2018
8
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 12
Financial portfolio 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 17
Disclosure of information to the Auditor 17
Substantial Shareholdings 18
Corporate Governance Statement 19
Introduction 19
The Board Constitution and Procedures 19
Board Committees 19
Remuneration Committee 19
Audit Committee 19
The Quoted Company Alliance (QCA) Code 20
Communication with Investors 20
Internal Control 20
Going concern 21
4
Annual Report 2018 Independence of Auditor 21
Remuneration Report 22
Directors’ Emoluments 22
Directors’ Interests 22
Remuneration Policy 23
Review of the Business and Risks 24
Risks 24
Share Capital 24
Related Party Transactions 24
Independent Auditor’s Report to the Members of Livermore Investments Group Limited 25
Consolidated Statement of Financial Position as at 31 December 2018 30
Consolidated Statement of profit or loss for the year ended 31 December 2018 31
Consolidated Statement of Comprehensive Income for the year ended 31 December 2018 32
Consolidated Statement of changes in equity for the year ended 31 December 2018 33
Consolidated Statement of cash flows for the year ended 31 December 2018 34
Notes on the Financial Statements 36
Shareholder Information 70
Registrars 70
Website 70
Direct Dividend Payments 70
Lost Share Certificate 70
Duplicate Shareholder Accounts 70
Notice of Annual General Meeting 71
Corporate Directory 74
5
Highlights
•
Net profit for the year was USD 5 2m (2017: USD 16 4m)
•
Net Asset Value per share remains stable at USD 1 00 (December 2017: USD 1 00)
• At 15 January 2018, 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 generated USD 29 7m in distributions and USD 14m in net gains
in 2018
6
Annual Report 2018 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 2018 References to the Company
hereinafter also include its consolidated subsidiaries (note 8)
The year-end NAV was USD 1 00 per share (2017 NAV: USD 1 00 per share) Net profit for the year
was USD 5 2m (2017 Net Profit: USD 16 4m)
The Company recorded net gains of USD 14m from its US CLO and warehousing portfolio Management
took advantage of lower funding costs to reduce the cost of financing or extend some of its CLO
positions as well as created new CLOs with long reinvestment periods at very low cost of financing in
early 2018 as well as sold some of its short reinvestment period positions Interest and distribution
income from the financial portfolio totalled USD 31 5m (2017: USD 28 0m)
References to financial statements hereinafter are to the Company’s consolidated financial
statements
Financial Review
The NAV of the Company at 31 December 2018 was USD 174 3m (2017: USD 175 4m) Net profit,
during the year was USD 5 2m, which represents earnings per share of USD 0 03
Administrative expenses were USD 8 9m (2017: USD 6 2m)
7
The overall change in the NAV is primarily attributed to the following:
Shareholders’ funds at beginning of year
Income from investments
Realised losses on investments
Unrealised losses on investments
Administration costs
Net finance income
Increase in net assets from operations
Dividends paid
Shareholders’ funds at end of year
31 December 2018
US $m
31 December 2017
US $m
175 4
31 5
(0 1)
(15 6)
(8 9)
-
6 9
(8 0)
174 3
157 2
28 0
(0 1)
(4 0)
(6 2)
0 5
18 2
-
175 4
Net Asset Value per share
US $1 00
US $1 00
Dividend & Buyback
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
The Board of Directors will decide on the Company’s dividend policy for 2019 based on profitability,
liquidity requirements, portfolio performance, market conditions, and the share price of the Company
relative to its NAV
The company has no shares in treasury
Richard B Rosenberg
Chairman
Noam Lanir
Chief Executive Officer
21 May 2019
8
Annual Report 2018
Review of Activities
Introduction and Overview
Overall, 2018 was a challenging year for most asset classes and most market participants Public
equities, government bonds, fixed rate investment bonds as well as most credit markets ended in the
red In light of the investment environment, the Company achieved a relatively strong performance
in 2018, generating cash distributions of USD 29 7m from its CLO and warehousing portfolio The
significant volatility in broader markets, however, impacted the year-end valuations of CLO positions
reducing the net gain on the CLO and warehousing portfolio to USD 14m (2017: USD 22 1m) As in
previous years, the Company actively managed its CLO and warehousing portfolio and generated
gains in a year that saw most industry participants experience some losses The results of 2018
speak to the skills of the management team to create value as well as the resilience of the portfolio
In 2018, the Company reported NAV/share of USD 1 00 and net profit of USD 5 2m Interest and
distribution income amounted to USD 31 5m, of which, USD 29 7m was generated from the CLO and
warehousing portfolio The net return of the CLO and warehousing portfolio was USD 14m as mark-
to-market changes contributed to a loss of USD 16 7m Administrative expenses amounted to USD
8 9m including USD 2 6m of one-off administration cost
The Company’s income in 2018 derived mainly from its interest and distribution income generated
by its CLO and warehouse portfolio During the year, the CLO and warehousing portfolio generated
USD 29 7m in income CLO equity positions typically generate higher cash flow 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 2018, spreads in the US senior secured loan market as well as CLO financing costs tightened
in the first half of the year, and management pro-actively worked with banks and CLO managers to
create two new CLOs and refinance and reduce the financing cost of another CLO position Further,
management sold some of its short reinvestment period CLO positions as it deemed the risk of loan
price volatility capped the upside on these positions On the warehousing front, management closed
four warehouses generating USD 4m in gains as well as generating cheap entry points into new CLO
positions In the latter half of the year, management priced another CLO that had secured tight AAA
funding costs prior to the CLO debt market widening as well as extending the reinvestment period
of another CLO by 5 years
During the year, the Company invested an additional USD 32 8m in primarily new issue CLO equity
positions and disposed USD 16m of CLO positions, while the warehouse portfolio increased by USD
13m 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 continued to grow in 2018, supported by the ongoing expansionary monetary
policies in the major currency areas and favourable financing conditions Business and consumer
confidence remained relatively healthy, although they did ease back as the year progressed
