2016
6
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
Review of Activities 9
Introduction and Overview 9
Global Investment Environment 9
Livermore’s Strategy 11
Financial portfolio and trading activity 11
Events after the Reporting Date 14
Litigation 14
Report of the Directors 15
The Board’s Objectives 15
The Board of Directors 15
Directors’ responsibilities in relation to the consolidated financial statements 15
Disclosure of information to the Auditor 16
Substantial Shareholdings 16
Corporate Governance Statement 17
Introduction 17
The Board Constitution and Procedures 17
Board Committees 17
Remuneration Committee 17
Audit Committee 17
Communication with Investors 18
Internal Control 18
Going concern 18
Independence of Auditor 18
4
Annual Report 2016 Remuneration Report 19
Directors’ Emoluments 19
Directors’ Interests 19
Interests of Directors in share options 20
Share Option Scheme 20
Remuneration Policy 20
Review of the Business and Risks 22
Risks 22
Share Capital 22
Related Party Transactions 22
Report of the independent auditor to the members of Livermore Investments Group Limited 23
Consolidated Statement of Financial Position as at 31 December 2016 29
Consolidated Statement of profit or loss for the year ended 31 December 2016 30
Consolidated Statement of Comprehensive Income for the year ended 31 December 2016 31
Consolidated Statement of changes in equity for the year ended 31 December 2016 32
Consolidated Statement of cash flows for the year ended 31 December 2016 34
Notes on the Financial Statements 36
Shareholder Information 87
Registrars 87
Website 87
Direct Dividend Payments 87
Lost Share Certificate 87
Duplicate Shareholder Accounts 87
Notice of Annual General Meeting 88
Corporate Directory 91
5
Highlights
•
Net Asset Value per share increased 16 8% to USD 0 90 (December 2015: USD 0 77)
•
•
In addition, the Company returned USD 22 9m to shareholders in 2016 by distributing a dividend
of USD 0 0858 per share and buying back 17,475,585 shares at an average price of GBP 0 34
Successfully sold its Wyler Park property in Bern in 2016 The investment generated a total
return of 122% on the investment amount
•
CLO portfolio performed strongly generating over 41% gains in 2016
6
Annual Report 2016 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 2016
The year-end NAV was USD 0 90 per share after payment of a USD 15m dividend, USD 0 0858 per
share (2015 NAV: USD 0 77 per share) Further, the Company bought back 17,475,585 shares in the
year for a total cost of USD 7 86m Net profit, including discontinued operations, for the year was
USD 34 0m (2015 Net loss: USD 4 7m)
Following the successful refinancing and lease extension with SBB of its Wyler Park property in
Bern, the Company took advantage of strong demand for properties offering stable yields in the
market and sold the property in October 2016 generating a total return of 122% on invested capital
The Company recorded gains from the sale of the Wyler Park property and a solid performance from
the financial portfolio as the CLO market recovered sharply after management took advantage of
low prices earlier in the year Interest and dividend income from the financial portfolio totalled USD
26 3m (2015: USD 25 7m)
Financial Review
The NAV of the Group at 31 December 2016 was USD 157 2m (2015: USD 148 6m) Net profit,
including discontinued operations, during the year was USD 34m, which represents earnings per
share of USD 0 19
Administrative expenses, including discontinued operations, excluding provisions were USD 8 2m
(2015: USD 5 2m)
7
The overall change in the NAV is primarily attributed to the following:
Shareholders’ funds at beginning of year
Income from investments
Disposal of Wyler Park
Other income
Realised gains / (losses) on investments
Loss on impairment of investments
Unrealised gains on investments
Unrealised exchange profit / (losses)
Administration costs
Net finance costs
Tax credit / (charge)
Increase / (decrease) in net assets from operations
Purchase of own shares
Dividends paid
Shareholders’ funds at end of year
Net Asset Value per share
Dividend & Buyback
31 December
2016
US $m
31 December
2015
US $m
148 6
30 4
7 6
-
0 3
-
(2 9)
1 7
(8 2)
(1 2)
3 8
31 5
(7 9)
(15 0)
157 2
160 0
30 9
-
0 1
(2 5)
(31 7)
8 4
(0 4)
(5 2)
(2 5)
(2 0)
(4 9)
(1 5)
(5 0)
148 6
US $0 90
US $0 77
For the year ended 31 December 2016, the Board announced an interim dividend of USD 15m (USD
0 0858 per share) to members on the register on 6 January 2017 The dividend was paid on 27 January 2017
During 2016, the Company bought back 17,475,585 shares to be held in treasury for a total cost of USD
7 86m As at 31 December 2016, the Company held 129,306,403 shares in treasury
Richard B Rosenberg
Chairman
Noam Lanir
Chief Executive Officer
25 May 2017
8
Annual Report 2016
Review of Activities
Introduction and Overview
The Company had a very strong performance in 2016, demonstrating the knowledge and skills of the
management team to create value as well as the resilience of the portfolio Despite a tough start
from a global economy and financial markets perspective, the Company generated a 16 8% increase
in Net Asset Value per share in 2016 The success in 2016 came headwinds in the energy and commodity
markets and unexpected geo-political events such as “Brexit” and the US election results
During the year, significant effort was put into actively managing the CLO portfolio as well as
negotiating the sale of the Wyler Park property Active CLO portfolio management included several
secondary purchases when the markets mispriced credit risk earlier in the year as well as engaging
with CLO managers to manage risky loans and taking advantage of the weak US Leveraged Loan
market to increase spread on the underlying collateral Further, management converted its existing
warehouse into a CLO and the warehouse generated a 23% return over its 10 months’ life
The Wyler Park sale was accomplished as a sale of shares of the company holding the Wyler Park
asset generating a total return of 122% on invested capital The sale generated USD 57 2m in net
cash to the Company
In 2016, the Group generated interest and dividend income of USD 26 3m and investment property
income of USD 4 5m The Group reported NAV/share of USD 0 90 after a dividend of USD 0 0858/
share (2015: USD 0 77) and net profit of USD 34m Administrative expenses amount to USD 8 2m
(2015: USD 5 2m) and finance costs were USD 1 2m (2015: USD 2 5m)
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 moderate global economic recovery continued in 2016 Following subdued growth in the first
half of the year, the global economy gained momentum primarily stimulated by developments in
the US Favourable financing conditions, robust economic growth in China and the stabilisation of
commodity prices contributed to the slight upturn in global manufacturing The economic situation
in many commodity exporting countries, however, remained challenging Oil and commodity prices
recovered somewhat over the course of the year
Inflation, as measured by the CPI, remained below central bank targets in most advanced economies
Compared to 2015, however, annual inflation recorded a slight increase in most cases, predominantly
due to higher energy prices In the euro area, inflation dropped to an average of 0 2%, remaining
well short of the ECB’s price stability objective of ‘below, but close to 2%’ In the US, inflation
9
reached 2 1% in December 2016, its highest level since June 2014, and averaged 1 3% in 2016,
following virtual price stagnation in the previous year
Economic growth in the US averaged 1 6% in 2016, down significantly over the previous year
The strength of the US dollar and rising credit risk premia dampened investment and exports
Furthermore, investment activity in the energy and mining sector continued to decline due to
low oil and commodity prices In the second half of the year, however, the US economy gained
momentum driven by private consumption The labour market edged closer to full employment with
the unemployment rate down to 4 7% by the end of the year
In the euro area, GDP advanced by 1 7% in 2016, having grown by 2 0% the previous year The
expansionary monetary policy of the European Central Bank (ECB) continued to bolster economic
developments The economy picked up in all euro area countries and was broad based, with Germany
remaining the driving force Low energy prices and favourable financing conditions contributed to
domestic demand, while exports expanded slightly thanks to the weak euro Employment continued
to gain momentum and the unemployment rate dropped below 10%
Japan’s moderate economic recovery continued in 2016, with GDP advancing by 1 0% However, the
substantial appreciation of the yen in the first half of 2016 weighed significantly on the Japanese
economy Consequently, the government launched a comprehensive economic stimulus package and
postponed the next consumption tax increase The labour market continued to improve and the
unemployment rate registered a further decline, dropping to 3 1% by December
Switzerland’s economy gained some momentum in 2016, sustaining its recovery from the sharp
appreciation of the Swiss franc at the beginning of 2015 GDP was up by 1 3%, following growth of
0 8% in the previous year whereas the situation on the labour market continued to stabilise
Disappointing manufacturing indicators in China at the beginning of the year raised concerns
about the country’s growth outlook, leading to turbulence on the international financial markets
Monetary and fiscal stimulus measures subsequently helped to stabilise the economy GDP growth
averaged 6 7% in 2016
The Indian economy developed favourably overall GDP grew slightly above potential (around 7%)
in the first three quarters In addition, the government made some headway with important reform
packages, such as the nationwide harmonisation of the goods and services tax In November,
the government carried out a surprise currency reform aimed at curtailing the shadow economy,
but bottlenecks in the supply and distribution of new banknotes put a considerable damper on
economic growth
In view of low core inflation, central banks in many countries maintained their expansionary
monetary policies One exception was the US, where inflation had come in close to target Given the
favourable labour market situation and satisfactory inflation development, the US Federal Reserve
raised the target range for its policy rate by 0 25 percentage points to between 0 5% and 0 75% in
December The ECB, by contrast, introduced further substantial easing measures lowering its deposit
rate by 0 1 percentage points to – 0 4%, and the main refinancing rate by 0 05 percentage points to
0% Furthermore, it increased its monthly asset purchases and pledged to purchase corporate bonds
for the first time Persistently low inflation induced the Bank of Japan to adopt negative rates and
yield curve control policies
Global financial markets started the year on the back foot as concerns over China’s growth and
capital flight issues took hold and the market digested the US Federal Reserve’s expectation of
10
Annual Report 2016 multiple rate hikes in 2016 Already high credit risk premia and the downslide in oil and commodity
markets did not help the situation However, the financial markets recovered sharply from March
onwards as the ECB and the Bank of Japan instituted additional easing measures and data out of
China was supportive
The S&P 500 Index dropped 11 5% but recovered sharply and ended the year 9 8% higher than the
start of the year whereas the EuroStoxx 50 Index recovered to almost flat levels after dropping
18 5% earlier in the year The yields on the US treasury bonds ended marginally higher at 2 444%
versus 2 2694% at the start of the year as expectations of expansionary fiscal policies took hold
with the election of a new US President However, German and Euro area government bond yields
declined on account of lower interest rates and additional monetary policy easing Credit spreads
recovered sharply in response to better growth prospects, recovery in energy and commodity markets,
and additional monetary policy easing US High yield and Leveraged Loan markets generated total
returns of 17 5% and 9 88% as measured by the Bloomberg Barclays US Corporate High Yield Total
Return Index and the Credit Suisse Leveraged Loan Index respectively
Sources: Board of Governors of the Federal Reserve System, European Central Bank (ECB), Swiss National Bank, Bloomberg, Morgan Stanley
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
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
Financial portfolio and trading activity
The Group manages a financial portfolio valued at USD 103 3m as at 31 December 2016, which is
invested mainly in fixed income and credit related securities
The following is a table summarizing the financial portfolio as of year-end 2016
Name
2016
Book Value US $m
2015
Book Value US $m
Investment in the loan market through CLOs
Open Warehouse facilities
Hedge Funds
Perpetual Bonds
Other Public Equities
Invested Total
Cash
Total
81 8
17 3
1 0
1 2
2 0
103 3
60 4
163 7
66 0
5 0
1 0
1 8
2 9
76 7
25 8
102 5
11
Senior Secured Loans and Collateralized Loan Obligations (CLO):
US senior secured loans are a floating rate asset class with a senior secured claim on the borrower and with
overall low volatility and low correlation to the equity market CLOs are managed portfolios invested into
diversified pools of senior secured loans and financed with long term financing
With the energy and commodity complex continuing to trade at very low levels, 2016 had a difficult start
for the credit and US Leveraged Loan and CLO market US senior secured loans offered wide spreads and very
attractive risk-return characteristics By mid-March, however, the credit markets and US Leveraged Loan
markets started a strong recovery as investors saw the value and concerns about defaults and economic
growth diminished The US Leveraged Loan market returned an impressive 9 88% in 2016 as measured by
the Credit Suisse Leveraged Loan Index, the highest annual return since 2010
As expected, CLO managers also took advantage of the weaker loan market earlier in the year and invested
in higher spreads and lower priced loans to add value In addition, with the specialized experience of
management, the Company bought strong performing CLO equity positions at deep discount, while the
