2017
7
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 10
Livermore’s Strategy 11
Financial portfolio and trading activity 12
Events after the Reporting Date 15
Litigation 15
Report of the Directors 16
The Board’s Objectives 16
The Board of Directors 16
Directors’ responsibilities in relation to the financial statements 16
Disclosure of information to the Auditor 17
Substantial Shareholdings 17
Corporate Governance Statement 18
Introduction 18
The Board Constitution and Procedures 18
Board Committees 18
Remuneration Committee 18
Audit Committee 18
Communication with Investors 19
Internal Control 19
Going concern 19
Independence of Auditor 19
4
Annual Report 2017 Remuneration Report 20
Directors’ Emoluments 20
Directors’ Interests 20
Interests of Directors in share options 21
Share Option Scheme 21
Remuneration Policy 21
Review of the Business and Risks 23
Risks 23
Share Capital 23
Related Party Transactions 23
Independent Auditor’s Report to the Members of Livermore Investments Group Limited 24
Consolidated Statement of Financial Position as at 31 December 2017 30
Consolidated Statement of profit or loss for the year ended 31 December 2017 31
Consolidated Statement of Comprehensive Income for the year ended 31 December 2017 32
Consolidated Statement of changes in equity for the year ended 31 December 2017 33
Consolidated Statement of cash flows for the year ended 31 December 2017 34
Notes on the Financial Statements 36
Shareholder Information 83
Registrars 83
Website 83
Direct Dividend Payments 83
Lost Share Certificate 83
Duplicate Shareholder Accounts 83
Notice of Annual General Meeting 84
Corporate Directory 87
5
Highlights
• Net Asset Value per share increased 11 0% to USD 1 00 (December 2016: USD 0 90)
•
For the year ended 31 December 2017, the Company announced an interim dividend of USD 8m
(USD 0 04576 per share) to members on the register on 26 January 2018 The dividend was paid
on 23 February 2018
• CLO portfolio and warehouse performed strongly generating USD 22 1m gains in 2017
6
Annual Report 2017 Chairman’s and Chief Executive’s Review
Introduction
We are pleased to announce the financial results for Livermore Investments Group Limited
(“Livermore” or “the Company”) for the year ended 31 December 2017 References to the Company
hereinafter also include its consolidated subsidiaries (note 10)
The year-end NAV was USD 1 00 per share (2016 NAV: USD 0 90 per share) Net profit for the year
was USD 16 4m (2016 Net Profit: USD 34 0m)
The Company recorded gains from the financial portfolio as the US credit and CLO markets continued
to perform well Management took advantage of lower funding costs to reduce the cost of financing
for several of its CLO positions Interest and distribution income from the financial portfolio totalled
USD 28 0m (2016: USD 26 3m)
References to financial statements hereinafter are to the Company’s consolidated financial
statements
Financial Review
The NAV of the Company at 31 December 2017 was USD 175 4m (2016: USD 157 2m) Net profit,
during the year was USD 16 4m, which represents earnings per share of USD 0 09
Administrative expenses were USD 6 2m (2016: USD 8 2m – including discontinued operations)
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
Realised (losses) / gains on investments
Unrealised gains on investments
Unrealised exchange profit
Administration costs
Net finance income / (costs)
Tax credit / (charge)
Increase 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
2017
US $m
31 December
2016
US $m
157 2
28 0
-
(0 1)
(4 0)
-
(6 2)
0 5
-
18 2
-
-
175 4
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
US $1 00
US $0 90
For the year ended 31 December 2017, the Board announced an interim dividend of USD 8m (USD
0 04576 per share) to members on the register on 26 January 2018 The dividend was paid on 23
February 2018
During 2017, the Company cancelled 129,306,403 Ordinary Shares, which it held as Treasury Shares As
at 31 December 2017, the Company held no shares in treasury
Richard B Rosenberg
Chairman
Noam Lanir
Chief Executive Officer
28 May 2018
8
Annual Report 2017
Review of Activities
Introduction and Overview
The Company achieved strong performance in 2017, generating an 11 6% increase in NAV Active
management of its CLO and warehousing portfolio were the key drivers of performance in 2017,
demonstrating the knowledge and skills of the management team to create value as well as the
resilience of the portfolio
In 2017, the Company generated interest and distribution income of USD 28 0m The Company
reported NAV/share of USD 1 00 and net profit of USD 16 4m Administrative expenses amount to
USD 6 2m (2016: USD 8 2m – including discontinued operations), finance income USD 0 5m (2016:
USD 0m) and finance costs were USD 0m (2016: USD 1 2m – including discontinued operations)
The net income was primarily driven by interest and distribution income generated by the CLO
and warehousing portfolio partly offset by loss on fair value of investments of USD 5 9m and
administrative and financing expenses as noted above
The Company relies primarily on the interest and distribution income generated by its CLO and
warehouse portfolio During the year, the CLO and warehousing portfolio generated USD 27 8m in
income CLO equity positions typically generate higher cashflow than their expected IRRs because
it is expected that future defaults in the loans held by CLOs may erode the residual value over time
Thus, the performance of the company’s CLO portfolio is mainly through the cash flow generated
on a regular basis
During 2017, spreads in the US senior secured loan market tightened significantly, and management
pro-actively worked with banks and CLO managers to refinance and reduce the financing costs of
its individual CLO positions This helped offset the spread tightening on the assets and increased
future potential cashflow from these positions On the warehousing front, management closed six
warehouses generating USD 4m in carry as well as generating cheap entry points into new CLO
positions During the year, the CLO and warehousing portfolio generated 22 7% return on invested capital
During the year, the Company invested an additional USD 35 9m in primarily new issue CLO equity
positions and disposed USD 26 2m of CLO positions, while the warehouse portfolio increased by USD
8 3m as compared to the beginning of the year
The Company 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 has 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 Company is well positioned
to benefit from current market conditions
9
Global Investment Environment
The global economy gained further momentum in 2017 and global GDP recorded its strongest growth
since 2011 Monetary policies in the major currency areas were still accommodative and financing
conditions favourable Increased investment activity further buoyed the broad-based recovery In
the advanced economies, employment continued to grow and unemployment declined Economic
conditions also developed favourably in the emerging economies While utilisation of production
capacity increased globally, wage and price gains remained subdued
Global trade in goods rose by 4 5%, driven by the upswing in manufacturing and the recovery in
information and communications technology Higher demand from China further fostered global
trade and commodity prices continued to recover in 2017 While the price for Brent crude briefly
dipped below USD 50 per barrel in the first half of the year, a reduction in high inventory levels, the
favourable global economic conditions and the agreement among the major oil-producing countries
to limit production saw the price rise continuously from mid-year, reaching approximately USD 65
per barrel at year-end Prices for industrial metals also increased in the wake of the global economic
upturn
Consumer and business confidence remained healthy until the end of the year, suggesting that the
upturn can be expected to continue Financing conditions, which remain favourable, are also likely
to contribute to this Moreover, in 2017, several countries saw structural reforms implemented that
should boost economic growth in the medium term Political risks in certain countries, as well as
potential international tensions, remain a source of uncertainty
Economic growth in the US was considerably stronger at 2 3% in 2017 than in the previous year
(1 5%) After a weak start at the beginning of the year, the economy gained broad-based momentum
The labour market was close to full employment with the unemployment rate falling to 4 1% by the
end of the year Furthermore, substantial tax cuts approved raised consumer confidence These tax
cuts are likely to provide slight growth stimuli as early as 2018
The economic upswing in the euro area firmed Annual GDP growth averaged 2 5% in 2017, compared
with 1 8% the previous year The economy picked up in all euro area countries, with Germany
remaining a driving force Employment continued to gain momentum in most member states, and
at year-end, the unemployment rate in the euro area was below 9% for the first time since 2009
Against this backdrop, consumer and business confidence continued to improve; the last comparable
boost in confidence was observed in 2000
However, the situation in the individual Euro zone member states painted an uneven picture
with respect to the level of unemployment, public debt levels and structural reform While some
countries, such as France, initiated reforms, other countries only made tentative progress Moreover,
the number of non-performing loans remained high in some EU countries, despite an improvement
on the previous year The future economic relationship between the EU and the UK following the
UK’s decision to leave the union also presents a challenge
Inflation, as measured by the CPI, remained below central bank targets in most advanced economies
Compared to 2016, however, annual inflation recorded an increase in most cases, predominantly due
to higher energy prices In the euro area, inflation rose to 1 5% from almost zero in the previous
year Core inflation, however, remained at around 1% US inflation averaged 2 1% and was thus
considerably higher than in the year before (1 3%) Core inflation, however, receded slightly to
1 8%, primarily due to a decline in prices for communication services
10
Annual Report 2017
In view of the moderate inflation rates, many central banks maintained their expansionary
monetary policy One exception was the US Federal Reserve, which continued to pursue a cautious
normalisation of its monetary policy after US inflation had approached its target and the economy
was close to full employment The Federal Reserve increased the target range for its policy rate
in three steps by a total of 0 75 percentage points to 1 25 – 1 50% In October, it also began to
reduce its balance sheet by no longer reinvesting a portion of its matured government bonds and
mortgage-backed securities The European Central Bank (ECB) left its deposit rate at – 0 4% and
the main refinancing rate at 0 0% It also continued its asset purchase programme, albeit reducing
the purchase volume by EUR 20 billion to EUR 60 billion per month in April Since developments in
inflation were regarded as disappointing, the ECB decided in October to further extend the asset
purchase programme until at least September 2018, but to halve its monthly purchase volume to
EUR 30 billion from January 2018 Key rates are expected to remain unchanged for an extended
period of time and well past the horizon of its net asset purchases The ECB also decided, as part
of its regular refinancing operations, to continue supplying banks with unlimited liquidity until at
least the end of 2019
On the back of a strong economic growth and still accommodative monetary policy, risk assets
performed well in 2017 The S&P 500 was up every month of the year and ended with a gain of
21 8% while the EuroStoxx 50 and MSCI ACWI Index generated a 9 15% and 24% return for the
year respectively US Credit markets had a good year in 2017 with High Yield bonds returning 7 5%
and Leveraged Loans generating a total return of 4 25% as measured by the Bloomberg Barclays US
Corporate High Yield Index and the Credit Suisse Leveraged Loan Index respectively Volatility in the
US equity markets remained exceptionally low during the year and the US 10 year Treasury bond
yield was little changed
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
11
Financial portfolio and trading activity
The Company manages a financial portfolio valued at USD 126 9m as at 31 December 2017, which
is invested mainly in fixed income and credit related securities
The following is a table summarizing the financial portfolio as of year-end 2017
Name
2017
Book Value US $m
2016
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
97 2
25 5
1 0
1 2
2 0
126 9
34 2
161 1
81 8
17 3
1 0