Employment rose further in the advanced economies, and in some countries (US, Japan, Germany)
unemployment fell to its lowest level in decades Developments varied across the emerging economies
Growth slowed in China, while economic conditions in Brazil, India and Russia continued to improve
The utilisation of production capacity increased worldwide Against this background, wage growth
picked up in various advanced economies By contrast, consumer price inflation remained subdued overall
In the second half of the year, the positive economic momentum was overshadowed by concerns
regarding the global economic outlook Trade tensions between the US and China as well as several
other countries as well as a number of political issues such as the UK’s imminent exit from the EU
dampened prospects Volatility on the financial markets increased markedly from October and most
stock markets closed the year with a clear loss
The US economy gained further momentum in 2018 with annual GDP growth averaging 2 9% Growth
was stimulated by extensive tax cuts and higher public spending Furthermore, companies continued
to benefit from favourable financing conditions Private consumption remained a driving force on
the back of robust disposable income growth and upbeat consumer confidence By contrast, higher
mortgage rates led to a decline in construction investment The labour market improved further, and
the unemployment rate fell to 3 9% by the end of the year Towards the end of the year, however,
the optimism for continued higher growth faded as the US Federal Reserve indicated their intentions
to raise interest rates despite signs of slowing global growth
Economic growth in the euro area was unable to match the strong momentum of 2017 This was
partly attributable to special factors, including adverse weather conditions, strikes and a reduction
in vehicle production in Germany in connection with new emission standards Furthermore, business
and consumer sentiment cooled during the course of the year Nevertheless, domestic demand held
up well overall and GDP grew by 1 8% in 2018 (2017: 2 5%) The labour market continued to
improve By the end of the year the unemployment rate had fallen to 7 9%, its lowest level since
October 2008 Against this backdrop, wage growth picked up
Economic growth in China remained solid at 6 6% Nevertheless, momentum slowed during the
year, primarily due to modest investment growth Higher capital market interest rates and macro-
prudential measures taken by the government dampened the demand for loans, stabilising household
and business debt relative to GDP The escalation of trade tensions with the US over the course of
the year constituted a further risk to the Chinese economy From September, the US imposed an
additional 10% tariff on selected Chinese products with an annual trade value of around USD 200 billion
Commodity prices fluctuated sharply Buoyed by the solid global economy and the oil output
restrictions agreed by major oil-producing countries, by autumn the price of Brent crude had risen
to USD 86 per barrel However, the expansion in global oil production and concerns regarding a
global economic slowdown subsequently led to a price correction At the end of 2018, the oil price
stood at approximately USD 55 per barrel, slightly lower than at the beginning of the year Industrial
metal prices also initially maintained their upward trend before declining in the second half of the year
Inflation, as measured by the CPI, rose in most advanced economies compared with 2017, primarily
driven by higher energy and food prices Core inflation, which excludes volatile categories of goods
such as oil products and food, thus changed only marginally in many countries In the US, annual
10
Annual Report 2018 average headline inflation rose to 2 5% and core inflation to 2 1% The Federal Reserve’s preferred
price inflation measure, the personal consumption expenditure (PCE) deflator, which excludes
volatile energy and food prices, was back in line with the Fed’s target of 2% for the first time since 2012
Headline inflation in the euro area increased to 1 7% However, core inflation remained at around
1%, as it has done for some years In Japan, headline inflation rose to 1 0% while core inflation
continued to fluctuate around 0% over the course of the year Despite the highly expansionary
monetary policy, medium-term inflation expectations persisted significantly below the Bank of
Japan’s inflation target of 2%
In light of the inflation momentum and the improved labour market conditions, the US Federal
Reserve continued to tighten its monetary policy It increased the target range for its policy rate in
four steps by a total of 1 percentage point to 2 25 – 2 5% At the same time, it carried on reducing
its balance sheet, and emphasised in December that further interest rate rises would be dependent
on economic developments The European Central Bank left its deposit rate at – 0 4% and the main
refinancing rate at 0 0%, and said it intended to leave its key rates unchanged at least through
the summer of 2019 The ECB remained confident that inflation would move towards its target
level of just under 2% Against this backdrop, it ended its programme of net asset purchases at the
end of 2018, having already reduced it from EUR 60 billion per month to EUR 30 billion per month
in January, and again in October to EUR 15 billion per month However, it intends to continue
reinvesting maturing bonds for an extended period of time
While 2017 was characterized by unusually low volatility in financial markets, 2018 was another
story Despite a good start to the year, almost all asset classes had a poor showing In the US,
although the S&P 500 Index had gained about 8% by the end of September, it lost about 15% in the
last quarter to end the year down by 7% The EuroStoxx 50 Index in Europe fared worse losing about
14% for the year The SHCOMP Index suffered the worst with the Index down about 25% in 2018
Although the US government bond markets performed well in the last quarter, they had a terrible
first 9 months The US 10-year yields increased from 2 46% at the start of the year to a high of
3 23% before ending the year at 2 68% Fixed rate investment grade bonds suffered a similar fate
Leveraged Loans was one of the only major asset classes that generated positive returns The
Credit Suisse Leveraged Loan Index (CSLLI) was up 1 14% as compared to the 2 25% loss in the US
high yield market as measured by the Merrill Lynch High Yield Master II Index Loans performed
exceedingly well in the first half of the year on the back of continued economic growth in the US
and a rising rate environment Total institutional loans outstanding was $1 048 trillion as of June
30, 2018, up 11% from the prior year As a result of strong inflows and CLO creation, loan spreads
