4
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 11
Events after the Reporting Date 17
Litigation 17
Report of the Directors 18
The Board’s Objectives 18
The Board of Directors 18
Directors’ responsibilities in relation to the consolidated financial statements 18
Disclosure of information to the Auditor 19
Substantial Shareholdings 19
Corporate Governance Statement 20
Introduction 20
The Board Constitution and Procedures 20
Board Committees 20
Remuneration Committee 20
Audit Committee 20
Communication with Investors 21
Internal Control 21
Going concern 21
Independence of Auditor 21
4
Annual Report 2014 Remuneration Report 22
Directors’ Emoluments 22
Directors’ Interests 22
Interests of Directors in share options 23
Share Option Scheme 23
Remuneration Policy 23
Review of the Business and Risks 25
Risks 25
Share Capital 25
Related Party Transactions 25
Report of the independent auditor to the members of Livermore Investments Group Limited 26
Consolidated Statement of Financial Position as at 31 December 2014 28
Consolidated Statement of profit or loss for the year ended 31 December 2014 29
Consolidated Statement of Comprehensive Income for the year ended 31 December 2014 30
Livermore investments group limited 31
Consolidated Statement of changes in equity for the year ended 31 December 2014 31
Consolidated Statement of cash flows for the year ended 31 December 2014 33
Notes on the Financial Statements 35
Shareholder Information 85
Registrars 85
Website 85
Direct Dividend Payments 85
Lost Share Certificate 85
Duplicate Shareholder Accounts 85
Notice of Annual General Meeting 86
Corporate Directory 89
5
Highlights
• Net Asset Value per share - USD 0 82 after payment of interim dividend of USD 0 0256 per share
(December 2013: USD 0 86)
• Performance driven by profitable activity in the US loan market and exit from Montana Tech
Components offset by adverse currency movements and further declines in the share price of Babylon
• Wyler Park property in Bern, Switzerland fully let
•
No material developments in the private equity portfolio
6
Annual Report 2014 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 2014
The year-end NAV was USD 0 82 per share after payment of a USD 5m dividend, USD 0 0256 per
share (2013 NAV: USD 0 86 per share) Net profit for the year was USD 7 2m (2013 Net Profit: USD 2 5m)
The portfolio recorded gains from exit of Montana Tech Components as well as from the CLO portfolio
offset by losses from currency movements and Babylon, loss on impairment of investments and one-
off administrative expenses Interest and dividend income from the financial portfolio totalled USD
26 6m (2013: USD 29 1m)
Wyler Park, our investment property in Bern, Switzerland performed well, generating over CHF 5 4m
(USD 5 2m) in net rent during the year All of the 39 apartments and commercial spaces are fully
rented The loan against Wyler Park was successfully refinanced in January 2015
There were no significant developments in the private equity portfolio during the year
Financial Review
The NAV of the Group at 31 December 2014 was USD 160 0m Net profit during the year was USD
7 2m, which represents earnings per share of USD 0 04
Administrative expenses were USD 7 2m (2013: USD 12 3m)
7
The overall change in the NAV is primarily attributed to the following:
Shareholders’ funds at beginning of year
Income from investments
Other income
Realised losses on investments
Loss on impairment on investments
Unrealised losses on investments
Unrealised exchange (losses) / gains
Administration costs
Net finance costs
Tax charge
Decrease in net assets from operations
Purchase of own shares
Dividends paid
Shareholders’ funds at end of year
31 December
2014
US $m
168 4
31 8
0 5
(1 6)
(8 9)
(9 4)
(0 6)
(7 2)
(7 2)
(0 8)
(3 4)
-
(5 0)
160
31 December
2013
US $m
173 0
34 5
0 1
(0 6)
(2 5)
(16 0)
0 1
(12 3)
(4 3)
(1 9)
(2 9)
(1 7)
-
168 4
Net Asset Value per share
US $0 82
US $0 86
Dividend & Buyback
During 2014, the Company did not repurchase any additional shares to be held in treasury As at 31
December 2014, the Company held 108,830,818 shares in treasury For the year ended 31 December
2014, the Company paid a dividend of USD 5m (USD 0 0256 per share)
To date, the Company has not repurchased any additional shares to be held in treasury
Annual General Meeting
The Group’s Annual General Meeting will be held on 26 August 2015 The Notice for the meeting is
on page 86 of this report
Richard B Rosenberg
Chairman
Noam Lanir
Chief Executive Officer
26 May 2015
8
Annual Report 2014
Review of Activities
Introduction and Overview
2014 will likely leave its mark on history as the year where geopolitical risk raised its ugly head, Oil
prices tumbled, and the US Federal Reserve brought about an end to its open-ended Quantitative
Easing (QE) program without significant volatility Russia annexed Crimea and Ukraine fell into civil
war, ISIS was formed and significantly increased its presence in Iraq and Syria, and conflict escalated
in the sensitive Israel-Gaza region Crude Oil prices fell over 50% as record production in the US met
weaker demand and a worried OPEC unwilling to adjust production fearing loss of market share and
influence Central bank actions were divergent - the US Federal Reserve ended its QE program and
signalled monetary tightening in 2015 whereas the European Central Bank loosened monetary policy
and considered QE in 2015, and the Bank of Japan bumped its target for asset purchases
The Group portfolio held up reasonably well helped by income gains from its US loan exposure and a
successful exit from Montana Tech Components In 2014, the Group generated interest and dividend
income of USD 26 6m and investment property income of USD 5 2m However, a further decline in the
share price of Babylon, unrealized losses on CHF versus the USD, and an adverse impact of Ukraine
and certain defaults in Latin America on the Group’s emerging market exposure through CLOs offset
these gains The Group reported NAV/share of USD 0 82 after a dividend of USD 0 0256/share (2013:
USD 0 86) and net income of USD 7 2m Administrative expenses amount to USD 7 2m (2013: USD
12 3m) and finance costs were USD 7 3m (2013: USD 5 2m), of which USD 3 0m relates to the loan
against the Wyler Park property and USD 3 5m reflects unrealized losses on currency movements In
January 2015, some of the unrealized currency losses have reversed following removal of the CHF
floor against the EUR by the Swiss National Bank
The Group does not have an external management company structure and thus does not bear the
burden of external management and performance fees Furthermore, 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 its strong foothold in the US
CLO market as well as the robustness of its investment portfolio and the alignment of management’s
interests with those of its shareholders, management believes that the Group is well positioned to
benefit from current market conditions
Global Investment Environment
The global economy expanded moderately in 2014, amid widening divergence both across and within
regions The modest growth momentum that had started in late 2013 continued in 2014, albeit with
a pause in the first quarter attributed largely to temporary and one-off factors such as unusually
cold weather in the US and the shutdown of heavy-industry plants in China for environmental
reasons Whereas the US economy increasingly gathered momentum, growth in Japan and Europe
was sluggish Advanced economies increasingly benefited from waning private sector deleveraging,
improved labour markets, rising confidence and accommodative policies By contrast, in several
emerging market economies, structural impediments and tightened financial conditions persisted,
weighing on their growth prospects Geopolitical risks, relating mostly to the conflict between
Ukraine and Russia and tensions in major oil producing countries, persisted throughout the year
Inflation rates around the world declined as a result of the sharp drop in oil prices
9
In the US, real GDP increased at an annual rate of 3 75% in the second half of 2014 after a reported
increase of just 1 25% in the first half The second-half gains in GDP reflected solid advances in
consumer spending, modest gains in business investment spending as well as subdued gains in
housing GDP growth was supported by accommodative financial conditions, including declines in
the cost of borrowing for many households and businesses; by a reduction in the restraint from fiscal
policy relative to 2013; and by increases in spending spurred by continuing job gains Employment
rose appreciably and the unemployment rate fell in 2014 declining from 6 7% to 5 7% by the end
of the year Wage growth, however, remained tepid Core inflation remained subdued standing at a
little over 1 25% in 2014 In response to improving employment conditions, the US Federal Reserve
brought an end to their bond buying program and hinted at possible monetary tightening in 2015
subject to continued improvement in employment
Following two years of negative GDP growth in the wake of the sovereign debt crisis, the Euro area
economy averaged 0 9% growth in 2014, albeit unevenly throughout the year, reflecting a positive
and increasing contribution from domestic demand The return to growth was supported by very
accommodative monetary policy and a much weaker Euro A high level of unemployment, sizeable
unutilized capacity, and ongoing adjustments in private and public sector balance sheets, however,
dampened the growth trend Labour markets showed signs of improvement with the unemployment
rate declining modestly, although with large variances across the region Headline inflation continued
its downward trend and averaged 0 4% in 2014 on account of lower oil prices as well as weak
demand and significant slack in the labour market In response, the European Central Bank (ECB)
introduced negative interest rates, announced a series of longer-term refinancing operations, and
subsequently in January 2015 announced purchases of sovereign debt and asset-backed securities
The Swiss economy performed well in a difficult environment At 2 0%, the expansion in real GDP in
2014 was slightly higher than in 2013, and unemployment decreased slightly While exports gained
momentum, growth in private consumption and investment was moderate The mortgage and real
estate markets remained a focus of attention for the Swiss National Bank (SNB) An increase in the
sectoral countercyclical capital buffer together with other measures helped dampen momentum
on the mortgage and real estate markets and stabilize lending growth Monetary policy in 2014
operated in an environment where inflation was close to zero and interest rates were very low
Against this background, the minimum exchange rate of CHF 1 20 per euro continued to be the key
instrument for ensuring appropriate monetary conditions in Switzerland However, with growing
signs of divergence between the US and the Euro area, the minimum exchange rate came under
substantial pressure prompting the SNB to introduce negative interest rates Subsequently, with
continued pressure on the exchange rate, the SNB decided to abandon the minimum exchange rate
and further lower the negative interest rates to -0 75% in January 2015, which caused significant
volatility in the currency markets
Supported by central bank activity, financial markets moved higher in general Volatility remained
low except early in the year when the US Federal Reserve began to wind down its QE program,
and then in October when concerns of weaker global demand as well as a sharp drop in oil prices
spooked the markets
The S&P 500 Index generated total returns of 13 7% in 2014 and the EuroSTOXX 50 Index returned
4% while India’s Nifty Index total return was 33% as Indians voted out the incumbent government
and gave a majority mandate to the Bharatiya Janata Party on hopes of economic reform and a
crackdown on corruption
Stronger economic performance in the US and expectations of future monetary tightening versus
sluggish growth and looser monetary policy in Europe and Japan were reflected in the currency
10
Annual Report 2014 markets The Euro fell 12% against the US Dollar and dragged down the Swiss Franc with it as
the SNB maintained its minimum exchange rate against the Euro The Japanese Yen continued its
weakness in 2014 falling a further 12%
Against widely held expectations of higher longer term rates, the US 10 year treasury yields fell from
around 3% at the start of the year to 2 17% as inflation expectations dimmed and expectations of
lower rates for much longer in Europe began to take hold with German 10 year bund yields falling
from 1 93% to 0 54%
During the first half of the year, US high yield and leveraged loans benefited from a varying
combination of accommodative global central banks, stagnant growth trends, low market volatility,
and resilient stocks US loans also benefitted from record new issue Collateralized Loan Obligations