existing portfolio continued to outperform the market - highlighting management’s strong selection and
origination expertise Further, as spreads in the debt markets tightened, management worked with its CLO
managers and refinanced a few of its positions to lower the cost of financing in those CLOs
The Group’s CLO portfolio generated a return of approximately 40% in 2016 and continued to generate
strong cash flows aggregating USD 26 0m in 2016 In addition, the Group converted its warehouse into a
CLO and generated a 23% cash return during the 10 month warehousing period In the second half of the
year, the Company invested in the first-loss tranche of three new warehouse facilities with long tenures
and no mark-to-market triggers Management successfully converted these warehouses into new issue
CLOs in 2017 as it expects cost of CLO financings to decline materially given the demand for floating rate
secured debt As of the end of the year 2016, all of the Group’s US CLO equity positions were passing their
Overcollateralization (OC) tests and remained robust Management continues to actively monitor the CLO
portfolio and position it towards longer reinvestment periods with better quality loans and conduct relative
value as well as opportunistic trading
Looking into the near future, management believes that default rates should continue to stay below
historical averages as only 4 4% of the US Leveraged Loan market matures before 2019 and the new US
Government expects to increase economic growth Management continues to focus on sectors such as
Retail, Healthcare and Energy that are expected to undergo shifts due to technology or regulation
While management maintains a positive view on the CLO portfolio, mid-long term performance may be
negatively impacted by a strong pull back in the US or European economy or geo-political events that
could result in a spike in defaults Despite positive developments in the overall health of the US economy,
we acknowledge the continued below trend growth globally as well as headwinds relating to the potential
monetary tightening in the US, weak commodity markets and geopolitical risks
The Group’s CLO portfolio is divided into the following geographical areas:
US CLOs
Global Credit CLOs
European CLOs
2016
Amount
US $000
78,725
2,495
548
81,768
Percentage
96 28%
3 05%
0 67%
100%
2015
Amount
US $000
60,401
4,780
765
65,946
Percentage
91 6%
7 2%
1 2%
100%
12
Annual Report 2016
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 The Group expects
material exits of portfolio companies from funds to materialize between 2017 and 2020 During the
reporting period distributions of USD 0 2m were received from SRS Private
The following summarizes the book value of the private equity funds as at year-end 2016
Name
Evolution Venture (Israel)
SRS Private (India)
Elephant Capital (India)
Da Vinci (Russia)
Panda Capital (China)
Other investments
India Blue Mountains (India)
Total
Book\ValueUS $m
1 9
1 3
0 6
0 4
0 3
1 0
-
5 5
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 mobile keyboard and language correction software company, a software
company operating in the digital radio market, a software test tool developer, and a virtualization
technology company The virtualization technology company has been performing well
SRS Private Fund: SRS Private is a private equity fund focused on real estate in India The fund
has invested in residential and mixed use projects in India 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 In 2016, the fund distributed USD 0 2m from proceeds of its investment in SRS
Charminar
Elephant Capital: India-focused private equity fund, which is AIM quoted (Ticker: ECAP) During the
period, the fund delisted from the LSE/AIM market in order to reduce costs given the small size of
the remaining fund Livermore owns 9 9% of the delisted fund As of August 2016, the fund reported
an unaudited NAV of 0 36 pence per share
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
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
13
manager is in the process of building up operational capacity for product manufacturing
India Blue Mountains: India Blue Mountains was a hotel and hospitality development fund that
has been reorganized into three separate companies each holding a hotel development in India in
Mumbai, Pune and Goa Once developed, 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 The Pune hotel
is now operational
Given the high debt load on the individual assets, as well as delays and underperformance, net asset
values for the properties held under the SPVs have been reduced to nil
The following table reconciles the review of activities to the Group’s financial assets as of 31
December 2016
Name
Financial Portfolio
Private Equity Funds
Total
Financial assets at fair value through profit or
loss (note 5)
Financial assets at fair value through other
comprehensive income (note 6)
Total
Events after the reporting date
2016
Book Value US $m
103 3
5 5
108 8
102 1
6 7
108 8
The three warehouse facilities that the Company invested in, during 2016, were converted to CLOs
in May 2017 For two out of the three warehouses, with a carrying amount as at 31 December
2016 of USD 11 185m, the company invested an additional amount of USD 15 5m during 2017
(before their conversion) For these two warehouses, Livermore’s investment amount plus net carry
amounting to USD 28 1m became receivable in May 2017 For the other one, with a carrying amount
as at 31 December 2016 of USD 6 066m, the Company invested an additional amount of USD 3m
during 2017 (before its conversion) For that warehouse, the amount to be received has not yet
been determined, however it is expected that it will exceed Livermore’s investment amount There
were no other material events after the end of the reporting year, which have a bearing on the
understanding of these consolidated financial statements
Litigation
At the time of this Report, there is one matter in litigation that the Group is involved in Further
information is provided in note 33 to the consolidated financial statements
14
Annual Report 2016 Report of the Directors
The Directors submit their annual report and audited consolidated financial statements of the Group
for the year ended 31 December 2016
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 61), 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 50), 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 eighteen 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 49), Executive Director and Chief Investment Officer
Ron was appointed as Executive Director and Chief Investment Officer on 10 August 2007 Ron has
led the establishment and development of Livermore’s investment platform as a leading specialized
house in the credit space Ron also 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
investment 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
16 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
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
15
In preparing these consolidated financial statements, the Directors are required to:
•
Select suitable accounting policies and then apply them consistently;
•
Make judgments and estimates that are reasonable and prudent;
•
•
State whether applicable accounting standards have been followed, subject to any material
departures disclosed and explained in the financial statements;
Prepare the consolidated financial statements on the going concern basis unless it is
inappropriate to presume that the Group will continue in business
he 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 23 April 2017 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
133,936,588
44 04
RB Investments GmbH
25,456,903
Merrill Lynch Pierce, Fenner & Smith, Inc
9,329,051
8 37
3 07
76 62
14 56
5 34
* after consideration of treasury shares (note 15)
Save as disclosed in this report and in the remuneration report, the Company is not aware of any person
who is interested directly or indirectly in 3% 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 31 to the consolidated financial statements
16
Annual Report 2016 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 (the “Code”)
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, 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
17
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
18
Annual Report 2016 Remuneration Report
The Directors’ emoluments, benefits and shareholdings during the year ended 31 December 2016
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
Total
emoluments
2016
US $000
Total
emoluments
2015
US $000
Richard Barry
Rosenberg
10/06/05
Noam Lanir
10/06/05
Ron Baron
01/09/07
60
400
350
-
45
-
50
500
110
945
91
445
3,628
3,978
1,878
The dates are presented in day / month / year format
Directors’ Interests
Interests of Directors in ordinary shares
Director
Notes
As at 31 December 2016
As at 31 December 2015
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
133,936,588
44 041%
76 620% 151,412,173
49 787%
78 740%
25,456,903
8 371%
14 560% 25,456,903
8 371%
13 240%
15,000
0 005%
0 01%
15,000
0 005%
0 01%
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
19
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 13)
Another loan of USD 2 500m was made during the year, for the acquisition of shares in the
Company Interest is payable on the loan at 6 month US LIBOR plus 0 25% per annum and the
loan is secured on the shares acquired The loan is repayable on the earlier of the employee
leaving the Company or April 2020 The loan is included within trade and other receivables
(note 13)
Interests of Directors in share options
No of options at
31 December 2016
Date of grant
Exercise
price, GBP
Exercise
Price**,
US $
Vesting period
of options
Richard Barry Rosenberg
500,000
13/05/08
0 30
0 37
Vested
The options are exercisable up to 10 years after the date of grant No options were exercised during
the year ended 31 December 2016
* 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 2016
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:
• 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
•
20
Annual Report 2016
•
•
•
•
•
•
•
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
21
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
investment
geography selection and concentration), balance sheet risk
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
(gearing) and/or
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
Further information on Financial risk management is provided in note 36 of the consolidated
financial statements
Share Capital
There was no change in the authorised share capital during the year to 31 December 2016 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 2016
are disclosed in note 31 to the consolidated financial statements
By order of the Board of Directors
Chief Executive Officer
25 May 2017
22
Annual Report 2016 Independent Auditor’s Report to the
Members of Livermore Investments
Group Limited
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the 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 2016, the consolidated
statements of profit or loss, comprehensive income, changes in equity, and cash flows for the
year then ended, and the notes to the consolidated financial statements, including a summary of
significant accounting policies
In our opinion, the accompanying consolidated financial statements give a true and fair view of the
consolidated financial position of the Group as at 31 December 2016 and of its consolidated financial
performance and its consolidated cash flows for the year then ended, in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European Union
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISA) Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for
the Audit of the Consolidated Financial Statements section of our report We are independent of
the Group in accordance with the International Ethics Standards Board for Accountants’ Code of
Ethics for Professional Accountants (IESBA Code) together with the ethical requirements that are
relevant to our audit of the consolidated financial statements in Cyprus, and we have fulfilled
our other ethical responsibilities in accordance with these requirements and the IESBA Code We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion
Emphasis of Matter
We draw attention to note 33 to the consolidated financial statements, which describes the
existence of a 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 modified in
respect of this matter
23
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance
in our audit of the consolidated financial statements of the current period These matters were
addressed in the context of our audit of the consolidated financial statements as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters
We have determined the matters described below to be the key audit matters to be communicated
in our report
Key audit matter
How the matter was addressed
Material uncertainty over legal case (see Emphasis
of matter paragraph)
As disclosed in note 33, one of the custodian
banks that the Company uses, faces a contingent
claim with regards to the redemption of shares
which were bought in 2008 at the request of
Livermore and on its behalf
We obtained written updates on the status
of the case as well as the estimate for the
potential outcome of the legal case from the
legal advisors of the custodian bank
We have also searched public records over the
internet to identify any developments in relation
to the case
Due to the potential amount of exposure and the
material uncertainty over the existence of any
obligation for the Company and its outcome,
the legal case has been identified as a key audit
matter
Investments’ existence and activity
As presented on the statement of financial
position and in note 8, the Company has
financial assets measured at fair value of $114m
These financial assets are held either through
custodian banks or directly by the Company
Since these investments make up the majority
of the financial assets of the Company we
considered their existence and activity as a key
audit matter
We have considered the adequacy of disclosures
the
discussed with Management
and
developments and surrounding uncertainties in
relation to the case
For investments held through custodian banks
we have confirmed the existence and ownership
of investments by:
•