continued to compress This picture changed in the last two months of the year as concerns over
the future growth of the economy and reduced chances of rate increases drove outflows from retail
funds as the credit spreads turned wider Strong demand in 2017 and early 2018 led to weaker
documentation and increase in the loan market exposure of Single-B rated loans This dynamic has
the potential to create issues if growth slows down in the future or if financing conditions tighten
for an extended period of time
Sources: Board of Governors of the Federal Reserve System, European Central Bank (ECB), Swiss National Bank, Bloomberg, Morgan Stanley
11
Livermore’s Strategy
The financial portfolio is focused on fixed income instruments which generate regular cash flows
and include exposure mainly to senior secured and usually broadly syndicated US loans and to a
limited extent emerging market debt through investments in CLOs This part of the portfolio is
geographically focused on the US
Strong emphasis is given to maintaining sufficient liquidity and low leverage at the overall portfolio
level and to re-invest in existing and new investments along the economic cycle
Financial portfolio
The Company manages a financial portfolio valued at USD 139 2m as at 31 December 2018, which
is invested mainly in fixed income and credit related securities
The following is a table summarizing the financial portfolio as of year-end 2018
Name
2018
Book Value US $m
2017
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 1
38 4
1 1
1 1
1 5
139 2
26 2
165 4
97 2
25 5
1 0
1 2
2 0
126 9
34 2
161 1
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
Continuing the trend in 2017, the leveraged loan market performed well in the first half of 2018 with
the Credit Suisse Leveraged Loan Index recording a total return of 2 38% The demand for floating rate
instruments remained strong on the back of rate increases by the US Federal Reserve, and this allowed
borrowers to take advantage of the favourable financing conditions and reduce the spread they pay on their
loans as well as address near term maturities and reduce the risk of default in the near term According to
JP Morgan, retail loan funds experienced about USD 15 9bn of inflows in the first nine months of 2018 In
the last quarter of the year, however, concerns of slowing global economic growth, trade tensions between
12
Annual Report 2018
the US and China, as well as geopolitical risks such as “Brexit” took hold driving credit spreads wider Loan
repricing activity slowed down and retail funds experienced outflows as prospects of higher rates in the
US diminished The last two month of 2018 was marked by increased volatility and lack of liquidity in the
Leveraged Loan market and the LSTA/S&P Leveraged Loan Index dropped about 5% from its peak Retail
funds saw about USD 20bn of outflows with USD 15bn in December alone Default rates, however, have
continued to stay below average levels (1 63% for the S&P/LSTA Leverage Loan Index as of 31 December
2018 vs 3% long term average) and the near to mid-term outlook remains benign due to looser covenants
and very few near-term loan maturities While default rates can stay low, we expect price volatility to stay
at higher levels than prior years From the perspective of long-term CLO equity investors, an environment
of technically-driven loan price volatility without an increase in defaults over the near to medium term is
extremely attractive
The CLO market started on a very strong footing in 2018 with demand for floating rate paper outstripping
supply The cost of financing for new CLOs in the first quarter declined to lowest levels seen in a decade As
supply caught up to the demand, the tightening bias reversed By the end of the year, the cost of financing
for new CLOs had risen considerably following the rise in spreads in the credit markets Nonetheless,
2018 was a very active year for CLOs According to S&P Capital IQ, new US CLO issuance in 2018 totalled
a record USD 128 9 billion In addition, 2018 also saw significant volume in resets (USD 122 1bn) and
refinancing (USD 33 8bn)
The Company’s CLO and warehousing portfolio generated cash flow of USD 29 7m and a net return of
about USD 14m in 2018 The Company converted four warehouses into CLOs and generated about USD
4m in carry during the year Management also refinanced one of its CLOs to reduce the cost of financing
substantially as well as extended the reinvestment period of another CLO by 5 years As signs of risk of loan
price volatility increased around the middle of the year, management sold its short reinvestment period
CLO positions at very high levels As of year-end 2018, the Company had two open warehouses, one of
which has been converted to a CLO as of the date of publication of 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 2018, 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
13
The Company’s CLO portfolio is divided into the following geographical areas:
US CLOs
Global Credit CLOs
European CLOs
2018
Amount
US $000
Percentage
2017
Amount
US $000
Percentage
97,081
100 00%
96,536
99 28%
-
-
-
-
-
699
97,081
100%
97,235
-
0 72%
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 Israel and 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 over the next
couple of years During the reporting period distributions of USD 0 7m were received from SRS Private
The following summarizes the book value of the private equity funds as at year-end 2018
Name
Evolution Venture (Israel)
Elephant Capital (India)
Panda Capital (China)
Da Vinci (Russia)
Other investments
Total
Book Value US $m
3 5
0 7
0 4
0 1
1 7
6 4
Evolution Venture: Evolution is an Israel focused Venture Capital fund It invests in early stage
technology companies The fund has now exited its investment in WhiteSmoke and written off the
Wi-Fi solutions and digital radio investments Its main asset is its investment in the virtualization
technology company, which continues to perform well
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 2018, the fund reported an unaudited
NAV of 0 37 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
14
Annual Report 2018
The following table reconciles the review of activities to the Company’s financial assets as of 31
December 2018
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
2018
Book Value US $m
139 2
6 4
145 6
138 1
7 5
145 6
Events after the reporting date
One of the two warehouse facilities that the Company invested in, during 2018, with a carrying
amount as at 31 December 2018 of USD 15m, was closed in May 2019 For the closed warehouse,
Livermore’s investment amount plus net carry amounting to a total of USD 15 3m became receivable
in May 2019
