983
(1,627)
10,490
4,734
(1,976)
495
13,743
-
(1,018)
12,725
(3,551)
99
9,273
(786)
5,356
8,487
Basic and diluted earnings per share ( US $)
33
0 02
0 03
The notes on the following pages form part of these consolidated financial statements
Annual Report 2011
32
Livermore Investment Group Limited
Consolidated Statement of Comprehensive Income for the year ended 31 December 2011
Profit for the year
Other comprehensive income:
Available for sale financial assets
•
Fair value losses
• Reclassification to profit or loss due to disposals
• Reclassification to profit or loss due to impairment
Foreign exchange losses from translation of:
•
•
•
associate
subsidiaries
reclassification to profit or loss due to disposal
of associate
Note
2011
US $000
5,356
2010
US $000
8,487
(4,367)
(438)
9,873
-
(158)
-
27
27
10
28
(1,364)
573
6,330
(4,856)
(577)
7,154
Total comprehensive income for the year
10,266
15,747
The total comprehensive income for the year ended 31 December 2011 and 2010 is wholly attributable
to the owners of the parent company
The notes on the following pages form part of these consolidated financial statements
33
Livermore Investments Group Limited
Consolidated Statement of Changes in Equity for the year ended 31 December 2011
Note
15
16/30
27
27
10
28
Balance at 1 January 2010
Purchase of own shares
Share option charge
Transactions with owners
Profit for the year
Other comprehensive
income:
Available-for-sale financial
assets
• Fair value losses
• Reclassification to
profit or loss due to
disposals
• Reclassification to
profit or loss due to
impairment
Transfer on disposal of
associate
Foreign exchange losses
arising from translation of:
• associate
• subsidiaries
• reclassification to
profit or loss due to
disposal of associate
Total comprehensive
income for the year
Balance at 31 December
2010
Purchase of own shares
Share option charge
15
16/30
Transactions with owners
Share
capital
US
$000
Share
premium
US
$000
Treasury
Shares
US
$000
Share
option
reserve
US
$000
Translation
reserve
US
$000
Investments
revaluation
reserve
US
$000
Retained
earnings
US
$000
Total
US
$000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
215,499
(9,610)
5,759
(2,449)
(20,840)
(59,791)
128,568
-
-
-
-
-
-
-
-
-
-
-
-
(2,037)
-
(2,037)
-
-
-
-
-
-
-
-
-
-
14
14
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,037)
14
(2,023)
8,487
8,487
(1,364)
-
(1,364)
573
6,330
-
-
573
6,330
5,948
(5,948)
-
(4,856)
(577)
7,154
-
-
-
-
-
-
(4,856)
(577)
7,154
1,721
11,487
2,539
15,747
215,499
(11,647)
5,773
(728)
(9,353)
(57,252)
142,292
-
-
-
(7,125)
-
(7,125)
-
4
4
-
-
-
-
-
-
-
-
-
(7,125)
4
(7,121)
Annual Report 2011
34
Share
capital
US
$000
Share
premium
US
$000
Treasury
Shares
US
$000
Note
Share
option
reserve
US
$000
-
-
-
-
-
-
Translation
reserve
US
$000
Investments
revaluation
reserve
US
$000
Retained
earnings
US
$000
Total
US
$000
-
-
-
-
(4,367)
(438)
9,873
(158)
-
-
5,356
5,356
-
-
-
-
(4,367)
(438)
9,873
(158)
(158)
5,068
5,356
10,266
-
-
-
-
-
-
-
-
-
-
-
-
215,499 (18,772)
5,777
(886)
(4,285)
(51,896) 145,437
Profit for the year
Other comprehensive
income:
Available-for-sale financial
assets
• Fair value losses
• Reclassification to
profit or loss due to
disposals
• Reclassification to
profit or loss due to
impairment
Foreign exchange losses
arising from translation of:
•
subsidiaries
Total comprehensive
income for the year
Balance at 31 December
2011
27
27
-
-
-
-
-
-
-
The notes on the following pages form part of these consolidated financial statements.
35
Livermore Investments Group Limited
Consolidated Statement of Cash Flows for the year ended 31 December 2011
Note
2011
US $000
2010
US $000
Cash flows from operating activities
Profit before tax
Adjustments for
Depreciation
Provisions for legal and other cases
Interest expense
Interest and dividend income
Gain on investment in associate
Loss on investments
Equity settled share options
Exchange differences
3
35
31
25
28
27
30
31
Changes in working capital
Increase in trade and other receivables
Increase / (decrease) in trade and other payables
Cash flows from operations
Tax paid
Net cash from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
3
Acquisition of investments
Proceeds from sale of investments
Payments for derivative financial instruments
Disposal of associate
Interest and dividend received
Net cash from investing activities
6,983
9,273
100
(224)
4,335
148
(2,248)
3,447
(18,891)
(10,490)
-
10,247
4
819
3,373
(1,030)
993
3,336
(357)
2,979
-
(36,895)
27,057
-
-
19,942
10,104
(495)
1,976
14
(99)
1,526
(593)
(423)
510
(469)
41
(55)
(66,805)
36,488
(585)
13,729
8,675
(8,553)
Annual Report 2011
36
Cash flows from financing activities
Purchase of own shares
Proceeds from bank loans
Repayments of bank loans
Interest paid
Settlement of litigation
Net cash from financing activities
Note
2011
US $000
2010
US $000
15
(7,125)
167,767
(2,037)
142,193
(175,960)
(139,332)
(4,335)
(197)
(3,447)
-
(19,850)
(2,623)
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Exchange differences on cash and cash equivalents
Translation differences on foreign operations’ cash and
cash equivalents
(6,767)
(9,995)
(483)
(1)
(11,135)
700
284
156
Cash and cash equivalents at the end of the year
14
(17,246)
(9,995)
The notes on the following pages form part of these consolidated financial statements
37
Notes on the Financial Statements
1 General Information
Incorporation, principal activity and status of the Company
1 1 The Company was incorporated as an international business company and registered in the
British Virgin Islands (BVI) on 2 January 2002 under IBC Number 475668 with the name
Clevedon Services Limited The liability of the members of the Company is limited
1 2 The Company changed its name to Empire Online Limited on 5 May 2005 and then to
Livermore Investments Group Limited on 28 February 2007
1 3 The principal activity of the Group changed to investment services on 1 January 2007
Before that the principal activity of the Group was the provision of marketing services to
the online gaming industry and, since 1 January 2006, the operation of online gaming
1 4 The principal legislation under which the Company operates is the BVI Business Companies
Act, 2004
1 5 The registered office of the Company is located at Trident Chambers, PO Box 146, Road
Town, Tortola, British Virgin Islands
2
Accounting Policies
The significant accounting policies applied in the preparation of the consolidated financial
statements are as follows:
2 1 Basis of preparation
The consolidated financial statements of Livermore Investments Group Limited have been
prepared in accordance with International Financial Reporting Standards (“IFRS”) as
adopted by the European Union and on a going concern basis The consolidated financial
statements have been prepared on the historical cost basis except for the following:
•
Financial instruments at fair value through profit or loss (including derivatives) are
measured at fair value
• Available- for- sale financial assets are measured at fair value
•
Investment property is measured at fair value
The financial information is presented in US dollars because this is the currency in which
the Group primarily operates
The Directors have reviewed the accounting policies used by the Group and consider them
to be the most appropriate
2 2 Adoption of new and revised IFRSs
As from 1 January 2011, the Group adopted all the new or revised IFRS and relevant
amendments which became effective and also were endorsed by the European Union, and
are relevant to its operations
The adoption of the above did not have a material effect on the consolidated financial
statements
All IFRS issued by the International Standards Board (IASB) which are effective for the year
ended 31 December 2011, have been adopted by the EU through the endorsement procedure
established by the European Commission, with the exception of certain provisions of IAS 39:
“Financial Instruments: Recognition and Measurement” relating to portfolio hedge accounting
Annual Report 2011
38
The following Standards, Amendments to Standards and Interpretations had been issued
by the date of authorisation of these consolidated financial statements but are not yet
effective for the year ended 31 December 2011:
Standards and Interpretations endorsed by the EU
Effective for
annual periods
beginning on or
after:
Amendment to IFRS 7: “Disclosures Transfers of Financial Assets”
1 July 2011
Standards and Interpretations not endorsed by the EU
IFRS 9: “Financial Instruments: Classification and Measurement”
1 January 2015
IFRS 10: “Consolidated Financial Statements”
IFRS 11: “Joint Arrangements”
IFRS 12: “Disclosure of Interests in Other Entities”
IFRS 13: “Fair Value Measurement”
IAS 19 (Revised): “Employee Benefits”
IAS 27 (Revised): “Separate Financial Statements”
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
1 January 2013
IAS 28 (Revised): “Investments in Associates and Joint Ventures”
1 January 2013
IFRIC 20: “Stripping Costs in the Production Phase of a Surface Mine”
1 January 2013
Amendment to IFRS 1: “Severe Hyperinflation and Removal of Fixed
Dates for First time Adopters”
Amendment to IFRS 1: “Government Loans”
Amendment to IFRS 7: “Disclosures Offsetting Financial Assets and
Financial Liabilities”
Amendment to IAS 1: “Presentation of Items of Other Comprehensive
Income”
1 July 2011
1 January 2013
1 January 2013
1 July 2012
Amendment to IAS 12: “Deferred Tax: Recovery of Underlying Assets”
1 January 2012
Amendment to IAS 32: “Offsetting Financial Assets and Financial
Liabilities”
1 January 2014
The Board of Directors expects that when the above Standards or Interpretations become
effective in future periods will not have a material effect on the consolidated financial
statements of the Group
In relation to IFRS 9, the Management has not yet assessed the likely impact of the
application of this Standard, since the Management has not yet determined its accounting
policy to be followed under the new Standard
39
2 3 Basis of consolidation
The consolidated financial statements incorporate the financial statements of the
Company and entities (including special purpose entities) controlled by the Company (the
“subsidiaries”) Control is achieved where the Company has the power to govern the
financial and operating policies of an entity so as to obtain benefits from its activities
The financial statements of all the Group companies are prepared using uniform accounting
policies Where necessary, adjustments are made to the financial statements of subsidiaries
to bring their accounting policies into line with those used by the Group
All intra-group transactions, balances, income and expenses are eliminated on consolidation
The results and cash flows of any subsidiaries acquired or disposed of during the year are
included in the consolidated financial statements from the effective date of acquisition or
up to the effective date of disposal
2 4 Current assets are those which, in accordance with IAS 1 Presentation Of Financial
Statements are:
• expected to be realised within normal operating cycle, via sale or consumption, or
• held primarily for trading, or
• expected to be realised within 12 months from the reporting date, or
• cash and cash equivalent not restricted in their use
All other assets are non-current
2 5
Investment Property Revenue
Rental income is recognised on a straight line basis over the lease term Service charges
and management fees are recognised as the related costs are incurred and charged
Changes to rental income that arise from reviews to open market rental values or increases
that are indexed linked on a periodic basis are recognised from the date on which the
adjustment became due Lease incentives granted are recognised as an integral part of the
net consideration for the use of the property Lease incentives are allocated evenly over
the life of the lease Rental income and services charged are stated net of VAT and other
related taxes
2 6
Interest and dividend income
•
• Dividend income is recognised on the date that the Group’s right to receive payment is