•
tracing significant investment activity to
custodian statements
requesting and obtaining custodian letters
confirming the holding of each investment
as at the reporting date
For other significant
investments we have
requested and obtained direct confirmations
from fund managers for the Company’s holding
24
Annual Report 2016 Investments’ valuation - Level 3
The Company has financial assets of $28m
classified within fair value hierarchy as level 3,
as disclosed in note 8 The fair value of level 3
financial assets is generally determined either
based on third party valuations, or when not
available, based on adjusted Net Asset Value
(NAV) calculations using inputs from third
parties
Due to the use of judgement, the existence of
unobservable inputs and the significant total
value of financial assets within the level 3
hierarchy, we consider the valuation of these
investments as a key audit matter
Implementation of IFRS9 “Financial Instruments”
Livermore has elected to apply IFRS 9 “Financial
Instruments” as issued in July 2014, earlier than
its effective date as described in note 3 of the
consolidated financial statements
The application of IFRS 9 was considered a key
audit matter since it had a material impact on
the financial statements
In assessing the valuation of level 3 financial
assets we have:
•
•
• discussed the valuation methodologies
applied with Management and assessed
their appropriateness for each investment
where applicable, reviewed third party
valuations and assessed the method
well as the qualifications and
as
independence of the valuer
In a single case where the valuation
has been performed by Management,
evaluated the reasonableness of the
underlying assumptions and verified that
the inputs used are from reliable third -
party sources
evaluated the adjusted NAV calculations
performed by Management and assessed the
inputs used
considered the adequacy of d i s c l o s u r e s
in relation to the valuation methodologies
used for each class of level 3 financial assets
•
•
We have reviewed and assessed:
•
the appropriateness and adequacy of the
relevant accounting policies
the proper classification and
measurement of financial assets and
liabilities
the adequacy of disclosures in relation to
the application of IFRS 9
•
•
We have also recalculated the financial impact
on the transition to IFRS 9
25
Disposal of Livermore Investment AG
Following the disposal of Livermore Investment
AG (refer to note 23), the investment property
activities of the Group discontinued
In addition to the above, upon the discontinuance
of its investment property activities, Livermore
met the definition of an investment entity, as
this is defined in IFRS 10 “Consolidated Financial
Statements”
Since the above disposal had a pervasive effect
on the consolidated financial statements we
considered it to be a key audit matter
We have evaluated whether Management
requirements of
has properly applied
IFRS 5 “Non-current Assets Held for Sale and
Discontinued Operations” by:
the
•
•
terms of sale contract
recalculated the gain on the disposal and
verify that the calculation is in line with
the
ensuring that the results and cash flows of
the discontinued operations have been
properly presented and adequate disclosures
have been made
We have evaluated whether Livermore meets the
definition of an investment entity in accordance
with the criteria set by IFRS 10
We have also evaluated the transition to an
investment entity by:
•
•
•
relevant accounting policies
assessing
applied and disclosures made
confirming that the consolidation of
subsidiaries ceased upon the date of change
in status
assessing the recognition and measurement
of the investments in subsidiaries as well as
the amounts receivable from or payable to
subsidiaries as at the date of change in status
Other Information
The Board of Directors is responsible for the other information The other information comprises
the information included in the Highlights, Chairman’s and Chief Executive’s Review, Review of
Activities, Report of the Directors, Corporate Governance Statement, Remuneration Report, Review
of the Business and Risks, the Shareholder Information, the Notice of Annual General Meeting and
the Corporate Directory but does not include the consolidated financial statements and our auditor’s
report thereon
Our opinion on the consolidated financial statements does not cover the other information and we
do not express any form of assurance conclusion thereon
In connection with our audit of the consolidated financial statements, our responsibility is to
read the other information and, in doing so, consider whether the other information is materially
inconsistent with the consolidated financial statements or our knowledge obtained in the audit or
otherwise appears to be materially misstated If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are required to report that fact
We have nothing to report in this regard
26
Annual Report 2016
Responsibilities of the Board of Directors 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, 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
In preparing the consolidated financial statements, the Board of Directors is responsible for assessing
the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to
going concern and using the going concern basis of accounting unless the Board of Directors either
intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so
The Board of Directors is responsible for overseeing the Group’s financial reporting process
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial
statements as a whole are free from material misstatement, whether due to fraud or error, and to
issue an auditor’s report that includes our opinion Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material
misstatement when it exists Misstatements can arise from fraud or error and are considered material
if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these consolidated financial statements
As part of an audit in accordance with ISA, we exercise professional judgment and maintain
professional scepticism throughout the audit We also:
•
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those
risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our
opinion The risk of not detecting a material misstatement resulting from fraud is higher than
for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control
•
•
• Obtain an understanding of internal control relevant to the audit 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 Group’s internal control
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the Board of Directors
Conclude on the appropriateness of the Board of Directors’ use of the going concern basis
of accounting and, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the Group’s ability to
continue as a going concern If we conclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related disclosures in the consolidated financial
statements or, if such disclosures are inadequate, to modify our opinion Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report However, future
events or conditions may cause the Group to cease to continue as a going concern
Evaluate the overall presentation, structure and content of the consolidated financial statements,
•
27
•
including the disclosures, and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves a true and fair view
Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the consolidated financial
statements We are responsible for the direction, supervision and performance of the group
audit We remain solely responsible for our audit opinion
We communicate with the Board of Directors regarding, among other matters, the planned scope
and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit
We also provide the Board of Directors with a statement that we have complied with relevant
ethical requirements regarding independence, and to communicate with them all relationships and
other matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards
From the matters communicated with the Board of Directors, we determine those matters that
were of most significance in the audit of the consolidated financial statements of the current
period and are therefore the key audit matters We describe these matters in our auditor’s report
unless law or regulation precludes public disclosure about the matter or when, in extremely rare
circumstances, we determine that a matter should not be communicated in our report because the
adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication
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
The engagement partner on the audit resulting in this independent auditor’s report is Mr Nicos
Mouzouris
Nicos Mouzouris
Certified Public Accountant and Registered Auditor
for and on behalf of
Grant Thornton (Cyprus) Ltd
Certified Public Accountants and Registered Auditors
Limassol, 25 May 2017
28
Annual Report 2016
Livermore Investments Group Limited
Consolidated Statement of Financial Position as at 31 December 2016
Note
2016
US $000
2015
US $000
Assets
Non-current assets
Property, plant and equipment
Available- for-sale financial assets
Financial assets at fair value through profit or loss
Financial assets at fair value through other
comprehensive income
Investment property
Investments in subsidiaries
Trade and other receivables
Current assets
Trade and other receivables
Available- for-sale financial assets
Financial assets at fair value through profit or loss
Financial assets at fair value through other
comprehensive income
Current tax asset
Cash at bank
Total assets
Equity
Share capital
Share premium and treasury shares
Other reserves
Retained earnings
Total equity
Liabilities
Non-current liabilities
Bank loans
Deferred tax
Provisions
Current liabilities
Bank loans
Bank overdrafts
Trade and other payables
Provisions
Dividend payable
Derivative financial instruments
Total liabilities
Total equity and liabilities
Net asset valuation per share
4
5
6
9
11
13
13
4
5
6
14
15
15
18
12
32
18
19
20
32
21
17
-
-
81,769
5,634
-
5,252
2,513
95,168
5,427
-
20,318
1,039
-
60,383
87,167
26
78,464
1,533
-
123,324
-
1,128
204,475
4,490
2,683
8,268
-
6
25,770
41,217
182,335
245,692
-
169,187
(39,842)
27,829
-
177,053
2,631
(31,047)
157,174
148,637
-
-
-
-
-
1,160
8,616
385
15,000
-
25,161
75,003
3,937
385
79,325
1,407
13,208
2,770
128
-
217
17,730
25,161
182,335
97,055
245,692
Basic and diluted net asset valuation per share (US $)
22
0 90
0 77
These consolidated Financial Statements were approved by the Board of Directors on 25 May 2017
The notes 1 to 37 form part of these consolidated financial statements
29
Livermore Investments Group Limited
Consolidated Statement of Profit or Loss for the year ended 31 December 2016
Continuing operations
Investment income
Interest and dividend income
Profit / (loss) on investments
Gross profit / (loss)
Other income
Administrative expenses
Operating profit / (loss)
Finance costs
Profit / (loss) before taxation
Taxation charge
Note
2016
US $000
2015
US $000
25
26
26,334
1,695
25,675
(33,955)
28,029
(8,280)
-
35
27
(7,888)
(4,749)
20,141
(218)
(12,994)
(1,114)
19,923
(14,108)
(38)
(15)
28
29
Profit / (loss) for the year from continuing operations
19,885
(14,123)
Discontinued operation
Profit for the year on discontinued operations
23
Profit / (loss) for the year
14,091
33,976
9,364
(4,759)
Earnings per share
Basic and diluted earnings per share ( US $)
• From continuing operations
• On discontinued operations
30
30
0 11
0 08
0 19
(0 07)
0 05
(0 02)
The profit / (loss) for the year (both from continuing and discontinued operations) is wholly
attributable to the owners of the parent
The notes 1 to 37 form part of these consolidated financial statements
30
Annual Report 2016
Livermore Investment Group Limited
Consolidated Statement of Comprehensive Income for the year ended 31 December 2016
Note
2016
US $000
2015
US $000
33,976
(4,759)
Profit / (loss) 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 gains / (losses) from translation of
subsidiaries
Items that are not reclassified subsequently to profit or loss
•
•
Financial assets designated at fair value through other
comprehensive income – fair value losses
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
Foreign exchange losses reclassified on disposal of subsidiary
26
26
23
Total comprehensive income for the year
-
(34,906)
190
(314)
34,166
(39,979)
(4,301)
-
-
-
1,538
1,538
31,403
3,459
31,726
-
35,185
(4,794)
The total comprehensive income for the year is wholly attributable to the owners of the parent
The notes 1 to 37 form part of these consolidated financial statements
31
Livermore Investments Group Limited
Consolidated Statement of Changes in Equity for the year ended 31 December 2016
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 2015
Purchase of own shares
Dividends
Transfer on expiry of options
16
Transactions with owners
Loss 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
2015
Adjustment on initial
application of IFRS 9
As restated
Purchase of own shares
Dividends
26
26
3 1
Transfer on expiry of options
16
Transactions with owners
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
215,499 (36,902)
5,777
(1,414)
(1,426)
(21,560)
159,974
-
-
-
-
-
-
-
-
-
-
(1,544)
-
-
(1,544)
-
-
(271)
(271)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,544)
(4,999)
(4,999)
271
-
(4,728)
(6,543)
(4,759)
(4,759)
(34,906)
-
(34,906)
3,459
31,726
-
-
3,459
31,726
(314)
-
-
(314)
(314)
279
(4,759)
(4,794)
215,499 (38,446)
5,506
(1,728)
(1,147)
(31,047)
148,637
-
-
-
-
(34,471)
34,471
-
215,499 (38,446)
5,506
(1,728)
(35,618)
3,424
148,637
-
-
-
-
(7,866)
-
-
-
-
(5,429)
(7,866)
(5,429)
-
-
-
-
-
-
-
-
-
(7,866)
(15,000)
(15,000)
5,429
-
(9,571)
(22,866)
32
Annual Report 2016 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
Profit for the year
Other comprehensive
income:
Financial assets at fair value
through OCI- Fair value
losses
Foreign exchange gains
arising from translation
of subsidiaries
Foreign exchange losses
reclassified on disposal
of subsidiary
23
Total comprehensive
income for the year
Balance at 31 December
2016
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
33,976
33,976
-
-
-
-
-
-
-
-
-
(4,301)
190
-
-
1,538
-
-
-
(4,301)
190
1,538
1,728
(4,301)
33,976
31,403
215,499 (46,312)
77
-
(39,919)
27,829
157,174
The notes 1 to 37 form part of these consolidated financial statements.