1 2
2 0
103 3
60 4
163 7
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
US Leveraged loans continued to perform well in 2017 as demand for floating rate product increased with
expectations of higher short terms rates in the US Net inflows into loan funds amounted to USD 9 4bn
as per JP Morgan The Credit Suisse Leveraged Loan Index had a total return of 4 25% in 2017 and about
two-thirds of the loan market was trading over par according to S&P Capital IQ Borrowers took advantage
of the increased demand and successfully refinanced or repriced their spreads at lower levels At the same
time, the 12 month lagging default rate by principal amount on the S&P/LSTA Leveraged Loan Index as of
December 2017 was 2 1% versus the long term average of 3% Market participants expect the default rates
to stay at benign levels given economic growth and the corporate tax cuts in the US
The cost of financing for new CLOs also declined in line with the spreads in the US loan market Spreads
on the AAA rated tranches of CLOs declined from about 140bps at the start of the year to about 110bps by
the end of the year The Company’s management took advantage of availability of lower financing costs in
the market to refinance and/or extend the reinvestment period of several of its CLOs As a result, the spread
compression on the loans has been significantly offset on such CLOs and an extension of the reinvestment
period has created optionality for CLO managers to take advantage of loan price volatility that may arise
in the near-mid term
The Company’s CLO and warehousing portfolio generated cashflow of USD 27 8m and a net return of
about USD 22 1m in 2017 (approximately 22 7% on the 2017 invested capital) The Company converted
six warehouses into CLOs and generated about USD 4m in carry during the year As of year end 2017, the
Company had two open warehouses which have both been converted to CLOs as of the date of publication of
12
Annual Report 2017
this report The Company continues to look for opportunities to invest in the first-loss tranche of warehouse
facilities with long tenures and no mark-to-market triggers As of the end of the year 2017, all of the
Company’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 through recycling old CLOs into new or refinancing them with extended reinvestment periods, as
well as conducting relative value and opportunistic trading
Looking into the near future, management believes that default rates should continue to stay below
historical averages as only a small percentage of the US Leveraged Loan market matures before 2020
and the US corporate tax cuts and stronger economic growth provide for a stable backdrop Management
continues to focus on sectors such as Retail, Healthcare and Technology 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 Company’s CLO portfolio is divided into the following geographical areas:
US CLOs
Global Credit CLOs
European CLOs
2017
Amount
US $000
Percentage
96,536
99 28%
-
699
97,235
-
0 72%
100%
2016
Amount
US $000
78,725
2,495
548
81,768
Percentage
96 28%
3 05%
0 67%
100%
Private Equity Funds
The other private equity investments held by the Company 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
Company expects material exits of portfolio companies from funds to materialize between 2018 and
2020 During the reporting period distributions of USD 0 2m were received from SRS Private
13
The following summarizes the book value of the private equity funds as at year-end 2017
Name
Evolution Venture (Israel)
SRS Private (India)
Elephant Capital (India)
Da Vinci (Russia)
Panda Capital (China)
Other investments
Total
Book\ValueUS $m
3 8
1 0
0 6
0 4
0 3
1 0
7 1
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 and is the
main contributor to the funds’ NAV
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 2017, the fund distributed USD 0 2m from proceeds of its investment in SRS
Charminar As the term of the fund is drawing to a close, the fund manager informed the Company
that it is in process of proposing a solution to generate liquidity for the fund investors
Elephant Capital: India-focused private equity fund, which was AIM quoted (Ticker: ECAP) 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 2017, the fund reported an unaudited
NAV of 0 27 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
manager is in the process of building up operational capacity for product manufacturing
14
Annual Report 2017 The following table reconciles the review of activities to the Company’s financial assets as of 31
December 2017
Name
Financial Portfolio
Private Equity Funds
Total
Financial assets at fair value through profit or loss (note 4)
Financial assets at fair value through other comprehensive
income (note 5)
Total
2017
Book Value US $m
126 9
7 1
134 0
125 8
8 2
134 0
Events after the reporting date
The two warehouse facilities that the Company invested in, during 2017, were closed in April and
May 2018 For both warehouses, with a carrying amount as at 31 December 2017 of USD 25 5m,
the Company invested an additional amount of USD 10m during 2018 (before their closure) For
these warehouses, Livermore’s investment amount plus net carry amounting to a total of USD 37 6m
became receivable in April and May 2018
At 15 January 2018, the Board announced an interim dividend of USD 8m (USD 0 04576 per share)
to members on the register on 26 January 2018 The dividend was paid on 23 February 2018 There
were no other material events after the end of the reporting year, which have a bearing on the
understanding of these financial statements
Litigation
At the time of this Report, there is one matter in litigation that the Company is involved in Further
information is provided in note 31 to the financial statements
15
Report of the Directors
The Directors submit their annual report and audited financial statements of the Company for the
year ended 31 December 2017
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 Company’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 62), Non-Executive Director, Chairman of the Board
Richard joined the Company 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 51), Founder and Chief Executive Officer
Noam founded the Company in July 1998, to develop a specialist online marketing operation Noam
has led the growth and development of the Company’s operations over the last nineteen 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 50), 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
17 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 financial statements
The Directors are responsible for preparing the Annual Report and the financial statements in accordance with
applicable law and International Financial Reporting Standards as adopted by the European Union
The Directors are required to prepare financial statements for each financial year which give a true and fair
view of the financial position of the Company, and its financial performance and cash flows for that period
In preparing these financial statements, the Directors are required to:
16
Annual Report 2017 •
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 financial statements on the going concern basis unless it is inappropriate to
presume that the Company will continue in business
The Directors are responsible for keeping proper accounting records that are sufficient to show and
explain the Company’s transactions, and at any time enable the financial position of the Company to
be determined with reasonable accuracy and enable them to ensure that the 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 Company 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 Company’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 25 April 2018 the Directors are aware of the following interests in 3 per cent or more of the
Company’s issued ordinary share capital:
Groverton Management Ltd
RB Investments GmbH
Number of Ordinary
Shares
% of issued ordinary
share capital
133,936,588
25,456,903
76 62
14 56
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 29 to the financial statements
17
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 Company 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 Company, 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
18
Annual Report 2017 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 Company’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 Company 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 Company 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 Company’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 Company 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 Company, making
reasonable assumptions about interest and distribution income, future trading performance, valuation
projections and debt requirements On the basis of this review, the Directors have a reasonable
expectation that the Company has 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
19
Remuneration Report
The Directors’ emoluments, benefits and shareholdings during the year ended 31 December 2017
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
2017
US $000
Total
emoluments
2016
US $000
Richard Barry
Rosenberg
10/06/05
Noam Lanir
10/06/05
Ron Baron
01/09/07
59
400
350
-
45
-
26
250
85
695
110
945
2,478
2,828
3,978
The dates are presented in day / month / year format
Directors’ Interests
Interests of Directors in ordinary shares
Director
Notes
As at 31 December 2017
As at 31 December 2016
Number of
Ordinary
Shares
Percentage of
ordinary share
capital
Number of
Ordinary Shares
Percentage of
ordinary share
capital
Percentage of
voting rights*
133,936,588
76 620%
133,936,588
44 041%
76 620%
25,456,903
14 560%
25,456,903
8 371%
14 560%
15,000
0 01%
15,000
0 005%
0 01%
Noam Lanir
Ron Baron
a)
b)
Richard
Barry Rosenberg
* after consideration of treasury shares (note 14)
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
20
Annual Report 2017
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 will be
reduced annually on a straight line over five years, as long as the key management employee
remains with the Company The relevant reduction in the loan amount for the year was USD
1 128m The loans together with their related accrued interest of USD 0 117m were classified
as “other assets” and are included under trade and other receivables (note 12)
Another loan of USD 2 500m was made during 2016, 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, including interest accrued, is repayable on
the earlier of the employee leaving the Company or August 2019 The loan is included within
trade and other receivables (note 12)
Interests of Directors in share options
No of options at
31 December 2017
Date of grant
Exercise
price, GBP
Exercise
Price*, US $
Vesting period
of options
Richard Barry Rosenberg
500,000
13/05/08
0 30
0 41
Vested
The options are exercisable up to 10 years after the date of grant No options were exercised during
the year ended 31 December 2017
* The exercise price as per the share option scheme is quoted in British Pounds The indicative equivalent
USD amount shown in the table above is based on the exchange rates as at 31 December 2017
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 Company 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 Company’s policy has been designed to ensure that the Company has the ability to attract, retain and
motivate executive Directors and other key management personnel to ensure the success of the organization
The following key principles guide its policy:
21
•
•
•
• 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 Company’s stated purpose to maximize
long-term shareholder value
the remuneration structure will reflect a just system of rewards for the participants
the overall quantum of all potential remuneration components will be determined by the exercise
of informed judgement of the independent remuneration committee, taking into account the
success of the Company 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 Company, will be
taken into account, especially when determining annual salary increases
•
•
•
•
•
22
Annual Report 2017 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 Company operates, and include economic recession, declining corporate
profitability, higher corporate default rates and lower than historical recoveries, rising inflation and
interest rates and excessive stock-market speculation
The Company’s portfolio is exposed to interest rate changes, credit risk, liquidity risk and volatility particularly
in the US, EU 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 emerging markets are exposed to governmental and regulatory risks
The mitigation of these risks is achieved by following micro and macroeconomic trends and changes,
regular monitoring of underlying assets and price movements and investment diversification The