(CLO) volume while lower Treasury yields supported the high yield market High yield bonds returned
5 74% in the first half while leveraged loans returned 2 4% Conditions in the second half of
the year, however, proved far more difficult, driven by broader market volatility, growing retail
withdrawals, and later in the year, by intensified pressure on the Energy sector as oil prices plunged
This backdrop drove high yield bond and loan yields significantly higher Loans outperformed high
yield bonds substantially in the second half as the loan market has a much lower exposure to the
Energy sector and also because loans have higher recovery rates given default due to their seniority
in the capital structure All in all, leveraged loans returned 2 05% for the year versus 2 17% for
high-yield bonds Default rates edged somewhat higher during the year with the issuer-weighted
loan default rate at 1 49%, up from 1 32% at the start of the year
Sources: Board of Governors of the Federal Reserve System, European Central Bank (ECB), Swiss National Bank, Bloomberg, JP Morgan
Livermore’s Strategy
The financial portfolio is focused on fixed income instruments which generate regular cash flows
and include exposure mainly to senior secured and usually broadly syndicated US loans and to a
limited extent emerging market debt through investments in CLOs This part of the portfolio is
geographically focused on the US with some exposure to Europe and emerging markets
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
Review of Significant Investments
Name
Wyler Park*
SRS Charminar
Other Real Estate Assets
Montana Tech Components
Total
* Net of related loan
Book Value
US $m
38 5
9 1
1 5
-
49 1
11
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 43m (USD 4 85m)
Following the successful development of 39 residential apartments, management rented out all of
them The entire property is fully rented and the annual rental income from the residential area is
about CHF 0 98m (USD 1 07m)
Livermore is the sole owner of Wyler Park through its wholly owned Swiss subsidiary, Livermore
Investments AG The loan outstanding on the project as of 31 December 2014 is CHF 77 5m (USD
78 1m), which is a non-recourse loan to Livermore Investments AG backed only by this property In
January 2015, management successfully refinanced the loan against Wyler Park with a Swiss bank
The principal amount of the new loan facility is CHF 68m The facility is committed until at least 30
June 2019 Upon successful extension of the lease with SBB from 2019 to 2029, an additional CHF
10m would be available under this facility
The valuation of the property on current-use basis (highest and best use), as of year-end 2014 is CHF
115 8m (USD 116 6m) and of year end 2013 was CHF 115 7m (USD 129 9m)
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 132 1m In 2009, the
promoters of the investee company were arrested on charges of criminal conspiracy, cheating, and
misappropriation of funds Later it was discovered that the investee company had breached the terms
of the investment agreement resulting in a default On 13 January 2011 the Company Law Board
(“CLB”) passed an order and allowed Infrastructure Leasing & Financial Services Limited (“IL&FS”)
to become an 80% shareholder and control the management of the company SRS Charminar and
other investors have agreed to a settlement with IL&FS wherein the settlement amount will be paid
in four tranches over five years
The carrying amount of the investment is based on discounted expected cash flows and as of year-
end was USD 9 1m (2013: USD 8 9m)
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
In January 2014, MTC and Livermore entered into an agreement whereby MTC bought back its shares
from Livermore at EUR 4 56 per share The sale was completed in June 2014 for a total consideration
of EUR 6 9m (USD 9 4m)
12
Annual Report 2014
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
2014 the investment environment relating to most funds was challenging and the Group expects
that material exits of portfolio companies should materialize between 2016 and 2018 During the
reporting period a distribution of USD 1 4m from SRS Private and Blue Ridge fund were carried out
The following summarizes the book value of the private equity funds as at year-end 2014
Name
SRS Private (India)
Evolution Venture (Israel)
India Blue Mountains (India)
Elephant Capital (India)
Da Vinci (Russia)
Panda Capital (China)
Blue Ridge Capital (China) Other investments
Total
Book Value
US $m
3 7
2 6
0 8
0 4
0 3
0 3
0 5
8 7
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 Approximately 56 6%
of the net asset value of the fund is invested in mixed-use assets (commercial and residential combined),
17% is in SRS Charminar, 14 5% is in land primarily for residential assets, 3 2% is invested at the entity
level of real estate developers, and 8 7% in cash and receivables In 2014, the fund distributed USD 0 67m
As of year-end 2014, the investment was valued at USD 3 7m
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
The Wi-Fi solutions company, language enhancements product company and the virtualization
technology company have been performing well
India Blue Mountains: India Blue Mountains is a hotel development fund that is developing 4 star
and 5 star hotels in India The fund plans to develop three hotels in prime areas of Mumbai, Pune
and Goa All hotels will be managed by the Accor Group (Novotel brands) Accor has also invested
equity and holds a 26% stake in all of the hotels
13
The Pune hotel is a Novotel brand hotel with 223 rooms built on a land area of 70,200 sq ft with
a total built-up area of approximately 373,043 sq ft which includes 37,248 sq ft of commercial
area The hotel opened for business in December 2013 and is generating cash flow to cover operating
costs However, to fund interest and amortizations, India Blue Mountains raised equity capital in
2014 Given the debt load and outlook of hospitality in Pune, Livermore decided not to participate
in the capital raise
The Mumbai hotel is on a 82,609 sq ft land site with a gross area of approximately 573,960 sq ft
The hotel will be a Novotel brand hotel with 543 rooms The property location is in close proximity
to the Mumbai International Airport and Domestic Airport
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
The investment is being carried at a valuation of USD 0 8m as of December 2014
Elephant Capital: India-focused private equity fund, which is AIM quoted (Ticker: ECAP) Its portfolio
investments include a leading tiles manufacturer in India, a media business with an exclusive content
library, and an online venture to distribute cricket related content
As of August 2014, the audited NAV of the fund was 35 pence per share Additional information
about the fund and its portfolio is available at www elephantcapital com
Da Vinci: The fund is primarily focused on Russia and CIS countries and is primarily invested
in the Moscow Exchange and a Ukrainian coal company The Moscow Exchange performed well
in local currency terms increasing revenues, EBITDA and Net Income as well as EBITDA margins
and Net Income margins The coal company is located in Western Ukraine The European Bank
for Reconstruction and Development (EBRD) is assessing the company for investment The fund is
building a club of investors to support and facilitate this investment The Group’s investment in the
fund was valued at USD 0 3m as of 31 December 2014
Panda Capital: Panda Capital is a China-based private equity fund focused on early-stage industrial
operations in China 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
Blue Ridge: Blue Ridge is a China focused private equity fund The fund is mostly wound down To
date, the fund has distributed USD 1 5m (73 5% of investment)
Financial portfolio and trading activity
The Group manages a financial portfolio valued at USD 99 1m (net of leverage) as at 31 December
2014, which is invested mainly in fixed income and credit related securities
14
Annual Report 2014 The following is a table summarizing the financial portfolio as of year-end 2014
Name
2014
Book Value US $m
2013
Book Value US $m
Investment in the loan market through CLOs
Babylon
Hedge Funds
Corporate bonds
Other Public Equities
Total
Total net of leverage
82 2
0 9
1 1
2 0
1 9
88 1
99 1*
91 9
9 2
2 2
1 9
2 8
108 0
98 0
* this figure includes USD 16m which the Company invested during the period in the first loss
tranche of warehouse facilities for accumulating loans with the intention to transfer these loans
to a CLO
Senior Secured Loans and Collateralized Loan Obligations (CLO):
During 2014 the Group continued to re-invest distributions from its CLO portfolio into new issue CLO
transactions albeit at a reduced pace CLOs are managed portfolios invested into diversified pools of
senior secured loans and financed with long term financing pre-fixed at the time of issuance The
Group also provided first loss investments into credit facilities to secure and warehouse collateral
for its upcoming CLO transactions
The US senior secured loan market continued to offer good risk adjusted returns as an inflation
linked asset class with a senior secured claim on the borrower and with overall low volatility and
low correlation to the equity market
The US leveraged loan market performed well during the first half of 2014 supported by record new
CLO volume, accommodative global central banks, low growth trends, low market volatility and
resilient stocks Demand from retail, however, was weak as prospects of rate increases diminished
with lower inflation and growth expectations Conditions in the second half of the year, however,
proved far more difficult, driven by broader market volatility, growing retail withdrawals, and later
in the year, by intensified pressure on the Energy sector as oil prices plunged Defaults also ticked
up ending the year at 1 49% on an issuer-weighted basis versus 1 32% at the start of the year Total
return from leveraged loans in 2014 was 2 05% New issue loans registered their second highest
annual volume with USD 467bn of institutional loan pricing in 2014 (2013: USD 670bn) driven by
re-financings as well as a global backdrop for M&A activity
The US CLO portfolio continued to perform well on account of low current default rates, a benign
default outlooks and relatively stable credit fundamentals of their underlying loans At the end of
the reporting period all of our CLO investments were passing their coverage tests (thereby making
15
dividend distributions) During the year, the CLO portfolio generated USD 21 7m in cash distributions,
as well as earning USD 2 7m on warehousing facilities Cash payments to CLO equity remained
strong although cash distributions from pre-crisis CLOs declined further due to amortization of
the cheapest liabilities and diversion of cash-flow to pay manager incentive fees While new issue
CLOs also face lower excess spreads, they have longer reinvestment periods which should enable
them to weather a downturn, and benefit from wider spreads or any volatility in loan prices in the
future The Group has continued to reduce exposure to CLOs with shorter reinvestment periods and
focus on new issue CLOs As at 31 December 2014, over 82% of the Group CLO portfolio is invested
in post-crisis CLOs
Secondary market prices for CLOs rose in the first half of 2014 but subsequently fell as the market
re-assessed loans with exposure to oil as well as a drop in loan prices in general While the Group’s
US CLO portfolio performed better than market, its global and emerging market credit CLO portfolio
was severely impacted by defaults in Mexico and Brazil, conflict in Ukraine, as well as the drop in
oil prices Livermore reduced a part of its emerging markets CLO exposure at levels much higher than
year end and management continues to monitor developments in this portfolio
As US interest rates are expected to remain low until mid-2015 or longer and very few loans mature
in the near term, corporate defaults are expected to remain low in the near-medium term, with the
exception of certain energy related companies Management believes that the environment should
remain attractive for investments in CLO income notes In 2014, Livermore launched three new issue
cash-flow CLOs as an anchor investor and participated in additional new issue CLOs of leading managers
While management maintains a positive view on the CLO portfolio, mid-long term performance may be
negatively impacted by a pull back into a substantial recession in the US or Europe or a geo-political
event that could result in a spike in defaults Despite positive developments in the overall health of
the US economy, we acknowledge the continued EU sovereign debt issues as well as the headwinds the
US economy may face relating to the potential monetary tightening and geopolitical risks
The Group’s CLO portfolio is divided into the following geographical areas:
US CLOs
Global Credit CLOs
European CLOs
2014
Amount
US $000
68,704
12,008
1,505
82,217
Percentage
83 6%