33
Livermore Investments Group Limited
Consolidated Statement of Cash Flows for the year ended 31 December 2016
Cash flows from operating activities
(Loss) / profit before tax
19,923
(13,731)
Note
2016
US $000
2015
US $000
Adjustments for
Depreciation
Provision charge
Interest expense
Interest and dividend income
Gain / (Loss) on investments
Exchange differences
32
28
25
26
Changes in working capital
Decrease in trade and other receivables*
Increase in trade and other payables*
Cash flows from operations
Interest and dividends received
Settlement of litigation
32
Tax paid
Net cash from operating activities
Cash flows from investing activities
Proceeds from disposal of subsidiary – net of cash
and cash equivalents disposed
23
Acquisition of investments
Proceeds from sale of investments
Settlement of derivative
Acquisition of associate
Capital return of associate
10
7
-
216
(26,334)
(1,695)
(243)
(8,126)
24,486
4,251
20,611
26,561
(128)
(39)
47,005
31,752
(37,039)
14,462
(148)
-
-
16
513
267
(25,675)
33,955
558
(4,097)
17,053
649
13,605
25,969
-
(18)
39,556
-
(32,415)
13,679
2,332
(7,500)
8,183
Net cash used for investing activities
9,027
(15,721)
34
Annual Report 2016 Note
2016
US $000
2015
US $000
Cash flows from financing activities
Purchase of own shares
15
Interest paid
Dividends paid
Net cash used for financing activities
Net increase / (decrease) in cash and cash
equivalents:
•
from continuing operations
• of discontinued operations
23
Cash and cash equivalents at the beginning of the year
Exchange differences on cash and cash equivalents
Cash and cash equivalent of subsidiaries, removed on
change in investment entity status
2 1
(7,866)
(331)
-
(8,197)
47,835
826
12,562
(245)
(1,755)
(1,544)
(390)
(4,999)
(6,933)
16,902
2,332
(6,548)
(124)
-
Cash and cash equivalents at the end of the year
14
59,223
12,562
*other than movements on change in investment entity status
The notes 1 to 37 form part of these consolidated financial statements
35
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 Company changed to investment activities on 1 January 2007
Before that the principal activity of the Company 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 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 an accrual basis (other than for cash flow information) using the
significant accounting policies and measurement bases summarised in note 3, and also on a
going concern assumption
The financial information is presented in US dollars because this is the currency in which the
Company primarily operates
The Directors have reviewed the accounting policies used by the Company and consider them
to be the most appropriate
2 1
Investment entity status
On 28 October 2016, Livermore disposed to a third party the 100% of the shares of its
subsidiary Livermore Investments AG in Switzerland, and as a result discontinued its
investment property activities that constituted an operating segment of the Group (notes
23 and 24) The Directors have determined that since the discontinuance of its investment
property activities, Livermore meets the definition of an investment entity, as this is defined
in IFRS 10 “Consolidated Financial Statements” As per IFRS 10 an investment entity is an
entity that:
•
obtains funds from one or more investors for the purpose of providing those investors
with investment management services;
commits to its investors that its business purpose is to invest funds solely for returns
from capital appreciation, investment income, or both; and
•
• measures and evaluates the performance of substantially all of its investments on a
fair value basis
In accordance with IFRS 10, an investment entity is exempted from consolidating its
subsidiaries, unless any subsidiary which is not itself an investment entity mainly provides
36
Annual Report 2016
services that relate to the investment entity’s investment activities In Livermore’s situation,
none of its subsidiaries provides such services
Given the above, these financial statements consolidate the Company’s subsidiaries up
to 28 October 2016 As of that date, the subsidiaries have been de-consolidated, and
recognised as Investments in subsidiaries at their fair value as at 28 October 2016 (note
11) No material gains or losses occurred on this transition
3 Accounting Policies
The significant accounting policies applied in the preparation of the consolidated financial
statements are as follows:
Adoption of new and revised IFRS
3 1
As from 1 January 2016, 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 consolidated financial
statements
In addition to the above, the Company has elected to apply IFRS 9 “Financial Instruments”
as issued in July 2014, earlier than its effective date, because the new accounting policies
reflect better the Company’s business model and provide more reliable and relevant
information for its users to assess the amounts and timing of future cash flows
IFRS 9 replaces IAS 39 ‘’Financial Instruments: Recognition and Measurement’’ The new
standard introduces extensive changes to IAS 39’s guidance on the classification and
measurement of financial assets and introduces a new ‘expected credit loss’ model for the
impairment of financial assets
The date of the initial application of IFRS 9 is 1 January 2016 In accordance with the
transitional provisions in IFRS 9 (par 7 2 15), comparative figures have not been restated,
and therefore are presented in accordance with the previously applied policies in accordance
with IAS 39
The most significant impact of the adoption of IFRS 9, was on the classification and
measurement of the Company’s financial assets The Directors have reviewed the
classification and measurement of the Company’s financial assets based on the new criteria
that consider the assets’ contractual cash flows and the business model in which they are
managed, and determined that:
•
•
•
Financial assets previously classified as “financial assets at amortised cost”, shall
remain in this same category
Financial assets previously classified as “financial assets at fair value through profit or
loss”, shall remain in this same category
Financial assets previously classified as “available-for-sale” shall be reclassified
as “financial assets at fair value through profit or loss” However, the Directors on
initial application date have made an irrevocable election to designate certain equity
investments that are not held for trading, which were previously classified as “available-
for-sale”, as “financial assets at fair value through other comprehensive income”
37
The impact of the adoption of IFRS 9 is summarized as follows:
31 December
2016
US $000
1 January
2016
US $000
Reclassification out of Available-for-sale financial assets
(95,566)
(81,147)
Reclassification to Financial assets at fair value through
profit or loss
85,429
67,196
Designated as Financial assets at fair value through other
comprehensive income
10,137
13,951
Net assets impact
-
-
Adjustment to Retained earnings
34,832
34,471
Adjustment to Investments revaluation reserve
(34,832)
(34,471)
Equity impact
-
-
Also, the profit or loss for the year 2016 is higher by USD 3 669m (representing an increase
of USD 0 02 on basic and diluted earnings per share for 2016) due to the adoption of IFRS
9 This is mostly attributable to the fact that the additional fair value losses recognised
in profit or loss are less than the impairment losses on available-for-sale financial assets
that would have been recognised based on IAS 39
The adoption of IFRS 9 did not have any significant impact on the Company’s financial
liabilities
The following Standards, Amendments to Standards and Interpretations had been issued
by the date of authorisation of these consolidated financial statements but are not yet
effective (nor early adopted), or have not yet been endorsed by the EU, for the year ended
31 December 2016:
38
Annual Report 2016
IFRS 14: “Regulatory Deferral Accounts”
IFRS 15:
Customers”
“Revenue
from Contracts with
IFRS 16: “Leases”
IFRIC 22: “Foreign Currency Transactions and
Advance Consideration“
Annual Improvements to IFRS 2014–2016 Cycle
Amendment to
Measurement
Transactions”
IFRS 2: “Classification and
Payment
based
Share
of
Amendments to IFRS 4: “Applying IFRS 9 Financial
Instruments with IFRS 4 Insurance Contracts”
Amendment to IFRS 10, and IAS 28: “Sale or
Contribution of Assets between an Investor and
its Associate or Joint Venture”
Clarifications to IFRS 15: “Revenue from Contracts
with Customers”
Amendment to IAS 7: “Disclosure Initiative”
Amendment to IAS 12: “Recognition of Deferred
Tax Assets for Unrealised Losses”
Amendment to IAS 40: “Transfers of Investment
Property”
Endorsed by
the EU
No
Yes
No
No
No
No
No
Effective (IASB)
for annual periods
beginning on or after
1 January 2016
1 January 2018
1 January 2019
1 January 2018
1 January 2017 /
2018
1 January 2018
1 January 2018
No
to be determined
No
No
No
No
1 January 2018
1 January 2017
1 January 2017
1 January 2018
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
3 2 Basis of consolidation (policy applied up to 28 October 2016 – refer to note 2 1)
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
39
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
3 3
Investments in subsidiaries (policy applied since 28 October 2016 – refer to note 2 1)
Subsidiaries are entities controlled either directly or indirectly by the Company
Investments in subsidiaries are initially recognised at their fair value and subsequently
measured at fair value through profit or loss Subsequently, any gains or losses arising
from changes in their fair value are included in profit or loss for the year
Dividends and other distributions from subsidiaries are recognised as income when the
Company’s right to receive payment has been established
A subsidiary which provides services that relate to the Company’s investment activities is
consolidated rather than included within the investments in subsidiaries measured at fair
value through profit or loss
3 4
Investments in associates and joint ventures
An associate is an entity over which the Company is able to exert significant influence but
not control
A joint venture is an arrangement that the Company controls jointly with one or more
other investors, and over which the Company 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
Dividends and other distributions from associates and joint ventures are recognised as
income when the Company’s right to receive payment has been established
3 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
40
Annual Report 2016
3 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 becomes 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
3 7
Interest and dividend income
•
•
Interest income is recognised based on the effective interest method
Dividend income is recognised on the date that the Company’s right to receive payment
is established, which in the case of quoted securities is the ex-dividend date
3 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
ii
assets and liabilities are translated at the closing rate at the reporting date; and
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
41
3 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 taxes are calculated using the liability method on temporary differences Deferred
tax is generally provided on the difference between the carrying amounts of assets
and liabilities and their tax bases However, deferred tax is not provided on the initial
recognition of goodwill, nor on the initial recognition of an asset or liability unless the
related transaction is a business combination or affects tax or accounting profit Deferred
tax on temporary differences associated with shares in subsidiaries and joint ventures is
not provided if reversal of these temporary differences can be controlled by the group
and it is probable that reversal will not occur in the foreseeable future In addition, tax
losses available to be carried forward as well as other income tax credits to the group are
assessed for recognition as deferred tax assets
Deferred tax liabilities are provided in full, with no discounting Deferred tax assets are
recognised to the extent that it is probable that the underlying deductible temporary
differences will be able to be offset against future taxable income Current and deferred
tax assets and liabilities are calculated at tax rates that are expected to apply to their
respective period of realisation, provided they are enacted or substantively enacted as at
the reporting date
Changes in deferred tax assets or liabilities are recognised as a component of tax expense
within profit or loss, except where they relate to items that are charged or credited
directly to equity in which case the related deferred tax is also charged or credited
directly to equity
3 10 Investment property
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
3 11 Equity instruments
Equity instruments issued by the Company are recorded at proceeds received, net of direct issue costs
Own equity instruments purchased by the Company or its subsidiaries are recorded at the consideration
paid, including directly associated costs, 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 received
3 12 Share Options
IFRS 2 “Share-based Payment” requires the recognition of equity settled share based
payments at fair value at the date of grant
The Company issues equity-settled share based payments to certain employees The fair
value of share-based payments to employees at grant date is measured using the Binomial
pricing model
42
Annual Report 2016
The fair value determined at the grant date is expensed on a straight-line basis over the
vesting period, based on the Company’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
3 13 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 2016 or 2015