Interest income is recognised based on applicable effective interest rates
established, which in the case of quoted securities is the ex-dividend date
2 7 Foreign currency
The individual financial statements of each Group company are presented in the currency
of the primary economic environment in which it operates (its functional currency) For
the purpose of the consolidated financial statements, the results and financial position
of each Group company are expressed in USD, which is the functional currency of the
Company and the presentation currency for the consolidated financial statements
Transactions in foreign currencies other than each group entity’s functional currency are
recorded at the rates of exchange prevailing on the dates of the transaction Monetary assets
and liabilities denominated in non-functional currencies are translated into functional
currency equivalents using year-end spot foreign exchange rates Non-monetary assets
Annual Report 2011
40
and liabilities are translated upon initial recognition using exchange rates prevailing at the
dates of the transactions Non-monetary assets that are measured in terms of historical
cost in foreign currency are not re-translated
Gains and losses arising on the settlement of monetary items and on the re-translation
of monetary items are included in the profit or loss for the year Those that arise on
the re-translation of non-monetary items carried at fair value are included in the profit
or loss of the year except for differences arising on the re-translation of non-monetary
available-for-sale financial assets in respect of which gains and losses are recognised in
other comprehensive income For such non-monetary items any exchange component of
that gain or loss is also recognised in other comprehensive income
The results and financial position of all Group entities that have a functional currency
different from US dollars are translated into the presentation currency as follows:
i assets and liabilities are translated at the closing rate at the reporting date; and
ii
income and expenses and also cash flows are translated at an average exchange rate
(unless this average is not a reasonable approximation of the cumulative effect of
the rates prevailing on the transaction dates, in which case the items are translated
at the rates prevailing at the dates of the transactions); and
iii exchange differences arising are recognised in other comprehensive income within
the translation reserve Such translation exchange differences are reclassified to
profit or loss in the period in which the foreign operation is disposed of
2 8 Taxation
Current tax is the tax currently payable based on taxable profit for the year in accordance
with the tax laws applicable in jurisdictions where the Group operates
Deferred income taxes are calculated using the liability method on temporary differences
Deferred tax is generally provided on the difference between the carrying amounts of
assets and liabilities and their tax bases However, deferred tax is not provided on the
initial recognition of goodwill, nor on the initial recognition of an asset or liability unless
the related transaction is a business combination or affects tax or accounting profit
Deferred tax on temporary differences associated with shares in subsidiaries and joint
ventures is not provided if reversal of these temporary differences can be controlled by the
group and it is probable that reversal will not occur in the foreseeable future In addition,
tax losses available to be carried forward as well as other income tax credits to the group
are assessed for recognition as deferred tax assets
Deferred tax liabilities are provided in full, with no discounting Deferred tax assets are
recognised to the extent that it is probable that the underlying deductible temporary
differences will be able to be offset against future taxable income Current and deferred
tax assets and liabilities are calculated at tax rates that are expected to apply to their
respective period of realisation, provided they are enacted or substantively enacted as at
the reporting date
Changes in deferred tax assets or liabilities are recognised as a component of tax expense
within profit or loss, except where they relate to items that are charged or credited directly
to equity in which case the related deferred tax is also charged or credited directly to
equity
41
2 9 Property, plant and equipment
Property, plant and equipment is stated at historical cost less accumulated depreciation
Carrying amounts are reviewed at each reporting date for impairment indications
Depreciation is calculated using the straight-line method, at annual rates estimated to
write off the cost of the assets less any estimated residual values over their expected
useful lives The annual depreciation rates used are as follows:
Computer Hardware
Fixtures and Fittings
Office Renovation
Motor Vehicles
-
-
-
-
33 3%
10%
25%
25%
2 10 Investment property
Certain of the Group’s properties are classified as investment property, being held for long
term investment gains and to earn rental income
Investment properties are measured initially at cost, and thereafter are stated at fair
value, which reflects market conditions at the reporting date Gains or losses arising from
changes in the fair values of investment properties are included in the profit or loss in the
year in which they arise
Investment property is valued at fair value based on valuations provided by a certified
external valuer
2 11 Equity instruments
Equity instruments issued by the Company are recorded at proceeds received, net of direct
issue costs
Own equity instruments purchased by the Company or its subsidiaries are recorded at
the consideration paid, including directly associated assets, and they are deducted from
total equity as treasury shares until they are sold or cancelled Where such shares are
subsequently sold, any consideration received is included in total equity
The share premium account includes any premiums received on the initial issuing of the
share capital Any transaction costs associated with the issuing of shares are deducted
from the premium paid
2 12 Share Options
IFRS 2 “Share-based Payment” requires the recognition of equity settled share based
payments at fair value at the date of grant
The Group issues equity-settled share based payments to certain employees The fair value
of share-based payments to employees at grant date is measured using the Binomial pricing
model
The fair value determined at the grant date is expensed on a straight-line basis over the
vesting period, based on the Group’s estimate of the shares that will eventually vest and
adjusted for the effect of non market-based vesting conditions The corresponding credit is
taken to the share option reserve
On exercise of the options any related amounts recognised in the share option reserve are
Annual Report 2011
42
transferred to share premium
On lapse of the options any related amounts recognised in the share option reserve are
transferred to retained earnings
2 13 Leases
Leases where a significant portion of the risk and rewards of ownership are retained by the
lessor are classified as operating leases and rentals are recognised to profit or loss on a
straight-line basis over the term of the lease
2 14 Borrowing costs
Borrowing costs primarily comprise interest on the Group’s borrowings Any borrowing
costs directly attributable to the acquisition, construction or production of qualifying
assets are added to the cost of the corresponding assets until such time as the assets are
substantially ready for their intended use or sale All other borrowing costs are expensed
in the period in which they are incurred and reported within “finance costs”
No borrowing costs have been capitalised for either 2011 or 2010
2 15 Financial assets
Financial assets are recognised when the Group becomes a party to the contractual
provisions of the financial instrument
A financial asset is derecognised only where the contractual rights to the cash flows
from the asset expire or the financial asset is transferred and that transfer qualifies for
derecognition A financial asset is transferred if the contractual rights to receive the
cash flows of the asset have been transferred or the Group retains the contractual rights
to receive the cash flows of the asset but assumes a contractual obligation to pay the
cash flows to one or more recipients A financial asset that is transferred qualifies for
derecognition if the Group transfers substantially all the risks and rewards of ownership
of the asset, or if the Group neither retains nor transfers substantially all the risks and
rewards of ownership but does transfer control of that asset
Financial assets are measured initially at fair value plus transaction costs, except for
financial assets and financial liabilities carried at fair value through profit or loss, which
are measured initially at fair value
Financial assets are measured subsequently as described below
All financial assets except for those at fair value through profit or loss are subject to
review for impairment at least at each reporting date Financial assets are impaired when
there is any objective evidence that a financial asset or a group of financial assets is
impaired Different criteria to determine impairment are applied for each category of
financial assets, which are also described below
Loans and receivables
• Trade and other receivables
Trade and other receivables are initially recognised and carried at their fair value which
normally is their original transaction value, and are subsequently measured at their
amortised cost An estimate for doubtful debts is made when collection of the full amount
is no longer probable Bad debts are written off when identified Where the time value of
43
money is significant receivables are discounted to present value
• Cash and cash equivalents
Cash comprises cash in hand and balances with banks Cash equivalents are short term,
highly liquid investments that are readily convertible to known amounts of cash They
include unrestricted short-term bank deposits originally purchased with maturities of three
months or less
Bank overdrafts are considered to be component of cash and cash equivalents, since they
form an integral part of the Group’s cash management
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets that are either
classified as held for trading or are designated by the Group to be carried at fair value
through profit or loss upon initial recognition All assets within this category are measured
at their fair value, with changes in value recognised in the profit or loss when incurred
Upon initial recognition, attributable transactions costs are recognised in profit or loss
when incurred
Available-for-sale financial assets
Available-for-sale financial assets include non-derivative financial assets that are either
designated as such or do not qualify for inclusion in any of the other categories of financial
assets Financial assets within this category are measured at fair value, with changes in
fair value recognised in other comprehensive income, within the investments revaluation
reserve Unquoted equity investments for which the fair value cannot be reliably measured
are stated at cost less impairments Gains and losses arising from investments classified
as available-for-sale are recognised in the profit or loss when they are sold or when the
investment is impaired
In the case of impairment of available-for-sale assets, the cumulative loss previously
recognised in other comprehensive income is reclassified to profit or loss Impairment
losses recognised in the profit or loss on equity instruments are not subsequently reversed
through the profit or loss Impairment losses recognised previously on debt securities
are reversed through the profit or loss when the increase in fair value can be related
objectively to an event occurring after the impairment loss was recognised in the profit or
loss
An assessment for impairment is undertaken at least at each reporting date, following the
IAS 39 guidance
2 16 Financial liabilities