14 6%
1 8%
100%
2013
Amount
US $000
64,874
25,021
1,986
91,881
Percentage
70 6%
27 2%
2 2%
100%
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
In Q1 2014, Livermore sold approximately half of its shareholding in Babylon at an average price of
USD 1 98 and now holds approximately 4% of Babylon’s issued share capital
Noam Lanir, the majority shareholder of the Group, is also a major shareholder in Babylon (note 32)
16
Annual Report 2014 The following table reconciles the review of activities to the Group’s financial assets and investment
property as of year-end 2014:
Name
Significant Investments
Private Equity Funds
Financial Portfolio
Total
Available- for-sale financial assets (note 4)
Financial assets at fair value through profit or
loss (note 5)
Net Investment property (note 8 & 17)
Total
Events after the reporting date
2014
Book Value US $m
49 1
8 7
88 1
145 9
101 9
5 5
38 5
145 9
Events after the reporting date are described in note 36 of the consolidated financial statements
Litigation
At the time of this Report, there are two litigation matters that the Group is involved in Further
information is provided in note 34 to the consolidated financial statements
17
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 59), 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
Noam Lanir (age 48), 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 sixteen years which
culminated in its IPO in June 2005 on AIM 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 He is also a major
benefactor of a number of charitable organisations
Ron Baron (age 47), 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 advising banks and large corporations on
corporate transactions, including buy-outs and privatisations Ron has over thirteen years of experience
as an investment manager with particular focus on the US credit market and CLOs He holds an MBA
from INSEAD Fontainebleau and a LLB (LAW) and BA in Economics from Tel Aviv University
The Directors submit their annual report and audited consolidated financial statements of the Group
for the year ended 31 December 2014
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:
18
Annual Report 2014 •
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
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 30 April 2015 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
RB Investments GmbH
13,915,419
Merrill Lynch Pierce, Fenner & Smith, Inc
9,329,051
4 58
3 07
79 07
7 13
4 78
* after consideration of treasury shares (note 14)
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% 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 32 to the consolidated financial statements
19
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 – September 2012 (the “Code”) However, the Company is keen to adopt and promote the
provisions of that Code Up to 31 December 2014 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 Following the resignation of one of the
Non-Executive Directors, this committee has one member until a new Non-Executive Director is
appointed The duties of the Committee include monitoring the auditor’s performance and reviewing
accounting policies and financial reporting procedures
20
Annual Report 2014 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
Going concern
The Directors have reviewed the current and projected financial position of the Group, making
reasonable assumptions about interest and dividend income, future trading performance, valuation
projections and debt requirements On the basis of this review, the Directors have a reasonable
expectation that the Company and the Group have adequate resources to continue in operational
existence for the foreseeable future Accordingly, they continue to adopt the going concern basis in
preparing the Annual Report and accounts
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 auditor that it is independent;
a review of fees paid to the auditor in respect of audit and non-audit services
21
Remuneration Report
The Directors’ emoluments, benefits and shareholdings during the year ended 31 December 2014
were as follows:
Directors’ Emoluments
Each of the Directors has a service contract with the Company
Director
Date of
agreement
Fees
US $000
Benefits
US $000
Reward
payments
US $000
Share options
expense
US $000
Total
emoluments
2014
US $000
Total
emoluments
2013
US $000
Richard Barry
Rosenberg
10/06/05
Noam Lanir
10/06/05
Ron Baron
01/09/07
74
400
350
-
45
-
25
-
2,628
-
-
-
99
445
2,978
71
2,245
6,762
The dates are presented in day / month / year format
Directors’ Interests
Interests of Directors in ordinary shares
Director
Notes
As at 31 December 2014
As at 31 December 2013
Number of
Ordinary
Shares
Percentage
of ordinary
share capital
Percentage
of voting
rights
Number of
Ordinary
Shares
Percentage
of ordinary
share capital
Percentage
of voting
rights
154,412,173
50 773%
79 068% 154,412,173
50 773%
79 068%
13,915,419
4 576%
7 126%
13,915,419
4 576%
7 126%
15,000
0 005%
0 008%
15,000
0 005%
0 008%
Noam Lanir
Ron Baron
a)
b)
Richard
Barry Rosenberg
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) In 2007, loans of USD 5 523m were made to RB Investments GMBH, a company owned by Ron
Baron, for the acquisition of shares in the Company Interest was payable on these loans at 6
month US LIBOR plus 0 25% per annum and the loans were secured on the shares acquired
The loans were repayable on the earlier of the employee leaving the Company or April 2013
22
Annual Report 2014
In December 2012 the Board decided to renew the outstanding amount of these loans for a
period of another five years Based on the Board’s decision, the outstanding amount will be
reduced annually on a straight line over five years, as long as the key management employee
remains with the Company The relevant reduction in the loan amount for the year was USD
1 128m The loans together with their related accrued interest of USD 0 117m were classified
as “other assets” and are included under trade and other receivables (note 12) 1 128m The
loans together with their related accrued interest of USD 0 117m were classified as “other
assets” and are included under trade and other receivables (note 12)
Interests of Directors in share options
No of options at
31 December 2014
Date of grant
Exercise
price, GBP
Exercise
Price**,
US $
Vesting period
of options
Noam Lanir
10,000,000
19/07/06
0 78
1 22
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 22
1 11
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 2014
** 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 2014
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 of other Group entities
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:
23
•
•
•
•
•
•
•
•
•
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
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
24
Annual Report 2014 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 US companies and
emerging market countries 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 2014 The
authorised share capital is 1,000,000,000 ordinary shares with no par value
Related party transactions
Details of any transactions of the Group with related parties during the year to 31 December 2014
are disclosed in note 32 to the consolidated financial statements
By order of the Board of Directors
Chief Executive Officer
26 May 2015
25
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 2014 and the
consolidated statements of profit or loss, comprehensive income, changes in equity, and cash
flows for the year then ended, and a summary of significant accounting policies and other
explanatory information
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 2014 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
26
Annual Report 2014 Emphasis of Matter
We draw attention to Note 4 to the consolidated financial statements which describes the
existence of material uncertainty of the future cash flows relating to the investment of the Group
through SRS Charminar Investments Ltd, an Indian Real Estate company
We also draw attention to Note 34 to the consolidated financial statements which describes the
existence of material uncertainty over the outcome of a legal case against one of the custodian
banks that the Group uses and Livermore as the beneficial owner
Our opinion is not qualified in respect of these matters
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
Limassol
Date: 26 May 2015
27
Livermore Investments Group Limited
Consolidated Statement of Financial Position as at 31 December 2014
Note
2014
US $000
2013
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
Investments in associate and joint venture
Other assets
Current assets
Trade and other receivables
Available- for-sale financial assets
Financial assets at fair value through profit or loss
Current tax asset
Derivative financial instruments
Cash at bank
Total assets
Equity
Share capital
Share premium and treasury shares
Other reserves
Retained earnings
Total equity
Liabilities
Non current liabilities
Deferred tax
Current liabilities
Bank loans
Bank overdrafts
Short term bank loans
Trade and other payables
Provisions
Current tax payable
Derivative financial instruments
Total liabilities
Total equity and liabilities
Net asset valuation per share
3
4
5
8
9
12
12
4
5
21
16
13
14
14
11
17
18
19
20
33
21
16
42
99,374
1,806
116,609
-
2,538
220,369
20,890
2,561
3,704
-
1,125
3,807
32,087
23
116,846
2,157
129,916
5,524
3,384
257,850
3,399
3,242
13,244
6
-
4,150
24,041
252,456
281,891
-
178,597
2,937
(21,560)
-
178,597
13,539
(23,765)
159,974
168,371
2,272
2,272
1,956
1,956
78,092
10,355
-
1,758
-
5
-
90, 210
87,974
15,188
3,475
2,776
26
-
2,125
111,564
92,482
252,456
113,520
281,891
Basic and diluted net asset valuation per share (US $)
22
0 82
0 86
These consolidated Financial Statements were approved by the Board of Directors on 26 May 2015
The notes on pages 35 to 84 form part of these consolidated financial statements
28
Annual Report 2014
Livermore Investments Group Limited
Consolidated Statement of Profit or Loss for the year ended 31 December 2014
Investment income
Interest and dividend income
Investment property income
Loss on investments
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
2014
US $000
2013
US $000
24
25
26
27
28
29
29
30
26,619
5,159
(9,885)
21,893
462
29,068
5,473
(13,652)
20,889
55
(7,219)
(12,259)
15,136
(7,286)
109
7,959
(755)
8,685
(5,242)
906
4,349
(1,875)
7,204
2,474
Basic and diluted earnings per share ( US $)
31
0 04
0 01
The profit for the year is wholly attributable to the owners of the parent
The notes on pages 35 to 84 form part of these consolidated financial statements
29
Livermore Investment Group Limited
Consolidated Statement of Comprehensive Income for the year ended 31 December 2014
Profit for the year
Other comprehensive income:
Items that will be reclassified subsequently to the profit or loss
• Available for sale financial assets – fair value losses
•
Foreign exchange (losses) / gains from translation of subsidiaries
Reclassification to profit or loss
Available for sale financial assets
• Reclassification to profit or loss due to disposals
• Reclassification to profit or loss due to impairment
Note
2014
US $000
2013
US $000
7,204
2,474
(17,128)
(8,840)
(626)
92
(10,550)
(6,274)
26
26
(1,709)
8,861
7,152
892
2,499
3,391
Total comprehensive income for the year
(3,398)
(2,883)
The total comprehensive income for the year is wholly attributable to the owners of the parent
The notes on pages 35 to 84 form part of these consolidated financial statements
30
Annual Report 2014 Livermore Investments Group Limited
Consolidated Statement of Changes in Equity for the year ended 31 December 2014
Note
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
Balance at 1 January 2013
Purchase of own shares
14
26
26
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
Foreign exchange gains
arising from translation of
subsidiaries
Total comprehensive
income for the year
Balance at 31 December
2013
Dividends
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
26
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
215,499 (35,180)
5,777
(880)
13,999
(26,239)
172,976
-
-
-
-
-
-
-
-
(1,722)
(1,722)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,722)
(1,722)
2,474
2,474
(8,840)
-
(8,840)
892
2,499
-
-
892
2,499
92
-
-
92
92
(5,449)
2,474
(2,883)
215,499 (36,902)
5,777
(788)
8,550
(23,765)
168,371
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(4,999)
(4,999)
(4,999)
(4,999)
7,204
7,204
(17,128)
(1,709)
-
-
(17,128)
(1,709)
31
Note
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
• Reclassification to
profit or loss due to
impairment
26
Foreign exchange gains
arising from translation of
subsidiaries
Total comprehensive
income for the year
Balance at 31 December
2014
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8,861
(626)
-
-
-
8,861
(626)
(626)
(9,976)
7,204
(3,398)
215,499 (36,902)
5,777
(1,414)
(1,426)
(21,560)
159,974
The notes on pages 35 to 84 form part of these consolidated financial statements.