After a successful application the Company became a tax resident in the Republic of Cyprus as from
18 January 2019
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 25 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 2018
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 63), 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 52), 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 twenty 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 51), 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 18 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 Ron is also the founder and owner of Israel Cycling Academy a non-profit professional
cycling team
Augoustinos Papathomas (age 56), Non-Executive Director
Augoustinos joined the Board in February 2019 He is a trained and qualified UK Chartered
Accountant He is the senior Partner of APP Audit and APP Advisory in Cyprus with over 30 years
of experience in assurance, taxation and advisory for local and international clients He is also an
insolvency practitioner with experience in many liquidations and receiverships Augoustinos has
served as a director in various bodies and organisations and currently he is the chairman of the
Famagusta Chamber of Commerce and Industry in Cyprus
16
Annual Report 2018 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:
•
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
17
Substantial Shareholdings
As at 24 April 2019 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
Ron Baron
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 23 to the financial statements
18
Annual Report 2018 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
The Board Constitution and Procedures
The Company is controlled through the Board of Directors, which throughout 2018 comprised one Non-
Executive Director until the appointment of a new Non-Executive Director in February 2019 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 Throughout 2018, this committee had one member until the appointment of a
new Non-Executive Director in February 2019 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 Throughout 2018, this committee had one
member until the appointment of a new Non-Executive Director in February 2019 The duties of the
Committee include monitoring the auditor’s performance and reviewing accounting policies and
financial reporting procedures
19
The Quoted Company Alliance (QCA) Code
The Directors recognise the importance of good corporate governance and have chosen to apply
the Quoted Companies Alliance Corporate Governance Code (the ‘QCA Code’) The QCA Code was
developed by the QCA in consultation with a number of significant institutional small company
investors, as an alternative corporate governance code applicable to AIM companies The underlying
principle of the QCA Code is that “the purpose of good corporate governance is to ensure that the
company is managed in an efficient, effective and entrepreneurial manner for the benefit of all
shareholders over the longer term” The Directors anticipate that whilst the Company will continue
to comply with the QCA Code, given the Group’s size and plans for the future, it will also endeavour
to have regard to the provisions of the UK Corporate Governance Code as best practice guidance to
the extent appropriate for a company of its size and nature To see how the Company addresses the
key governance principles defined in the QCA Code please refer to the table listed on the Company’s
website Further information on compliance with the QCA Code will be provided in our next annual
report
A complete index of the disclosures required by the QCA Code, including those on the Company’s
website, can be found at http://www livermore-inv com/CorporateGovernance
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 misstatement 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
20
Annual Report 2018 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
21
Remuneration Report
The Directors’ emoluments, benefits and shareholdings during the year ended 31 December 2018
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
2018
US $000
Total
emoluments
2017
US $000
Richard Barry
Rosenberg
10/06/05
Noam Lanir
10/06/05
Ron Baron
01/09/07
60
400
350
-
45
-
71
500
131
945
85
695
4,304
4,654
2,828
The dates are presented in day / month / year format
Directors’ Interests
Interests of Directors in ordinary shares
Notes
As at 31 December 2018
As at 31 December 2017
Number of
Ordinary
Shares
Percentage of
ordinary share
capital
Number of Ordinary
Shares
Percentage of
ordinary share
capital
133,936,588
76 620%
133,936,588
76 620%
25,456,903
14 560%
25,456,903
14 560%
15,000
0 01%
15,000
0 01%
Noam Lanir
Ron Baron
a)
b)
Richard
Barry Rosenberg
Notes:
a) Noam Lanir has its interest in 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 2016 a loan of USD 2 500m was made to RB Investments GMBH, a company owned by
Ron Baron, for the acquisition of shares in the Company Interest was payable on the loan at
6-month US LIBOR plus 0 25% per annum and the loan was secured on the shares acquired
The loan, including interest accrued, was repayable on the earlier of the employee leaving the
Company or August 2019 The loan including interest accrued was settled during 2018
22
Annual Report 2018
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:
• 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
•
•
•
•
•
23
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 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
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 28 of the financial statements
Share Capital
There was no change in the authorised share capital during the year to 31 December 2018 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
2018 are disclosed in note 23 to the financial statements
By order of the Board of Directors
Chief Executive Officer
21 May 2019
24
Annual Report 2018
Independent Auditor’s Report to the
Members of Livermore Investments
Group Limited
Opinion
We have audited the consolidated financial statements of Livermore Investments Group Limited
(the ‘’Company’’) and its consolidated subsidiaries Livermore Investments Cyprus Limited and
Livermore Capital AG (the ‘’Group’’), which comprise the consolidated statement of financial
position as at 31 December 2018, the consolidated statements of profit or loss, comprehensive
income, changes in equity and cash flows for the year then ended, and notes to the consolidated
Financial statements, including a summary of significant accounting policies
In our opinion, the accompanying consolidated financial statements give a true and fair view of
the consolidated financial position of the Group as at 31 December 2018, and of its consolidated
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
Basis for Opinion