Financial liabilities are recognised when the Group becomes a party to the contractual
provisions of the financial instrument
A financial liability is derecognised when it is extinguished, discharged, cancelled or
expires
Financial liabilities are measured initially at fair value plus transactions costs, except for
financial liabilities carried at fair value through profit or loss, which are measured initially
at fair value
Annual Report 2011
44
Financial liabilities at amortised cost
After initial recognition financial liabilities are measured at amortised cost using the
effective interest rate method
Derivative financial liabilities
The Group’s financial liabilities also include financial derivative instruments The Group’s
derivative instruments consist of interest rate swaps and forward currency contracts
All derivative financial instruments which are not designated as hedging instruments are
accounted for at fair value through profit or loss
Financial guarantee contracts
A financial guarantee contract is a contract that requires the issuer to make specified
payments to reimburse the holder for a loss it incurs because a specified debtor fails to
make payment when due in accordance with the original or modified terms of a debt
instrument
After initial recognition, financial guarantee contracts are measured at the higher of:
the amount determined in accordance with IAS 37; and
the amount initially recognised less, when appropriate, cumulative
amortisation recognised in accordance with IAS 18
(i)
(ii)
2 17 Legal and other disputes
Provision is made where a reliable estimate can be made of the likely outcome of legal and
other disputes against the Group No provision is made for other possible claims or where
an obligation exists but it is not possible to make a reliable estimate Costs associated with
claims made by the Group are charged to the profit or loss as they are incurred
2 18 Segment reporting
In identifying its operating segments, management generally follows the Group’s investment
activity lines Each of these operating segments is managed separately as each of these
investment activity lines requires different monitoring and strategic decision making
process as well as allocation of resources
The measurement policies the Group uses for segment reporting under IFRS 8 are the same
as those used in its consolidated financial statements Any inter-segment transfers are
carried out at arm’s length prices
2 19 Critical accounting judgments and key sources of estimation uncertainty
The preparation of financial statements in conformity with IFRS requires the use of certain
critical accounting estimates and requires management to exercise its judgement in the
process of applying the Group’s accounting policies It also requires the use of assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the consolidated financial statements and the reported
amounts of revenues and expenses during the reporting period Although these estimates
are based on management’s best knowledge of current events and actions, actual results
may ultimately differ from those estimates
45
Estimates and judgements are continually evaluated and are based on historical experience
and other factors, including expectations of future events that are believed to be reasonable
under the circumstances
Impairment of available-for-sale financial assets
Critical accounting judgments
(i)
The Group follows the guidance in IAS 39 on determining when an investment is impaired
This determination requires significant judgments In making this judgment, the Group
evaluates, among other factors, the duration and extent to which the fair value of an
investment is less than its cost and the financial health and near-term business outlook
for the investee, including factors such as industry and sector performance, changes in
technology and financing cash flow
The Group assesses at each reporting date whether financial assets are impaired
If impairment has occurred, this loss is recognised to profit or loss
If there is objective evidence that an impairment loss has been incurred on an unquoted
equity instrument that is not carried at fair value because its fair value cannot be reliably
measured, or on a derivative asset that is linked to and must be settled by delivery of
such an unquoted equity instrument, the amount of the loss is measured as the difference
between the asset’s carrying amount and the present value of estimated future cash flows
discounted at the current market rate of return of similar financial assets
Classification of financial assets
(ii)
The management exercises significant
in determining the appropriate
classification of the financial assets of the Group, especially for its investments and the
identification of any embedded derivatives The factors considered include the contractual
terms and characteristics which are very carefully examined, and also the Group’s intentions
and expected needs for the realisation of the financial assets
judgement
All new investments (other than additions to existing financial assets) are classified as at
fair value through profit or loss upon initial recognition, because management considers
them to be held for trading, and this also reflects more fairly the way these assets are
managed by the Group The Group’s business is investing in financial assets with a view to
profiting from their total return in the form of income and capital growth This portfolio
of financial assets is managed and its performance evaluated on a fair value basis, in
accordance with a documented investment strategy, and information about the portfolio
is provided internally on that basis to the Group’s Board of Directors and other key
management personnel
Deferred tax assets
(iii)
The tax rules applicable for the relevant Company’s operations are carefully taken into
consideration for the recognition of a deferred tax asset If a positive forecast of taxable
income indicates the probable use of a deferred tax asset, especially when it can be utilised
Annual Report 2011
46
without a time limit, that deferred tax asset is usually recognised in full The recognition
of deferred tax assets that are subject to certain legal or economic limits or uncertainties
is assessed individually by management based on the specific facts and circumstances
Estimation uncertainty
The following are the significant estimates that have the most significant effect on
recognition and measurement of relevant items
Fair value of financial instruments
(i)
Management uses valuation techniques in measuring the fair value of financial instruments,
where active market quotes are not available Details of the bases used for financial assets
and liabilities are disclosed in note 7 In applying the valuation techniques management
makes maximum use of market inputs, and uses estimates and assumptions that are, as
far as possible, consistent with observable data that market participants would use in
pricing the instrument Where applicable data is not observable, management uses its best
estimate about the assumptions that market participants would make These estimates may
vary from the actual prices that would be achieved in an arm’s length transaction at the
reporting date
Fair value of investment property
(ii)
Investment property is stated at fair value The fair valuation is based on discounted
cash-flow (DCF) method Under this method, the current market value of the property
is determined as the total of all projected future net earnings (before interest, taxes,
depreciation and amortization) discounted to present-day equivalents These net earnings
are discounted individually for property with due allowance for specific opportunities and
threats, and with adjustment in line with market conditions and risks
Provision for legal and other cases
(iii)
Determining whether provisions for legal and other disputes shall be recognised, requires
the Group to assess the likelihood of an economic outflow occurring as a result of past
events Where an economic outflow is considered probable, a provision has been made for
the estimated outflow
Where the information required by IAS 37 “Provisions, Contingent Liabilities and Contingent
Assets” is expected to prejudice the outcome of legal and other disputes, it has not been
disclosed on these grounds
Further details of provisions are provided in note 35
47
3 Property, plant and equipment
Office
Renovation
US $000
Computer
Hardware
US $000
Fixtures and
Fittings
US $000
Motor
Vehicles
US $000
Total
US $000
Cost
As at 1 January 2010
Additions
As at 1 January 2011 and
31 December 2011
325
35
360
136
9
145
Accumulated
depreciation
As at 1 January 2010
Charge for the year
As at 1 January 2011
Charge for the year
(150)
(86)
(236)
(73)
(116)
(29)
(145)
-
As at 31 December 2010
(309)
(145)
Net book value
As at 31 December 2011
51
As at 31 December 2010 124
-
-
95
11
106
(41)
(27)
(68)
(20)
(88)
18
38
4
Intangible assets
Cost
As at 31 December 2010 and at 31 December 2011
Accumulated amortisation
As at 31 December 2010 and 31 December 2011
Net book value
As at 31 December 2010 and 31 December 2011
26
-
26
(1)
(6)
(7)
(7)
(14)
12
19
582
55
637
(308)
(148)
(456)
(100)
(556)
81
181
Computer
Software
US $000
147
(147)
-
Annual Report 2011
48
5 Available-for-sale financial assets
Non-current assets
Fixed income investments
Private equities
Financial and minority holdings
Other investments
Current assets
Fixed income investments
Public equity investments
Hedge funds
2011
US $000
2010
US $000
53,815
14,162
15,226
5,549
88,752
7,007
2,900
2,926
12,833
25,827
18,070
18,919
5,620
68,436
11,886
5,826
2,842
20,554
For description of each of the above categories, refer to note 7
Available-for-sale financial assets, comprising principally investments in debt and equity
instruments are fair valued at least at each reporting date For investments traded in active
markets, fair value is determined by reference to Stock Exchange quoted bid prices For
other investments, fair value is estimated by reference to the current market value of similar
instruments or by reference to the discounted cash flows of the underlying assets Equity
investments for which fair values cannot be measured reliably are recognised at cost less
impairment
Available-for-sale financial assets are classified as non-current, unless they are expected to
be realised within twelve months of the reporting date or unless they will need to be sold to
raise operating capital
The Group’s portfolio is structured based on those investments which are considered to be
long term, core investments and those which could be readily convertible to cash and are
expected to be realised within normal operating cycle and form part of the Group’s treasury
function
During 2011 for the purpose of annual impairment assessments and due to market conditions,
management considered the impairment of certain available-for-sale financial assets
Impairment testing indicated that for those financial assets their carrying amount may not be
recoverable
The related charges in 2011, of USD 9 873m (2010 USD 6 330m), are included within loss on
investments (note 27), and represent impairment losses arising due to:
49
Significant fall in value
Prolonged fall in value
Investment in SRS Charminar
2011
US $000
5,408
4,465
9,873
2010
US $000
4,330
2,000
6,330
Included in the Financial and minority holdings is the investment in SRS Charminar
Investments Ltd (“SRS Charminar”), a private company incorporated in the Republic of
Mauritius Livermore invested USD 20m in SRS Charminar acquiring a 15% ownership stake
SRS Charminar through its wholly owned subsidiaries invested INR 5 2b (USD 132 1m at date
of investment) which is equivalent to USD 95 8m as at 31 December 2011 (2010: 114 7m) in
a real estate company in India (“investee company”) The investment in the investee company
was in the form of Compulsorily Convertible Debentures (“CCDs”), that included a put option
which was exercisable either if the investee company did not have an IPO within 3 years or
if certain terms in the Investment Agreement were not met The put option is secured by