32
Annual Report 2014 Livermore Investments Group Limited
Consolidated Statement of Cash Flows for the year ended 31 December 2014
Cash flows from operating activities
Profit before tax
Adjustments for
Depreciation
Provisions for legal and other cases
Interest expense
Interest and dividend income
Loss on investments
Exchange differences
Changes in working capital
Increase in trade and other receivables
Decrease in trade and other payables
Cash flows from operations
Interest and dividends-received
Tax paid
Net cash from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Acquisition of investments
Proceeds from sale of investments
Acquisition of joint venture
9
Capital return of joint venture
Net cash used for investing activities
Cash flows from financing activities
Note
2014
US $000
2013
US $000
7,959
4,349
3
33
29
24
26
29
13
-
3,780
(26,619)
9,885
3,506
(1,476)
(16,292)
(1,050)
(18,818)
25,773
(167)
6,788
(32)
(27,340)
33,262
-
5,000
10,890
32
(274)
4,739
(29,068)
13,652
503
(6,067)
(817)
(3,539)
(10,423)
28,821
(572)
17,826
-
(43,597)
28,850
(5,000)
-
(19,747)
Purchase of own shares
14
-
(1,722)
33
Proceeds from bank loans
Repayments of bank loans
Interest paid
Settlement of litigation
Dividends paid
Net cash used for financing activities
Note
2014
US $000
7,242
(11,547)
(3,884)
(26)
(4,999)
(13,214)
2013
US $000
48,374
(45,605)
(4,739)
-
-
(3,692)
Net increase / (decrease) in cash and cash
equivalents
4,464
(5,613)
Cash and cash equivalents at the beginning of the year
(11,038)
Exchange differences on cash and cash equivalents
Translation differences on foreign operations’ cash and
cash equivalents
93
(67)
(5,254)
(182)
11
Cash and cash equivalents at the end of the year
13
(6,548)
(11,038)
The notes on pages 35 to 84 form part of these consolidated financial statements
34
Annual Report 2014 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 activities 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
Investments in associates and joint ventures are 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 IFRS
As from 1 January 2014, the Company 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 financial statements
All IFRS issued by the International Standards Board (IASB) which are effective for the year
ended 31 December 2014, 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
35
The following Standards, Amendments to Standards and Interpretations had been issued
by the date of authorisation of these financial statements but are not yet effective for the
year ended 31 December 2014:
IFRS 9: “Financial Instruments”
IFRS 14: “Regulatory Deferral Accounts”
IFRS 15:
Customers”
“Revenue
from Contracts with
Annual Improvements 2010–2012 Cycle
Annual Improvements 2011–2013 Cycle
Annual Improvements 2012–2014 Cycle
Amendment to IFRS 10, IFRS 12, and IAS 28:
“Investment Entities: Applying the Consolidation
Exception”
Amendment to IFRS 10, and IAS 28: “Sale or
Contribution of Assets between an Investor and
its Associate or Joint Venture”
Amendment
“Accounting
Acquisitions of Interests in Joint Operations”
IFRS 11:
to
for
Amendment to IAS 1: “Disclosure Initiative”
Amendment to IAS 16 and IAS 38: “Clarification
of Acceptable Methods of Depreciation and
Amortisation”
Amendments to IAS 16 and IAS 41: “Bearer Plants”
Amendment to IAS 19: “Defined Benefit Plans:
Employee Contributions”
Amendment to IAS 27: “Equity Method in Separate
Financial Statements”
Endorsed by
the EU
No
No
No
Yes
Yes
No
No
No
No
No
No
No
Yes
No
Effective for annual
periods beginning
on or after
1 January 2018
1 January 2016
1 January 2017
1 July 2014
1 July 2014
1 January 2016
1 January 2016
1 January 2016
1 January 2016
1 January 2016
1 January 2016
1 January 2016
1 July 2014
1 January 2016
The Board of Directors expects that when the above Standards or Interpretations become
effective in future periods, they will not have a material effect on the financial statements
of the Company
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
36
Annual Report 2014
2 3 Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company
and all of its subsidiaries Control is achieved where the Company is exposed, or has right,
to variable returns from its involvement with a subsidiary and has the ability to affect
those returns through its power over the subsidiary
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 subsidiaries
have a reporting date of 31 December
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
Investments in associates and joint ventures
An associate is an entity over which the Group is able to exert significant influence but
not control
A joint venture is an arrangement that the Group controls jointly with one or more other
investors, and over which the Group has rights to a share of the arrangement’s net assets
rather than direct rights to underlying assets and obligations for underlying liabilities
Investments in associates and joint ventures are measured at fair value through profit or loss in
accordance with IAS 39, based on the exemption available by IAS 28 “Investments in Associates
and Joint Ventures” for entities that are venture capital organisations or similar entities
2 5 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 6
Investment property income
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 7
Interest and dividend income
•
•
Interest income is recognised based on the effective interest method
Dividend income is recognised on the date that the Group’s right to receive payment is
established, which in the case of quoted securities is the ex-dividend date
37
2 8 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
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 9 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
38
Annual Report 2014
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
2 10 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 11 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 12 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 13 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
39
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
transferred to share premium
On lapse of the options any related amounts recognised in the share option reserve are
transferred to retained earnings
2 14 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 15 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 2014 or 2013
2 16 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 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
40
Annual Report 2014
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
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 a 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 transaction 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 impairment 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 financial 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 17 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
41
Financial liabilities are measured initially at fair value plus transaction costs, except for
financial liabilities carried at fair value through profit or loss, which are measured initially
at fair value
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
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
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 management regards a fall in fair value below cost
of 30% or more, or for 12 months or more, to be significant
42
Annual Report 2014
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)
in determining the appropriate
The Management exercises significant
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
Investments in loan markets through CLOs are classified as available-for-sale All other
investments are classified as at fair value through profit or loss upon initial recognition,
because this 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
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
43
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
Refer also to note 4 for estimation uncertainty over the fair value determination of the
investment in SRS Charminar
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 A one-period DCF
model was adopted under which the valuation period extends for 100 years from the
valuation date, with an implicit residual value in the 11th period Discounting is based on
a risk-adjusted interest rate and a gross yield determined individually for each property on
the basis of appropriate benchmarks derived from arm’s-length transactions The weighted
average discount rate used is 4 09% and the weighted average gross yield used is 4 68%
The valuations assume 1% annual inflation for income and all expenditure
Further details are disclosed in note 8
44
Annual Report 2014
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 2013
Additions
367
10
163
13
111
2
As at 1 January 2014
377
176
113
Additions
Disposals
-
-
-
-
-
-
26
-
26
32
(26)
667
25
692
32
(26)
As at 31 December 2014
377
176
113
32
698
Accumulated
depreciation
As at 1 January 2013
Charge for the year
As at 1 January 2014
Charge for the year
On disposals
(367)
(10)
(377)
-
-
(154)
(10)
(164)
(8)
-
(95)
(7)
(102)
(5)
-
As at 31 December 2014
(377)
(172)
(107)
Net book value
As at 31 December 2014
As at 31 December 2013
-
-
4
12
6
11
(21)
(5)
(26)
-
26
-
32
-
(637)
(32)
(669)
(13)
26
(656)
42
23
4 Available-for-sale financial assets
Non-current assets
Fixed income investments (CLO Income Notes)
Private equities
Financial and minority holdings
2014
US $000
2013
US $000
82,217
7,891
9,266
91,881
15,897
9,068
45
Current assets
Public equity investments
Hedge funds
Other investments
99,374
116,846
1,491
1,070
-
2,561
2,214
1,026
2
3,242
For description of each of the above categories, refer to note 6
During 2014, 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 impairment charges in 2014, of USD 8 861m (2013 USD 2 499m), are included
within loss on investments (note 26), and represent impairment losses arising due to:
Significant fall in value
Prolonged fall in value
Significant and prolonged fall in value
Investment in SRS Charminar
2014
US $000
2013
US $000
5,693
1,328
1,840
8,861
1,707
-
792
2,499
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 82 5m as at 31 December 2014 (2013: 83m) in a
real estate company in India (“investee company”)
In 2009, the promoters of the investee company were arrested on charges of criminal
conspiracy, cheating, and misappropriation of funds Later it was discovered that the investee
company had breached the terms of the investment agreement resulting in a default
On January 13, 2011 the Company Law Board (“CLB”) passed an order and allowed
Infrastructure Leasing & Financial Services Limited (“IL&FS”) to become an 80% shareholder
and control the management of the company
SRS Charminar and other investors have agreed to a settlement with IL&FS wherein the
settlement amount will be paid in four tranches over five years The last two tranches are not
guaranteed by IL&FS and the significant uncertainty of these payments has been considered
in the discount rates used of 45% and 50% respectively in contrast to the 10% used for
46
Annual Report 2014
discounting the first two tranches Also, all regulatory and court approvals were received and
the effective date of the settlement was fixed
The carrying amount of the investment is based on discounted expected cash flows and was
USD 9 1m (2013: USD 8 9m), 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
Also included in Private equities is the investment in SRS Private Investments, L P (“SRS
Private”) with a carrying amount at reporting date of USD 3 7m (2013: USD 3 6m) 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 2014 amounts approximately to 17% (2013: 13 1%) of its net assets
5 Financial assets 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
2014
US $000
2013
US $000
330
1,476
1,806
1,623
1,717
65
299
3,704
569
1,588
2,157
1,609
10,137
1,209
289
13,244
For description of each of the above categories, refer to note 6
6 Financial assets at fair value
The Group allocates its non-derivative financial assets at fair value (notes 4 and 5) as follows:
•
•
Fixed income investments relate to fixed and floating rate bonds, perpetual bank debt,
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
47
•
•
•
•
•
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
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