Company also engages from time to time in certain hedging activities to mitigate these risks
Internal risks to shareholders and their returns are related to Portfolio risks (investment and geography
selection and concentration), balance sheet risk (gearing) and/or investment mismanagement risks
The Company’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 Company activities and investments All
service providers to the Company are regularly reviewed The mitigation of the risks related to investments
is effected by investment restrictions and guidelines and through reviews at Board Meetings
As the portfolio of the Company is currently invested in USD denominated assets, movements in other
currencies are expected to have a limited impact on the business
On the asset side, the Company’s exposure to interest rate risk is limited to the interest bearing deposits and
portfolio of bonds and loans in which the Company invests Currently, the Company is primarily invested in
sub-investment grade corporate loans through CLOs, which exposes the Company to credit risk (defaults
and recovery rates, loan spreads over base rate) as well as liquidity risks in the CLO market
Management monitors liquidity to ensure that sufficient liquid resources are available to the Company
The Company’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 34 of the financial statements
Share Capital
There was no change in the authorised share capital during the year to 31 December 2017 The
authorised share capital is 1,000,000,000 ordinary shares with no par value
Related party transactions
Details of any transactions of the Company with related parties during the year to 31 December
2017 are disclosed in note 29 to the financial statements
By order of the Board of Directors
Chief Executive Officer
25 May 2018
23
Independent Auditor’s Report to the
Independent Auditor’s Report to the
Members of Livermore Investments
Members of Livermore Investments
Group Limited
Group Limited
Opinion
Opinion
We have audited the consolidated financial statements of Livermore Investments Group Limited (the
We have audited the consolidated financial statements of Livermore Investments Group Limited (the
‘’Company’’) and its consolidated subsidiaries Livermore Investments Cyprus Limited and Livermore
‘’Company’’) and its consolidated subsidiaries Livermore Investments Cyprus Limited and Livermore
Capital AG (together with the Company the ‘’Group’’), which comprise the consolidated statement
Capital AG (together with the Company the ‘’Group’’), which comprise the consolidated statement
of financial position as at 31 December 2017, the consolidated statements of profit or loss,
of financial position as at 31 December 2017, the consolidated statements of profit or loss,
comprehensive income, changes in equity, and cash flows for the year then ended, and the notes
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
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
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 2017 and of its consolidated
the consolidated financial position of the Group as at 31 December 2017 and of its consolidated
financial performance and its consolidated cash flows for the year then ended, in accordance with
financial performance and its consolidated cash flows for the year then ended, in accordance with
International Financial Reporting Standards (IFRSs) as adopted by the European Union
International Financial Reporting Standards (IFRSs) as adopted by the European Union
Basis for Opinion
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs) Our
We conducted our audit in accordance with International Standards on Auditing (ISAs) Our
responsibilities under those standards are further described in the Auditor’s Responsibilities for
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 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
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
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
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
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
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion
for our audit opinion
Emphasis of Matter – Uncertain Outcome of a Legal Claim
Emphasis of Matter – Uncertain Outcome of a Legal Claim
We draw attention to note 31 to the consolidated financial statements, which describes the
We draw attention to note 31 to the consolidated financial statements, which describes the
uncertain outcome of a legal claim against one of the custodian banks that the Group and the
uncertain outcome of a legal claim against one of the custodian banks that the Group and the
Company uses on its behalf Our opinion is not modified in respect of this matter
Company uses on its behalf Our opinion is not modified in respect of this matter
24
Annual Report 2017 Key Audit Matters
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance
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
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
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
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
We have determined the matters described below to be the key audit matters to be communicated
in our report
in our report
Key audit matter
How the matter was addressed
Investments’ valuation Level 3
Our audit work included, but was not restricted to:
The Group has financial assets of $39m classified
within the fair value hierarchy of level 3, as
disclosed in note 7 to the consolidated financial
statements 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
The Group has invested in five warehouse
facilities, of which the two have not been
converted to Collateralized Loan Obligations
(CLOs) as at the year end These two warehouse
facilities were converted to CLOs in April and
May 2018 The directors classify these facilities
as Financial Assets at Fair Value through Profit
or Loss Their fair value is determined on an
adjusted NAV calculation based on their return
which occur in the post year end period on their
conversion to CLO
•
•
Due to the use of significant judgements by the
Directors, 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 key audit matter
• discussing the valuation methodologies
applied by the directors and assessing
their appropriateness for each investment;
• obtaining third party confirmations
indicating the NAV of the investments
and comparing to clients’ records; and
evaluating the independent professional
valuer’s competence, capabilities and
objectivity;
in cases where the valuations have been
performed by the directors, evaluating
the reasonableness of the underlying
assumptions and verifying the inputs used;
as from reliable third – party sources;
considering the adequacy of consolidated
financial statement disclosures in relation
to the valuation methodologies used for
each class of level 3 financial assets
25
Consolidation of subsidiaries
Our audit work included, but was not restricted to:
are
not
investment
evaluating the Directors’ assessment for the
determination of which of the subsidiaries,
that
entities
themselves, provide services that relate to
the Company’s investment activities;
assessing
reasonableness of
the
Directors’ assessment; and
checking
the
disclosures
adequacy
relevant
the
of
•
•
•
During 2017 the Directors re-assessed their
determination of which of the subsidiaries, that
are not investment entities themselves, provide
services that relate to the Group’s investment
activities and therefore need to be consolidated
rather than included within the investments
in subsidiaries measured at fair value through
profit or loss As a result, two subsidiaries have
been identified that are not investment entities
themselves and their services relate to the
Company’s investment activities (note 10 shows
further details of the Company’s consolidated
and unconsolidated subsidiaries) In performing
this re-assessment, the Directors exercised
significant judgment (note 3 17 (ii))
Due to the use of significant judgment by the
Directors, we consider the consolidation of
subsidiaries to be a key audit matter
26
Annual Report 2017 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
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 ISAs, we exercise professional judgment and maintain
professional skepticism 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
27
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,
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
28
Annual Report 2017 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, 28 May 2018
29
Livermore Investments Group Limited
Consolidated Statement of Financial Position as at 31 December 2017
Note
2017
US $000
2016
US $000
Assets
Non-current assets
Property, plant and equipment
Financial assets at fair value through profit or loss
Financial assets at fair value through other
comprehensive income
Investments in subsidiaries
Trade and other receivables
Current assets
Trade and other receivables
Financial assets at fair value through profit or loss
Financial assets at fair value through other
comprehensive income
Cash at bank
Total assets
Equity
Share capital
Share premium and treasury shares
Other reserves
Retained earnings
Total equity
Liabilities
Current liabilities
Bank overdrafts
Trade and other payables
Provisions
Dividend payable
Total liabilities
Total equity and liabilities
Net asset valuation per share
4
5
10
12
12
4
5
13
14
14
17
18
30
19
8
97,235
7,129
5,426
2,553
112,351
3,166
28,612
1,118
34,175
67,071
15
81,769
5,634
4,339
2,513
94,270
5,507
20,318
1,039
60,387
87,251
179,422
181,521
-
169,187
(37,978)
44,236
-
169,187
(39,842)
27,829
175,445
157,174
-
3,977
-
-
3,977
1,160
7,802
385
15,000
24,347
3,977
179,422
24,347
181,521
Basic and diluted net asset valuation per share (US $)
20
1 00
0 90
These financial statements were approved by the Board of Directors on 28 May 2018
The notes 1 to 35 form part of these consolidated financial statements
30
Annual Report 2017
Livermore Investments Group Limited
Consolidated Statement of Profit or Loss for the year ended 31 December 2017
Continuing operations
Investment income
Interest and distribution income
(Loss) / profit on investments
Gross profit
Administrative expenses
Operating profit
Finance costs
Finance income
Profit before taxation
Taxation charge
Profit / (loss) for the year from continuing operations
Note
2017
US $000
2016
US $000
23
24
25
26
26
27
28,043
(5,918)
22,125
(6,204)
15,921
(19)
488
16,390
(18)
16,372
26,334
1,749
28,083
(7,942)
20,141
(218)
-
19,923
(38)
19,885
Discontinued operation
Profit for the year on discontinued operations
21
-
14,091
Profit for the year
Earnings per share
Basic and diluted earnings per share ( US $)
• From continuing operations
• On discontinued operations
16,372
33,976
28
28
0 09
-
0 09
0 11
0 08
0 19
The profit for the year is wholly attributable to the owners of the parent
The notes 1 to 35 form part of these consolidated financial statements
31
Livermore Investment Group Limited
Consolidated Statement of Comprehensive Income for the year ended 31 December 2017
Note
2017
US $000
2016
US $000
16,372
33,976
Profit for the year
Other comprehensive income:
Items that will be reclassified subsequently to the profit or loss
•
Foreign exchange gains 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
•
Foreign exchange losses reclassified on disposal of subsidiary
21
Total comprehensive income for the year
-
190
16,372
34,166
1,899
(4,301)
-
-
1,538
1,538
18,271
31,403
The total comprehensive income for the year is wholly attributable to the owners of the parent
The notes 1 to 35 form part of these consolidated financial statements
32
Annual Report 2017 Livermore Investments Group Limited
Consolidated Statement of Changes in Equity for the year ended 31 December 2017
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 2016
Adjustment on initial application of
IFRS 9
3 1
Purchase of own shares
Dividends
Transfer on expiry of options
15
Transactions with owners
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
21
Total comprehensive income for the year
Balance at 31 December 2016
Cancellation of shares
14
Transactions with owners
Profit for the year
Other comprehensive income:
Financial assets at fair value
through OCI- Fair value gains
Transfer of realised gains
Total comprehensive income for the
year
Balance at 31 December 2017
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
190
1,538
-
-
-
-
-
-
(7,866)
(15,000)
(15,000)
5,429
-
(9,571)
(22,866)
33,976
33,976
(4,301)
-
-
-
-
-
(4,301)
190
1,538
1,728
(4,301)
33,976
31,403
215,499
(46,312)
77
-
(39,919)
27,829
157,174
(46,312)
46,312
(46,312)
46,312
-
-
-
169,187
-
-
-
-
-
-
-
-
-
77
-
-
-
-
-
-
-
-
-
-
-
-
-
16,372
16,372
1,899
(35)
-
35
1,899
-
1,864
16,407
18,271
(38,055)
44,236
175,445
The notes 1 to 35 form part of these consolidated financial statements.