land which was valued at around USD 1 3 billion at the time of investment and guarantees a
minimum return of approximately 30% IRR if exercised
SRS believes that there had been material breaches of the terms of the Investment Agreement
and that the funds invested in the investee company had been utilized in a manner contrary
to the terms agreed The material breaches were incurable in nature and therefore constituted
Events of Default Accordingly, SRS exercised their rights under the Put Option Agreement
and issued a put option notice in January 2009 requiring the investee company and other
counterparties to payback the CCDs
Following a dispute on the grounds of the put option notice between the promoters and
the investors, the parties agreed to invoke arbitration to be held in Mumbai On 14 August
2009, the arbitration process was completed and the arbitrator ruled in favour of investors
The award entitles the investors to investment plus interest amounting to 30% IRR until 14
August 2009 and 18% IRR thereafter Meanwhile, the investors have filed and won an interim
order for injunction against the promoters and the investee company to prohibit sale, transfer
or encumbering of the assets secured under the put option Thereafter, the promoters have
filed against the arbitral award and the injunction order As of 31 December 2011, there was
no change in status of these lands
On 13 January 2011 the Company Law Board (“CLB”) passed an order and allowed
Infrastructure Leasing & Financial Services Limited (“IL&FS”) to become 80% shareholder and
control the management of the investee company Since 2011 the investors and IL&FS have
been in negotiations and the investors have filed an application with the CLB to order IL&FS
to acknowledge and share their plan for satisfying the investors’ claims or in the alternative
recall the CLB order of 13 January 2011 The matter is still pending in court
After the reporting period, SRS has reported that they have been able to work out a settlement
with IL&FS and the investee company However, the implementation of the proposed
settlement is subject to certain conditions including receipt of appropriate and acceptable
regulatory and court approvals
Due to the legal complexity and the receipt of the regulatory and court approvals required for
Annual Report 2011
50
the implementation of the proposed settlement as well as the various counterparties involved,
the outcome remains uncertain
The carrying amount of the investment in SRS Charminar at 31 December 2011 is USD 14 7m
(2010: USD 17 8m), which represents its estimated fair value SRS Charminar’s only holding is
its investment in the investee company (through its wholly owned subsidiaries) and thus its
fair value is wholly attributable to the above mentioned investment The fair value is based on
discounted cash flow expectations and approximates the 15% share of the original investment
in the real estate company as translated to USD Accordingly, the fair value movement of the
investment is mainly due to the exchange rate fluctuations between INR and USD
Also included in the Financial and minority holdings is the investment in SRS Private
Investments, L P (“SRS Private”) with a carrying amount at reporting date of USD 2 6m (2010:
USD 3 1m) which is based on a net asset valuation (NAV) SRS Private through a fund has
invested in various real estate projects in India as well as in SRS Charminar, and its investment
in SRS Charminar as at 31 December 2011 amounts approximately to 21 2% (2010: 22 4%) of
its net assets
6 Financial at fair value through profit or loss
Non-current assets
Private equities
Real estate entities
Current assets
Fixed income investments
Public equity investments
Hedge funds
Other investments
2011
US $000
2010
US $000
1,575
1,454
3,029
21,609
7,372
2,066
271
31,318
2,844
1,763
4,607
33,453
5,878
1,710
-
41,041
For description of each of the above categories, refer to note 7
The Financial assets at fair value through profit or loss, comprising principally investments in
debt and equity instruments, are fair valued at least at each reporting date
The Group’s portfolio is structured based on investments which are considered to be long term,
core investments and those which could be readily convertible to cash and are expected to be
realised within normal operating cycle and form part of the Group’s treasury function
51
7 Categories of financial assets at fair value
The Group categorise its financial assets at fair value as follows:
• Fixed income investments relate to fixed and floating rate bonds and investments in the
loan market through CLOs
• Private equities relate to investments in both high growth opportunities in emerging
markets and deep value opportunities in mature markets The company generally invests
directly in prospects where it can exert significant influence
• Financial and minority holdings relate to significant investments (of over USD 5m) which
are strategic for the Company and are done in the form of equity purchases or convertible
loans Main investments under this category are in the fields of real estate and media
• Hedge funds relate to investments in funds managed by sophisticated investment managers
that pursue investment strategies with the goal of generating absolute returns
• Public equity investments relate to investments in shares of companies listed on public
stock exchanges
• Real estate entities relate to investments in real estate projects
8 Fair value measurements of financial assets and liabilities
The following table presents financial assets measured at fair value in the consolidated
statement of financial position in accordance with the fair value hierarchy This hierarchy
groups financial assets and liabilities into three levels based on the significance of inputs
used in measuring the fair value of the financial assets and liabilities The fair value hierarchy
has the following levels:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2: inputs other than quoted prices included within Level 1 that are observable for
the asset or liability, either directly (ie as prices) or indirectly (ie derived from prices);
and
• Level 3: inputs for the asset or liability that are not based on observable market data
(unobservable inputs)
The level within which the financial asset is classified is determined based on the lowest level
of significant input to the fair value measurement
Valuation of financial assets and liabilities
• Public equities, Credit Notes and Bonds are valued per their closing bid market prices
on quoted exchanges, or as quoted by market maker
• Hedge Funds and Private Equity funds are valued per reports provided by the funds on
a periodic basis, and if traded, per their closing bid market prices on quoted exchanges,
or as quoted by market maker
• Private Equities and Unlisted Investments are valued using market valuation techniques
as determined by the Directors, mainly on the basis of discounted cash flow techniques
or valuations reported by third-party managers of such investments
• Derivative instruments are valued at fair value as provided by counter parties of the
derivative agreement Derivative instruments consist of interest rate swaps and forward
currency contracts
Annual Report 2011
52
Financial assets and financial liabilities measured at fair value in the consolidated statement
of financial position are grouped into the fair value hierarchy as follows:
2011
US
$000
Level 1
2011
US
$000
Level 2
2011
US
$000
Level 3
2011
US
$000
Total
2010
US
$000
Level 1
2010
US
$000
Level 2
2010
US
$000
Level 3
2010
US
$000
Total
28,616
53,815
-
82,431
45,339
25,827
-
71,166
Assets
Fixed income
investments
Private equities
Financial and minority
holdings
Public equity
investments
Hedge funds
Real estate entities
-
-
-
4,992
3,084
-
10,272
-
-
Other investments
5,820
12,653
15,737
2,850
15,226
15,226
-
18,064
20,914
18,919
18,919
-
-
10,272
11,704
4,992
1,454
5,820
-
-
5,620
-
-
1,454
-
-
-
11,704
4,552
1,763
5,620
-
-
1,763
-
-
-
-
4,552
47,792
58,807
29,333
135,932
65,513
30,379
38,746
134,638
Liabilities
Interest rate swaps
-
-
8,515
8,515
-
-
8,515
8,515
-
-
8,723
8,723
-
-
8,723
8,723
The methods and valuation techniques used for the purpose of measuring fair value are
unchanged compared to the previous reporting period
No financial assets or liabilities have been transferred between levels
The Group’s financial assets and liabilities classified in Level 3 use valuation techniques based
on significant inputs that are not based on observable market data
Financial assets within this level can be reconciled from beginning to ending balances as
follows:
53
Available-for-sale
At fair value through
profit or loss
Financial
and minority
holdings
US $000
At 1 January 2019
22,092
Purchases
Gains losses
recognised in:
-
Private
equities
US $000
13,524
1,965
Real estate
US $000
2,982
-
Private
equities
US $000
2,903
-
Total
US $000
41,501
1,965
• Profit or loss
(3,896)
(1,944)
(1,210)
(59)
(7,109)
• Other
comprehensive
income
Exchange difference
Settlements
-
723
1,734
-
(59)
-
(9)
-
At 1 January 2011
18,919
15,220
1,763
Sales
Purchases
Gains losses
recognised in:
-
-
-
141
-
-
-
-
-
2,844
(1,651)
516
1,734
714
(59)
38,746
(1,651)
657
• Profit or loss
(525)
(1,626)
(425)
(134)
(2,710)
• Other
comprehensive
income
(3,168)
(2,657)
Exchange difference
-
-
-
116
-
-
(5,825)
116
At 31 December 2011
15,226
11,078
1,454
1,575
29,333
A reasonable change in any individual significant input used in the level 3 valuations is not
anticipated to have a significant change in fair values as above
Annual Report 2011
54
9
Investment property
Valuation as at 1 January
Change in fair value
Exchange difference
As at 31 December
2011
US $000
119,018
4,103
(603)
122,518
2010
US $000
106,333
1,114
11,571
119,018
The investment property relates to Wyler Park property in Bern, Switzerland, which is used for
earning rental income
The investment property was valued by Wuest & Partners as at 31 December 2011 and 2010 on
the basis of open market value in accordance with the appraisal and valuation guidelines of
the Royal Institute of Certified Surveyors, and the European Group of Valuers’ Associations
Wuest & Partners are independent qualified valuers with substantial relevant experience
Wyler Park property investment loan is secured on the property itself
The future minimum rental income under non-cancellable rental agreements, is receivable as
follows:
Less than 1 year
Between 1 and 5 years
Over 5 years
2011
US $000
6,133
26,986
10,794
43,913
2010
US $000
5,194
20,922
12,553
38,669
Rental agreements are quoted in Swiss Francs The equivalent USD amounts shown in the
table above are based on the exchange rates as at 31 December 2011 and 31 December 2010
respectively
55
10 Investment in associate
As at 1 January
Share of loss for the year
Sales for the year
Exchange differences
As at 31 December
2011
US $000
-
-
-
-
-
2010
US $000
10,936
(2,141)
(3,939)
(4,856)
-
11 Details of Group undertakings
Details of the investments in which the Group has a controlling interest are as follows:
Name of Subsidiary
Livermore Properties
Limited
Livermore Management
Limited
Livermore Israel
Investments Limited
Place of
incorporation
Holding
Proportion of
voting rights
and shares
held
British Virgin
Islands
British Virgin
Islands
Ordinary shares
100%
Ordinary shares
100%
Israel
Ordinary shares
100%
Livermore Capital AG
Switzerland
Ordinary shares
100%
Livermore Investments AG
Switzerland
Ordinary shares
100%*
Livermore Real Estate I AG
Switzerland
Ordinary shares
100%
Enaxor S a r l
Luxembourg
Ordinary shares
100%
Livermore Investments
Cyprus Limited
Cyprus
Ordinary shares
100%
Sandhirst Ltd
Cyprus
Ordinary shares
100%
Principal activity
Holding of
investments
Holding of
investments
Holding of
investments
Administration
services
Real Estate owner
and management
Real Estate
management,
(Dormant)
Holding of
investment
Administration
services
Holding of
investments
* Held by Enaxor S a r l
Annual Report 2011
56
12 Deferred tax
The Company is an international business company based in the British Virgin Islands (BVI)