Other investments are investments not otherwise included in the categories above
7 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
that the entity can access at the measurement date;
• Level 2: inputs other than quoted prices included within Level 1 that are observable for
the asset or liability, either directly or indirectly; and
Level 3: unobservable inputs for the asset or liability
•
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
Investments are valued per their closing
Public Equities, and Fixed
bid market prices on quoted exchanges, or as quoted by market maker
Income
•
the CLOs based on
reports provided by
The Group values
market makers CLOs are typically valued by market makers using discounted
cash
include
default and recovery rates, prepayment rates and reinvestment assumptions
loans) of the CLOs
on the underlying portfolios
flow models The key assumptions
(typically senior secured
flow projections
the valuation
for cash
Default and recovery rates: The amount and timing of defaults in the underlying
collateral and the amount and timing of recovery upon a default affect are key to
the future cash flows a CLO will distribute to the CLO equity tranche All else equal,
higher default rates and lower recovery rates typically lead to lower cash flows
Conversely, lower default rates and higher recoveries lead to higher cash flows
Prepayment rates: Senior loans can be pre-paid by borrowers CLOs that are
within their reinvestment period may, subject to certain conditions, reinvest such
prepayments into other loans which may have different spreads and maturities CLOs
48
Annual Report 2014
that are beyond their reinvestment period typically pay down their senior liabilities
from proceeds of such pre-payments Therefore the rate at which the underlying
collateral prepays impacts the future cash flows that the CLO may generate
Reinvestment assumptions: A CLO within its reinvestment period may reinvest proceeds
from loan maturities, prepayments, and recoveries into purchasing additional loans
The reinvestment assumptions define the characteristics of the loans that a CLO may
reinvest in These assumptions include the spreads, maturities, and prices of such loans
Reinvestment into loans with higher spreads and lower prices will lead to higher cash
flows Reinvestment into loans with lower spreads will typically lead to lower cash flows
Discount rate: The discount rate indicates the yield that market participants expect
to receive and is used to discount the projected future cash flows Higher yield
expectations or discount rates lead to lower prices and lower discount rates lead to higher
prices for CLOs
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
•
•
•
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:
2014
US
$000
Level 1
2014
US
$000
Level 2
2014
US
$000
Level 3
2014
US
$000
Total
2013
US
$000
Level 1
2013
US
$000
Level 2
2013
US
$000
Level 3
2013
US
$000
Total
Assets
Fixed income
investments
Private equities
Financial and minority
holdings
-
-
Public equity investments
3,208
Hedge funds
Real estate entities
Investment in
associate and joint
venture
-
-
-
1,623
82,217
-
83,840
1,609
91,881
-
93,490
-
-
-
1,135
-
-
8,221
8,221
6,816
9,266
9,266
-
3,208
12,351
-
-
1,476
1,135
1,476
-
-
-
-
-
-
-
-
2,235
9,650
16,466
9,068
9,068
-
-
12,351
2,235
1,588
-
1,588
5,524
-
5,524
49
Other investments
Total return swaps
299
-
-
-
-
299
1,125
1,125
289
-
-
-
2
-
291
-
5,130
83,352
20,088
108,570
21,065
99,640
20,308
141,013
Liabilities
Interest rate swaps
-
-
-
-
-
-
-
-
-
-
2,125
2,125
-
-
2,125
2,125
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
Financial assets within level 3 can be reconciled from beginning to ending balances as follows:
50
Annual Report 2014
Available-
for-sale
At fair
value through
profit or loss
Derivative
financial
instruments
Financial
and
minority
holdings
US $000
Private
equities
US $000
Other
investments
US $000
Real estate
US $000
Private
equities
US $000
Total
return
swap
Total
US
$000
-
-
-
-
-
-
24,543
263
(3,195)
(1,017)
439
-
-
-
20,308
-
323
As at 1 January
2013
10,469
10,352
Purchases
-
263
Losses recognised
in:
• Profit or loss
(1,401)
(517)
• Other
comprehensive
income
Exchange difference
-
-
(1,017)
-
-
As at 1 January
2014
9,068
9,081
Sales
Purchases
(Losses) / gains
recognised in:
• Profit or loss
• Other
-
-
-
comprehensive
income
198
Exchange difference
-
-
323
-
(1,470)
(43)
-
As at 31 December
2014
9,266
7,891
5
-
(3)
-
2
-
-
(2)
-
-
1,752
1,965
-
-
(603)
(671)
-
439
-
-
1,588
569
-
-
-
-
68
-
(180)
(239)
1,125
(516)
-
-
-
-
153
(180)
1,476
330
1,125
20,088
51
The above gains and losses recognised can be allocated as follows:
Available-
for-sale
At fair
value through
profit or loss
Derivative
financial
instruments
Financial
and
minority
holdings
US $000
Private
equities
US $000
Other
investments
US $000
Real estate
US $000
Private
equities
US $000
Total
return
swap
Total
US
$000
(1,401)
(517)
(1,401)
(517)
-
-
(1,017)
(1,017)
(3)
(3)
-
-
(603)
(671)
(603)
(671)
-
-
-
-
(1,401)
(1,534)
(3)
(603)
(671)
-
-
-
-
-
(3,195)
(3,195)
(1,017)
(1,017)
(4,212)
-
-
(1,470)
(1,470)
198
198
(43)
(43)
198
(1,513)
-
-
(2)
(2)
(2)
68
68
-
-
(239)
1,125
(239)
1,125
(516)
(516)
-
-
-
-
153
153
68
(239)
1,125
(363)
2013
Profit or loss
•
Financial assets
held at year-end
Other comprehensive
income
•
Financial assets
held at year-end
Total gains / (losses)
for 2013
2014
Profit or loss
•
Financial assets
held at year-end
Other comprehensive
income
•
Financial assets
held at year-end
Total gains / (losses)
for 2013
52
Annual Report 2014
The Group has not developed any quantitative unobservable inputs for measuring the fair
value of its level 3 financial assets at 31 December 2014 and 2013 Instead the Group used
prices from third-party pricing information without adjustment
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
8
Investment property
Valuation as at 1 January
Fair value gain / (loss) –
recognised in profit or loss
Exchange difference
As at 31 December
2014
US $000
129,916
61
(13,368)
116,609
2013
US $000
126,543
(179)
3,552
129,916
The investment property relates to Wyler Park property in Bern, Switzerland, which is used for
earning rental income The Group has no restriction on the realizability of the property or the
remittance of income and any proceeds of disposal
Wyler Park property investment loan (note 17) is secured on the property itself
Fair valuation
The investment property is the Group’s only non-financial asset measured at fair value on a
recurring basis, and its fair value is classified within the fair value hierarchy as level 3
The investment property was valued by the independent professional valuers Wüest & Partners
as at 31 December 2014 and 2013 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 The investment property is revalued annually on 31
December
The significant inputs and assumptions are developed in close consultation with management
The valuation processes and fair value changes are reviewed by the Board of Directors at each
reporting date
The fair values of investment property are estimated using the discounted cash-flow (DCF)
method With this method, the current market value of a 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
each property with due allowance for specific opportunities and threats, and with adjustment
in line with market conditions and risks All projected cash flows are presented to ensure
maximum transparency
53
The valuations are based on the following assumptions:
•
•
• The property has been appraised as continuation scenario That means, that no change
of use scenarios have been calculated as well that would result to a higher value
A one-period DCF model was adopted The valuation period extends for 100 years from
the valuation date, with an implicit residual value in the 11th period
Discounting is based on a risk-adjusted interest rate Rates are determined individually
for each property on the basis of appropriate benchmarks derived from arm’s-length
transactions They may be broken down as follows: risk-free interest rate + property
risk (immobility of capital) + premium for macro-location + premium for micro-location
depending on use + premium for property quality and income risk + any other specific
premiums
• Unless otherwise stated, the valuations assume 1% annual inflation for income and
all expenditure Where a nominal discount rate is applied, this is adjusted accordingly
• Credit risks posed by specific tenants are not explicitly factored into the valuation
• Allowance is made for the specific indexing provisions in existing leases An indexing
factor of 80% (Swiss average) is assumed for the period following lease expiry
• For existing tenancies, the timing of individual payments is assumed to comply with
the terms of the lease
Following lease expiry, cash flows for commercial premises are taken to be quarterly
in advance, for housing monthly in advance
In terms of running costs, entirely separate service charge accounts are assumed, with
no tenancy-related ancillary costs to be borne by the owner
•
• The maintenance (repair and upkeep) costs were calculated by means of a lifecycle
analysis of the individual building elements The building structure’s remaining lifespan
was estimated and periodic refurbishments modelled on the basis of the general
condition of the fabric as determined during the property inspection
Appropriate annual reserves were calculated accordingly and plausibility tested using
comparables and Wüest & Partner’s own benchmarks The calculation factors in 100% of
repair costs in the first 10 years; the proportion applied from year 11 onwards is limited to the
value-preserving investments (recoverable share)
The valuations are sensitive to the above inputs, all of which are unobservable
Future rental income
The future minimum rental income under non-cancellable rental agreements, is receivable as
follows:
Less than 1 year
Between 1 and 5 years
2014
US $000
5,923
21,186
27,109
2013
US $000
5,851
26,105
31,956
54
Annual Report 2014
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 2014 and 31 December 2013
respectively
9
Investments in associate and joint venture
As at 1 January
Additions
Capital return
Fair value (loss) / gain
As at 31 December
2014
US $000
5,524
-
(5,000)
(524)
-
Name of
investee
Type of
investment
Place of
incorporation
Principal
activity
Proportion of
voting rights
held
Silvermore Ltd
Joint
venture
Covenant Credit
Partners LLC*
Associate
Cayman
Islands
Delaware,
US
Investment
holding
(dormant)
Investment
holding
50%
52 5%
2013
US $000
-
5,000
-
524
5,524
Fair value
2014
US
$000
2013
US
$000
-
-
-
5,524
-
5,524
* Held by the subsidiary Blackline Investments Inc Covenant Credit Partners is no longer an
associate as at 31 December 2014
The joint venture does not prepare any financial information As at 31 December 2014
Silvermore had ceased to be a contractual party to a Total Return Swap (ISDA) agreement with
Citibank N A and had no other assets or liabilities Silvermore Ltd was dissolved in January 2015
55
10 Details of subsidiaries
Details of the investments in which the Group has a controlling interest are as follows:
Name of Subsidiary
Place of
incorporation
Holding
Proportion of
voting rights
and shares
held
Livermore Properties
Limited
Mountview Holdings
Limited*
British Virgin
Islands
British Virgin
Islands
Ordinary shares
100%
Principal activity
Holding of
investments
Ordinary shares
100%
Investment vehicle
Silvermore 2 Ltd*
Cayman Islands Ordinary shares
100%
Investment vehicle
Sycamore Loan Strategies
Ltd*
Sycamore Loan Funding
Ltd*
Livermore Israel
Investments Ltd
Cayman Islands Ordinary shares
100%
Investment vehicle
Cayman Islands Ordinary shares
100%
Investment vehicle
Israel
Ordinary shares
100%
Blackline Investments Inc
USA
Ordinary shares
52 5%
Livermore Capital AG
Switzerland
Ordinary shares
100%
Livermore Investments AG**
Switzerland
Ordinary shares
100%
Enaxor S a r l
Luxembourg
Ordinary shares
100%
Livermore Investments
Cyprus Limited
Cyprus
Ordinary shares
100%
Sandhirst Limited
Cyprus
Ordinary shares
100%
Holding of
investments
Holding of
investments
(Dormant)
Administration
services
Real Estate owner
and management
Holding of
investment
Administration
services
Holding of
investments
* Mountview Holdings Limited, Silvermore 2 Ltd, Sycamore Loan Strategies Ltd and Sycamore