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
the Audit of the Consolidated Financial Statements’’ section of our report We are independent of
the Group in accordance with the ‘’International Ethics Standards Board for Accountants’ Code
of Ethics for Professional Accountants’’ (IESBA Code) together with the ethical requirements that
are relevant to our audit of the consolidated Financial statements in Cyprus, and we have fulfilled
our other ethical responsibilities in accordance with these requirements and the IESBA Code We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion
Emphasis of Matter – Uncertain Outcome of a Legal Claim
We draw attention to note 25 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
Company uses on its behalf Our opinion is not modified in respect of this matter
25
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance
in our audit of the consolidated financial statements of the current period These matters were
addressed in the context of our audit of the consolidated financial statements as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these matters
We have determined the matter described below to be the key audit matter to be communicated
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 $50m 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 four warehouse
facilities, of which two have not been converted
to Collateralized Loan Obligations (CLOs) as at
the year end One out of these two warehouses
were converted to a CLO in April 2019 The other
one was not converted to a CLO before the date of
this report 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 actual
and expected returns which occur in the post
year end period on their conversion to CLO
Due to the use of significant judgments 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 a 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; and
considering the adequacy of consolidated
financial statement disclosures in relation to
the valuation methodologies used for each
class of level 3 financial assets
26
Annual Report 2018 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 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 scepticism throughout the audit We also:
•
•
Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those
risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our
opinion The risk of not detecting a material misstatement resulting from fraud is higher than
for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control
Obtain an understanding of internal control relevant to the audit in order to design audit
27
•
•
•
•
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
information
Obtain
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
sufficient appropriate audit evidence
regarding
financial
the
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 Group’s members as a body
and for no other purpose We do not, in giving this opinion, accept or assume responsibility for any
other purpose or to any other person to whose knowledge this report may come to
The engagement partner on the audit resulting in this independent auditor’s report is Mr Nicos
Mouzouris
28
Annual Report 2018 Nicos Mouzouris
Certified Public Accountant and Registered Auditor
for and on behalf of
Grant Thornton (Cyprus) Ltd
Certified Public Accountants and Registered Auditors
Limassol, 21 May 2019
29
Livermore Investments Group Limited
Consolidated Statement of Financial Position as at 31 December 2018
Note
2018
US $000
2017
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 and cash equivalents
Total assets
Equity
Share capital
Share premium
Other reserves
Retained earnings
Total equity
Liabilities
Current liabilities
Trade and other payables
Total liabilities
Total equity and liabilities
Net asset value per share
4
5
8
9
9
4
5
10
11
11
13
21
97,081
6,387
5,205
-
108,694
3,168
41,067
1,117
26,214
71,566
8
97,235
7,129
5,426
2,553
112,351
3,166
28,612
1,118
34,175
67,071
180,260
179,422
-
169,187
(20,279)
25,425
-
169,187
(37,978)
44,236
174,333
175,445
5,927
5,927
3,977
3,977
5,927
180,260
3,977
179,422
Basic and diluted net asset value per share (US $)
15
1 00
1 00
These financial statements were approved by the Board of Directors on 21 May 2019
The notes 1 to 29 form part of these consolidated financial statements
30
Annual Report 2018
Livermore Investments Group Limited
Consolidated Statement of Profit or Loss for the year ended 31 December 2018
Investment income
Interest and distribution income
Changes in value of investments
Note
17
18
2018
US $000
2017
US $000
31,541
(17,484)
14,057
28,043
(5,918)
22,125
Administrative expenses
19
(8,869)
(6,204)
Operating profit
Finance costs
Finance income
Profit before taxation
Taxation charge
Profit for the year
Earnings per share
20
20
21
5,188
(245)
233
5,176
(14)
5,162
15,921
(19)
488
16,390
(18)
16,372
Basic and diluted earnings per share ( US $)
22
0 03
0 09
The profit for the year is wholly attributable to the owners of the parent
The notes 1 to 29 form part of these consolidated financial statements
31
Livermore investments Group Limited
Consolidated Statement of Comprehensive Income for the year ended 31 December 2018
Profit for the year
Other comprehensive income:
Items that will be reclassified subsequently to 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 gains
•
capital return
Note
2018
US $000
2017
US $000
5,162
16,372
12
-
5,174
16,372
313
1,400
1,899
Total comprehensive income for the year
6,887
18,271
The total comprehensive income for the year is wholly attributable to the owners of the parent
The notes 1 to 29 form part of these consolidated financial statements
32
Annual Report 2018 Livermore Investments Group Limited
Consolidated Statement of Changes in Equity for the year ended 31 December 2018
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 2017
Cancellation of shares
11
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
Dividends
Transfer on expiry of options
Transactions with owners
Profit for the year
Other comprehensive income:
Financial assets at fair value
through OCI
•
•
fair value gains
capital return
Foreign exchange gains arising from
translation of subsidiaries
Transfer of realised losses
Total comprehensive income for the
year
Balance at 31 December 2018
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
215,499 (46,312)
77
(46,312)
46,312
(46,312)
46,312
169,187
-
-
-
-
-
-
-
-
-
-
-
-
-
169,187
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
77
-
(77)
(77)
-
-
-
-
-
-
-
The notes 1 to 29 form part of these consolidated financial statements.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12
-
12
12
(39,919)
27,829
157,174
-
-
-
-
-
-
-
16,372
16,372
1,899
(35)
-
35
1,899
-
1,864
16,407
18,271
(38,055)
44,236
175,445
-
(7,999)
(7,999)
-