3 14 Financial assets (policy applied as from 1 January 2016 – refer to note 3 1)
Financial assets are recognised when the Company 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 Company 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 Company transfers substantially all the risks and rewards of ownership
of the asset, or if the Company neither retains nor transfers substantially all the risks and
rewards of ownership but does transfer control of that asset
The Company classifies its financial assets in the following measurement categories:
those to be measured at fair value (either through other comprehensive income, or through
profit or loss), and
those to be measured at amortised cost
(a)
(b)
The classification depends on the entity’s business model for managing the financial assets
and the contractual terms of the cash flows Financial assets with embedded derivatives
are considered in their entirety when determining whether their cash flows are solely
payment of principal and interest
At initial recognition, the Company measures a financial asset at its fair value plus, in the
case of a financial asset not at fair value through profit or loss, transaction costs that are
directly attributable to the acquisition of the financial asset Transaction costs of financial
assets carried at fair value through profit or loss are expensed in profit or loss
Financial assets at fair value through profit or loss
The Company classifies the following financial assets at fair value through profit or loss:
43
equity investments that are held for trading;
(a)
(b) other equity investments for which the Directors have not elected to recognise fair value
gains and losses through other comprehensive income; and
(c) debt investments that do not qualify for measurement at either amortised cost or at fair
value through other comprehensive income
All financial assets within this category are measured at their fair value, with changes in
value recognised in the profit or loss when incurred
Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income (OCI) comprise equity
securities which are not held for trading, and for which the Company has made an
irrevocable election at initial recognition to recognise changes in fair value through OCI
rather than profit or loss
Where the Company’s management has elected to present fair value gains and losses on
equity investments in other comprehensive income, there is no subsequent reclassification
of fair value gains and losses to profit or loss Dividends from such investments continue to
be recognised in profit or loss when the Company’s right to receive payments is established
Financial assets at amortised cost
Assets that are held for collection of contractual cash flows where those cash flows
represent solely payments of principal and interest are measured at amortised cost A gain
or loss on a financial asset that is measured at amortised cost is recognised in profit or loss
when the asset is derecognised or impaired Interest income from these financial assets is
recognised based on the effective interest rate method
Impairment
The Company assesses on a forward looking basis the expected credit losses associated
with its assets carried at amortised cost The impairment methodology applied depends on
whether there has been a significant increase in credit risk For trade and other receivables
only, the Company applies the simplified approach permitted by IFRS 9, which permits
expected lifetime losses to be recognised from initial recognition of the receivables
Write offs
The Company writes off a financial asset when there is information indicating that the
counterparty is in severe financial difficulty and there is no realistic prospect of recovery,
e g when the counterparty has been placed under liquidation or has entered into bankruptcy
proceedings Financial assets written off may still be subject to enforcement activities,
taking into account legal advice where appropriate Any recoveries made are recognised in
profit or loss
3 15 Financial assets (policy applied until 31 December 2015 – refer to note 3 1)
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
44
Annual Report 2016
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
All financial assets except for those at fair value through profit or loss are subject to
review for impairment at least at each reporting date Financial assets are impaired when
there is any objective evidence that a financial asset or a group of financial assets is
impaired Different criteria to determine impairment are applied for each category of
financial assets, which are also described below
Loans and receivables
•
Trade and other receivables
Trade and other receivables are initially recognised 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
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
45
An assessment for impairment is undertaken at least at each reporting date, following the
IAS 39 guidance
3 16 Financial liabilities
Financial liabilities are recognised when the Company becomes a party to the contractual
provisions of the financial instrument
A financial liability is derecognised when it is extinguished, discharged, cancelled or
expires
Financial liabilities are measured initially at fair value plus 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 Company’s financial liabilities also include financial derivative instruments
All derivative financial instruments which are not designated as hedging instruments are
measured at fair value through profit or loss
3 17 Cash and cash equivalents
Cash comprises cash in hand and on demand deposits 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 Company’s cash management
3 18 Provisions
Provisions are recognised when the Company has a present legal or constructive obligation
as a result of past events, it is probable that an outflow of resources will be required
to settle the obligation, and a reliable estimate of the amount can be made Where the
Company expects a provision to be reimbursed, for example under an insurance contract,
the reimbursement is recognised as a separate asset but only when the reimbursement is
virtually certain
No provision is made for possible claims or where an obligation exists but it is not possible
to make a reliable estimate
Costs associated with claims made by the Company are charged to the profit or loss as they
are incurred
3 19 Discontinued operations
A discontinued operation is a component of the Group that either has been disposed of, or
46
Annual Report 2016
is classified as held for sale, and:
(a) represents a separate major line of business or geographical area of operations;
(b) is part of a single co ordinated plan to dispose of a separate major line of business
or geographical area of operations; or
(c) is a subsidiary acquired exclusively with a view to resale
The results from discontinued operations are presented in a single amount in the profit or
loss with further analysis in the notes This amount comprises the post tax profit or loss of
discontinued operations and the post tax gain or loss resulting from the measurement and
disposal of relevant assets The comparative disclosures for discontinued operations relate
to the operations that have been discontinued during the current reporting period
3 20 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
3 21 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 Company’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
Critical accounting judgments
Impairment of financial assets at amortised cost
i
The allowance for impairment on related party receivables (note 13) is based on assumptions
about risk of default and expected loss rates for expected lifetime losses The Company
uses judgement in making these assumptions and selecting the inputs to the impairment
calculation, based on the Company’s past history, existing market conditions as well as
forward looking estimates at the end of each reporting period For details of the key
assumptions and inputs used
The Company assesses at each reporting date whether financial assets at amortised cost
are impaired If impairment has occurred, this loss is recognised in profit or loss
ii
Classification of financial assets
47
judgement
The Management exercises significant
in determining the appropriate
classification of the financial assets of the Company The Directors determine the
appropriate classification of the Company’s financial assets based on Livermore’s business
model An entity’s business model refers to how an entity manages its financial assets in
order to generate cash flows, considering all relevant and objective evidence The factors
considered include the contractual terms and characteristics which are very carefully
examined, and also the Company’s intentions and expected needs for realisation of the
financial assets
All investments (except from certain equity instruments that are designated at fair value
through other comprehensive income) are classified as at fair value through profit or loss,
because this reflects more fairly the way these assets are managed by the Company The
Company’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 Company’s Board of Directors and other key management personnel
Estimation uncertainty
Fair value of financial instruments
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 8 In applying the valuation techniques management
makes maximum use of market inputs, and uses estimates and assumptions that are, as
far as possible, consistent with observable data that market participants would use in
pricing the instrument Where applicable data is not observable, management uses its best
estimate about the assumptions that market participants would make These estimates may
vary from the actual prices that would be achieved in an arm’s length transaction at the
reporting date
3 22 Comparatives
The comparative figures in the consolidated statement of profit or loss and the consolidated
statement of cash flows have been restated for the effect of discontinued operations
48
Annual Report 2016
4 Available-for-sale financial assets
Non-current assets
Fixed income investments (CLO Income Notes)
Private equities
Current assets
Public equity investments
Hedge funds
2016
US $000
2015
US $000
-
-
-
-
-
-
65,946
12,518
78,464
1,619
1,064
2,683
For description of each of the above categories, refer to note 7
During 2015, 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 2015 of USD 31 726m 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
5 Financial assets at fair value through profit or loss
2016
US $000
-
-
-
-
2015
US $000
11,119
1,490
19,117
31,726
2016
US $000
2015
US $000
Non-current assets
Fixed income investments (CLO Income Notes)
81,769
Private equities
Real estate entities
Current assets
Fixed income investments
Public equity investments
-
-
81,769
18,368
1,950
20,318
-
330
1,203
1,533
6,655
1,613
8,268
49
For description of each of the above categories, refer to note 7
The above investments represent financial assets that are mandatorily measured at fair value
through profit or loss
The Company treats its investments in the loan market through CLOs as non-current
investments as the Company generally intends to hold such investments over a period longer
than twelve months
6 Financial assets at fair value through other comprehensive income
Non-current assets
Private equities
Current assets
Hedge funds
2016
US $000
2015
US $000
5,634
1,039
-
-
For description of each of the above categories, refer to note 7
The above investments are non-trading equity investments that have been designated at fair
value through other comprehensive income
7 Financial assets at fair value
The Company allocates its non-derivative financial assets at fair value (notes 4, 5 and 6) as
follows:
•
•
•
•
•
Fixed income investments relate to fixed and floating rate bonds, perpetual bank debt,
investments in the loan market through CLOs, and investments in open warehouse
facilities
Private equities relate to investments in the form of equity purchases 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
influence Main investments under this category are in the fields of real estate
Hedge funds relate to equity 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
50
Annual Report 2016
8 Fair value measurements of financial assets and liabilities
The following table presents financial assets measured at fair value in the consolidated
statement of financial position in accordance with the fair value hierarchy This hierarchy
groups financial assets and liabilities into three levels based on the significance of inputs
used in measuring the fair value of the financial assets and liabilities The fair value hierarchy
has the following levels:
•
•
•
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
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
•
Fixed Income Investments, and Public Equity Investments are valued per their closing
market prices on quoted exchanges, or as quoted by market maker Investments in open
warehouse facilities that have not yet been converted to CLOs, are valued based on an
adjusted net asset valuation
The Company values the CLOs based on the valuation reports provided by market makers
CLOs are typically valued by market makers using discounted cash flow models The key
assumptions for cash flow projections include default and recovery rates, prepayment
rates and reinvestment assumptions on the underlying portfolios (typically senior
secured loans) of the CLOs
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 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
51
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
Private Equities 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
Hedge 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
Real Estates entities are valued by independent qualified property valuers with