and, under its laws, is not subject to taxation Deferred taxes relate to the temporary
differences between carrying amounts and corresponding tax base of its subsidiaries, in
Switzerland
The deferred tax shown in the consolidated statement of financial position relates to the
following items:
Investment property
– revaluation surplus
Derivative financial instruments
– recognised carrying amount
Tax losses
Net deferred tax asset
2011
US $000
(3,538)
1,423
2,603
488
2010
US $000
(2,271)
1,746
2,324
1,799
The movement on the deferred taxation account is as follows:
Investment
property
US $000
Derivative
financial
instruments
US $000
As at 1 January 2010
(1,332)
(Charged) / credited to
profit or loss (note 32)
Exchange difference
(763)
(176)
1,740
(176)
182
Tax losses
US $000
Total
US $000
1,515
620
189
1,923
(319)
195
As at 1 January 2011
(2,271)
1,746
2,324
1,799
(Charged) / credited to
profit or loss (note 32)
•
•
timing differences
(1,485)
change in tax rates
Exchange difference
197
21
(165)
(152)
(6)
494
(202)
(13)
(1,156)
(157)
2
As at 31 December 2011
(3,538)
1,423
2,603
488
57
The effective tax rates in Switzerland were reduced by 31 December 2011 from 23% to 21%
The Group expects that future taxable profits will be available in the jurisdiction where the
deferred tax assets occurred (Switzerland) so as to utilise the carrying amount of the deferred
tax assets recognised as at the end of the year
As at 31 December 2011 and 2010 there is no unrecognised deferred tax asset
13 Trade and other receivables
Accrued interest and dividend
income
Other receivables
Prepayments
2011
US $000
7,242
680
733
8,655
2010
US $000
9,886
33
212
10,131
The carrying amount of trade and other receivables approximates to their fair value
Included within accrued interest and dividend income, is an amount of USD 7 2m (2010: USD
3 7m) which is neither past due nor impaired and has been received in the first four months
following each reporting date
The ageing analysis of the past due but not impaired amounts, of accrued interest and
dividend income is as follows:
Less that 3 months
Between 3 and 6 months
Between 6 and 12 months
More than 1 year
2011
US $000
-
-
-
-
-
2010
US $000
-
-
-
6,152
6,152
The amounts due for more than one year for 2010 relate to accrued interest income receivable
from SRS Charminar Investments Ltd
Annual Report 2011
58
14 Cash and cash equivalents
Cash and cash equivalents included in the consolidated statement of cash flows comprise the
following at the reporting date:
Cash at bank
2011
US $000
2010
US $000
2,060
2,060
3,294
3,294
Bank overdrafts used for cash management purposes
(19,306)
(13,289)
Cash and cash equivalents for the purposes of the
consolidated statement of cash flows
(17,246)
(9,995)
15 Share capital
Authorised share capital
The Company has authorised share capital of 1,000,000,000 ordinary shares with no par value,
and no restrictions
Issued share capital
Ordinary shares with no par value
Number of
shares
Share premium
arising
US $000
As at 31 December 2010 and at 31 December 2011
304,120,401
215,499
Treasury shares
As at 1 January 2010
Additions
As at 1 January 2011
Additions
Number of
shares
13,425,966
8,409,798
US $000
9,610
2,037
21,835,764
27,497,119
11,647
7,125
As at 31 December 2011
49,332,883
18,772
59
In the consolidated statement of financial position the amount included comprises of:
Share premium
Treasury shares
2011
US $000
215,499
(18,772)
196,727
2010
US $000
215,499
(11,647)
203,852
16 Share options
The Company has a share option scheme for acquiring ordinary shares of the Company
Outstanding options
As at 31 December 2010 and 31
December 2011
Number of
options
Average
exercise price
GBP
Average exercise
price* USD
11,340,000
0 75
1 17
Average
exercise price
GBP
Average exercise
price* USD
Exercisable options
As at 1 January 2011
Exercisable during the year
Expired
Number of
options
11,712,221
166,667
(705,555)
At 1 January 2011
Exercisable during the year
11,173,333
166,667
0 84
0 30
1 90
0 76
0 30
As at 31 December 2011
11,340,000
0 75
1 30
0 47
2 95
1 18
0 47
1 17
Annual Report 2011
60
Details of share options outstanding at 31 December 2011
Number of
options
Grant date
Vesting
date
Earliest
exercise
date
Expire
date of
exercise
period
Exercise
price
GBP
Exercise
Price*
USD
Fair value at
grant date
USD
230,000
07/12/05
07/12/06
07/12/06
07/12/15
0 71
230,000
07/12/05
07/12/07
07/12/07
07/12/15
0 71
230,000
07/12/05
07/12/08
07/12/08
07/12/15
0 71
3,383,333
19/07/06
19/07/07
19/07/07
19/07/16
0 78
3,383,333
19/07/06
19/07/08
19/07/08
19/07/16
0 78
3,383,333
19/07/06
19/07/09
19/07/09
19/07/16
0 78
166,667
13/05/08
13/05/09 13/05/09
13/05/18
0 30
166,667
13/05/08
13/05/10 13/05/10
13/05/18
0 30
166,667
13/05/08
13/05/11
13/05/11
13/05/18
0 30
1 10
1 10
1 10
1 21
1 21
1 21
0 47
0 47
0 47
11,340,000
82,739
94,333
103,948
1,608,710
1,824,133
2,001,774
21,703
24,115
25,820
5,787,275
The fair value of options granted to employees was determined using the Binomial valuation
model The model takes into account a volatility rate of 41-45% calculated using the
historical volatility of a peer group of similar companies and a risk free interest rate of 4 0-
4 4% and it has been assumed the options have an expected life of two years post date of
vesting
The options lapsed at the earliest of the expiry date of exercise period or the termination of
the corresponding employee’s service
* The exercise prices as per the share option scheme are quoted in British Pounds The
indicative equivalent USD amounts shown in the table of details above as well as the average
exercise prices are based on the exchange rates as at 31 December 2011
17 Bank Loans
Long term bank loan
2011
US $000
84,316
2010
US $000
84,722
The long term bank loan is related to Wyler Park property investment purchase and is secured
on this property The decrease in the loan amount from 2010 to 2011 represents the effects of
currency translation from CHF to USD
Interest is payable at 3M CHF Libor + 0 85% The Group has fixed the variable element of
61
interest to 3 3% using an interest rate swap (note 18) Consequently, the loan’s effective
interest rate is 4 15%
The loan balance is repayable on 12 July 2014
18 Derivative financial instruments
Non-current liabilities
Interest rate swaps
Current liabilities
Interest rate swaps
2011
US $000
2010
US $000
5,143
5,470
3,372
3,253
During 2011 and 2010 the Group used forward currency contracts, however, no such
derivatives were open at 31 December 2011 or 2010
The Group uses interest rate swaps to manage its exposure to interest rate movements on its
bank borrowings by swapping a proportion from floating rates to fixed rates as follows:
Notional contract
amount
Underlying
floating rate
Contract
fixed rate
Contract
termination date
CHF 79,135,000
3M CHF Libor
CHF 10,000,000
6M CHF Libor
3 30%
3 255%
30 July 2014
17 June 2014
CHF 10,000,000
6M CHF Libor
3 1675%
17 November 2014
The calculation of the fair value of swaps is based on discounted cash flows of future
anticipated interest payments on the swap agreements in place compared with the discounted
cash flows of anticipated interest payments at market swap interest rates at the reporting date
The interest rate swap with CHF 79,135,000 notional amount relates to fixing the interest rate
on the loan against Wyler Park at 3 3%
For the year ended 31 December 2011 a fair value gain of USD 176,122 (2010: gain USD
497,175) has been recognised in the profit or loss in relation to all derivative financial
instruments
Annual Report 2011
62
19 Bank Overdrafts
Short term bank overdrafts
2011
US $000
19,306
2010
US $000
13,289
Short term bank overdrafts bear Libor + lender’s margin and have an average interest rate of
2 03% (2010 1 23%)
The Group’s bank overdraft facilities are secured by the Group’s financial assets portfolio up to
an amount, as at 31 December 2011, of USD 77m
20 Short term bank loans
Short term bank loans
2011
US $000
8,935
2010
US $000
17,128
Short term bank loans bear Libor + lender’s margin and have an average interest rate of 1 64%
(2010 1 96%) Their repayment period is usually one to three months and upon repayment
date usually they are renewed
The Group’s short term bank loan facilities are secured by the Group’s financial assets portfolio
up to an amount, as at 31 December 2011, of USD 35m
21 Trade and other payables
Other payables and accrued
expenses
2011
US $000
1,961
2010
US $000
1,159
The Directors consider that the carrying amount of trade and other payables approximates to
their fair value All amounts fall due within one year
22 Current tax payable
Corporation Tax
2011
US $000
122
2010
US $000
163
63
23 Net asset value per share
Net asset value per share has been calculated by dividing the net assets attributable to
ordinary shareholders by the closing number of ordinary shares (net of treasury shares) in
issue during the relevant financial periods
Diluted net asset value per share is calculated after taking into consideration the potentially
dilutive shares in existence as at 31 December 2011 and 31 December 2010
Net assets attributable to ordinary shareholders
(US $000)
2011
2010
145,437
142,292
Closing number of ordinary shares in issue
254,787,518
282,284,637
Basic net asset value per share (USD)
0 57
0 50
Closing number of ordinary shares including the
effect of potentially diluted shares
254,787,518
282,284,637
Diluted net assets value per share (US $)
0 57
0 50
Number of Shares
Ordinary shares
Treasury shares
304,120,401
304,120,401
(49,332,883)
(21,835,764)
Closing number of ordinary shares in issue
254,787,518
282,284,637
The Share options do not impact the diluted net asset value per share for 2011 and 2010 as
their exercise price was higher than the average market price of the Company’s shares on the
London Stock Exchange (AIM division) during the year ended 31 December 2011 and 2010
24 Segment reporting
The Group’s monitoring and strategic decision making process in relation to its investments is
separated into two activity lines which are also identified as the Group’s operating segments
These operating segments are monitored and strategic decisions are made on the basis of
segment operating results
Annual Report 2011
64
Segment information can be analysed as follows
Equity and debt
instruments
investment activities
Investment
property
activities
Total per financial
statements
2011
US $000
2010
US $000
2011
US $000
2010
US $000
2011
US $000
2010
US $000
Segment results
Investment income
Interest and dividend
income
Investment property
revenue
(Loss) / gain on
investments
Gain from investment
in associate
Gross profit
Other income
Administrative
expenses
18,891
10,490
-
-
18,891
10,490
-
-
5,684
4,734
5,684
4,734
(14,350)
(3,090)
4,103
1,114
(10,247)
(1,976)
-
495
-
-
-
495
4,541
3,000
7,895
9,787
5,848
14,328
13,743
-
-
-
3,000
-
(4,235)
(823)
(816)
(195)
(5,051)
(1,018)
Operating profit
Finance costs
Finance income
3,306
(1,531)
-
7,072
(326)
99
8,971
5,653
12,277
12,725
(3,763)
(3,225)
(5,294)
(3,551)
-
-
-
99
Profit before
taxation
1,775
6,845
5,208
2,428
6,983
9,273
Taxation charge
(167)
(88)
(1,460)
(698)
(1,627)
(786)
Profit for year
1,608
6,757
3,748
1,730
5,356
8,487
Segment assets
145,599
149,001
124,135
120,060
269,734
269,061
Segment liabilities
31,628
34,361
92,669
92,408
124,297
126,769
65
The Group’s interest and dividend income, investment property revenue and its investments
are divided into the following geographical areas:
Equity and debt
instruments investment
activities
Investment
property
activities
Total per financial
statements
2011
US $000
2010
US $000
2011
US $000
2010
US $000
2011
US $000
2010
US $000
Investment Income
Switzerland
72
700
9,787
5,848
9,859
6,548
Other European
countries
United States
India
Asia
Investments
Switzerland
Other European
countries
United States
India
Asia
(3,540)
4,130
11,190
(1,429)
(1,752)
4,541
7,390
(4,573)
248
7,895
-
-
-
-
-
-
(3,540)
4,130
11,190
7,390
(1,429)
(4,573)
(1,752)
248
9,787
5,848
14,328
13,743
-
-
122,518
119,018
122,518
119,018
37,171
42,603
70,681
24,670
3,410
55,629
31,061