-
-
77
-
(7,922)
(7,999)
5,162
5,162
313
1,400
-
-
-
-
16,051
(16,051)
313
1,400
12
-
17,764
(10,889)
6,887
(20,291)
25,425
174,333
33
Livermore Investments Group Limited
Consolidated Statement of Cash Flows for the year ended 31 December 2018
Note
2018
US $000
2017
US $000
Cash flows from operating activities
Profit before tax
Adjustments for
Depreciation
Interest expense
Interest and distribution income
Bank interest income
Changes in value of investments
Exchange differences
20
17
20
18
20
Changes in working capital
Decrease in trade and other receivables
Increase / (decrease)in trade and other payables
Cash flows from operations
Interest and distributions received
Settlement of litigation
24
Tax paid
Net cash from operating activities
Cash flows from investing activities
Acquisition of investments
Proceeds from sale of investments
Proceeds from capital return
Net cash used in investing activities
Cash flows from financing activities
Interest paid
Dividends paid
5,176
16,390
8
30
7
19
(31,541)
(28,043)
(233)
17,484
215
(8,861)
2,576
1,950
(4,335)
31,748
-
(14)
27,399
(91)
5,918
(397)
(6,197)
2,301
(3,825)
(7,721)
28,304
(385)
(18)
20,180
(120,027)
91,623
1,400
(27,004)
(120,675)
90,140
-
(30,535)
(134)
(7,999)
(125)
(15,000)
34
Annual Report 2018 Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Exchange differences on cash and cash equivalents
Translation differences on foreign operations’ cash and
cash equivalents
Note
2018
US $000
(8,133)
(7,738)
34,175
(215)
(8)
2017
US $000
(15,125)
(25,480)
59,227
428
-
Cash and cash equivalents at the end of the year
10
26,214
34,175
The notes 1 to 29 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 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 basis
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 8)
The Directors have reviewed the accounting policies used by the Company and consider them
to be the most appropriate
3 Accounting Policies
The significant accounting policies applied in the preparation of the financial statements are
as follows:
3 1 Adoption of new and revised IFRS
As from 1 January 2018, the Company adopted any applicable new or revised IFRS and
relevant amendments which became effective, and also were endorsed by the European
Union IFRS 9 “Financial Instruments” was applied on 1 January 2016, earlier than its
effective date
The adoption of the above at 1 January 2018 did not have any material effect on the
financial statements
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
36
Annual Report 2018
not yet been endorsed by the EU, for the year ended 31 December 2018:
•
IFRS 14: “Regulatory Deferral Accounts”
•
•
•
IFRS 16: “Leases”
IFRS 17: “Insurance Contracts”
IFRIC 23: “Uncertainty over
Treatments”
Income Tax
• Annual Improvements to IFRS 2015–2017 Cycle
• Amendment to
IFRS 3: “Definition of a
Business”
• 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”
Endorsed by
the EU
Effective date
(IASB)
No
Yes
No
Yes
Yes
No
Yes
No
1 January 2016
1 January 2019
1 January 2021
1 January 2019
1 January 2019
1 January 2020
1 January 2019
to
determined
be
• Amendments to IAS 1 and IAS 8: “Definition of
Material”
No
1 January 2020
• Amendment to
IAS 19: “Plan Amendment,
Curtailment or Settlement”
Yes
1 January 2019
• Amendment to IAS 28: “Long-term Interests in
Associates and Joint Ventures”
Yes
1 January 2019
• Amendments to References to the Conceptual
Framework in IFRS Standards
No
1 January 2020
The Board of Directors expects that when the above Standards or Interpretations become
effective in future periods, they will not have any 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
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
37
The Directors have determined that 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:
(a) obtains funds from one or more investors for the purpose of providing those investors with
(b)
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
(c) measures and evaluates the performance of substantially all of its investments on a fair
value basis
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 The financial statements consolidate the Company and its
subsidiaries providing such services (note 8 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 Current assets are those which, in accordance with IAS 1 Presentation Of Financial
Statements are:
• expected to be realised within the Company’s normal operating cycle, via sale or
consumption, or
• held primarily for trading, or
• expected to be realised within 12 months from the reporting date, or
• cash and cash equivalents not restricted in their use
All other assets are non-current
3 4
Interest and distribution income
•
Interest income is recognised based on the effective interest method
38
Annual Report 2018
• 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 5 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
The results and financial position of consolidated subsidiaries that have a functional
currency different from US dollars are translated into the presentation currency as follows:
(a) assets and liabilities are translated at the closing rate at the reporting date;
(b)
income and expenses and also cash flows are translated at an average exchange rate
(unless this average is not a reasonable approximation of the cumulative effect of the rates
prevailing on the transaction dates, in which case the items are translated at the rates
prevailing at the dates of the transactions); and
exchange differences arising are recognised in other comprehensive income within the
translation reserve Such translation exchange differences are reclassified to profit or loss
in the period in which the foreign operation is disposed of
(c)
3 6 Taxation
Current tax is the tax currently payable based on taxable profit for the year in accordance
with the tax laws applicable and enacted
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
3 7 Equity instruments
Equity instruments issued by the Company are recorded at proceeds received, net of direct
issue costs
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
39
3 8 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
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) those to be measured at fair value (either through other comprehensive income, or through
profit or loss), and
(b) those to be measured at amortised cost
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
when the asset is derecognised or impaired Interest income from these financial assets is
40
Annual Report 2018
recognised based on the effective interest rate method
The classification of debt instruments 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
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 9 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 10 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 11 Segment reporting