Loan Funding Ltd were established during the year
** Held by Enaxor S a r l
11 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
56
Annual Report 2014
following items:
2014
US $000
2013
US $000
Investment property
– revaluation surplus
Derivative financial instruments
– recognised carrying amount
Tax losses
Net deferred tax (liability)
(5,805)
47
3,486
(2,272)
(5,845)
344
3,545
(1,956)
The movement on the deferred taxation account is as follows:
Investment
property
US $000
Derivative
financial
instruments
US $000
Tax losses
US $000
Total
US $000
As at 1 January 2013
(4,503)
916
3,068
(519)
(Charged) / credited to
profit or loss (note 30)
•
timing differences
Exchange difference
(1,211)
(131)
(596)
24
390
87
(1,417)
(20)
As at 1 January 2014
(5,845)
344
3,545
(1,956)
(Charged) / credited to
profit or loss (note 30)
•
timing differences
Exchange difference
(329)
369
(294)
(3)
166
(225)
(457)
141
As at 31 December 2014
(5,805)
47
3,486
(2,272)
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 2014 and 2013 there is no unrecognised deferred tax asset
57
12 Trade and other receivables
Financial items
Accrued interest and dividend
income
Amounts due by related parties
(note 32)
Other receivables
Non-Financial items
Other assets (note 32)
Prepayments
Allocated as:
Current assets
Non-current assets
Other receivables include:
2014
US $000
2013
US $000
514
2,497
16,757
19,768
3,384
276
23,428
20,890
2,538
23,428
79
1,339
654
2,072
4,512
199
6,783
3,399
3,384
6,783
a
b
an amount of USD 15m that the Company invested during the period in the first
loss tranche of a warehouse facility for accumulating loans with the intention to
transfer these loans to a CLO In December 2014, the said CLO was priced and the
loans accumulated in the warehouse were agreed to be transferred at purchase
price to the CLO on 10 January, 2015 Consequently, Livermore’s investment
amount plus net carry earned became receivable as of the end of December
2014 On 16 January 2015 Livermore received a net amount of USD 16 3m
an amount of USD 1m that the Company invested during the period in the first
loss tranche of a warehouse facility for accumulating loans with the intention to
transfer these loans to a CLO In December 2014, the said CLO was priced and the
loans accumulated in the warehouse were agreed to be transferred at purchase
price to the CLO on 15 January, 2015 Consequently, Livermore’s investment amount
plus net carry earned became receivable as of the end of December 2014 On 16
January 2015 Livermore received a net amount of USD 1 39m
58
Annual Report 2014
13 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
2014
US $000
2013
US $000
3,807
4,150
Bank overdrafts used for cash management purposes
(10,355)
(15,188)
Cash and cash equivalents for the purposes of the
consolidated statement of cash flows
(6,548)
(11,038)
14 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 2013 and 31 December 2014
304,120,401
215,499
Treasury shares
As at 1 January 2013
Additions
Number of
shares
105,385,063
3,445,755
US $000
35,180
1,722
As at 1 January 2014
108,830,818
36,902
As at 31 December 2014
108,830,818
36,902
59
In the consolidated statement of financial position the amount included comprises of:
Share premium
Treasury shares
2014
US $000
215,499
(36,902)
178,597
2013
US $000
215,499
(36,902)
178,597
15 Share options
The Company has a share option scheme for acquiring ordinary shares of the Company
Outstanding options
As at 31 December 2013 and 31
December 2014
Number of
options
Average
exercise price
GBP
Average exercise
price* USD
11,340,000
0 75
1 18
Exercisable options
As at 31 December 2013 and 31
December 2014
Number of
options
Average
exercise price
GBP
Average exercise
price* USD
11,340,000
0 75
1 18
Details of share options outstanding at 31 December 2014
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
3,383,334
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
166,666
13/05/08
13/05/11
13/05/11
13/05/18
0 30
1 11
1 11
1 11
1 22
1 22
1 22
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
60
Annual Report 2014
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 lapse 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 2014
16 Derivative financial instruments
Current assets
Total return swap
Current liabilities
Interest rate swaps
2014
US $000
1,125
2013
US $000
-
-
2,125
During 2014 and 2013 the Group used forward currency contracts; however, no such
derivatives were open at 31 December 2014 or 2013
As at year end the Group was a contractual party to a Total Return Swap (ISDA) agreement
with Macquarie bank Based on the swap agreement the Group is entitled to receive the
total returns arising from a portfolio of loan assets (referenced assets), and is obliged to pay
interest at a floating rate on the facility amount (warehouse facility):
Referenced
assets amount
USD
300,000,000
Total returns
Facility amount
Floating rate
Maturity
date
Interest
payments, fees,
repayment
premiums
or penalties,
and other
distributions
USD
270,000,000
3M USD Libor +
1 9%
18 Sept
2015
The swap was entered as a means for accumulating loans with the intention to transfer these
loans to a CLO In December 2014, the said CLO was priced and the loans accumulated in the
warehouse were agreed to be transferred to the CLO on 10 January, 2015 Consequently, on 16
61
January 2015 the swap was terminated
The calculation of the fair value of the swap is based on discounted cash flows of future
anticipated interest payments compared with the discounted cash flows of anticipated total
returns receivable
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 78,029,509
(2013: CHF
78,353,556)
3M CHF Libor
3 30%
30 July 2014
CHF 10,000,000
6M CHF Libor
CHF 10,000,000
6M CHF Libor
3 255%
3 1675%
17 June 2014
17 November 2014
The calculation of the fair value of the 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
For the year ended 31 December 2014 a fair value gain of USD 3,131,381 (2013: gain USD
3,524,094) has been recognised in the profit or loss in relation to all derivative financial
instruments
17 Bank Loans
As at 1 January
Repayment
Exchange difference
As at 31 December
Allocated as:
Current bank loans
Non-current bank loans
2014
US $000
87,974
(830)
(9,052)
78,092
78,092
-
78,092
2013
US $000
86,258
(706)
2,422
87,974
87,974
-
87,974
62
Annual Report 2014
The bank loan relates to Wyler Park investment property purchase (note 8) and is secured
on this property The loan balance was fully repayable on 12 July 2014 The bank loan was
extended for a six month period and became fully repayable on 31 January 2015 Additionally
in January 2015, the Group successfully refinanced the loan with a new bank loan The
principal amount of the new loan facility is CHF 68 million (USD 73 million) The facility is
committed until at least 30 June 2019 Upon successful extension of the lease with SBB from
2019 to 2029, an additional CHF 10 million (USD 10 7 million) would be available under this
facility
The weighted average effective Interest for the loan was 3 71% (2013: 3M CHF Libor +
0 85%)
18 Bank Overdrafts
Short term bank overdrafts
2014
US $000
10,355
2013
US $000
15,188
Short term bank overdrafts bear Libor + lender’s margin and have an average interest rate of
1 49% (2013 1 77%)
The Group’s bank overdraft facilities are secured by the Group’s financial assets portfolio up
to an amount, as at 31 December 2014, of USD 31 5m
The Group’s bank overdraft undrawn facilities at 31 December 2014 amount to USD 21 2m
19 Short term bank loans
Short term bank loans
2014
US $000
-
2013
US $000
3,475
Short term bank loans bear Libor + lender’s margin and at 31 December 2013 had an average
interest rate of 2 66%
The Group’s short term bank loan facilities were secured by the Group’s financial assets
portfolio
20 Trade and other payables
Financial items
Trade payables
Amounts due to related parties
(note 32)
2014
US $000
727
579
2013
US $000
532
1,212
63
Accrued expenses
Non-Financial items
VAT payable
430
1,736
22
1,758
964
2,708
68
2,776
The Directors consider that the carrying amount of trade and other payables approximates to
their fair value All amounts fall due within one year
21 21 Current tax payable / (asset)
Corporation Tax
22 Net asset value per share
2014
US $000
5
2013
US $000
(6)
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 2014 and 31 December 2013
Net assets attributable to ordinary shareholders
(USD 000)
2014
2013
159,974
168,371
Closing number of ordinary shares in issue
195,289,583
195,289,583
Basic net asset value per share (USD)
0 82
0 86
Net assets attributable to ordinary shareholders
(USD 000)
159,974
168,371
Dilutive share options – exercise amount
234
247
64
Annual Report 2014
Net assets attributable to ordinary shareholders
including the effect of potentially diluted shares
(USD 000)
160,208
168,618
Closing number of ordinary shares in issue
195,289,583
195,289,583
Dilutive share options
500,000
500,000
Closing number of ordinary shares including the
effect of potentially diluted shares
195,789,583
195,789,583
Diluted net assets value per share (USD)
0 82
0 86
Number of Shares
Ordinary shares
Treasury shares
304,120,401
304,120,401
(108,830,818)
(108,830,818)
Closing number of ordinary shares in issue
195,289,583
195,289,583
The Share options (note 15) granted on 13 May 2008 have a dilutive effect on the net asset
value per share, given that their exercise price is lower than the net asset value per Company’s
share at 31 December 2014 and 2013 All other share options do not impact the diluted net
asset value per share for 2014 and 2013 as their exercise price was higher than the net asset
value per share at 31 December 2014 and 2013
Repurchase 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 repurchase of
Ordinary shares at a discount to the underlying net asset value enhances the net asset value
per share of the remaining equity shares
In 2014 the company has not bought any own shares
In 2013, the Company bought 3,445,755 of its Ordinary shares at an average price of USD 0 50
per share
23 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
65
Segment information can be analysed as follows:
Equity and debt
instruments
investment activities
Investment
property
activities
Total per financial
statements
2014
US $000
2013
US $000
2014
US $000
2013
US $000
2014
US $000
2013
US $000
Segment results
Investment income
Interest and dividend
income
Investment property
income
(Loss) / gain on
investments
Gross profit
Other income
Administrative
expenses
26,619
29,068
-
-
26,619
29,068
-
-
5,159
5,473
5,159
5,473
(9,946)
(16,324)
61
2,672
(9,885)
(13,652)
16,673
12,744
5,220
8,145
21,893
20,889
462
55
-
-
462
55
(5,417)
(11,122)
(1,802)
(1,137)
(7,219)
(12,259)
Operating profit
11,718
1,677
3,418
7,008
15,136
8,685
Finance costs
(4,254)
(1,680)
(3,032)
(3,562)
(7,286)
(5,242)
Finance income
109
906
-
-
109
906
Profit before
taxation
7,573
903
386
3,446
7,959
4,349
Taxation charge
-
(411)
(755)
(1,464)
(755)
(1,875)
Profit for year
7,573
492
(369)
1,982
7,204
2,474
Segment assets
134,815
150,875
117,641
131,016
252,456
281,891
Segment liabilities
11,278
20,798
81,204
92,722
92,482
113,520
66
Annual Report 2014
The Group’s investment income and its investments are divided into the following geographical areas:
Equity and debt
instruments investment
activities
Investment
property
activities
Total per financial
statements
2014
US $000
2013
US $000
2014
US $000
2013
US $000
2014
US $000
2013
US $000
-
-
6,732
8,145
6,732
8,145
(723)
(888)
18,400
(1,729)
(787)
15,161
18,941
(3,749)
(1,560)
12,744
-
-
-
-
-
-
(723)
(888)
18,400
18,941
(1,729)
(3,749)
(787)
(1,560)
6,732
8,145
21,893
20,889
-
-
116,609
129,916
116,609
129,916
6,225
14,521
83,843
14,219
4,283
98,406
14,887
13,199
-
-
-
-
-
-
-
-
6,225
14,521
83,843
98,406
14,219
14,887
4,283
13,199
108,570
141,013
116,609
129,916
225,179
270,929
Investment Income
Switzerland
Other European
countries
United States
India
Asia
Investments
Switzerland
Other European
countries
United States
India
Asia
Investment income, comprising interest and dividend income, gains or losses on investments,
and investment property income, 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 2014, 89% of the Group’s rent relates to rental income from a single customer (SBB –
Swiss national transport authority) in the investment property activities segment (2013: 89%)
67