5,345
-
-
-
-
-
-
-
-
37,171
42,603
70,681
55,629
24,670
31,061
3,410
5,345
135,932
134,638
122,518
119,018
258,450
253,656
Investment income, comprising interest and dividend income, gains or losses on investments,
and investment property revenue, is allocated on the basis of the customer’s geographical
location in the case of the investment property activities segment and the issuer’s location in
the case of the equity and debt instruments investment activities segment Investments are
allocated based on the issuer’s location
During 2011, 88% of the Group’s rent relates to rental income from a single customer
(SBB – Swiss national transport authority) in the investment property activities segment
(2010: 80 5%)
Annual Report 2011
66
25 Interest and dividend income
Interest from investments
Dividend income
Interest receivable written off
2011
US $000
2,886
22,157
(6,152)
18,891
2010
US $000
1,970
8,520
-
10,490
The Interest receivable has been written off as during the first half of the year since it has
been regarded as irrecoverable
26 Investment property income
Gross rental income
Direct expenses
2011
US $000
6,159
(475)
5,684
2010
US $000
5,196
(462)
4,734
All direct expenses relate to the generation of rental income
27 Loss on investments
Gain / (loss) on sale of investments
Investment property revaluation
Foreign exchange (loss) / gain
Loss due to impairment of available-for-sale
instruments
Fair value losses on financial assets through profit
or loss
Fair value gains on derivative instruments
2011
US $000
438
4,103
(456)
2010
US $000
(573)
1,114
4,146
(9,873)
(6,330)
(4,080)
(379)
(10,247)
(830)
497
(1,976)
67
The investments disposed of during the year resulted in the following realised gains/(losses)
(i e in relation to their original acquisition cost):
Available-for-sale
At fair value through profit or loss
28 Gain from investment in associate
Atlas Estates Ltd
Share of loss for the year
Gain on disposal
Foreign exchange loss reclassified from translation
reserve
29 Other income
Settlement of litigation
2011
US $000
(430)
535
105
2011
US $000
-
-
-
-
-
2011
US $000
3,000
2010
US $000
(573)
1,198
625
2010
US $000
495
(2,141)
9,790
(7,154)
495
2010
US $000
-
Other income relates to the settlement of the legal case between the Group and Uniplay
International Ltd
The related expenses of this case amounting to USD 0 794m are included in legal expenses
(note 30)
Annual Report 2011
68
30 Administrative expenses
Legal expenses
Directors’ fees and expenses
Share option expense
Professional and consulting fees
Other salaries and expenses
Office cost
Depreciation
Other operating expenses
Provision for legal and other cases – reversal
Audit fees
2011
US $000
1,989
1,367
4
415
463
298
100
493
(224)
146
5,051
2010
US $000
626
864
14
430
420
283
148
378
(2,248)
103
1,018
Legal expenses include USD 0 794m of expenses related to the settlement of the Group’s claim
against Uniplay International Ltd The Group received USD 3m as a result of the settlement
(note 29)
Throughout 2011 the Group employed 6 staff (2010:7)
Other salaries and expenses include USD 31,406 of social insurance and similar contributions
(2010: USD 34,019), as well as USD 12,247 of defined contributions plan costs (2010: USD
12,452)
31 Finance costs and income
Finance costs
Bank interest on investment property loan
Other bank interest
Bank custody fees
Foreign exchange loss
Finance income
Foreign exchange gain
2011
US $000
2010
US $000
3,763
572
140
819
5,294
3,225
222
104
-
3,551
-
99
Net finance costs
5,294
3,452
69
32 Taxation
Current tax charge
Prior year tax charge
Deferred tax charge
2011
US $000
2010
US $000
324
(10)
1,313
1,627
169
298
319
786
The tax charge for the year can be reconciled to
the accounting profit as follows:
Profit before tax
6,983
9,273
Effect of applicable corporation tax rates
Effect of income not subject to tax
Effect of expenses not deductible for tax purposes
Effect of current year losses
Prior year tax charge
Interest withholding tax
Property tax
Deferred tax charge
1,213
(899)
90
(355)
(10)
166
109
1,313
611
(394)
94
(259)
298
45
72
319
Tax for the year
1,627
786
The Company is an international business company based in the British Virgin Islands (BVI)
and, under the BVI laws, is not subject to corporation tax Corporation tax is calculated with
reference to the results of the Company’s subsidiaries
33 Earnings per share
Basic earnings per share has been calculated by dividing the profit for the year attributable
to ordinary shareholders of the parent Company by the weighted average number of ordinary
shares in issue of the parent during the relevant financial periods
Diluted earnings per share is calculated after taking into consideration other potentially
dilutive shares in existence during the year ended 31 December 2011 and the year ended 31
December 2010
Annual Report 2011
70
Profit for the year attributable to ordinary shareholders
of the parent (USD 000)
2011
2010
5,356
8,487
Weighted average number of ordinary shares in issue
267,345,907
286,552,752
Basic earnings per share (USD)
0 02
0 03
Weighted average number of ordinary shares including
the effect of potentially dilutive shares
267,345,907
286,552,752
Diluted earnings per share (USD)
0 02
0 03
The Share options do not impact the diluted earnings per share for 2011 and 2010 as their
exercise price was higher than the average market price of the Company’s shares on the
London Stock Exchange (AIM division) during the year ended 31 December 2011 and 2010
correspondingly
34 Related party transactions
The Group is controlled by Groverton Management Ltd, an entity owned by Mr Noam Lanir,
which at 31 December 2011 held 60 60% (2010: 54 70%) of the company’s voting rights
Amounts owed by key management
Amounts owed to / (by) Directors
Key management compensation
Short term benefits
Executive directors fees*
Executive directors reward payments
Non-executive directors fees
Share option expense
2011
US $000
5,568
60
2010
US $000
5,523
(9)
795
500
72
1,367
4
1,371
795
-
69
864
14
878
* These payments were made directly to companies to which they are related
Loans with a balance at 31 December 2011 of USD 5 5m (31 December 2010: USD 5 5m) were made
to key management during the year ended 31 December 2007 for the acquisition of shares in the
Company and were renewed during the year 31 December 2010 Interest is payable on these loans
71
at 6 month US LIBOR plus 0 25% per annum and the loans are secured on the shares acquired
The loans are repayable on the earlier of the employee leaving the Company or April 2013 These
loans are classified as financial assets available for sale in the consolidated statement of financial
position
Noam Lanir, through an Israeli partnership, is the major shareholder of Babylon Limited, an Israel
based Internet Services Company The Group has also invested in Babylon and as of 31 December
2011 it held 2 786m shares at a value of USD 6 6m
35 Provisions
Corporate guarantee
The Company provided a corporate guarantee to a bank in the amount up to €2 1m as part of
a shareholders’ guarantee required by a financing bank as condition to a loan facility provided
to DTH-Boom DTH-Boom is in a restructuring process and in breach of its loan covenants
The guarantee has been accounted for as a financial guarantee contract and an appropriate
amount has been provided for based on the management’s best estimate
A settlement agreement concerning the guarantee was reached during the first quarter of
2012 and the settlement is due to complete in the second quarter of 2012 The settlement
amount is fully provided as at 31 December 2011
Litigation
For litigation refer to note 36
The movement in the provisions for the year is as follows:
Legal and other cases
As at 1 January
Amounts reversed
Settlements
Exchange differences
At 31 December
2011
US $000
2010
US $000
1,585
(224)
(197)
(22)
1,142
4,200
(2,248)
-
(367)
1,585
During the year the Group’s management reversed an amount of USD 0 2m for the provisions
made during 2010 based on the settlement agreement related to legal and other cases
involving the Group
Annual Report 2011
72
36 Litigation
Ex employee vs Empire Online Ltd
In 2007 an ex employee of Empire Online Limited (the Company’s former name) filed a law
suit against one of its Directors and the Company in the Labor Court in Tel Aviv According to
the lawsuit the plaintiff claims compensation relating to the sale of all commercial activities
of Empire Online Limited until the end of 2006, and the dissolution of the company and the
terms of termination of his employment with Empire Online Limited
Prior to the filing of the lawsuit in Israel, the Company filed a claim against the plaintiff in
the Court in Cyprus based upon claims concerning breach of faith of the plaintiff towards his
employers Litigation was completed in Israel and a final decision is pending
No further information is provided on the above case as the Directors consider it could
prejudice the outcome of any claim
Secretline vs Livermore
In 2009, Secretline Investments Ltd (“Secretline”), a supplier of DTH Boom, filed a claim
against the Company and certain other DTH Boom shareholders in the District Court in Tel
Aviv The claim is related to guarantees provided by Livermore and certain other DTH Boom
shareholders to Secretline to secure a payment from DTH Boom to Secretline The guarantee
has been accounted for as a financial guarantee contract
The procedures were concluded during the first quarter of 2011 and there was a settlement
during the same period, under which the Group paid an amount of USD 0 2m
37 Commitments and contingencies
The Group has no capital or other commitments as at 31 December 2011
38 Events after the reporting date
In January 2012, Livermore agreed to settle its guarantees to a financing bank in relation to
its investment in DTH Boom The settlement amount is fully provided as at 31 December 2011
After the reporting period, the Manager of SRS Charminar has reported a finalization of
settlement negotiations with IL&FS and the investee company which is subject to certain
court and regulatory approvals
After the reporting date and prior to publishing this report, Livermore had acquired an
additional 1 039m share of the related company Babylon Ltd, an Internet software services
provider based in Tel Aviv
Following year end the Company purchased 24,589,824 additional shares to be held in treasury
for a total cost of USD 5 926m
39 Financial risk management objectives and policies
Background
The Group’s financial instruments comprise available for sale financial assets, financial assets
at fair value through profit or loss, derivatives, cash balances and receivables and payables
73
that arise directly from its operations For an analysis of financial assets and liabilities by
category, refer to note 40
Risk objectives and policies
The objective of the Group is to achieve growth of shareholder value, yet in line with
reasonable risk, taking into consideration that the protection of long-term shareholder value
is paramount The policy of the Board is to provide a framework within which the investment
manager can operate and deliver the objectives of the Group
Risks associated with financial instruments
Foreign currency risk
Foreign currency risks arise in two distinct areas which affect the valuation of the investment
portfolio, 1) where an investment is denominated and paid for in a foreign currency; and
2) where an investment has substantial exposure to non-US Dollar underlying assets or cash
flows denominated in a foreign currency The Group in general does not hedge its currency
exposure The Group discretionally and partially hedges against foreign currency movements
affecting the value of the investment portfolio based on its view on the relative strength of
certain currencies Any hedging transactions represent economic hedges; the Group does not
apply hedge accounting in any case Management monitors the effect of foreign currency
fluctuations through the pricing of the investments The level of investments denominated in
foreign currencies held by the Group at 31 December 2011 is the following:
2011
US $000
2011
US $000
2011
US $000
2010
US $000
2010
US $000
2010
US $000
Financial
assets
Liabilities
Net value
Financial
assets
Liabilities Net value
8,022
14,460
43,033
16,459
6,615
27
(3,914)
(8,649)
(9,662)
-
(3,780)
(3,066)
4,108
5,811
33,371
16,459
2,835
(3,039)
10,312
(4,014)
23,437
(16,255)
43,928
26,206
-
(5,668)
(2)
-
6,298
7,182
38,260
26,204
-
1,297
(4,120)
(2,823)
88,616
(29,071)
59,545
105,180
(30,059)
75,121
British Pounds (GPB)
Euro
Swiss Francs (CHF)
Indian Rupee (INR)
Israel Shekels (ILS)
Others
Total
Also, some of the USD denominated investments are backed by underlying assets which
are invested in non-USD assets For instance, investments in certain emerging market
private equity funds are denominated in USD but the funds in turn have invested in assets
denominated in non-USD currencies
A 10% increase of the following currency rates against the rate of United States Dollar (USD)
at 31 December 2011 would have the following impact A 10% decrease of the following
currencies against USD would have an approximately equal but opposite impact
Annual Report 2011
74
2011
US $000
2011
US $000
2010
US $000
2010
US $000
Profit or loss
Other
comprehensive
income
Profit or loss
Other
comprehensive
income
British Pounds (GPB)
Euro
Swiss Francs (CHF)
Indian Rupee (INR)
Israel Shekels (ILS)
Total
411
581
3,337
1,645
283
6,257
-
-
-
-
-
-
630
718
3,826
2,620
-
7,794
-
-
-
-
-
-
The above analysis assumes that all other variables in particular, interest rates, remain
constant The analysis does not include the impact arising from the translation of foreign
operations from their functional to the presentation currency
Interest rate risk
The Group is exposed to interest rate risk on its interest-bearing instruments which are
affected by changes in market interest rates The Group has borrowings of USD 84 3m (2010:
USD 84 7m) related to a real estate asset (Wylerpark, Bern), which have been fixed through
the use of an interest rate swap
The Group has banking credit lines which are available on short notice for the Group to use
in their investment activities, the costs of which are based on variable rates plus a margin
When an investment is made utilising the facility, consideration is given to the financing costs
which would impact the returns The level of banking facilities used is monitored by both the
Board and the management on a regular basis The level of banking facilities utilised at 31
December 2011 was USD 28 2m (2010: USD 30 4m)
As at 31 December 2011 the Group had no financial liabilities that bore an interest rate risk,
other than the previously disclosed bank facilities
Interest rate changes will also impact equity prices The level and direction of changes in
equity prices are subject to prevailing local and world economics as well as market sentiment
all of which are very difficult to predict with any certainty
The Group has fixed and floating rate financial assets including bank balances that bear
interest at rates based on the banks floating interest rates In particular, the fair value of
the Group’s fixed rate financial assets is likely to be negatively impacted by an increase in
interest rates The interest income of the Group’s floating rate financial assets is likely to be
positively impacted by an increase in interest rates
The Group’s interest bearing assets and liabilities are as follows:
75
Financial assets – subject to:
•
•
fair value changes
interest changes
Total
Financial liabilities – subject to:
•
interest changes
• both fair value and interest changes
Total
2011
US $000
2010
US $000
22,413
62,078
84,491
112,558
8,515
121,073
35,348
40,101
75,449
115,139
8,723
123,862
Changes in market interest rates will affect the valuation of fixed rate interest bearing
instruments A 1% (100 basis points) change in market interest rates would result in an
estimated 1 65% change in the net asset value as at 31 December 2011 (2010: 2 25%)
Particularly an increase of 1% (100 basis points) in interest rates would have the following
impact An equivalent decrease would have an approximately equal but opposite impact
2011
US $000
2011
US $000
2010
US $000
2010
US $000
Profit or loss
Other
comprehensive
income
Profit or loss
Other
comprehensive
income
Financial assets
•
•
fair value changes
interest changes
Financial liabilities
•
•
fair value changes
interest changes
(855)
621
2,769
(69)
(61)
(1,580)
-
-
-
401
4,406
(90)
2,466
(61)
3,137
85
-
-
-
85
The above analysis assumes that all other variables, in particular currency rates, remain constant
Annual Report 2011
76
Equity price risk
By the nature of its activities, most of the Group’s investments are exposed to market price
fluctuations The Board monitors the portfolio valuation on a regular basis and consideration
is given to hedging or adjusting the portfolio against large market movements
The Group had no single major financial instrument that in absolute terms and as a proportion
of the portfolio that could result in a significant reduction in the NAV and share price Due
to the very low exposure of the Group to public equities, and having no specific correlation to
any market, the equity price risk is low The portfolio as a whole does not correlate exactly to
any Index
Management of risks is primarily achieved by having a diversified portfolio to spread the
equity price risk A 10% uniform change in the value of the Group’s portfolio of financial
instruments (excluding private equities and financial and minority holdings) would result in a
6 81% change in the net asset value as at 31 December 2011 (2010: 6 19%), and would have
the following impact (either positive or negative, depending on the corresponding sign of the
change):
2011
US $000
2011
US $000
2010
US $000
2010
US $000
Profit or loss
Other
comprehensive
income
Profit or loss
Other
comprehensive
income
26
6,639
99
4,546
3,242
3,268
-
4,223
-
6,639
4,322
4,546
Available-for-sale
financial assets
Financial assets at fair
value through profit or
loss
Derivatives
The Investment Manager may use derivative instruments in order to mitigate market risk
or to take a directional investment These provide a limited degree of protection against a
rise in interest rates and would not materially impact the portfolio returns if a large market
movement did occur
Credit Risk
The Group invests in a wide range of securities with various credit risk profiles including
investment grade securities and sub investment grade positions The investment in debt
instruments is usually in investment grade securities, however, the Group may invest also in
sub investment grade or unrated debt instruments The investment manager mitigates the
credit risk via diversification across issuers However, the Group is exposed to a migration of
credit rating, widening of credit spreads and default of any specific issuer
77
The Group only transacts with regulated institutions on normal market terms which are trade
date plus one to three days The levels of amounts outstanding from brokers are regularly
reviewed by the management The duration of credit risk associated with the investment
transactions is the period between the date the transaction took place, the trade date and
the date the stock and cash are transferred, the settlement date The level of risk during the
period is the difference between the value of the original transaction and its replacement with
a new transaction The Group is mainly exposed to credit risk in respect of its interest bearing
investments of USD 82 5m (2010: USD 72 2m) The Group’s maximum credit risk exposure at
31 December 2011 is USD 92 4m (2010: USD 85 6m)
The fair values of the Group’s investments in bonds and other debt instruments are also
affected by the credit risk of those instruments However, it is not practical to provide an
analysis of the changes in fair values due to the credit risk impact for the year or previous
periods, nor to provide any relevant sensitivity analysis
The Group has no investment in sovereign debt as at 31 December 2011 or 2010
At 31 December the credit rating distribution of the Group’s asset portfolio subject to credit
risk (bonds and other debt instruments, bank balances and receivables) was as follows:
Rating
2011 Amount
US $000
Percentage
2010 Amount
US $000
Percentage
AA
AA-
A
A-
BBB
BBB+
BBB-
B
BB
BB+
BB-
C
CCC+
1,000
-
8,598
841
2,522
9,100
3,388
2,343
2,405
5,669
-
192
-
1%
-
9%
1%
3%
10%
4%
2%
3%
6%
-
0%
-
5,692
321
13,231
6,161
5,735
9,879
-
2,959
2,750
5,993
760
242
5,275
7%
0%
15%
7%
7%
12%
-
4%
3%
7%
1%
0%
6%
Annual Report 2011
78
Not Rated
56,355
61%
26,583
31%
92,413
100%
85,581
100%
For past due financial assets refer to note 13
Liquidity Risk
The major financial liability of the Group is the bank loan of CHF 79m (USD 84 3m) used for
purchase of a real estate property, which has a maturity in 2014 The loan is collateralized by
property valued at CHF 114 9m (USD 122 5m) in December 2011 The loan is non-recourse, i e
the holding company and its assets (apart from the Wyler Park property) are neither pledged
for this loan nor liable for recovery in case of default The following table summarizes the
contractual cash outflows in relation to the Group’s financial liabilities according to their
maturity
Less than 1
year
US $000
Between 1 and
2 years
US $000
Between 2 and
5 years
US $000
Over 5 years
US $000
31 December 2011
Borrowings
29,005
764
84,985
Derivative financial
instruments
Other financial
liabilities
3,373
3,172
2,018
2,803
-
-
Total
35,181
3,936
87,003
-
-
-
-
79
Less than 1
year
US $000
Between 1
and 2 years
US $000
Between 2
and
5 years
US $000
Over 5 years
US $000
31 December 2010
Borrowings
31,281
864
86,234
Derivative financial
instruments
Other financial
liabilities
3,257
2,958
2,632
2,447
-
-
Total
36,985
3,822
88,866
-
-
-
-
A significant proportion of the Group’s portfolio is invested in mid-term private equity
investments with low or no liquidity The investments of the Group in publicly traded securities
are subject to availability of buyers at any given time and may be very low or non-existent
subject to market conditions
The management take into consideration the liquidity of each investment when purchasing
and selling in order to maximise the returns to shareholders by placing suitable transaction
levels into the market Special consideration is given to investments that represent more than
5% of the investee
At 31 December 2011, the Group had liquid investments totalling USD 99 7m, comprising of
USD 2 0m in cash and cash equivalents, USD 53 8 in investments in loan market through CLOs,
USD 28 6m in fixed income investments, USD 10 3m in public equities and USD 5 0m in hedge
funds
Management structures and manages the Group’s portfolio based on those investments which
are considered to be long term, core investments and those which could be readily convertible
to cash, are expected to be realised within normal operating cycle and form part of the
Group’s treasury function
The following table lists the contractual cash inflows in relation to the Group’s financial
assets with a contractual maturity based on their maturity
Annual Report 2011
80
Less than 1
year
US $000
Between 1 and
2 years
US $000
Between 2and
5 years
US $000
Over 5 years
US $000
-
5,333
-
55,489
473
473
-
3,010
19,080
5,333
3,010
74,569
Less than 1
year
US $000
Between 1 and
2 years
US $000
Between 2and
5 years
US $000
Over 5 years
US $000
4,645
5,275
-
27,794
-
-
1,497
31,956
31 December 2011
Available-for-sale
financial assets
Financial assets at fair
value through profit or
loss
31 December 2010
Available-for-sale
financial assets
Financial assets at fair
value through profit or
loss
Total
4,645
5,275
1,497
59,750
Capital Management
The Group considers its capital to be its issued share capital and of it’s reserves
Net debt to equity
The Group manages its capital to ensure that it will be able to continue as a going concern
while maximising the return to shareholders through the optimisation of the balance between
its net debt and equity
Net debt to equity ratio is calculated using the following amounts as included on the