substantial relevant experience on such investments Underlying property values are
determined based on their estimated market values
Derivative instruments are valued at fair value as provided by counter parties (banks)
of the derivative agreement
Investments in subsidiaries are valued at fair value as determined on an adjusted net
asset valuation basis
•
•
•
•
•
52
Annual Report 2016 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:
2016
US
$000
Level 1
2016
US
$000
Level 2
2016
US
$000
Level 3
2016
US
$000
Total
2015
US
$000
Level 1
2015
US
$000
Level 2
2015
US
$000
Level 3
2015
US
$000
Total
Assets
Fixed income
investments
Private equities
1,117
81,769
17,251
100,137
1,634
65,946
5,021
72,601
Public equity investments
1,951
Hedge funds
Real estate entities
Investments in
subsidiaries
-
-
-
-
-
-
1,038
-
-
5,634
-
-
-
5,634
1,951
1,038
-
5,252
5,252
-
3,232
-
-
-
-
-
1,064
-
-
12,848
12,848
-
-
1,203
3,232
1,064
1,203
-
-
3,068
82,807
28,137
114,012
4,866
67,010
19,072
90,948
Liabilities
Forward contract
-
-
-
-
-
-
-
-
-
-
217
217
-
-
217
217
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, except from a certain
equity instrument that was delisted and therefore transferred from Level 1 to Level 3 in 2016
53
Financial assets within level 3 can be reconciled from beginning to ending balances as follows:
At fair
value
through
OCI
Available-for-sale
At fair value through profit or loss
Derivative
financial
instruments
Investments
in
subsidiarie
Private
equities
US $000
Private
equities
US $000
Other
investments
US $000
Real
estate
US$000
Private
equities
US $000
Fixed
Income
investments
US $000
Total return
swap
US $000
US $000
Total
US $000
As at 1 January 2015
Purchases
Settlement
(Losses) / gains
recognised in:
• Profit or loss
• Other
comprehensive
income
Exchange
difference
As at 1 January 2016
Transfer on initial
application of IFRS
9 (note 3 1)
Change in
investment entity
status (note 2 1)
Transfer from Level 1
Purchases
Settlement
(Losses) / gains
recognised in:
-
-
-
-
-
-
-
17,157
-
(59)
(4,177)
(403)
-
12,518
12,848
(12,518)
-
369
-
(3,308)
• Profit or loss
-
• Other
comprehensive
income
(4,275)
Exchange
difference
-
As at 31 December 2016
5,634
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,476
330
-
1,125
-
-
-
104
-
(377)
-
-
-
-
-
5,000
-
-
(1,332)
21
207
-
-
1,203
330
5,021
-
(330)
(1,288)
-
-
-
-
-
85
-
-
-
-
-
-
-
-
-
-
-
-
17,000
(6,062)
1,292
-
-
17,251
-
-
-
-
-
-
-
-
20,088
5,000
(1,391)
(3,845)
(403)
(377)
19,072
-
5,567
4,279
-
-
-
369
17,000
(9,370)
(315)
977
-
(4,275)
-
85
5,252
28,137
54
-
-
-
-
-
-
-
-
-
-
-
-
Annual Report 2016
The above gains and losses recognised can be allocated as follows:
At fair
value
through
OCI
Available-for-sale
At fair value through profit or loss
Derivative
financial
instruments
Investments
in
subsidiarie
Private
equities
US $000
Private
equities
US $000
Other
investments
US $000
Real
estate
US$000
Private
equities
US $000
Fixed
Income
investments
US $000
Total return
swap
US $000
US $000
Total
US $000
2015
Profit or loss
•
•
Financial
assets held at
year-end
Financial
assets not held
at year-end
Other
comprehensive
income
•
Financial
assets held at
year-end
Total (losses) /
gains for 2015
2016
Profit or loss
•
Financial
assets held at
year-end
Other
comprehensive
income
•
Financial
assets held at
year-end
Total (losses) /
gains for 2016
-
-
-
-
-
-
(4,275)
(4,275)
(4,177)
-
(4,177)
(403)
(4,580)
-
-
-
-
104
-
104
-
104
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
21
207
21
-
21
-
-
207
-
207
-
-
-
-
-
(4,052)
207
(3,845)
(403)
(4,248)
1,292
-
(315)
977
-
-
-
1,292
-
-
-
(4,275)
(315)
(3,298)
55
The Company has not developed any quantitative unobservable inputs for measuring the fair
value of its level 3 financial assets at 31 December 2016 and 2015 Instead the Company 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
9
Investment property
Valuation as at 1 January
Fair value (loss) / gain
Additions
Exchange difference
Disposal (note 23)
As at 31 December
2016
US $000
123,324
(102)
102
1,439
(124,763)
-
2015
US $000
116,609
7,819
-
(1,104)
-
123,324
The investment property relates to Wyler Park property in Bern, Switzerland, which was used
for earning rental income
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 2015 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 significant inputs and assumptions are developed in close consultation with management
The fair values of investment property were 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
56
Annual Report 2016
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
Over 5 years
2016
US $000
-
-
-
-
2015
US $000
5,629
23,050
36,879
65,558
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 2015
10 Investments in associate and joint venture
As at 1 January
Additions
Capital return
Fair value gain
As at 31 December
2016
US $000
-
-
-
-
-
2015
US $000
-
7,500
(8,183)
683
-
Name of
investee
Type of investment
Place of
incorporation
Proportion of
voting rights
held
Silvermore Ltd
Joint venture
Cayman Islands
50%
Principal
activity
I n v e s t m e n t
Holding (dormant)
During 2015 , the Group invested in a 25% interest in Highbridge Loan Management
Warehouse 7-2015 Ltd (a company incorporated in Cayman Islands), through its subsidiary
Mountview Holdings Ltd, until Highbridge was converted into a CLO After the conversion into
a CLO the entity ceased to be an associate of the Company
57
11 Investments in subsidiaries
As at 1 January
Additions (note 2 1)
Fair value loss
As at 31 December
2016
US $000
-
5,567
(315)
5,252
2015
US $000
-
-
-
-
Details of the investments in which the Company has a controlling interest as at 31 December
2016 are as follows:
Name of Subsidiary
Place of
incorporation
Holding
Proportion of
voting rights
and shares
held
Livermore Properties
Limited
Mountview Holdings
Limited
Sycamore Loan Strategies
Ltd
Livermore Israel
Investments Ltd
Ordinary shares
100%
Principal activity
Holding of
investments
Ordinary shares
100%
Investment vehicle
British Virgin
Islands
British Virgin
Islands
Cayman Islands Ordinary shares
100%
Investment vehicle
Israel
Ordinary shares
100%
Livermore Capital AG
Switzerland
Ordinary shares
100%
Livermore Investments
Cyprus Limited
Cyprus
Ordinary shares
100%
Sandhirst Limited
Cyprus
Ordinary shares
100%
Holding of
investments
Administration
services
Administration
services
Holding of
investments
Silvermore 2 Ltd and Enaxor S a r l were dissolved during the year The shares of Sandhirst
Limited which were previously held by Enaxor S a r l were transferred upon the liquidation of
the latter to the Company
Livermore Investments AG was sold during 2016 (note 23)
There are no restrictions in receiving any amounts from any subsidiary, including cash
dividends or repayments of loans and advances
58
Annual Report 2016
12 Deferred tax
The Company is a British Virgin Islands (BVI) international business company and, under the
BVI laws, is not subject to taxation Deferred taxes relate to temporary differences between
carrying amounts and corresponding tax base of its subsidiaries, in Switzerland
The deferred tax shown in the consolidated statement of financial position relates to the
following items:
Investment property
– revaluation surplus
Tax losses
Net deferred tax (liability)
2016
US $000
-
-
-
2015
US $000
6,362
(2,425)
3,937
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 2015
(5,805)
47
3,486
(2,272)
(Charged) / credited to
profit or loss (note 23)
•
timing differences
Exchange difference
(895)
338
(46)
(1)
(913)
(148)
(1,854)
189
As at 1 January 2016
(6,362)
(Charged) / credited to
profit or loss (note 23)
•
timing differences
Exchange difference
Reversal on disposal of
subsidiary (note 23)
-
(77)
6,439
As at 31 December 2016
-
-
-
-
-
-
2,425
(3,937)
(380)
28
(2,073)
(380)
(49)
4,366
-
-
As at 31 December 2016 and 2015 there is no unrecognised deferred tax asset
59
13 Trade and other receivables
2016
US $000
2015
US $000
Financial items
Accrued interest and dividend
income
Amounts due by related parties
(note 31)
Other receivables
Allowance for impairment
Non-Financial items
Other assets (note 31)
Prepayments
Allocated as:
Current assets
Non-current assets (note 31(2)
and 31(3))
65
9,634
-
(2,940)
6,759
1,128
53
7,940
5,427
2,513
7,940
304
2,514
272
-
3,090
2,256
272
5,618
4,490
1,128
5,618
Allowance for impairment
The allowance relates to amounts due by subsidiaries (note 31), which are regarded as credit-
impaired and have been assessed on an individual basis The Directors in determining that
these amounts are credit-impaired have considered that the specific subsidiaries are in net
liability position without prospects currently of generating adequate profits and cash flows to
become able to repay in full the amounts due to the Company Their recoverable amount has
been determined based on an adjusted net asset valuation basis, which the Directors regard as
approximation to the present value of the estimated future cash inflows from those subsidiaries
As at 1 January
Addition (note 2 1)
Charge for the year
As at 31 December
2016
US $000
-
2,818
122
2,940
2015
US $000
-
-
-
-
60
Annual Report 2016
For the remaining receivables of financial nature, there are no lifetime expected losses
Therefore no corresponding allowance for impairment has been recognised
No receivable amounts have been written-off during either 2016 or 2015
14 Cash and cash equivalents
Cash and cash equivalents included in the consolidated statement of cash flows comprise the
following at the reporting date:
Cash at bank
Bank overdrafts used for cash management purposes
2016
US $000
2015
US $000
60,383
(1,160)
25,770
(13,208)
Cash and cash equivalents
59,223
12,562
15 Share capital
Authorised share capital
The Company has authorised share capital of 1,000,000,000 ordinary shares with no par value,
and no restrictions
Issued share capital
Ordinary shares with no par value
Number of
shares
Share premium
arising
US $000
As at 31 December 2015 and 31 December 2016
304,120,401
215,499
Treasury shares
As at 1 January 2015
Additions
As at 1 January 2016
Additions
Number of
shares
108,830,818
3,000,000
US $000
36,902
1,544
111,830,818
17,475,585
38,446
7,866
As at 31 December 2016
129,306,403
46,312
61
In the consolidated statement of financial position the amount included as share premium and
treasury shares comprises of:
Share premium
Treasury shares
2016
US $000
215,499
(46,312)
169,187
2015
US $000
215,499
(38,446)
177,053
16 Share options
The Company has a share option scheme for acquiring ordinary shares of the Company
Outstanding options
As at1 January 2015
Options expired
As at 31 December 2015
Options expired
As at 31 December 2016
Exercisable options
As at1 January 2015
Options expired
As at 31 December 2015
Options expired
As at 31 December 2016
Number of
options
11,340,000
(690,000)
10,650,000
(10,150,000)
500,000
Number of
options
11,340,000
(690,000)
10,650,000
(10,150,000)
500,000
Average
exercise price
GBP
Average exercise
price* USD
0 75
0 71
0 76
0 78
0 30
1 18
1 05
1 12
0 96
0 37
Average
exercise price
GBP
Average exercise
price* USD
0 75
0 71
0 76
0 78
0 30
1 18
1 05
1 12
0 96
0 37
62
Annual Report 2016
Details of share options outstanding at 31 December 2016
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
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
0 37
0 37
0 37
500,000
21,703
24,115
25,820
71,638
* 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 2016
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
17 Derivative financial instruments
Current liabilities
Forward contract
2016
US $000
2015
US $000
-
217
Forward contracts
The Group uses forward foreign exchange contracts to mitigate exchange rate exposure arising
from forecast transactions between USD and CHF As at the reporting date the outstanding
forward agreements are as follows:
Notional
contract amount
USD 5,000,000
USD 5,000,000
USD 10,000,000
USD 5,000,000
Foreign
exchange
currency
Contract
termination
date
CHF
CHF
CHF
CHF
0 9965
0 9988
1 0096
1 0234
Contract
termination date
19 February 2016
19 February 2016
19 February 2016
19 February 2016
63
Forward contracts are considered by the Management as economic hedge arrangements but
have not been designated as hedging instruments for accounting purposes and their fair
value changes are recognised in the profit or loss The calculation of the fair value of forward
contracts is based on the contractual cash flows of future anticipated net settlement using
the foreign exchange rates prevailing at the reporting date
For the year ended 31 December 2016 a net fair value gain of USD 0 069m (2015: USD 0 991)
has been recognised in the profit or loss in relation to all derivative financial instruments
18 Bank Loans
As at 1 January
Additions
Interest charge
Repayments of principal
Repayments of interests
Exchange difference
Refinancing fees
Amortization of refinancing fees
Disposal (note 23)
As at 31 December
Allocated as:
Current bank loans
Non-current bank loans
2016
US $000
76,410
-
923
(1,138)
(923)
936
-
79
(76,287)
-
-
-
-
2015
US $000
78,092
78,822
1,278
(79,751)
(1,278)
(541)
(212)
-
-
76,410
1,407
75,003
76,410
The bank loan relates to Wyler Park investment property purchase (note 9) and was secured on
this property
19 Bank Overdrafts
Short term bank overdrafts
2016
US $000
1,160
2015
US $000
13,208
64
Annual Report 2016
Bank overdrafts bear Libor + lender’s margin and have an average interest rate of 3 49%
(2015: 1 78%)
The Company’s bank overdraft facilities are secured by the Company’s financial assets portfolio
up to an amount, as at 31 December 2016, of USD 31 8m
The Company’s bank overdraft undrawn facilities at 31 December 2016 amount to USD 30 6m
20 Trade and other payables
2016
US $000
2015
US $000
Financial items
Trade payables
Amounts due to related parties
(note 31)
Accrued expenses