33
Livermore Investments Group Limited
Consolidated Statement of Cash Flows for the year ended 31 December 2017
Note
2017
US $000
2016
US $000
Cash flows from operating activities
profit before tax
Adjustments for
Depreciation
Interest expense
Interest and distribution income
Bank interest income
Loss / (profit) on investments
Exchange differences
26
23
26
24
26
Changes in working capital
Decrease in trade and other receivables
(Decrease) / increase in trade and other payables
Cash flows from operations
Interest and distribution received
Settlement of litigation
30
Tax paid
Net cash from operating activities
Cash flows from investing activities
Proceeds from disposal of subsidiary – net of cash
and cash equivalents disposed
21
Acquisition of investments
Proceeds from sale of investments
Settlement of derivative
Net cash used for investing activities
16,390
19,923
7
19
7
216
(28,043)
(26,334)
(91)
5,918
(397)
(6,197)
2,301
(3,825)
(7,721)
28,304
(385)
(18)
20,180
-
(120,675)
90,140
-
(30,535)
-
(1,749)
(243)
(8,180)
24,540
4,251
20,611
26,561
(128)
(39)
47,005
31,752
(37,039)
14,462
(148)
9,027
34
Annual Report 2017 Note
2017
US $000
2016
US $000
Cash flows from financing activities
Purchase of own shares
14
Interest paid
Dividends paid
Net cash used for financing activities
Net (decrease) / increase in cash and cash
equivalents:
•
from continuing operations
• of discontinued operations
21
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
-
(125)
(15,000)
(15,125)
(25,480)
-
59,227
428
-
(7,866)
(331)
-
(8,197)
47,835
826
12,562
(245)
(1,751)
Cash and cash equivalents at the end of the year
13
34,175
59,227
The notes 1 to 35 form part of these consolidated financial statements
35
Notes on the Consolidated
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 (“the 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
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 (i e the Company’s functional currency)
References to the Company hereinafter also include its consolidated subsidiaries (note 10)
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 Company
(notes 21 and 22) 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 “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
36
Annual Report 2017
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
services that relate to the investment entity’s investment activities In Livermore’s
situation, two of its subsidiaries provide such services Note 10 shows further details of
the consolidated and unconsolidated subsidiaries
Given the above, these financial statements consolidate the Company’s subsidiaries up to 28
October 2016 As of that date, the subsidiaries (other than the two ones providing services
that relate to the investment entity’s investment activities) have been de-consolidated,
and recognised as Investments in subsidiaries at their fair value as at 28 October 2016
(note 10) No material gains or losses occurred on this transition
3 Accounting Policies
The significant accounting policies applied in the preparation of the financial statements
are as follows:
Adoption of new and revised IFRS
3 1
As from 1 January 2017, the Company adopted all the new or revised IFRS and relevant
amendments which became effective and also were endorsed by the European Union, and
are relevant to its operations
The adoption of the above did not have a material effect on the financial statements
In 2016, the Company 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 was 1 January 2016
The most significant impact of the adoption of IFRS 9, was on the classification and
measurement of the Company’s financial assets The Directors 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 was 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 were 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 IFRS (including relevant amendments and interpretations) had been issued
by the date of authorisation of these financial statements but are not yet effective, or have
not yet been endorsed by the EU, for the year ended 31 December 2017:
IFRS 14: “Regulatory Deferral Accounts”
No
1 January 2016
Endorsed by
the EU
Effective date
(IASB)
38
Annual Report 2017
IFRS 15: “Revenue from Contracts with Customers”
IFRS 16: “Leases”
IFRS 17: “Insurance Contracts”
Yes
Yes
No
1 January 2018
1 January 2019
1 January 2021
IFRIC 22: “Foreign Currency Transactions and
Advance Consideration”
Yes
1 January 2018
IFRIC 23: “Uncertainty over Income Tax Treatments”
Annual Improvements to IFRS 2014–2016 Cycle
Annual Improvements to IFRS 2015–2017 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 9: “Prepayment Features with
Negative Compensation”
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
IAS 19:
Curtailment or Settlement”
to
“Plan Amendment,
Amendment to IAS 28: “Long term Interests in
Associates and Joint Ventures”
Amendment to IAS 40: “Transfers of Investment Property”
Conceptual Framework for Financial Reporting (Revised)
No
Yes
No
Yes
Yes
Yes
1 January 2019
1 January 2018
1 January 2019
1 January 2018
1 January 2018
1 January 2019
No
to be determined
Yes
No
No
Yes
No
1 January 2018
1 January 2019
1 January 2019
1 January 2018
1 January 2020
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
Investments in subsidiaries and basis of consolidation
Subsidiaries are entities controlled either directly or indirectly by the Company
39
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 consolidate the financial statements of the Company and, until
28 October 2016, all of its subsidiaries Since 28 October 2016, the date on which the
Company met the definition of an investment entity (note 2 1), the financial statements
consolidate the financial statements of the Company and its subsidiaries providing services
that relate to the Company’s investment activities (note 10 shows further details of the
consolidated and unconsolidated subsidiaries)
Investments in unconsolidated 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 unconsolidated subsidiaries are recognised as
income when the Company’s right to receive payment has been established
A subsidiary that is not an investment entity itself and 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
The financial statements of the consolidated subsidiaries are prepared using uniform
accounting policies Where necessary, adjustments are made to the financial statements
of consolidated subsidiaries to bring their accounting policies into line with those used by
the Company All consolidated 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 consolidated subsidiaries acquired or disposed of during
the year are consolidated from the effective date of acquisition or up to the effective date
of disposal
3 3
Investments in joint ventures
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 joint ventures are measured at fair value through profit or loss in accordance
with IFRS 9, 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 4 Current assets are those which, in accordance with IAS 1 Presentation Of Financial
Statements are:
• expected to be realised within normal operating cycle, via sale or consumption, or
• held primarily for trading, or
40
Annual Report 2017
• 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
3 5
Interest and distribution income
•Interest income is recognised based on the effective interest method.
•Distribution 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 6 Foreign currency
The financial statements of the Company are presented in USD, which is the currency of
the primary economic environment in which it operates (its functional currency)
Transactions in foreign currencies 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 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 as part of the fair value gain or loss except for differences arising
on the re-translation of non-monetary financial assets designated at fair value through
other comprehensive income 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
3 7 Taxation
Current tax is the tax currently payable based on taxable profit for the year in accordance
with the tax laws applicable and enacted
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 Company
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 Company
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
41
3 8 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 within 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 9 Share Options
Equity settled share-based payments are measured 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
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 10 Borrowing costs
Borrowing costs primarily comprise interest on the Company’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 2017 or 2016
3 11 Financial assets
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
42
Annual Report 2017
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:
(a)
(b)
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
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:
(a)
equity investments that are held for trading;
(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
43
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 12 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 may 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 13 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 14 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
44
Annual Report 2017
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 15 Discontinued operations
A discontinued operation is a component of the Company that either has been disposed of,
or is classified as held for sale, and:
(a)
(b)
(c)
represents a separate major line of business or geographical area of operations;
is part of a single co ordinated plan to dispose of a separate major line of business or
geographical area of operations; or
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 16 Segment reporting
In identifying its operating segments, management generally follows the Company’s
investment activity lines Management regards that since the discontinuance of the
investment property activity (note 21), the Company’s activities fall under a single operating segment
3 17 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 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 judgements
(i)
Classification of financial assets
The management exercises significant
judgement
in determining the appropriate
45
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
(ii) Consolidation of subsidiaries
Management exercised significant judgment in determining which of the subsidiaries
that are not investment entities themselves, provide services that relate to the Company’s
investment activities and therefore need to be consolidated rather than included within the
investments in subsidiaries measured at fair value through profit or loss Following a revised
assessment in 2017, two subsidiaries have been identified that are not investment entities
themselves and their services relate to the Company’s investment activities As a result,
the Company has revised its comparative amounts to consolidate those subsidiaries (note
3 18) Note 10 shows further details of the Company’s consolidated and unconsolidated
subsidiaries
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 7 In applying the valuation techniques management
makes maximum use of market inputs, and uses estimates and assumptions that are, as far
as possible, consistent with observable data that market participants would use in pricing