In making investment decisions, Management assesses individual investments and then, in
41
analysing their performance, it receives and uses information for each investment product
separately rather than based on any segmental information Given that, Management
regards that the Company’s activities fall under a single operating segment
3 12 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
Management exercises significant judgement in determining the appropriate classification
of the financial assets of the Company The Directors determine the appropriate classification
of the Company’s financial assets based on Livermore’s business model An entity’s business
model refers to how an entity manages its financial assets in order to generate cash
flows, considering all relevant and objective evidence The factors considered include
the contractual terms and characteristics which are very carefully examined, and also the
Company’s intentions and expected needs for realisation of the financial assets
All investments (except from certain equity instruments that are designated at fair value
through other comprehensive income) are classified as financial assets 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
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
42
Annual Report 2018
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
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
2018
US $000
2017
US $000
97,081
97,081
39,590
1,477
41,067
97,235
97,235
26,647
1,965
28,612
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
5 Financial assets at fair value through other comprehensive income
Non-current assets
Private equities
Current assets
Hedge funds
2018
US $000
2017
US $000
6,387
7,129
1,117
1,118
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
43
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 and liabilities 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
7 1 Valuation of financial assets
•
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 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
44
Annual Report 2018
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 are valued at fair value as determined on an adjusted net
asset valuation basis
45
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:
2018
US
$000
Level 1
2018
US
$000
Level 2
2018
US
$000
Level 3
2018
US
$000
Total
2017
US
$000
Level 1
2017
US
$000
Level 2
2017
US
$000
Level 3
2017
US
$000
Total
1,100
97,081
38,490
136,671
1,132
97,235
25,515
123,882
Assets
Fixed income
investments
Private equities
Public equity investments
1,477
Hedge funds
Investments in
subsidiaries
-
-
-
-
-
1,117
6,387
-
-
6,387
1,477
1,117
-
5,205
5,205
-
1,965
-
-
-
-
1,118
7,129
-
-
7,129
1,965
1,118
-
5,426
5,426
Liabilities
-
-
-
-
-
-
-
-
2,577
98,198
50,082
150,857
3,097
98,353
38,070
139,520
The methods and valuation techniques used for the purpose of measuring fair value are
unchanged compared to the previous reporting year
No financial assets or liabilities have been transferred between different levels
46
Annual Report 2018
Financial assets within level 3 can be reconciled from beginning to ending balances as follows:
At fair value
through OCI
At fair value
through
profit or loss –
Investments in
subsidiaries
Private equities
US $000
Fixed Income
investments
US $000
US $000
As at 1 January 2017
Purchases
Settlement
Gains / (losses)
recognised in:
5,634
-
(124)
-
Profit or loss
-
- Other
comprehensive
income
As at 1 January 2018
Purchases
Settlement
Gains / (losses)
recognised in:
-
Profit or loss
- Other
comprehensive
income
1,619
7,129
-
(1,055)
-
313
17,251
83,500
(75,500)
264
-
25,515
75,000
(62,500)
475
-
4,339
1,200
-
(113)
-
5,426
-
-
(221)
-
Total
US $000
27,224
84,700
(75,624)
151
1,619
38,070
75,000
(63,555)
254
313
As at 31 December 2018
6,387
38,490
5,205
50,082
47
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
subsidiaries
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 gains / (losses) for 2017
-
264
(113)
151
1,619
1,619
-
264
-
1,619
(113)
1,770
At fair value
through OCI
At fair value
through profit
or loss
Investments in
subsidiaries
Private equities
US $000
Fixed Income
investments
US $000
US $000
Total
US $000
2018
Profit or loss
-
-
Financial assets held at
year-end
Financial assets not
held at year-end
Other comprehensive income
-
Financial assets held at
year-end
Total gains / (losses) for 2018
-
-
313
313
990
(515)
-
475
(221)
-
-
(221)
769
(515)
313
567
48
Annual Report 2018 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
subsidiaries
Private equities
investments
US $000
US $000
US $000
Total
US $000
-
264
(113)
151
2017
Profit or loss
-
Financial assets held at
year-end
Other comprehensive income
-
Financial assets held at
year-end
Total gains / (losses) for 2017
(113)
1,770
1,619
1,619
-
264
-
1,619
At fair value
through OCI
At fair value
through profit
or loss
Investments in
subsidiaries
Private equities
investments
Fixed Income
US $000
US $000
US $000
Total
US $000
2018
Profit or loss
-
-
Financial assets held at
year-end
Financial assets not
held at year-end
Other comprehensive income
-
Financial assets held at
year-end
Total gains / (losses) for 2018
-
-
313
313
990
(515)
-
475
(221)
-
-
(221)
769
(515)
313
567
The Company has not developed any quantitative unobservable inputs for measuring the fair
value of its level 3 financial assets at 31 December 2018 and 2017 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 The net asset value of a warehouse is primarily driven by the
fair value of its underlying loan asset portfolio (as determined by the warehouse’s manager)
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
Investments in subsidiaries
Unconsolidated subsidiaries
As at 1 January
Additions
Fair value loss
As at 31 December
2018
US $000
2017
US $000
5,426
-
(221)
5,205
4,339
1,200
(113)
5,426
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
2018 are as follows:
49
Name of Subsidiary
Place of
incorporation
Holding
Proportion
of voting
rights and
shares held
Principal
activity
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
50
Annual Report 2018 9 Trade and other receivables
2018
US $000
2017
US $000
Financial items
Accrued interest and distribution
income
Amounts due by related parties
(note 23)
Non-Financial items
Prepayments
VAT receivable
Allocated as:
Current assets
Non-current assets (note 23(2))
1
3,104
3,105
60
3
3,168
3,168
-
3,168
2
5,577
5,579
130
10
5,719
3,166
2,553
5,719
Allowance for impairment
The allowance related to amounts due by subsidiaries, which were regarded as credit-impaired
and had been assessed on an individual basis
As at 1 January
Eliminated upon waiver of
balances (notes 8 and 23)
As at 31 December
2018
US $000
-