24 Interest and dividend income
Interest from investments
Dividend income
25 Investment property income
Gross rental income
Direct expenses
2014
US $000
434
26,185
26,619
2014
US $000
5,923
(764)
5,159
2013
US $000
663
28,405
29,068
2013
US $000
5,846
(373)
5,473
All direct expenses relate to the generation of rental income
26 Loss on investments
Gain / (loss) on sale of investments
Investment property revaluation
Foreign exchange (loss) / gain
2014
US $000
1,709
61
(232)
2013
US $000
(892)
(179)
81
Loss due to impairment of available-for-sale
financial assets
(8,861)
(2,499)
Fair value losses on financial assets through profit
or loss
(5,067)
(13,985)
Fair value (loss) / gains on investment in joint
venture
Fair value gains on derivative instruments
Bank custody fees
(524)
3,133
(104)
524
3,519
(221)
(9,885)
(13,652)
The investments disposed of during the year resulted in the following realised (losses) / gains
(i e in relation to their original acquisition cost):
68
Annual Report 2014
Available-for-sale
At fair value through profit or loss
27 Other income
Disposal gain
Gain on liquidation of subsidiaries
2014
US $000
(2,682)
(2,374)
(5,056)
2013
US $000
(3,953)
898
(3,055)
2014
US $000
2013
US $000
462
-
462
-
55
55
Disposal gain relates to the sale of a fully amortized domain name
28 Administrative expenses
Legal expenses
Directors’ fees and expenses
Professional and consulting fees
Other salaries and expenses
Office cost
Depreciation
Other operating expenses
Provisions for legal and other cases - reversal
Audit fees
2014
US $000
2013
US $000
118
3,522
1,299
1,152
299
13
657
-
159
7,219
57
9,078
1,667
769
284
32
512
(274)
134
12,259
Throughout 2014 the Group employed 6 members of staff (2013: 7)
Other salaries and expenses include USD 82,632 of social insurance and similar contributions
(2013: USD 40,694), as well as USD 19,499 of defined contributions plan costs (2013: USD
15,255)
69
29 Finance costs and income
Finance costs
Bank interest on investment property loan*
Other swap interest cost
Other bank interest
Foreign exchange loss
Finance income
Foreign exchange gain
2014
US $000
2013
US $000
3,032
496
252
3,506
7,286
3,555
689
495
503
5,242
109
906
Net finance costs
7,177
4,336
*Includes interest payments on a related swap (note 16)
30 Taxation
Current tax charge
Deferred tax charge
2014
US $000
298
457
755
2013
US $000
458
1,417
1,875
The tax charge for the year can be reconciled to
the accounting profit as follows:
Profit before tax
7,959
4,349
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
Interest withholding tax
Property tax
Deferred tax charge
Tax for the year
177
(131)
232
(87)
-
107
457
755
706
(702)
61
(38)
411
20
1,417
1,875
70
Annual Report 2014
The parent 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 in Switzerland and Cyprus
31 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 2014 and the year ended 31
December 2013
Profit for the year attributable to ordinary shareholders
of the parent (USD 000)
2014
2013
7,204
2,474
Weighted average number of ordinary shares outstanding
195,289,583
196,692,363
Basic earnings per share (USD)
0 04
0 01
Weighted average number of ordinary shares outstanding
195,289,583
196,692,363
Dilutive effect of share options
84,418
83,102
Weighted average number of ordinary shares including
the effect of potentially dilutive shares
195,374,001
196,775,465
Diluted earnings per share (USD)
0 04
0 01
The Share options (note 15) granted on 13 May 2008 have a dilutive effect on the weighted
average number of ordinary shares only, given that their exercise price is lower than the
average market price of the Company’s shares on the London Stock Exchange (AIM division)
during the year ended 31 December 2014 and 2013 All other share options do not impact
the diluted earnings per share for 2014 and 2013 as their exercise price was higher than the
average market price of the Company’s shares during the year ended 31 December 2014 and 2013
71
32 Related party transactions
The Group is controlled by Groverton Management Ltd, an entity owned by Noam Lanir, which
at 31 December 2014 held 79 06% (2013: 79 06%) of the Company’s effective voting rights
2014
US $000
2013
US $000
Amounts receivable from key management
Other assets
Directors’ current accounts
Amounts receivable from associate
Promissory notes
Amounts payable to other related party
Loan payable
Amounts payable to key management
Directors’ current accounts
Key management compensation
Short term benefits
Executive directors' fees
Executive directors' reward payments
Non-executive directors' fees
Non-executive directors' reward payments
3,384
2,497
5,881
-
-
(499)
(499)
(80)
(80)
795
2,628
74
25
3,522
(1)
(2)
(3)
(4)
4,512
425
4,937
914
914
(1,212)
(1,212)
-
-
795
8,212
71
-
9,078
(1) Loans of USD 5 523m were made to a key management employee for the acquisition of shares
in the Company Interest was payable on these loans at 6 month US LIBOR plus 0 25% per annum
and the loans were secured on the shares acquired The loans were repayable on the earlier of the
72
Annual Report 2014
employee leaving the Company or April 2013 In December 2012 the Board decided to renew the
outstanding amount of these loans for a period of another five years Based on the Board’s decision,
the outstanding amount will be reduced annually on a straight line over five years, as long as the
key management employee remains with the Company The relevant reduction in the loan amount
for the year was USD 1 128m The loans together with their related accrued interest of USD 0 117m
were classified as “other assets” and are included under trade and other receivables (note 12)
(2) Demand promissory notes of USD 0 914m were made from Covenant Credit Partners LLC
(maker) to Blackline Investments Inc (holder) Interest on these notes was at 2 0% per
annum and was fully repaid in June 2014
(3) A loan with a balance at 31 December 2014 of USD 0 499m (31 December 2013: USD
1 2m) has been received from a related company Chanpak Ltd The loan is free of interest, it is
unsecured and is repayable on demand This loan is included within trade and other payables
(note 20)
(4) These payments were made directly to companies to which they are related
No social insurance and similar contributions nor any other defined benefit contributions plan costs
were incurred for the Group in relation to its key management personnel in either 2014 or 2013
Noam Lanir, through an Israeli partnership, is the major shareholder of Babylon Limited, an Israel
based Internet Services Company The Group as of 31 December 2014 held a total of 1 941m shares
at a value of USD 0 922m (2013: 3 915m shares at a value of USD 9 3m) which represents 4% of its
effective voting rights The investment in Babylon Ltd is included within public equity investments
under financial assets at fair value through profit or loss (note 5)
During the year the Group received administrative services of USD 0 103m (2013: nil) in connection
with investments from another related company Mash Medical Life Tree Marketing Ltd
33 Provisions
The movement in provisions for the year is as follows:
As at 1 January
Amounts reversed
Settlements
As at 31 December
34 Litigation
2014
US $000
2013
US $000
26
-
(26)
-
300
(274)
-
26
Fairfield Sentry Ltd vs custodian bank and beneficial owners
One of the custodian banks that the Group uses faces a contingent claim up to USD 2 1m,
and any interest as will be decided by a US court and related legal fees, with regards to the
73
redemption of shares in Fairfield Sentry Ltd, which were brought in 2008 at the request of
Livermore and on its behalf The same case was also filed in BVI where the Privy Council ruled
against the plaintiffs
As a result of the surrounding uncertainties over the existence of any obligation for Livermore,
as well as for the potential amount of exposure, the Directors cannot form an estimate of the
outcome for this case and therefore no provision has been made
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 claimed 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
On 5 March 2014, the Labor Court in Tel Aviv issued a ruling in which the court denied most
of the plaintiff’s claims and accepted only his claim for termination of employment On 16
April 2014 the plaintiff filed an appeal against the ruling
No further information is provided on the above case as the Directors consider it could
prejudice the outcome of the appeal
35 Commitments
The Group has no capital or other commitments as at 31 December 2014
36 Events after the reporting date
After the reporting period, the Group has successfully refinanced its investment property loan
with a new bank loan (note 17)
In March 2015, the Company announced an interim dividend of USD 5m (USD 0 0256 per
ordinary share)
37 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
that arise directly from its operations For an analysis of financial assets and liabilities by
category, refer to note 38
Risk objectives and policies
The objective of the Group is to achieve growth of shareholder value, 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
74
Annual Report 2014
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 2014 is the following:
2014
US $000
2014
US $000
2014
US $000
2013
US $000
2013
US $000
2013
US $000
Financial
assets
Liabilities
Net value
Financial
assets
Liabilities Net value
1,485
3,947
31,109
9,142
2,892
-
(6,982)
(228)
(8)
-
(90)
(5)
(5,497)
3,719
2,160
5,106
(12,273)
(10,113)
(203)
4,903
31,101
41,097
(1,646)
39,451
9,142
2,802
(5)
8,944
9,989
-
-
(4,204)
(2,350)
8,944
5,785
(2,350)
48,575
(7,313)
41,262
67,296
(20,676)
46,620
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 2014 would have the following impact A 10% decrease of the following
currencies against USD would have an approximately equal but opposite impact
75
2014
US $000
2014
US $000
2013
US $000
2013
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
(550)
371
3,110
914
280
4,125
-
-
-
-
-
-
(1,011)
490
3,945
894
579
4,897
-
-
-
-
-
-
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 78 0m (2013:
USD 88 0m) related to a real estate asset (Wylerpark, Bern), the interest rate of which was
fixed through the use of an interest rate swap until 30 July 2014
The Group has banking credit lines which are available on short notice for the Group to use
in its 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 2014 was USD 10 3m (2013: USD 18 6m)
As at 31 December 2014 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 has exposure to US bank loans and to a lesser degree emerging market loans
76
Annual Report 2014
through CLO equity tranches An investment in the CLO equity tranche represents a leveraged
investment into such loans As these loans (assets of a CLO) and the liabilities of a CLO are
floating rate in nature (typically 3 month LIBOR as the base rate), the residual income to CLO
equity tranches is normally linked to the floating rate benchmark and thus normally do not
carry substantial interest rate risk In the current low rate environment, however, most loans
feature a LIBOR floor The presence of LIBOR floors creates an interest rate risk to CLO equity
distributions as long as the benchmark rate is below the weighted average LIBOR floor level
on the CLO loan portfolio Thus, an increase in the benchmark floating rate up to the weighted
average LIBOR floor level is expected to cause distributions to CLO equity to reduce whereas a
decrease in the benchmark floating rate is expected to increase such distributions
The Group’s interest bearing assets and liabilities are as follows:
Financial assets – subject to:
•
•
fair value changes
interest changes
Total
Financial liabilities – subject to:
•
interest changes
• both fair value and interest changes
Total
2014
US $000
2013
US $000
4,903
83,869
88,772
88,447
-
88,447
1,609
96,030
97,639
106,637
2,125
108,762
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 -0 23% change in the net asset value as at 31 December 2014 (2013: 0 91%)
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
77
2014
US $000
2014
US $000
2013
US $000
2013
US $000
Profit or loss
Other
comprehensive
income
Profit or loss
Other
comprehensive
income
(322)
839
-
(884)
(367)
-
-
-
-
-
(137)
960
669
38
1,530
-
-
-
-
-
Financial assets
•
•
fair value changes
interest changes
Financial liabilities
•
•
fair value changes
interest changes