consolidated statement of financial position, for the reporting periods under review:
81
Cash at bank
Bank overdrafts
Bank loans
Short term bank loans
Net Debt
Total equity
2011
US $000
(2,060)
19,306
84,316
8,935
2010
US $000
(3,294)
13,289
84,722
17,128
110,497
111,845
145,437
143,236
Net debt to equity ratio
0 76
0 78
The decrease of the ratio in 2011 is mainly attributable to the profitability of the year that
increased Group’s equity The Board believes that the ratio remains at an acceptable and
manageable level
Re-purchase of own shares
The Board believes that the ability of the Company to re-purchase its own Ordinary shares in
the market may potentially benefit equity shareholders of the Company The re-purchase of
Ordinary shares at a discount to the underlying net asset value enhances the net asset value
per share of the remaining equity shares
Under this policy, in 2011, the Company bought 27,497,119 (2010: 8,409,798) of its Ordinary
shares at an average price of USD 0 26 (2010: USD 0 24) per share
Annual Report 2011
82
40 Financial assets and liabilities by IAS 39 category
Financial assets:
Non current assets
Available-for-sale financial assets
Financial assets at fair value through profit or loss
Current assets
Loans and receivables:
Trade and receivables
Cash at bank
Available-for-sale financial assets
Financial assets at fair value through profit or loss
Financial liabilities:
Non-current liabilities
Financial liabilities at amortised cost:
2011
US $000
2010
US $000
88,752
3,029
7,922
2,060
12,833
31,318
68,436
4,607
9,919
3,294
20,554
41,041
2011
US $000
2010
US $000
Bank loan
84,316
84,722
Financial liabilities at fair value through profit or
loss:
Derivative financial instruments
5,143
5,470
Current liabilities
Financial liabilities at amortised cost:
Bank overdrafts
Short term bank loans
Other financial liabilities
Financial liabilities at fair value through profit or
loss:
19,306
8,935
2,803
13,289
17,128
2,447
Derivative financial instruments
3,372
3,253
The carrying amount of the financial assets and liabilities at amortised cost approximates to
their fair value
83
Shareholder Information
Registrars
All enquiries relating to shares or shareholdings should be addressed to:
Capita Registrars
PXS
34 Beckenham Road
Beckenham
Kent BR3 4TU
Telephone: 0870 162 3100
Facsimile: 020 8639 2342
Change of Address
Shareholders can change their address by notifying Capita Registrars in writing at the above address
Website
www livermore-inv com
The Company’s website provides, amongst other things, the latest news and details of the Company’s
activities, share price details, share price information and links to the websites of our brands
Direct Dividend Payments
Dividends can be paid automatically into shareholders’ bank or building society accounts Two
primary benefits of this service are:
•
•
There is no chance of the dividend cheque going missing in the post; and
The dividend payment is received more quickly because the cash sum is paid directly into the
account on the payment date without the need to pay in the cheque and wait for it to clear
As an alternative, shareholders can download a dividend mandate and complete and post to Capita
Registrars
Lost Share Certificate
If your share certificate is lost or stolen, you should immediately contact Capita Registrars on 0870
162 3100 who will advise on the process for arranging a replacement
Duplicate Shareholder Accounts
If, as a shareholder, you receive more than one copy of a communication from the Company you may
have your shares registered in at least two accounts This happens when the registration details of
separate transactions differ slightly If you wish to consolidate such multiple accounts, please call
Capita Registrars on 0870 162 3100
Please note that the Directors of the Company are not seeking to encourage shareholders to either
buy or sell the Company’s shares
Annual Report 2011
84
Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting of Livermore Investments Group Limited
(the “Company”) will be held at 10 Snow Hill, London, EC1A 2AL on 28 August 2012 at 10am for
the purposes of the following:
To consider, and if thought fit, to pass the following resolutions, numbers 1 to 6 of which will be
proposed as Resolutions of Members and numbers 7 and 8 of which will be proposed as Special
Resolutions:
1
2
3
4
To receive and adopt the Report of Directors, the financial statements and the report of the
Auditor for the year ended 31 December 2011
To re-elect Richard Rosenberg, who is due to retire as Director in accordance with the Articles
of Association of the Company
To re-elect Noam Lanir, who is due to retire as Director in accordance with the Articles of
Association of the Company
To re-appoint Grant Thornton Cyprus as auditor of the Company to hold office from the
conclusion of this meeting until the conclusion of the next general meeting at which financial
statements are laid before the Company
5
To authorise the Directors to determine the auditor’s remuneration
6
That for the purposes of article 5 1 of the Articles of Association of the Company:
(a)
(b)
the Directors be and are generally and unconditionally authorised to allot up to a maximum
aggregate amount of 75,888,662 new ordinary shares of no par value of the Company to
such persons and at such times and on such terms as they think proper during the period
expiring at the end of the Annual General Meeting of the Company in 2013 or, if earlier, 15
months from the date of the passing of this resolution (unless previously revoked or varied
by the Company in general meeting); and
the Company be and is hereby authorised to make prior to the expiry of such period any
offer or agreement which would or might require such ordinary shares to be issued in
pursuance of any such offer or agreement notwithstanding the expiry of the authority
given by this resolution;
so that all previous authorities of the Directors pursuant to the said article 5 1 be and are
hereby revoked
7
THAT, subject to the passing of resolution 6 set out in the Notice convening this Meeting, the
Directors be and are empowered in accordance with article 5 2 of the Articles of Association
of the Company to allot new ordinary shares of no par value in the capital of the Company
(“ordinary shares”) for cash, pursuant to the authority conferred on them to allot such shares
by that resolution 6 as if the pre-emption provisions contained in article 5 2 did not apply to
any such allotment, provided that the power conferred by this resolution shall be limited to:
(a)
the allotment of ordinary shares in connection with an issue or offering in favour of
holders of ordinary shares and any other persons entitled to participate in such issue or
offering where the shares respectively attributable to the interests of such holders and
85
persons are proportionate (as nearly as may be) to the respective number of ordinary
shares held by or deemed to be held by them on the record date of such allotment, subject
only to such exclusions or other arrangements as the Directors may consider necessary or
expedient to deal with fractional entitlements or legal or practical problems under the
laws or requirements of any recognised regulatory body or stock exchange in any territory;
and
the allotment of up to an aggregate amount of 11,383,299 of such ordinary shares
(b)
and this power, unless renewed, shall expire at the end of the Annual General Meeting of
the Company in 2013 or, if earlier, 15 months from the date of the passing of this resolution
(unless previously revoked or varied by the Company in general meeting) but shall extend
to the making, before such expiry, of an offer or agreement which would or might require
ordinary shares to be allotted after such expiry and the Directors may allot such shares in
pursuance of such offer or agreement as if the authority conferred hereby had not expired
8
That, in accordance with the Articles of Association, the company be and is hereby generally
and unconditionally authorised to make market purchases (within the meaning of section 693
of the Companies Act 2006 (as amended)) on the AIM market of the London Stock Exchange
plc of ordinary shares of no par value in the capital of the Company (“ordinary shares”)
provided that:
(a)
(b)
(c)
the maximum number of ordinary shares hereby authorised to be purchased is 45,533,197;
the authority hereby conferred (unless previously renewed or revoked) shall expire at the
conclusion of the Annual General Meeting of the Company next following the meeting at
which this resolution is passed; and
the Company may, under the authority hereby conferred and prior to the expiry of that
authority, make a contract to purchase its own shares which will or may be executed
wholly or partly after the expiry of that authority and may make a purchase of its own
shares in pursuance of such contract
A member of the Company unable to attend the Meeting may be represented at the Meeting by
aproxy appointed in accordance with the Notes attached hereto
By order of the Board
Chris Sideras
Company Secretary
Trident Chambers
PO Box 146
Road Town
Tortola
British Virgin Islands
30 June 2012
Annual Report 2011
86
Notes
(i)
(ii)
(iii)
(iv)
A member entitled to attend and vote at the Meeting convened by the above Notice is
entitled to appoint one or more proxies to attend and, on a poll, to vote in his place A
proxy need not be a member of the Company Completion of the Form of Proxy will not
prevent you from attending and voting in person
To appoint a proxy you should complete the Form of Proxy enclosed with this Notice of
Annual General Meeting To be valid, the Form of Proxy, together with the power of attorney
or other authority (if any) under which it is signed or a notarially certified or office copy of
the same, must be delivered to the offices of Capita Registrars, PXS, 34 Beckenham Road,
Beckenham, Kent BR3 4TU by no later than 48 hours (not including weekends of banks
holidays) before the time fixed for the meeting or any adjourned meeting
In the case of joint holders, the vote of the senior holder who tenders a vote whether in
person or by proxy shall be accepted to the exclusion of the votes of the other joint holders
and, for this purpose, seniority shall be determined by the order in which the names stand
in the register of members of the Company in respect of the relevant joint holding
In the case of holders of depository interests representing ordinary shares in the Company,
a Form of Direction must be completed in order to appoint Capita IRG Trustees Limited, the
Depository, to vote on the holder’s behalf at the meeting or, if the meeting is adjourned,
at the adjourned meeting To be effective, a completed and signed Form of Direction (and
any power of attorney or other authority under which it is signed) must be delivered to the
Company’s Transfer Agent, Capita Registrars, PXS, 34 Beckenham Road, Beckenham, Kent,
BR3 4TU by no later than 72 hours (not including weekends or bank holidays) before the
time fixed for the meeting or any adjourned meeting
Completion of the Form of Direction will not prevent you from attending and voting in
person Depository Interest holders wishing to attend the meeting should contact the
Depository on the above address or email custodymgt@capitaregistrars com to request a
Letter of Corporate Representation
87
Principal Bankers
Leumi Bank
Dianastrasse 5
CH-8002
Zurich
Switzerland
Bank Hapoalim
18 Boulevard Royal
BP 703
L-2017
Luxembourg
FIBI Bank
Seestrasse 61
Zurich 8027
Switzerland
Credit Suisse AG
Seeefldstrasse 1
Zurich 8070
Switzerland
Corporate Directory
Secretary
Chris Sideras
Registered Office
Trident Chambers
PO Box 146
Road Town
Tortola
British Virgin Islands
Company Number
475668
Registrars
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent BR3 4TU
England
Auditor
Grant Thornton (Cyprus) Ltd
41-49 Agiou Nicolaou Str
Nicosia
Cyprus
Solicitors
Travers Smith
10 Snow Hill
London
EC1A 2AL
England
Nominated Adviser & Broker
Matrix Corporate Capital LLP
One Vine Street
London
W1J 0AH
England
Annual Report 2011
88