the instrument Where applicable data is not observable (level 3), management uses its
best estimates which may vary from the actual prices that would be achieved in an arm’s
length transaction at the reporting date Further information on level 3 valuations of
financial assets is provided in note 7 2
3 18 Comparatives
As described in note 3 17 (ii), the comparative figures have been restated for the
consolidation of two of the subsidiaries that are not investment entities themselves and
provide services that relate to the Company’s investment activities The main impact of
this restatement is as follows:
Decrease in investments in subsidiaries
2016
US $000
(913)
46
Annual Report 2017
Increase in property, plant and equipment
Increase in trade and other receivables
Increase in cash at bank
Decrease in trade and other payables
Net assets impact
Decrease in fair value loss on investments in subsidiaries
Increase in administrative expenses
Profit or loss impact
15
80
4
814
-
54
(54)
-
The Company does not present a third consolidated statement of financial position at
1 January 2016 since the financial position as at that date is not affected from the
above reclassifications, and remains unchanged in relation to the previously published
consolidated financial statements
4 Financial assets at fair value through profit or loss
Non-current assets
Fixed income investments (CLO Income Notes)
Current assets
Fixed income investments
Public equity investments
2017
US $000
2016
US $000
97,235
97,235
26,647
1,965
28,612
81,769
81,769
18,368
1,950
20,318
For description of each of the above categories, refer to note 6
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
47
5 Financial assets at fair value through other comprehensive income
Non-current assets
Private equities
Current assets
Hedge funds
2017
US $000
2016
US $000
7,129
5,634
1,118
1,039
For description of each of the above categories, refer to note 6
The above investments are non-trading equity investments that have been designated at fair
value through other comprehensive income
6 Financial assets at fair value
•
The Company allocates its non-derivative financial assets at fair value (notes 4 and 5) as
follows:
Fixed income investments relate to fixed and floating rate bonds, perpetual bank debt,
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
7
Fair value measurements of financial assets and liabilities
The following table (note 7 2) 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
48
Annual Report 2017
•
7 1 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 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 valuations reported by third-party managers of such
investments Real Estate 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
• 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
•
•
Derivative instruments are valued at fair value as provided by counter parties (banks) of
the derivative agreement
Investments in subsidiaries and joint ventures are valued at fair value as determined on
an adjusted net asset valuation basis
49
7 2 Fair value hierarchy
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:
2017
US
$000
Level 1
2017
US
$000
Level 2
2017
US
$000
Level 3
2017
US
$000
Total
2016
US
$000
Level 1
2016
US
$000
Level 2
2016
US
$000
Level 3
2016
US
$000
Total
1,132
97,235
25,515
123,882
1,117
81,769
17,251
100,137
Assets
Fixed income
investments
Private equities
Public equity investments
1,965
Hedge funds
Investments in
subsidiaries
-
-
-
-
-
1,118
7,129
-
-
7,129
1,965
1,118
-
5,426
5,426
-
1,951
-
-
-
-
1,038
5,634
-
-
5,634
1,951
1,038
-
4,339
4,339
Liabilities
-
-
-
-
-
-
-
-
3,097
98,353
38,070
139,520
3,068
82,807
27,224
113,099
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 2017
Financial assets within level 3 can be reconciled from beginning to ending balances as follows:
50
Annual Report 2017
Financial assets within level 3 can be reconciled from beginning to ending balances as follows:
Available-
for-sale
At fair
value
through
OCI
At fair value through profit or loss
Investments
in
subsidiarie
Private
equities
US $000
Private
equities
US $000
Real
estate
US$000
Private
equities
US $000
Fixed
Income
investments
US $000 US $000
As at 1 January 2016
-
12,518
1,203
330
5,021
12,848
(12,518)
-
(330)
Transfer on initial
application of IFRS
9 (note 3 1)
Change in
investment entity
status (note 2 1)
Transfer from Level 1
Purchases
Settlement
Gains / (losses)
recognised in:
-
369
-
(3,308)
• Profit or loss
-
• Other
comprehensive
income
(4,275)
Exchange
difference
-
As at 1 January 2017
5,634
Purchases
Settlement
Gains / (losses)
recognised in:
-
(124)
• Profit or loss
-
• Other
comprehensive
income
1,619
As at 31 December 2017
7,129
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,288)
-
-
-
-
-
-
85
-
-
-
-
-
-
Total
US $000
19,072
-
-
-
4,600
3,312
-
-
-
369
17,000
(9,370)
-
-
-
17,000
(6,062)
1,292
(261)
1,031
-
-
-
-
(4,275)
85
17,251
4,339
27,224
83,500
1,200
84,700
(75,500)
-
(75,624)
264
(113)
151
-
-
1,619
-
-
-
-
-
-
-
-
-
-
-
-
-
25,515
5,426
38,070
51
The above gains and losses recognised can be allocated as follows:
At fair value
through OCI
At fair value
through profit
or loss
Investments in
subsidiarie
Private equities
US $000
Fixed Income
investments
US $000
US $000
Total
US $000
2016
Profit or loss
•
Financial assets held at
year-end
Other comprehensive income
Financial assets held at
•
year-end
-
1,292
(261)
1,031
(4,275)
-
-
(4,275)
Total (losses) / gains for 2016
(4,275)
1,292
(261)
(3,244)
At fair value
through OCI
At fair value
through profit
or loss
Investments in
subsidiarie
Private equities
US $000
Fixed Income
investments
US $000
US $000
Total
US $000
2017
Profit or loss
•
Financial assets held at
year-end
Other comprehensive income
Financial assets held at
•
year-end
Total (losses) / gains for 2017
-
264
(113)
151
1,619
1,619
-
264
-
(113)
1,619
1,770
52
Annual Report 2017 The above gains and losses recognised can be allocated as follows:
At fair value
through OCI
At fair value
through profit
or loss
Fixed Income
Investments in
subsidiarie
Private equities
investments
US $000
US $000
US $000
Total
US $000
2016
Profit or loss
•
Financial assets held at
year-end
Other comprehensive income
•
Financial assets held at
year-end
-
1,292
(261)
1,031
(4,275)
-
-
(4,275)
Total (losses) / gains for 2016
(4,275)
1,292
(261)
(3,244)
At fair value
through OCI
At fair value
through profit
or loss
Investments in
subsidiarie
Private equities
investments
Fixed Income
US $000
US $000
US $000
Total
US $000
2017
Profit or loss
•
Financial assets held at
year-end
Other comprehensive income
•
Financial assets held at
year-end
Total (losses) / gains for 2017
-
264
(113)
151
1,619
1,619
-
264
-
(113)
1,619
1,770
The Company has not developed itself any quantitative unobservable inputs for measuring the
fair value of its level 3 financial assets at 31 December 2017 and 2016 Instead the Company
used prices from third-party pricing information without adjustment
Fixed income investments within level 3 represent open warehouses that have been valued
based on their net asset value Their net asset value is primarily driven by the fair value of
their underlying loan asset portfolio plus received and accrued interest less the nominal value
of the financing and accrued interest on the financing In all cases, due to the nature and
the short life of a warehouse, the carrying amounts of the warehouses’ underlying assets and
liabilities are considered as representative of their fair values
Private equities within level 3 represent investments in private equity funds Their value has
been determined by each fund manager based on the funds’ net asset value Each fund’s net
asset value is primarily driven by the fair value of its underlying investments In all cases,
considering that such investments are measured at fair value, the carrying amounts of the
funds’ underlying assets and liabilities are considered as representative of their fair values
Investments in subsidiaries have been valued based on their net asset position The main
assets of the subsidiaries represent investments measured at fair value and receivables from
the Company itself Their net asset value is considered as a fair approximation of their fair value
A reasonable change in any individual significant input used in the level 3 valuations is not
anticipated to have a significant change in fair values as above
8
Investment property
Valuation as at 1 January
Fair value (loss) / gain
Additions
Exchange difference
Disposal (note 21)
As at 31 December
2017
US $000
-
-
-
-
-
-
2016
US $000
123,324
(102)
102
1,439
(124,763)
-
The investment property relates to Wyler Park property in Bern, Switzerland, which was used
for earning rental income
53
9
Investment in joint venture
As at 1 January / 31 December
2017
US $000
-
2016
US $000
-
Details of the company’s investment in joint venture are as follows:
Name of investee
Place of
incorporation
Proportion of voting
rights and shares held
Silvermore Ltd
Cayman Islands
50%
Principal activity
Investment Holding
(dormant)
10 Investments in subsidiaries
Unconsolidated subsidiaries
As at 1 January
Additions
Fair value loss
As at 31 December
2017
US $000
2016
US $000
4,339
1,200
(113)
5,426
-
4,600
(261)
4,339
Additions in 2016 relate to the initial recognition of the unconsolidated subsidiaries, following
the change into investment entity status of the Company (note 2 1)
Additions in 2017 relate to the fair value of receivable amounts from two of the Company’s
unconsolidated subsidiaries, that have been waived by the Company The nominal amount
of these balances was a total of USD 4 143m (Livermore Properties Ltd: USD 3 103m, and
Sandhirst Ltd: USD 1 040m)
Details of the investments in which the Company has a controlling interest as at 31 December
2017 are as follows:
54
Annual Report 2017
Place of
incorporation
Holding
Proportion
of voting
rights and
shares held
Principal
activity
Name of Subsidiary
Consolidated subsidiaries
Livermore Capital AG
Switzerland
Ordinary shares
100%
Livermore Investments
Cyprus Limited
Cyprus
Ordinary shares
100%
Unconsolidated subsidiaries
Livermore Properties Limited
Mountview Holdings Limited
British Virgin
Islands
British Virgin
Islands
Ordinary shares
100%
Ordinary shares
100%
Sycamore Loan Strategies Ltd Cayman Islands
Ordinary shares
100%
Livermore Israel Investments Ltd
Israel
Ordinary shares
100%
Sandhirst Limited
Cyprus
Ordinary shares
100%
Administration
services
Administration
services
Holding of
investments
Investment
vehicle
Investment
vehicle
Holding of
investments
Holding of
investments
11 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, which were
discontinued in 2016 (note 21)
The movement on the deferred taxation account is as follows:
Investment property
US $000
As at 1 January 2016
(6,362)
Tax losses
US $000
2,425
Total
US $000
(3,937)
Charged to profit or loss
(note 21)
•
timing differences
Exchange difference
Reversal on disposal of
subsidiary (note 21)
As at 31 December
2016 and 2017
-
(77)
6,439
-
(380)
28
(2,073)
-
(380)
(49)
4,366
-
As at 31 December 2017 and 2016 there is no unrecognised deferred tax asset
55
12 Trade and other receivables
2017
US $000
2016
US $000
Financial items
Accrued interest and distribution
income
Amounts due by related parties
(note 29)
Allowance for impairment
Non-Financial items
Other assets (note 29)
Prepayments
VAT receivable
Allocated as:
Current assets
Non-current assets (note 29(3))
2
5,577
-
5,579
-