Non-Financial items
Employee benefits accrued
Prepayment from tenants
VAT payable
6
3,233
2,327
5,566
3,050
-
-
8,616
444
1,377
386
2,207
-
510
53
2,770
21 Dividend payable
Dividend payable
2016
US $000
15,000
2015
US $000
-
At 15 December 2016, the Board announced an interim dividend of USD 15m (USD 0 0858 per
share) to members on the register on 6 January 2017 The dividend was paid on 27 January 2017
65
22 Net asset value per share
Net asset value per share has been calculated by dividing the net assets attributable to
ordinary shareholders by the closing number of ordinary shares (net of treasury shares) in
issue during the relevant financial periods
Diluted net asset value per share is calculated after taking into consideration the potentially
dilutive shares in existence as at 31 December 2016 and 31 December 2015
Net assets attributable to ordinary shareholders
(USD 000)
2016
2015
157,174
148,637
Closing number of ordinary shares in issue
174,813,998
195,289,583
Basic net asset value per share (USD)
0 90
0 77
Net assets attributable to ordinary shareholders
(USD 000)
157,174
148,637
Dilutive share options – exercise amount
185
221
Net assets attributable to ordinary shareholders
including the effect of potentially diluted shares
(USD 000)
157,359
148,858
Closing number of ordinary shares in issue
174,813,998
195,289,583
Dilutive share options
500,000
500,000
Closing number of ordinary shares including the
effect of potentially diluted shares
175,313,998
192,789,583
Diluted net asset value per share (USD)
0 90
0 77
Number of Shares
Ordinary shares
Treasury shares
304,120,401
304,120,401
(129,306,403)
(111,830,818)
Closing number of ordinary shares in issue
174,813,998
192,289,583
66
Annual Report 2016
The Share options (note 16) 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 2016 and 2015 All other share options do not impact the diluted net
asset value per share for 2015 (expired in 2016) as their exercise price was higher than the
net asset value per share at 31 December 2015
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 2016, the Company bought an additional 17,475,585 of its Ordinary shares at an average
price of USD 0 45 per share In 2015, the Company bought 3,000,000 of its Ordinary shares at
an average price of USD 0 51 per share (note 31)
23 Discontinued operations
The discontinued operations relate to the investment property (Wyler Park) activities that
constituted an operating segment of the Group (note 24) These activities were carried out
through the Group’s subsidiary, Livermore Investments AG in Switzerland, of which 100% of
shares were disposed to a third party on 28 October 2016
23 1 Profit or loss
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
Details of profit or loss items of the discontinued operations are as follows:
Gross rental income
Direct expenses
Other operating expenses
Investment property revaluation
Bank interest on investment
property loan
Gain on disposal of subsidiary
(note 23 2)
Profit before taxation on
discontinued operations
Taxation credit / (charge) (note
23 3)
Profit for the year on
discontinued operations
2016
US $000
4,459
(423)
(278)
(102)
(1,004)
7,563
10,215
3,876
14,091
2015
US $000
5,634
(407)
(406)
7,819
(1,340)
-
11,300
(1,936)
9,364
67
23 2 Gain on disposal of subsidiary
2016
US $000
2015
US $000
Cash consideration received
Net assets at disposal date
- investment property
- cash and cash equivalents
- other assets
- Bank loan
- other liabilities
Foreign exchange losses
reclassified from translation
reserve
31,758
(124,763)
(6)
(1,075)
76,287
26,900
(1,538)
Gain on disposal of subsidiary
7,563
-
-
-
-
-
-
-
-
23 3 Taxation
Taxation credit / (charge) on the discontinued operations is analysed as follows:
Tax on ordinary activities
Deferred taxation (note 12)
Taxation credit / (charge)
2016
US $000
(110)
3,986
3,876
23 4 Cash flows
Details of the cash flows of the discontinued operations are as follows:
Operating activities
Investing activities
Financing activities
Translation differences on foreign
operations’ cash and cash equivalents
Net cash from discontinued
operations
2016
US $000
2,975
(102)
(2,061)
14
826
2015
US $000
(82)
(1,854)
(1,936)
2015
US $000
4,831
-
(2,481)
(18)
(1,854)
2,332
68
Annual Report 2016
24 Segment reporting
The Group’s monitoring and strategic decision making process in relation to its investments is
separated into two activity lines which are also identified as the Group’s operating segments
These operating segments are monitored and strategic decisions are made on the basis of
segment operating results
Segment information can be analysed as follows:
Equity and debt
instruments
investment activities
Investment
property
activities
Total per financial
statements
2016
US $000
2015
US $000
2016
US $000
2015
US $000
2016
US $000
2015
US $000
Segment results
Investment income
Interest and dividend
income
Investment property
income
Gain / (loss) on
investments
26,334
25,675
-
-
26,334
25,675
-
-
4,036
5,227
4,036
5,227
1,695
(33,955)
(102)
7,819
1,593
(26,136)
Gross profit / (loss)
28,029
(8,280)
3,934
13,046
31,963
4,766
Other income
Administrative
expenses
Operating profit /
(loss)
-
35
-
-
-
35
(7,692)
(4,510)
(478)
(645)
(8,170)
(5,155)
20,337
(12,755)
3,456
12,401
23,793
(354)
Finance costs
(212)
(1,109)
(1,008)
(1,345)
(1,220)
(2,454)
Profit / (loss) before
taxation
Taxation (charge) /
credit
Profit / (loss) for
year
20,125
(13,864)
2,448
11,056
22,573
(2,808)
(5)
-
3,844
(1,951)
3,839
(1,951)
20,120
(13,864)
6,292
9,105
26,412
(4,759)
Segment assets
182,335
121,104
Segment liabilities
25,161
15,681
-
-
124,588
182,335
245,692
81,374
25,161
97,055
69
The Group’s investment income and its investments are divided into the following geographical areas:
Equity and debt
instruments investment
activities
Investment
property
activities
(discontinued – note 23 1)
Total per financial
statements
2016
US $000
2015
US $000
2016
US $000
2015
US $000
2016
US $000
2015
US $000
Investment Income
Switzerland
Other European
countries
United States
India
Asia
-
330
27,850
102
(203)
-
(22)
(5,950)
(2,235)
(73)
3,884
13,046
3,884
13,046
-
-
-
-
-
-
330
(22)
27,850
(5,950)
102
(203)
(2,235)
(73)
4,766
28,079
(8,280)
3,884
13,046
31,963
Investments
Switzerland
Other European
countries
United States
India
Asia
726
3,341
5,089
100,399
2,022
7,524
72,030
10,004
3,825
114,012
90,948
-
-
-
-
-
-
123,324
726
123,324
-
-
-
-
3,341
5,089
100,399
72,030
2,022
7,524
10,004
3,825
123,324
114,012
214,272
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 2016, 81 6% of the Group’s rent relates to rental income from a single customer
(SBB – Swiss national transport authority) in the investment property activities segment
(2015: 81 9%)
70
Annual Report 2016
25 Interest and dividend income
Interest from investments
Dividend income
2016
US $000
114
26,220
26,334
2015
US $000
127
25,548
25,675
No dividend income has been recognised in 2016 in relation to investments designated at fair
value through other comprehensive income
26 Profit / (loss) on investments
Loss on sale of investments
Loss due to impairment of available-for-sale
financial assets
Fair value profit/(losses) on financial assets
through profit or loss
Fair value gain on associate
Fair value loss on investment in subsidiaries
Fair value gains on derivative instruments
Bank custody fees
2016
US $000
-
-
2,056
-
(315)
69
(115)
1,695
2015
US $000
(3,459)
(31,726)
(320)
683
-
991
(124)
(33,955)
The investments disposed of during the year resulted in the following realised losses (i e in
relation to their original acquisition cost):
Available-for-sale
At fair value through profit or loss
2016
US $000
-
(3,540)
(3,540)
2015
US $000
(5,723)
(303)
(6,026)
71
27 Administrative expenses
Legal expenses
Directors’ fees and expenses
Other salaries and expenses
Professional and consulting fees
Office costs
Depreciation
Other operating expenses
Provision charge
Audit fees
Impairment charge on receivables
2016
US $000
19
5,033
149
1,879
172
7
388
-
119
122
2015
US $000
63
2,414
176
806
254
13
414
513
96
-
7,888
4,749
Throughout 2016 the Group employed 6 members of staff (2015: 7), and the Company
employed 2 members of staff (2015: 2)
Other salaries and expenses include USD 18,706 of social insurance and similar contributions
(2015: USD 21,640), as well as USD 16,655 of defined contributions plan costs (2015: USD 6,593)
28 Finance costs
Finance costs
Other bank interest
Foreign exchange loss
29 Taxation
Current tax charge
2016
US $000
2015
US $000
216
2
218
2016
US $000
38
38
267
847
1,114
2015
US $000
15
15
The parent company is a British Virgin Islands (BVI) international business company 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
72
Annual Report 2016
30 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 2016 and the year ended 31
December 2015
2016
2015
Continuing operations
Profit / (loss) for the year attributable to ordinary
shareholders of the parent (USD 000)
19,885
(14,123)
Weighted average number of ordinary shares outstanding
186,255,696
194,599,172
Basic earnings per share (USD)
0 11
(0 07)
Weighted average number of ordinary shares outstanding
186,255,696
194,599,172
Dilutive effect of share options
24,715
59,005
Weighted average number of ordinary shares including
the effect of potentially dilutive shares
186,280,411
194,658,177
Diluted earnings per share (USD)
0 11
(0 07)
2016
2015
Discontinued operations
Profit / (loss) for the year attributable to ordinary
shareholders of the parent (USD 000)
14,091
9,364
Weighted average number of ordinary shares outstanding
186,255,696
194,599,172
Basic earnings per share (USD)
0 08
0 05
Weighted average number of ordinary shares outstanding
186,255,696
194,599,172
Dilutive effect of share options
24,715
59,005
Weighted average number of ordinary shares including
the effect of potentially dilutive shares
186,280,411
194,658,177
Diluted earnings per share (USD)
0 08
0 05
The Share options (note 16) 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 2016 and 2015 All other share options do not impact the diluted
earnings per share for 2015 (expired in 2016) as their exercise price was higher than the average
market price of the Company’s shares during the year ended 31 December 2015
73
31 Related party transactions
The Company is controlled by Groverton Management Ltd, an entity owned by Noam Lanir, which
at 31 December 2016 held 76 62% (2015: 78 74%) of the Company’s effective voting rights
2016
US $000
2015
US $000
Amounts receivable from subsidiaries
Livermore Properties Limited
Sandhirst Limited
Allowance for impairment
Amounts receivable from key management
Directors’ current accounts
Other assets
Loan receivable
Amounts payable to subsidiaries
Livermore Investments Cyprus Limited
Livermore Capital AG
Livermore Israel Investments Ltd
Amounts payable to other related party
Loan payable
Amounts payable to key management
Directors’ current accounts
Other key management personnel
3,103
1,018
(2,940)
1,181
3,000
1,128
2,513
6,641
(169)
(687)
(2,210)
(878)
(149)
(149)
(13)
(5)
(18)
-
-
-
-
2,514
2,256
-
4,770
-
-
-
(80)
(499)
(499)
(35)
(843)
(878)
(1)
(1)
(1)
(1)
(2)
(3)
(4)
(4)
(4)
(5)
(4)
(6)
74
Annual Report 2016
Key management compensation
Short term benefits
Executive Directors' fees
Executive Directors' reward payments
Non-executive Directors' fees
Non-executive Directors' reward payments
Other key management fees
795
4,128
60
50
1,092
6,125
(7)
795
1,528
69
22
383
2,797
(1) The amounts receivable from subsidiaries and the Director’s current accounts with debit
balances are interest free, unsecured, and have no stated repayment date
(2) 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
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 is 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 are classified as “other assets” and are included under trade
and other receivables (note 13)
(3) A loan of USD 2 500m was made to a key management employee, during the year, for the
acquisition of shares in the Company Interest is payable on the loan at 6 month US LIBOR plus
0 25% per annum and the loan is secured on the shares acquired The loan is repayable on the
earlier of the employee leaving the Company or April 2020 The loan is included within trade and
other receivables (note 13)
(4) The amounts payable to subsidiaries and Director’s current accounts with credit balances are
interest free, unsecured, and have no stated repayment date
(5) A loan with a balance at 31 December 2016 of USD 0 149m (31 December 2015: USD 0 499m)
has been received from a related company (under common control), 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)
(6) The amount payable to other key management personnel relates to a payment made on behalf
of the Company for investment purposes and accrued consultancy fees
(7) These payments were made directly to companies which are related to Directors
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 2016 or 2015
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 2016 held a total of 1 941m shares
at a value of USD 0 973m (2015: 1 941m shares at a value of USD 0 931m) which represents 4% of
its effective voting rights The investment in Babylon Ltd is held through the subsidiary Livermore
Israel Investments Ltd (2015: included within public equity investments under financial assets at
fair value through profit or loss – note 5)
75
In 2016, the Company bought 17,475,585 (2015: 3,000,000) of its Ordinary shares from Groverton
Management Ltd, at an average price of USD 0 45 per share (2015: USD 0 51 per share) These
shares are included in Treasury shares (note 15)
As at the reporting date Livermore had 335,816 number of shares of Wanaka Capital Partners Mid-
Tech Opportunity Fund registered in its name but held for the absolute benefit of a related company