The above analysis assumes that all other variables, in particular currency rates, remain constant
Market 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 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
market price risk The Group has investments in CLO equity tranches and a total return swap
referencing a portfolio of senior secured loans (note 9) These investments represent leveraged
exposure to typically senior secured loans Investments in CLOs are subject to many risks
including market price risk, liquidity, credit risk, interest rate, reinvestment and certain other
risks
Prices of these CLO investments may be volatile and will generally fluctuate due to a variety
of factors that are inherently difficult to predict, including but not limited to changes in
prevailing credit spreads and yield expectations, interest rates, underlying portfolio credit
quality and market expectations of default rates on non-investment grade loans, general
economic conditions, financial market conditions, legal and regulatory developments, domestic
and international economic or political events, developments or trends in any particular
industry, and the financial condition of the obligors that constitute the underlying portfolio
78
Annual Report 2014
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 5 55% change in the
net asset value as at 31 December 2014 (2013: 6 80%), and would have the following impact
(either positive or negative, depending on the corresponding sign of the change):
2014
US $000
2014
US $000
2013
US $000
2013
US $000
Profit or loss
Other
comprehensive
income
Profit or loss
Other
comprehensive
income
Available-for-sale
financial assets
Financial assets at fair
value through profit or
loss
Investment in joint
venture
801
403
-
6,876
8
9,490
-
-
1,484
552
2,044
-
-
9,490
1,204
6,876
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 both in investment grade securities and 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
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 investments subject to
credit risk (mainly CLOs) of USD 83 8m (2013: USD 93 5m) The Group’s maximum credit risk
exposure at 31 December 2014 is as follows:
79
Financial assets:
Loans and receivables:
•
•
Trade and other receivables
Cash at bank
Available-for-sale financial assets
Financial assets at fair value through profit or loss
Investments in associate and joint venture
Derivatives
2014
US $000
2013
US $000
19,768
3,807
23,575
82,217
1,623
-
1,125
2,072
4,150
6,222
91,880
1,609
5,524
-
108,540
105,235
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 exposure to US senior secured loans and to a lesser degree emerging market
loans through CLO equity tranches and a total return swap facility (note 16) These loans are
primarily non-investment grade loans or interests in non-investment grade loans, which are
subject to credit risk among liquidity, market value, interest rate, reinvestment and certain
other risks It is anticipated that these non-investment grade loans generally will be subject
to greater risks than investment grade corporate obligations
A non-investment grade loan or debt obligation or an interest in a non-investment grade
loan is generally considered speculative in nature and may become a defaulted security for
a variety of reasons A defaulted security may become subject to either substantial workout
negotiations or restructuring, which may entail, among other things, a substantial reduction
in the interest rate, a substantial write-down of principal, and a substantial change in the
terms, conditions and covenants with respect to such defaulted security In addition, such
negotiations or restructuring may be quite extensive and protracted over time, and therefore
may result in substantial uncertainty with respect to the ultimate recovery on such defaulted
security Bank loans have historically experienced greater default rates than has been the case
for investment grade securities
The Group has no investment in sovereign debt as at 31 December 2014 or 2013
At 31 December the credit rating distribution of the Group’s asset portfolio subject to credit
risk (CLOs, bonds and other debt instruments, bank balances and receivables) was as follows:
80
Annual Report 2014
Rating
2014 Amount
US $000
Percentage
2013 Amount
US $000
A+
A
A-
BBB+
BB
BB+
BB-
Not Rated
1,000
16,125
4,321
-
3,280
1,111
512
82,191
108,540
0 9%
14 9%
4 0%
-
3 0%
1 0%
0 5%
75 7%
100%
337
-
-
3,892
3,440
1,090
519
95,957
105,235
Percentage
0 3%
-
-
3 7%
3 3%
1 0%
0 5%
91 2%
100%
Included within “not rated” amounts are investments in loan market through CLOs of USD
78 936m (2013: USD 88 440m)
The modelled IRRs on the CLO portfolio are in the high single digit to low teens percentage
points with current cash distributions of over 20%
Liquidity Risk
The major financial liability of the Group is the bank loan of CHF 77 5m (USD 78 0m) used for
purchase of a real estate property, which has a maturity in 2014 The loan is collateralized
by property valued at CHF 115 7m (USD 116 7m) at 31 December 2014 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
Carrying
amount
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 2014
Bank loan
78,092
78,143
Bank overdraft
10,355
10,355
Other financial liabilities
1,736
1,736
Total
90,183
90,234
-
-
-
-
-
-
-
-
-
-
-
-
81
Carrying
amount
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 2013
Bank loan
91,449
92,121
Bank overdraft
15,188
15,188
Derivative financial
instruments
2,125
2,125
Other financial liabilities
2,708
2,708
Total
111,470
112,142
-
-
-
-
-
-
-
-
-
-
-
-
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
There is currently no exchange traded market for CLO securities and they are traded over-
the-counter through private negotiations or auctions subject to market conditions Currently
the CLO market is liquid, but in times of market distress the realization of the investments
in CLOs through sales may be below fair value The Group treats its investments in the loan
market through CLOs as non-current investments as the Group generally intends to hold such
investments over a longer period
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
At 31 December 2014, the Group had liquid investments totalling USD 91 6m, comprising of
USD 3 8m in cash and cash equivalents, USD 82 2 in investments in loan market through CLOs,
USD 1 6m in fixed income investments, USD 2 8m in public equities and USD 1 2m 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
82
Annual Report 2014
Capital Management
The Group considers its capital to be its issued share capital and all of its reserves
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:
Cash at bank
Bank overdrafts
Bank loans
Short term bank loans
Net Debt
Total equity
2014
US $000
(3,807)
10,355
78,092
-
2013
US $000
(4,150)
15,188
87,974
3,475
84,640
102,487
159,974
168,371
Net debt to equity ratio
0 53
0 61
The Board believes that the ratio remains at an acceptable and manageable level
83
38 Financial assets and liabilities by IAS 39 category
Note
2014
US $000
2013
US $000
Financial assets:
Loans and receivables:
Trade and receivables
Cash at bank
Available-for-sale financial assets
Financial assets at fair value through
profit or loss
Derivative financial instruments
Financial liabilities:
Financial liabilities at amortised cost:
Bank loan
Bank overdrafts
Short term bank loans
Other financial liabilities
12
13
4
5,9
16
17
18
19
20
Financial liabilities at fair value through
profit or loss:
Derivative financial instruments
16
19,768
3,807
23,575
101,935
5,510
1,125
2,072
4,150
6,222
120,088
20,925
-
132,145
147,235
78,092
10,355
-
1,736
90,183
-
90,183
87,974
15,188
3,475
2,708
109,345
2,125
111,470
The carrying amount of the financial assets and liabilities at amortised cost approximates to
their fair value
84
Annual Report 2014
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
85
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 the offices of Travers Smith LLP at 10 Snow Hill, London, EC1A 2AL
on 26 August 2015 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 2014
To re-elect Mr Richard Rosenberg, who is due to retire as Director in accordance with the
Articles of Association of the Company
To re-elect Mr 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)
the Directors be and are generally and unconditionally authorised to allot up to a maximum
aggregate amount of 65,096,527 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 2016 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
(b)
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
86
Annual Report 2014
offering where the shares respectively attributable to the interests of such holders and
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
(b)
the allotment of up to an aggregate amount of 19,528,958 of such ordinary shares
(representing approximately 10% of the Company’s issued ordinary share capital as at the
date of this Notice),
and this power, unless renewed, shall expire at the end of the Annual General Meeting of the
Company in 2016 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 of the Company, the Company be and
is hereby generally and unconditionally authorised to make market purchases (within the
meaning of section 693 of the UK 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)
the maximum number of ordinary shares hereby authorised to be purchased is 39,057,916;
(b)
(c)
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 a
proxy 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
25 June 2015
87
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 Asset Services, PXS1, 34 Beckenham
Road, Beckenham, Kent, BR3 4ZF by no later than 48 hours (not including weekends or
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 depositary interests representing ordinary shares in the Company,
a Form of Direction must be completed in order to appoint Capita IRG Trustees Limited, the
Depositary, 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 Asset Services, 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@capita co uk to request a Letter of
Corporate Representation
(v) Resolution 7 – Disapplication of pre-emption rights - If the Directors wish to allot any
equity securities for cash, the Companies Act 2006 requires that such equity securities are
offered first to existing shareholders in proportion to their existing holdings The Directors
intend to adhere to the provisions in the Pre-Emption Group’s Statement of Principles, as
updated in March 2015 and therefore Resolution 7 asks shareholders to grant the Directors
authority to allot shares for cash on a non-pre-emptive basis pursuant to the authority in
Resolution 6, but such allotment shall not be:
(a)
(b)
in excess of an amount equal to 5% of the total issued ordinary share capital of the
Company excluding treasury shares as at of the date of this Notice); or
in excess of an amount equal to 7 5% of the total issued ordinary share capital of the
Company (excluding treasury shares) within a rolling three-year period, without prior
consultation with shareholders
in each case other than in connection with an acquisition or specified capital investment
which is announced contemporaneously with the allotment or which has taken place in the
preceding six-month period and is disclosed in the announcement of the allotment
Resolution 7 also asks shareholders to disapply the statutory pre-emption provisions
in connection with a rights issue, but only in relation to the amount permitted under
Resolution 6, and allows the Directors, in the case of a rights issue, to make appropriate
arrangements in relation to fractional entitlements or other legal or practical problems
that might arise
88
Annual Report 2014
Corporate Directory
Secretary
Chris Sideras
Registered Office
Trident Chambers
PO Box 146
Road Town
Tortola
British Virgin Islands
Company Number
475668
Registrars
Capita Registrars
PXS
34 Beckenham Road
Beckenham
Kent BR3 4TU
England
Auditor
Grant Thornton (Cyprus) Ltd
10 Filiou Zannetou Street
Limassol 3021
Cyprus
Solicitors
Travers Smith
10 Snow Hill
London
EC1A 2AL
England
Nominated Adviser & Broker
Arden Partners plc
125 Old Broad Street
London
EC2N 1AR
England
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
UBS AG
Paradeplatz 6
CH-8098 Zürich
Switzerland
Bank Julius Baer & Co Ltd
Bahnhofstrasse 36,
CH-8010 Zurich,
Switzerland
89
4