130
10
5,719
3,166
2,553
5,719
65
9,634
(2,940)
6,759
1,128
133
-
8,020
5,507
2,513
8,020
Allowance for impairment
The allowance relates to amounts due by subsidiaries (note 29), which are regarded as credit-
impaired and have been assessed on an individual basis
As at 1 January
Addition (note 2 1)
Charge for the year
Eliminated upon waiver of
balances (notes 10 and 29)
As at 31 December
2017
US $000
2,940
-
-
(2,940)
-
2016
US $000
-
2,818
122
-
2,940
56
Annual Report 2017
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 2017 or 2016
13 Cash and cash equivalents
Cash and cash equivalents included in the consolidated statement of cash flows comprise the
following at the reporting date:
Cash at bank
Bank overdrafts used for cash management purposes
2017
US $000
2016
US $000
34,175
-
60,387
(1,160)
Cash and cash equivalents
34,175
59,227
14 Share capital
Authorised share capital
The Company has authorised share capital of 1,000,000,000 ordinary shares with no par value,
and no restrictions
Issued share capital
Ordinary shares with no par value
As at 1 January and 31 December 2016
Cancellation of shares
As at 31 December 2017
Treasury shares
As at 1 January 2016
Additions
As at 31 December 2016
Cancellation of shares
Number of
shares
Share premium
arising
US $000
304,120,401
(129,306,403)
174,813,998
Number of
shares
111,830,818
17,475,585
215,499
(46,312)
169,187
US $000
38,446
7,866
129,306,403
(129,306,403)
46,312
(46,312)
As at 31 December 2017
-
-
57
In August 2017 at the Annual General Meeting of the Company, a resolution was passed
to cancel 129,306,403 treasury shares registered in the name of the Company, as a capital
reduction
In the consolidated statement of financial position, the amount included as share premium
and treasury shares comprises of:
Share premium
Treasury shares
2017
US $000
169,187
-
169,187
2016
US $000
215,499
(46,312)
169,187
15 Share options
The Company has a share option scheme for acquiring ordinary shares of the Company
Outstanding and
exercisable options
As at 1 January 2016
Options expired
As at 31 December 2016
As at 31 December 2017
Number of
options
10,650,000
(10,150,000)
500,000
500,000
Average
exercise price
GBP
Average exercise
price* USD
0 76
0 78
0 30
0 30
1 12
0 96
0 37
0 41
Details of share options outstanding at 31 December 2017
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 41
0 41
0 41
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 2017
58
Annual Report 2017
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
16 Bank Loans
As at 1 January
Interest charge
Repayments of principal
Repayments of interests
Exchange difference
Amortization of refinancing fees
Disposal (note 21)
As at 31 December
2017
US $000
-
-
-
-
-
-
-
-
2016
US $000
76,410
923
(1,138)
(923)
936
79
(76,287)
-
The bank loan relates to Wyler Park investment property purchase (note 8) and was secured on
this property
17 Bank Overdrafts
Bank overdrafts
2017
US $000
-
2016
US $000
1,160
The Company has no bank overdraft undrawn facilities at 31 December 2017
59
18 Trade and other payables
2017
US $000
2016
US $000
Financial items
Trade payables
Amounts due to related parties
(note 29)
Accrued expenses
Non-Financial items
Employee benefits accrued
50
2,828
1,099
3,977
-
3,977
13
2,377
2,362
4,752
3,050
7,802
19 Dividend payable
Dividend payable
2017
US $000
-
2016
US $000
15,000
At 15 January 2018, the Board announced an interim dividend of USD 8m (USD 0 04576 per share) to
members on the register on 26 January 2018 The dividend was paid on 23 February 2018
20 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 2017 and 31 December 2016
60
Annual Report 2017
Net assets attributable to ordinary shareholders
(USD 000)
2017
2016
175,445
157,174
Closing number of ordinary shares in issue
174,813,998
174,813,998
Basic net asset value per share (USD)
1 00
0 90
Net assets attributable to ordinary shareholders
(USD 000)
175,445
157,174
Dilutive share options – exercise amount
203
185
Net assets attributable to ordinary shareholders
including the effect of potentially diluted shares
(USD 000)
175,648
157,359
Closing number of ordinary shares in issue
174,813,998
174,813,998
Dilutive share options
500,000
500,000
Closing number of ordinary shares including the
effect of potentially diluted shares
175,313,998
175,313,998
Diluted net asset value per share (USD)
1 00
0 90
Number of Shares
Ordinary shares
Treasury shares
174,813,998
304,120,401
-
(129,306,403)
Closing number of ordinary shares in issue
174,813,998
174,813,998
The Share options (note 15) granted on 13 May 2008 have a dilutive effect on the net asset
value per share, given that their exercise price is lower than the net asset value per Company’s
share at 31 December 2017 and 2016
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 17,475,585 of its Ordinary shares at an average price of USD
0 45 per share
61
21 Discontinued operations
The discontinued operations relate to the investment property (Wyler Park) activities that
constituted an operating segment of the Company (note 22) These activities were carried out
through the Company’s subsidiary, Livermore Investments AG in Switzerland, of which 100%
of shares were disposed to a third party on 28 October 2016
21 1 Profit or loss
Details of profit or loss items of the discontinued operations are as follows:
2017
US $000
2016
US $000
Gross rental income
Direct expenses
Other operating expenses
Investment property revaluation
Bank interest on investment
property loan
Gain on disposal of subsidiary
(note 21 2)
Profit before taxation on
discontinued operations
Taxation credit (note 21 3)
Profit for the year on
discontinued operations
21 2 Gain on disposal of subsidiary
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
Gain on disposal of subsidiary
-
-
-
-
-
-
-
-
-
2017
US $000
-
-
-
-
-
-
-
-
4,459
(423)
(278)
(102)
(1,004)
7,563
10,215
3,876
14,091
2016
US $000
31,758
(124,763)
(6)
(1,075)
76,287
26,900
(1,538)
7,563
62
Annual Report 2017
21 3 Taxation
Taxation credit on the discontinued operations is analysed as follows:
Tax on ordinary activities
Deferred taxation (note 11)
Taxation credit
2017
US $000
-
-
-
2016
US $000
(110)
3,986
3,876
21 4 Cash flows
Details of the cash flows of the discontinued operations are as follows:
2017
US $000
2016
US $000
Operating activities
Investing activities
Financing activities
Translation differences on foreign
operations’ cash and cash equivalents
Net cash from discontinued
operations
-
-
-
-
-
2,975
(102)
(2,061)
14
826
24 Segment reporting
Following the discontinuance of the investment property activities (note 21), the Directors
determined that the Company’s activities fall under a single operating segment
Segment information can be analysed as follows:
Equity and debt
instruments
investment activities
Investment property
activities
(discontinued – note 21 1)
Total per financial
statements
2017
US $000
2016
US $000
2017
US $000
2016
US $000
2017
US $000
2016
US $000
28,043
26,334
-
-
-
-
-
28,043
26,334
4,036
-
4,036
Segment results
Investment income
Interest and
distribution income
Investment property
income
63
Equity and debt
instruments
investment activities
Investment property
activities
(discontinued – note 21 1)
Total per financial
statements
2017
US $000
2016
US $000
2017
US $000
2016
US $000
2017
US $000
2016
US $000
(Loss) / gain on
investments
(5,918)
1,749
Gross profit
22,125
28,083
Administrative
expenses
(6,204)
(7,746)
Operating profit
15,921
20,337
Finance costs
Finance income
Profit before
taxation
(19)
488
(212)
-
16,390
20,125
Taxation (charge) /
credit
(18)
(5)
Profit for year
16,372
20,120
Segment assets
179,422
181,521
Segment liabilities
3,977
24,347
-
-
-
-
-
-
-
-
-
-
-
(102)
(5,918)
1,647
3,934
22,125
32,017
(478)
(6,204)
(8,224)
3,456
15,921
23,793
(1,008)
-
(19)
488
(1,220)
-
2,448
16,390
22,573
3,844
(18)
3,839
6,292
16,372
26,412
-
-
179,422
181,521
3,977
24,347
The Company’s investment income and its investments are divided into the following
geographical areas:
Equity and debt
instruments investment
activities
Investment
property
activities
(discontinued – note 21 1)
Total per financial
statements
2017
US $000
2016
US $000
2017
US $000
2016
US $000
2017
US $000
2016
US $000
Investment Income
Switzerland
Other European
countries
-
156
-
330
United States
22,255
27,904
-
-
-
3,884
-
3,884
-
-
156
330
22,255
27,904
64
Annual Report 2017
India
Asia
Investments
Switzerland
Other European
countries
(68)
(218)
102
(203)
22,125
28,133
-
-
-
-
-
(68)
(218)
102
(203)
3,884
22,125
32,017
-
-
3,047
3,154
United States
125,407
100,399
India
Asia
1,600
9,466
2,022
7,524
139,520
113,099
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,047
3,154
125,407
100,399
1,600
9,466
2,022
7,524
139,520
113,099
income, comprising
Investment
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
interest and distribution
income, gains or
During 2016, 81 6% of the Company’s rent related to rental income from a single customer
(SBB – Swiss national transport authority) in the investment property activities segment The
Company has no significant dependencies in respect of its investment income to any single issuer
65
23 Interest and distribution income
Interest from investments
Distribution income
2017
US $000
115
27,928
28,043
2016
US $000
114
26,220
26,334
Interest and distribution income is analysed between the Company’s different categories of
financial assets, as follows:
2017
2016
Interest
from
investments
US $000
Distribution
income
US $000
Total
US $000
Interest from
investments
US $000
Distribution
income
US $000
Total
US $000
Financial assets
at fair value
through
profit or loss
Fixed income
investments
Public equity
investments
Financial assets
at fair value
through other
comprehensive
income
75
-
75
27,826
27,901
114
26,024
26,138
6
6
-
196
196
27,832
27,907
114
26,220
26,334
Private equities
-
96
96
Financial assets
at amortised cost
Loan receivable
(note 29)
40
115
-
-
-
-
-
-
-
40
27,928
28,043
114
26,220
26,334
The Company’s distribution income derives from multiple issuers The Company does not have
any concentration to any single issuer
66
Annual Report 2017
24 (Loss) / profit on investments
Fair value (losses) / gains on financial assets
through profit or loss
Fair value loss on investment in subsidiaries
Fair value gains on derivative investments
Bank custody fees
2017
US $000
2016
US $000
(5,699)
(113)
-
(106)
(5,918)
2,056
(261)
69
(115)
1,749
For the year ended 31 December 2016, a net fair value gain of USD 0 069m has been
recognised in relation to derivative financial instruments
The investments disposed of had the following cumulative (i e from the date of acquisition up
to the date of disposal) financial impact in the Company’s net asset position:
Disposed in 2017
Disposed in 2016
Realised
(losses)/
gains*
US $000
Cumulative
distribution or
interest
US $000
Total
financial
impact
US $000
Realised
losses*
US $000
Cumulative
distribution
or interest
US $000
Total
financial
impact
US $000
Financial assets
at fair value
through profit or
loss
Fixed income
investments
Financial assets
at fair value
through other
comprehensive
income
(11,567)
(11,567)
19,686
19,686
8,119
8,119
(3,540)
4,998
1,458
(3,540)
4,998
1,458
Private equities
35
-
35
-
-
-
(11,532)
19,686
8,154
(3,540)
4,998
1,458
* difference between disposal proceeds and original acquisition cost
67
25 Administrative expenses
Legal expenses
Directors’ fees and expenses
Other salaries and expenses
Professional fees
Office costs
Depreciation