(other related party - under common control) These shares are not included in the financial assets
on the consolidated statement of financial position
During the year the Company received administrative services of USD 0 048m (2015: 0 039m) in
connection with investments from a related company (other related party - under common control),
Mash Medical Life Tree Marketing Ltd
32 Provisions
The movement in provisions for the year is as follows:
As at 1 January
Additions (note 33)
Settlements
As at 31 December
Allocated as:
Current liability
Non-current liability
33 Litigation
2016
US $000
2015
US $000
513
-
(128)
385
385
-
385
-
513
-
513
128
385
513
Fairfield Sentry Ltd vs custodian bank and beneficial owners
One of the custodian banks that the Company 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
redemption of shares in Fairfield Sentry Ltd, which were bought 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
No further information is provided on the above case as the Directors consider it could
prejudice its outcome
76
Annual Report 2016
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 On 10 June 2015 the court held a
hearing of the appeal and suggested that both sides settle the dispute by means of mediation
On 20 January 2016 the parties reached an agreement for an out of court settlement, for
which a corresponding provision has been made (note 32)
34 Commitments
The Company has expressed its intention to provide financial support to its subsidiaries, where
necessary to enable them to meet their obligations as they fall due
Other than the above, the Company has no capital or other commitments as at 31 December 2016
35 Events after the reporting date
The three warehouse facilities that the Company invested in, during 2016, were converted
to CLOs in May 2017 For two out of the three warehouses, with a carrying amount as at 31
December 2016 of USD 11 185m, the Company invested an additional amount of USD 15 5m
during 2017 (before their conversion) For these two warehouses, Livermore’s investment
amount plus net carry amounting to a total of USD 28 1m became receivable in May 2017 For
the other one, with a carrying amount as at 31 December 2016 of USD 6 066m, the Company
invested an additional amount of USD 3m during 2017 (before its conversion) For that
warehouse, the amount to be received has not yet been determined, however it is expected
that it will exceed Livermore’s investment amount
There were no other material events after the end of the reporting year, which have a bearing
on the understanding of these consolidated financial statements
36 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 37
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
77
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 financial instruments
denominated in foreign currencies held by the Group at 31 December 2016 is the following:
2016
US $000
2016
US $000
2016
US $000
2015
US $000
2015
US $000
2015
US $000
Financial
assets
Liabilities
Net value
Financial
assets
Liabilities Net value
British Pounds (GBP)
Euro
Swiss Francs (CHF)
Indian Rupee (INR)
1,754
2,715
8,090
-
(355)
(284)
(1,966)
-
Israel Shekels (ILS)
5,052
(2,212)
-
(6)
1,399
2,431
6,124
-
2,840
(6)
1,611
2,641
28,653
7,099
2,850
-
(4,475)
(2,864)
(253)
(9)
-
(90)
(5)
2,388
28,644
7,099
2,760
(5)
17,611
(4,823)
12,788
42,854
(4,832)
38,022
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 2016 would have the following impact A 10% decrease of the following
currencies against USD would have an approximately equal but opposite impact
78
Others
Total
Annual Report 2016
2016
US $000
2016
US $000
2015
US $000
2015
US $000
Profit or loss
Other
comprehensive
income
Profit or loss
Other
comprehensive
income
British Pounds (GBP)
Euro
Swiss Francs (CHF)
Indian Rupee (INR)
Israel Shekels (ILS)
77
243
590
-
284
63
-
-
-
-
(445)
162
2,842
-
273
Total
1,194
63
2,832
159
77
-
710
3
949
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 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 these banking facilities utilised at
31 December 2016 was USD 1 2m (2015: USD 13 2m)
As at 31 December 2016 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 through CLO equity tranches as well as through
warehousing facilities An investment in the CLO equity tranche or first loss tranche of a
warehouse represents a leveraged investment into such loans As these loans (assets of a CLO)
79
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 and warehouse first loss tranches is normally
linked to the floating rate benchmark and thus normally do not carry substantial interest rate risk
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
Total
2016
US $000
2015
US $000
3,550
156,970
160,520
1,160
1,160
4,534
93,836
98,370
89,618
89,618
Changes in market interest rates will affect the valuation of fixed rate interest bearing
instruments A 1% (100 basis points) increase in market interest rates would result in an
estimated 0 72% increase in the net asset value as at 31 December 2016 (2015: -0 18%)
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
2016
US $000
2016
US $000
2015
US $000
2015
US $000
Profit or loss
Other
comprehensive
income
Profit or loss
Other
comprehensive
income
Financial assets
•
•
fair value changes
interest changes
(256)
1,397
Financial liabilities
•
interest changes
(12)
1,129
-
-
-
-
(269)
888
(896)
(277)
-
-
-
-
The above analysis assumes that all other variables, in particular currency rates, remain constant
80
Annual Report 2016
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 as well as first loss
tranches of warehouse facilities 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
A 10% uniform change in the value of the Group’s portfolio of financial assets (excluding level
3 investments) would result in a 6 56% change in the net asset value as at 31 December 2016
(2015: 4 84%), and would have the following impact (either positive or negative, depending
on the corresponding sign of the change):
2016
US $000
2016
US $000
2015
US $000
2015
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 other
comprehensive income
Financial assets at fair value
through profit or loss
-
-
10,209
10,209
-
104
-
104
-
-
358
358
6,721
-
-
6,721
81
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 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 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 fixed income investments (mainly
CLOs) and to a lesser extend in respect of its financial assets at amortised cost, and other
instruments held for trading (perpetual bonds)
The Group’s maximum credit risk exposure at 31 December 2016 is as follows:
2016
US $000
2015
US $000
Financial assets:
At amortised cost
•
•
Trade and other receivables
Cash at bank
Available-for-sale financial assets
6,759
60,383
67,142
-
Financial assets at fair value through profit or loss
100,137
167,279
3,090
25,770
28,860
65,946
6,655
101,461
No collaterals are held by the Company itself in relation to the Company’s financial assets
subject to credit risk
The fair values of the above financial assets at fair value through profit or loss are also
affected by the credit risk of those instruments However, it is not practical to provide an
82
Annual Report 2016
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 as well as warehouse first loss tranches 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 2016 or 2015
At 31 December the credit rating distribution of the Group’s asset portfolio subject to credit
risk was as follows:
Rating
2016 Amount
US $000
Percentage
2015 Amount
US $000
Percentage
AA
A+
A
A-
BB
BB+
BB-
Not Rated
30,870
18 5%
18,772
-
82
-
-
29,495
17 6%
2,433
1,117
-
103,282
167,279
1 5%
0 7%
-
61 7%
100%
-
976
6,326
2,900
1,116
518
70,853
101,461
18 5%
-
1 0%
6 2%
2 9%
1 1%
0 5%
69 8%
100%
Included within “not rated” amounts are investments in loan market through CLOs of USD
79 336m and open warehouses of USD 17 251m (2015: CLOs of USD 63 046m and open
warehouses of USD 5 020m)
83
The modelled IRRs on the CLO portfolio as well as the warehouse first loss tranches are in low
teens percentage points
Liquidity Risk
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 2016
Bank overdraft
1,160
1,160
Trade and other payables
5,566
5,566
Total
6,726
6,726
-
-
-
-
-
-
-
-
-
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 2015
Bank loan
76,410
2,477
2,557
75,531
Bank overdraft
13,208
13,208
Trade and other payables
2,207
2,207
-
-
-
-
Total
91,825
17,892
2,557
75,531
-
-
-
-
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
Warehouse facilities are private negotiated financing facilities and are not traded and have no active
84
Annual Report 2016
market The Company, however, can opt to terminate such facility
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 2016, the Group had liquid investments totalling USD 146 3m, comprising of USD
60 4m in cash and cash equivalents, USD 81 8m in investments in loan market through CLOs, USD
1 1m in other fixed income investments, USD 2 0m in public equities and USD 1 0m in hedge funds
Management structures and manages the Group’s portfolio based on those investments which are
considered to be long term, core investments and those which could be readily convertible to cash, are
expected to be realised within normal operating cycle and form part of the Group’s treasury function
Capital Management
The Group considers its capital to be its issued total equity (i e its 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
Net Debt
Total equity
2016
US $000
(60,383)
1,160
-
2015
US $000
(25,770)
13,208
76,410
(59,223)
63,848
157,174
148,637
Net debt to equity ratio
(0 38)
0 43
The significant improvement in the ratio is mainly due to the disposal of investment property
activities (note 23) and the bank loan associated with it
85
37 Financial assets and liabilities by class
Financial assets:
Loans and receivables
Financial assets at amortised cost
Available-for-sale financial assets
Financial assets at fair value through
profit or loss
Financial assets designated at fair value
through other comprehensive income
Note
2016
US $000
2015
US $000
13, 14
13, 14
4
5
-
67,142
-
102,087
28,860
-
81,147
9,801
6
6,673
-
175,902
119,808
Financial liabilities:
Financial liabilities at amortised cost
18,19,20
6,726
91,825
Financial liabilities at fair value through
profit or loss:
Derivative financial instruments
17
-
6,726
217
92,042
The carrying amount of the financial assets and liabilities at amortised cost approximates to
their fair value
86
Annual Report 2016
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
87
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 29 August 2017 at 10am for the purposes of the following:
To consider, and if thought fit, to pass the following resolutions, numbers 1 to 4 of which will be
proposed as Resolutions of Members and numbers 5 to 7 of which will be proposed as Special Resolutions:
1
2
To receive and adopt the Report of Directors, the financial statements and the Report of the
Auditor for the year ended 31 December 2016
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
3
To authorise the Directors to determine the auditor’s remuneration
4
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 116,542,664 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 2018 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) provided that not more than 58,271,332 of such new
ordinary shares shall be issued otherwise than by way of a fully pre-emptive rights issue;
and
(b)
the Company be and is hereby authorised to make prior to the expiry of such period
(b)
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
5
THAT, subject to the passing of resolution 4 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 4 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
(a)
of holders of ordinary shares and any other persons entitled to participate in such issue
or offering where the shares respectively attributable to the interests of such holders
and 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
88
Annual Report 2016
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 17,481,399 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 2018 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
6
7
THAT in accordance with the Articles of Association of the Company and the BVI Business
Companies Act (as amended, the “BVI Companies Act”), the Company acting by the
Directors be and is hereby unconditionally authorised to cancel, by way of surrender for
no consideration pursuant to section 59(1A) of the BVI Companies Act, the 129,306,403
treasury shares registered in the name of the Company, as a capital reduction authorised
hereby pursuant to articles 9 6 and 42 2 of the Articles of Association of the Company
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 34,962,798;
(b) 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
(c)
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
26 June 2017
89
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 5 – Disapplication of pre-emption rights - If the Directors wish to allot any equity
securities for cash, the Articles of Association of the Company require 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 5 asks shareholders to grant
the Directors authority to allot shares for cash on a non-pre-emptive basis pursuant to the
authority in Resolution 4, but such allotment shall not be:
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
b)
a)
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 5 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 4, 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
90
Annual Report 2016
Principal Bankers
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
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
143, Spyrou Kyprianou Avenue
Limassol 3083
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
91
6