Other operating expenses
Audit fees
Impairment charge on receivables
2017
US $000
2016
US $000
19
3,608
152
1,385
409
7
512
112
-
19
5,033
149
1,799
306
7
388
119
122
6,204
7,942
Throughout 2017 the Company employed 4 members of staff (2016: 4) Two of those members
are the Company’s executive Directors
Other salaries and expenses include USD 13,212 of social insurance and similar contributions
(2016: USD 18,706), as well as USD 3,223 of defined contributions plan costs (2016: USD 16,655)
26 Finance costs and (income)
Finance costs
Other bank interest
Foreign exchange loss
Finance income
Foreign exchange gain
Bank interest income
2017
US $000
2016
US $000
19
-
19
(397)
(91)
(469)
216
2
218
-
-
218
68
Annual Report 2017
29 Taxation
Current tax charge
2017
US $000
18
18
2016
US $000
38
38
The Company is a British Virgin Islands (BVI) international business company and, under the
BVI laws, is not subject to corporation tax Corporation tax for 2016, relates to the results of
the Company’s consolidated subsidiaries in Switzerland and Cyprus (note 10)
28 Earnings per share
Basic earnings per share has been calculated by dividing the profit for the year attributable to
ordinary shareholders of the Company by the weighted average number of ordinary shares in
issue of the Company 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 2017 and the year ended 31
December 2016
2017
2016
Continuing operations
Profit / (loss) for the year attributable to ordinary
shareholders (USD 000)
16,372
19,885
Weighted average number of ordinary shares outstanding
174,813,998
186,255,696
Basic earnings per share (USD)
0 09
0 11
Weighted average number of ordinary shares outstanding
174,813,998
186,255,696
Dilutive effect of share options
183,891
24,715
Weighted average number of ordinary shares including
the effect of potentially dilutive shares
174,997,889
186,280,411
Diluted earnings per share (USD)
0 09
0 11
2017
2016
Discontinued operations
Profit / (loss) for the year attributable to ordinary
shareholders (USD 000)
Weighted average number of ordinary shares outstanding
-
-
14,091
186,255,696
69
Basic earnings per share (USD)
Weighted average number of ordinary shares outstanding
Dilutive effect of share options
Weighted average number of ordinary shares including
the effect of potentially dilutive shares
Diluted earnings per share (USD)
-
-
-
-
-
0 08
186,255,696
24,715
186,280,411
0 08
The Share options (note 15) granted on 13 May 2008 have a dilutive effect on the weighted
average number of ordinary shares only, given that their exercise price is lower than the average
market price of the Company’s shares on the London Stock Exchange (AIM division) during the
year ended 31 December 2017 and 2016
70
Annual Report 2017
29 Related party transactions
The Company is controlled by Groverton Management Ltd, an entity owned by Noam Lanir, which
at 31 December 2017 held 76 62% (2016: 76 62%) of the Company’s effective voting rights
Amounts receivable from unconsolidated
subsidiaries
Livermore Properties Limited
Sandhirst Limited
Allowance for impairment
Amounts receivable from key management
Directors’ current accounts
Other assets
Loan receivable
Amounts payable to unconsolidated
subsidiaries
2017
US $000
2016
US $000
-
24
-
24
3,000
-
2,553
5,553
3,103
1,018
(2,940)
1,181
3,000
1,128
2,513
6,641
Livermore Israel Investments Ltd
(2,603)
(2,210)
Amounts payable to other related party
Loan payable
(149)
(149)
Amounts payable to key management
Directors’ current accounts
Other key management personnel
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
(69)
(7)
(76)
795
2,728
59
26
994
4,602
(13)
(5)
(18)
795
4,128
60
50
1,092
6,125
(1)
(1)
(1)
(1)
(2)
(3)
(4)
(5)
(4)
(6)
(7)
(8)
71
(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 12)
(3) A loan of USD 2 500m was made to a key management employee, during 2016, 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, including interest accrued, is repayable on
the earlier of the employee leaving the Company or August 2019 The loan is included within trade
and other receivables (note 12)
(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 2017 of USD 0 149m (31 December 2016: USD 0 149m) has
been received from a related company (under common control), Chanpak Ltd The loan is free of
interest, is unsecured and is repayable on demand This loan is included within trade and other
payables (note 18)
(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
(8) Other Key management fees are included within professional fees in note 25
During the year, the Company has waived its receivable balances from its subsidiaries Livermore
Property Ltd (USD: 3 103m) and Sandhirst Ltd (USD: 1 040m) as a means of capital contribution to
the subsidiaries (note 10)
No social insurance and similar contributions nor any other defined benefit contributions plan costs
were incurred for the Company in relation to its key management personnel in either 2017 or 2016
Noam Lanir, through an Israeli partnership, is the major shareholder of Babylon Limited, an Israel
based Internet Services Company The Company as of 31 December 2017 held a total of 1 941m
shares at a value of USD 0 845m (2016: 1 941m shares at a value of USD 0 973m) which represents
4% of its effective voting rights The investment in Babylon Ltd is held through the subsidiary
Livermore Israel Investments Ltd
In 2016, the Company bought 17,475,585 of its Ordinary shares from Groverton Management Ltd, at
an average price of USD 0 45 per share These shares were included in Treasury shares (note 14)
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
(under common control) These shares are not included in the financial assets of the Company on
the consolidated statement of financial position
During the year the Company received administrative services of USD 0 048m (2016: 0 048m) in
connection with investments from a related company (under common control)
72
Annual Report 2017
30 Provisions
The movement in provisions for the year is as follows:
As at 1 January
Settlements
As at 31 December
31 Litigation
2017
US $000
2016
US $000
385
(385)
-
513
(128)
385
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
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 was made in 2016 and settled in 2017 (note 30)
32 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 2017
73
33 Events after the reporting date
The two warehouse facilities that the Company invested in, during 2017, were closed in April
and May 2018 For both warehouses, with a carrying amount as at 31 December 2017 of USD
25 5m, the Company invested an additional amount of USD 10m during 2018 (before their
closure) For these warehouses, Livermore’s investment amount plus net carry amounting to a
total of USD 37 6m became receivable in April and May 2018
At 15 January 2018, the Board announced an interim dividend of USD 8m (USD 0 04576 per
share) to members on the register on 26 January 2018 The dividend was paid on 23 February 2018
There were no other material events after the end of the reporting year, which have a bearing
on the understanding of these financial statements
34 Financial risk management objectives and policies
Background
The Company’s financial instruments comprise financial assets at fair value through profit or
loss, financial assets at fair value through other comprehensive income, and financial assets
and liabilities at amortised cost that arise directly from its operations For an analysis of
financial assets and liabilities by category, refer to note 35
Risk objectives and policies
The objective of the Company 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 Company
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 Company in general does not hedge its
currency exposure The Company 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
Company 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 Company at 31 December 2017 is
the following:
74
Annual Report 2017
2017
US $000
2017
US $000
2017
US $000
2016
US $000
2016
US $000
2016
US $000
Financial
assets
Financial
liabilities
Net value
Financial
assets
Financial
liabilities
Net value
British Pounds (GBP)
Euro
Swiss Francs (CHF)
Israel Shekels (ILS)
Others
Total
1,587
994
4,757
6,253
-
(111)
(211)
(774)
(2,603)
-
1,476
783
3,983
3,650
-
1,754
2,715
8,090
5,052
-
(355)
(284)
(1,966)
(2,212)
(6)
1,399
2,431
6,124
2,840
(6)
13,591
(3,699)
9,892
17,611
(4,823)
12,788
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 2017 would have the following impact A 10% decrease of the following
currencies against USD would have an approximately equal but opposite impact
2017
US $000
2017
US $000
2016
US $000
2016
US $000
Profit or loss
Other
comprehensive
income
Profit or loss
Other
comprehensive
income
British Pounds (GBP)
Euro
Swiss Francs (CHF)
Israel Shekels (ILS)
Total
93
78
398
365
934
55
-
-
-
55
77
243
590
284
1,194
63
-
-
-
63
The above analysis assumes that all other variables in particular, interest rates, remain constant
75
Interest rate risk
The Company is exposed to interest rate risk on its interest-bearing instruments which are
affected by changes in market interest rates
The Company has banking credit lines which are available on short notice for the Company 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 2017 was USD 0m (2016: USD 1 2m)
As at 31 December 2017 the Company 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 Company 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 Company’s fixed rate financial assets is likely to be negatively impacted by an increase in
interest rates The interest income of the Company’s floating rate financial assets is likely to
be positively impacted by an increase in interest rates
The Company 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)
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 Company’s financial assets and liabilities affected by interest rate changes are as follows:
Financial assets – subject to:
•
•
fair value changes
interest changes
Total
Financial liabilities – subject to:
•
interest changes
Total
2017
US $000
2016
US $000
1,132
34,167
35,299
-
-
3,550
60,383
63,933
1,160
1,160
76
Annual Report 2017
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
2017
US $000
2017
US $000
2016
US $000
2016
US $000
Profit or loss
Other
comprehensive
income
Profit or loss
Other
comprehensive
income
(148)
342
-
194
-
-
-
-
(256)
604
(12)
336
-
-
-
-
Financial assets
•
•
fair value changes
interest changes
Financial liabilities
•
interest changes
The above analysis assumes that all other variables, in particular currency rates, remain constant
Market price risk
By the nature of its activities, most of the Company’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 Company 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 Company 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 Company mainly 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 Company’s portfolio of financial assets (excluding
level 3 investments) would result in a 7 24% change in the net asset value as at 31 December
77
2017 (2016: 6 56%), and would have the following impact (either positive or negative,
depending on the corresponding sign of the change):
2017
US $000
2017
US $000
2016
US $000
2016
US $000
Profit or
loss
Other
comprehensive
income
Profit or loss
Other
comprehensive
income
Financial assets at fair
value through other
comprehensive income
Financial assets at fair value
through profit or loss
-
12,585
12,585
Derivatives
112
-
112
-
10,209
10,209
104
-
104
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 Company 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 Company is exposed to
a migration of credit rating, widening of credit spreads and default of any specific issuer
The Company 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 Company 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 Company’s maximum credit risk exposure at 31 December 2017 is as follows:
78
Annual Report 2017
2017
US $000
2016
US $000
Financial assets:
At amortised cost
•
•
Trade and other receivables
Cash at bank
5,579
34,175
39,754
Financial assets at fair value through profit or loss
123,884
163,638
6,759
60,387
67,146
100,137
167,283
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
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 Company 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 Company has no investment in sovereign debt as at 31 December 2017 or 2016
At 31 December the credit rating distribution of the Company’s asset portfolio subject to
credit risk was as follows:
79
Rating
2017 Amount
US $000
Percentage
2016 Amount
US $000
Percentage
AA
A
A-
BB
BB+
BBB
Not Rated
16,563
9,768
7,111
-
1,132
734
128,330
163,638
10 1%
6 0%
4 4%
-
0 7%
0 4%
78 4%
100%
30,870
86
29,495
2,433
1,117
-
103,282
167,283
18 5%
-
17 6%
1 5%
0 7%
-
61 7%
100%
Included within “not rated” amounts are investments in loan market through CLOs (equity
tranches) of USD 97 237m and open warehouses of USD 25 139m (2016: CLOs of USD 79 336m
and open warehouses of USD 17 251m)
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 Company’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 2017
Trade and other payables
3,977
3,977
Total
3,977
3,977
-
-
-
-
-
-
80
Annual Report 2017
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
4,752
4,752
Total
5,912
5,912
-
-
-
-
-
-
-
-
-
A small proportion of the Company’s portfolio is invested in mid-term private equity investments
with low or no liquidity The investments of the Company 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
market The Company, however, can opt to terminate such facility
The management takes 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 2017, the Company had liquid investments totalling USD 135 6m, comprising of USD
34 2m in cash and cash equivalents, USD 97 2m in investments in loan market through CLOs, USD
1 1m in other fixed income investments, USD 2 0m in public equities and USD 1 1m in hedge funds
management structures and manages the Company’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 Company’s
treasury function
Capital Management
The Company considers its capital to be its issued total equity (i e its share capital and all of
its reserves)
The Company manages its capital to ensure that it will be able to continue as a going concern
while maximising the return to shareholders through the optimisation of the balance between
its net debt and equity
Net debt to equity ratio is calculated using the following amounts as included on the
consolidated statement of financial position, for the reporting periods under review:
81
Cash at bank
Bank overdrafts
Net Debt
Total equity
Net debt to equity ratio
2017
US $000
(34,175)
-
(34,175)
175,445
(0 19)
2016
US $000
(60,387)
1,160
(59,227)
157,174
(0 38)
35 Financial assets and liabilities by class
Note
2017
US $000
2016
US $000
Financial assets:
Financial assets at amortised cost
12,13
39,754
67,146
Financial assets at fair value through
profit or loss
Financial assets designated at fair value
through other comprehensive income
4
5
Financial liabilities:
Financial liabilities at amortised cost
17,18
125,847
102,087
8,247
6,673
173,848
175,906
3,977
3,977
5,912
5,912
The carrying amount of the financial assets and liabilities at amortised cost approximates to
their fair value
82
Annual Report 2017
Shareholder Information
Registrars
All enquiries relating to shares or shareholdings should be addressed to:
Link Asset Services
34 Beckenham Road
Beckenham
Kent BR3 4TU
Telephone: 0871 664 0300
Facsimile: 020 8639 2342
Change of Address
Shareholders can change their address by notifying Link Asset Services 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 Link Asset Services
Lost Share Certificate
If your share certificate is lost or stolen, you should immediately contact Link Asset Services on
0871 664 0300 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
Link Asset Services on 0871 664 0300
Please note that the Directors of the Company are not seeking to encourage shareholders to either
buy or sell the Company’s shares
83
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 21 August 2018 at 10am for the purposes of the following:
To consider, and if thought fit, to pass the following resolutions, numbers 1 to 6 of which will be
proposed as Resolutions of Members and numbers 7 and 8 of which will be proposed as Special Resolutions:
1
2
3
4
To receive and adopt the Report of Directors, the financial statements and the Report of the
Auditor for the year ended 31 December 2017
To re-elect Mr Richard Rosenberg, who is due to retire as Director in accordance with the
Articles of Association of the Company
To re-elect Mr Noam Lanir, who is due to retire as Director in accordance with the Articles of
Association of the Company
To re-appoint Grant Thornton Cyprus as auditor of the Company to hold office from the
conclusion of this Meeting until the conclusion of the next general meeting at which financial
statements are laid before the Company
5
To authorise the Directors to determine the auditor’s remuneration
6
That for the purposes of article 5 1 of the Articles of Association of the Company:
(a)
the Directors be and are generally and unconditionally authorised to allot up to a maximum
aggregate amount of 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 2019 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 any
offer or agreement which would or might require such ordinary shares to be issued in
pursuance of any such offer or agreement notwithstanding the expiry of the authority
given by this resolution,
so that all previous authorities of the Directors pursuant to the said article 5 1 be and are
hereby revoked
7
THAT, subject to the passing of resolution 6 set out in the Notice convening this Meeting, the
Directors be and are empowered in accordance with article 5 2 of the Articles of Association
of the Company to allot new ordinary shares of no par value in the capital of the Company
(“ordinary shares”) for cash, pursuant to the authority conferred on them to allot such shares
by that resolution 6 as if the pre-emption provisions contained in article 5 2 did not apply to
any such allotment, provided that the power conferred by this resolution shall be limited to:
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Annual Report 2017
(a) the allotment of ordinary shares in connection with an issue or offering in favour of
holders of ordinary shares and any other persons entitled to participate in such issue or
offering where the shares respectively attributable to the interests of such holders and
persons are proportionate (as nearly as may be) to the respective number of ordinary
shares held by or deemed to be held by them on the record date of such allotment,
subject only to such exclusions or other arrangements as the Directors may consider
necessary or expedient to deal with fractional entitlements or legal or practical problems
under the laws or requirements of any recognised regulatory body or stock exchange in
any territory; and
(b) the allotment of up to an aggregate amount of 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 2019 or, if earlier, 15 months from the date of the passing of this
resolution (unless previously revoked or varied by the Company in general meeting) but
shall extend to the making, before such expiry, of an offer or agreement which would or
might require ordinary shares to be allotted after such expiry and the Directors may allot
such shares in pursuance of such offer or agreement as if the authority conferred hereby
had not expired
8
That, in accordance with the Articles of Association of the Company, the Company be and
is hereby generally and unconditionally authorised to make market purchases (within the
meaning of section 693 of the UK Companies Act 2006 (as amended)) on the AIM market
of the London Stock Exchange plc of ordinary shares of no par value in the capital of the
Company (“ordinary shares”) provided that:
(a) the maximum number of ordinary shares hereby authorised to be purchased is 34,962,798;
(b)
(c)
the authority hereby conferred (unless previously renewed or revoked) shall expire at the
conclusion of the Annual General Meeting of the Company next following the Meeting at which
this resolution is passed; and
the Company may, under the authority hereby conferred and prior to the expiry of that
authority, make a contract to purchase its own shares which will or may be executed wholly
or partly after the expiry of that authority and may make a purchase of its own shares in
pursuance of such contract
A member of the Company unable to attend the Meeting may be represented at the Meeting by a
proxy appointed in accordance with the Notes attached hereto
By order of the Board
Chris Sideras
Company Secretary
Trident Chambers
PO Box 146
Road Town
Tortola
British Virgin Islands
29 June 2018
85
Notes
(i)
(ii)
(iii)
(iv)
(i)
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 Link 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 Link Market Services 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, Link Asset Services, 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@linkgroup co uk to request a Letter
of Corporate Representation
(v) Resolution 7 – Disapplication of pre-emption rights - If the Directors wish to allot any equity
securities for cash, the 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 7 asks shareholders to grant
the Directors authority to allot shares for cash on a non-pre-emptive basis pursuant to the
authority in Resolution 6, but such allotment shall not be:
a)
b)
in excess of an amount equal to 5% of the total issued ordinary share capital of the
Company (excluding any treasury shares) as at the date of this Notice; or
in excess of an amount equal to 7 5% of the total issued ordinary share capital of the
Company (excluding treasury shares) within a rolling three-year period, without prior
consultation with shareholders,
in each case other than in connection with an acquisition or specified capital investment
which is announced contemporaneously with the allotment or which has taken place in the
preceding six-month period and is disclosed in the announcement of the allotment
Resolution 7 also asks shareholders to disapply the statutory pre-emption provisions
in connection with a rights issue, but only in relation to the amount permitted under
Resolution 6, and allows the Directors, in the case of a rights issue, to make appropriate
arrangements in relation to fractional entitlements or other legal or practical problems
that might arise
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Annual Report 2017
Principal Bankers
Bank Hapoalim
18 Boulevard Royal
BP 703
L-2017
Luxembourg
CBH Compagnie Bancaire Helvétique SA
Löwenstrasse 29 Zurich 8021
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
Link Asset Services
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
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