-
-
2017
US $000
2,940
(2,940)
-
For the remaining receivables of a financial nature, no lifetime expected credit losses and no
corresponding allowance for impairment have been recognised, as their default rates have
been determined to be close to 0%
No receivable amounts have been written-off during either 2018 or 2017
51
10 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
2018
US $000
2017
US $000
26,214
34,175
Cash and cash equivalents
26,214
34,175
11 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 2017
Cancellation of shares
As at 31 December 2017 and 31 December 2018
174,813,998
Number of
shares
Share premium
arising
US $000
304,120,401
(129,306,403)
215,499
(46,312)
169,187
Treasury shares
As at 1 January 2017
Cancellation of shares
Number of
shares
129,306,403
(129,306,403)
Share premium
arising
US $000
46,312
(46,312)
As at 31 December 2017 and 31 December 2018
-
-
In 2017, the Company cancelled 129,306,403 treasury shares registered in the name of the
Company, as a capital reduction
52
Annual Report 2018
12 Share options
The Company had a share option scheme under which it granted share options to employees
for acquiring ordinary shares of the Company The options lapsed at the earliest of the expiry
date of exercise period or the termination of the corresponding employee’s service The last
tranche of options lapsed unexercised during the year
Outstanding and
exercisable options
As at 1 January and 31 December 2017
Options expired
As at 31 December 2018
Number of
options
Exercise price
GBP
500,000
(500,000)
-
0 30
0 30
The Company has no outstanding share options at the end of the period
13 Trade and other payables
Financial items
Trade payables
Amounts due to related parties (note 23)
Accrued expenses
2018
US $000
2017
US $000
44
3,731
2,152
5,927
50
2,828
1,099
3,977
14 Dividends
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
15 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 any potentially
dilutive shares in existence as at 31 December 2018 and 31 December 2017
53
Net assets attributable to
ordinary shareholders (USD 000)
Closing number of ordinary
shares in issue
Basic net asset value per share
(USD)
Net assets attributable to
ordinary shareholders (USD 000)
Dilutive share options – exercise
amount
Net assets attributable to
ordinary shareholders including
the effect of potentially diluted
shares (USD 000)
Closing number of ordinary
shares in issue
2018
174,333
2017
175,445
174,813,998
174,813,998
1 00
174,333
-
1 00
175,445
203
174,333
175,648
174,813,998
174,813,998
Dilutive share options
-
500,000
Closing number of ordinary
shares including the effect of
potentially diluted shares
Diluted net asset value per
share (USD)
174,813,998
175,313,998
1 00
1 00
The Share options (note 12) had a dilutive effect on the net asset value per share for 2017,
given that their exercise price was lower than the net asset value per share at 31 December 2017
16 Segment reporting
The company’s activities fall under a single operating segment
The Company’s investment income and its investments are divided into the following
geographical areas:
Investment Income
Other European countries
United States
India
Asia
2018
US $000
(217)
13,327
(89)
(944)
2017
US $000
156
22,255
(68)
(218)
54
Annual Report 2018
Investments
Other European countries
United States
India
Asia
12,077
-
2,209
138,310
712
9,626
150,857
22,125
79
3,047
125,407
1,600
9,466
139,520
Investment income, comprising interest and distribution income as well as gains or losses on
investments, is allocated on the basis of the issuer’s location Investments are also allocated
based on the issuer’s location
The Company has no significant dependencies, in respect of its investment income, on any
single issuer
17 Interest and distribution income
Interest from investments
Distribution income
2018
US $000
101
31,440
31,541
2017
US $000
115
27,928
28,043
55
Interest and distribution income is analysed between the Company’s different categories of
financial assets, as follows:
2018
2017
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
29,728
29,803
868
868
75
-
27,826
27,901
6
6
30,596
30,671
75
27,832
27,907
Private equities
-
844
844
-
96
Financial assets at
amortised cost
Loan receivable
(note 23)
26
101
-
26
31,440
31,541
40
115
96
40
-
27,928
28,043
The Company’s distribution income derives from multiple issuers The Company does not have
any concentration to any single issuer
18 Changes in value of investments
Fair value losses on financial
assets through profit or loss
Fair value loss on investment in
subsidiaries
Bank custody fees
2018
US $000
(17,159)
(221)
(104)
(17,484)
2017
US $000
(5,699)
(113)
(106)
(5,918)
The investments disposed of had the following cumulative (i e from the date of their
acquisition up to the date of their disposal) financial impact in the Company’s net asset position:
56
Annual Report 2018
Disposed in 2018
Disposed in 2017
Realised
(losses)/
gains*
Cumulative
distribution or
interest
Total
financial
impact
Realised
(losses)/
gains*
Cumulative
distribution
or interest
Total
financial
impact
US $000
US $000
US $000
US $000
US $000
US $000
(7,703)
31,875
24,172
(11,567)
19,686
8,119
622
1
623
(7,081)
31,876
24,795
(11,567)
19,686
8,119
Financial assets
at fair value
through
profit or loss
Fixed income
investments
Public equity
investments
Financial assets
at fair value
through OCI
Private equities
(16,051)
1,777
(14,274)
35
-
(23,132)
33,653
10,521
(11,532)
19,686
35
8,154
* difference between disposal proceeds and original acquisition cost
19 Administrative expenses
2018
US $000
2017
US $000
Directors’ fees and expenses
Other salaries and expenses
Professional fees
Legal expenses
Office costs
Depreciation
Other operating expenses
Audit fees
5,730
156
1,896
27
382
8
588
82
8,869
3,608
152
1,385
19
409
7
512
112
6,204
Throughout 2018 the Company employed 4 members of staff (2017: 4) Two of those members are
the Company’s executive Directors
Other salaries and expenses include USD 13,445 of social insurance and similar contributions (2017:
USD 13,212), as well as USD 3,252 of defined contributions plan costs (2017: USD 3,223)
57
20 Finance costs and (income)
Finance costs
Bank interest expense
Foreign exchange loss
Finance income
Bank interest income
Foreign exchange gain
21 Taxation
Current tax charge
2018
US $000
2017
US $000
30
215
245
(233)
-
12
19
-
19
(91)
(397)
(469)
2018
US $000
14
2017
US $000
18
The Company is a British Virgin Islands (BVI) international business company and, under the BVI
laws, was not subject to corporation tax for either 2018 or 2017 The current tax charge relates
to the results of the Company’s consolidated subsidiaries in Switzerland and Cyprus (note 8)
58
Annual Report 2018
22 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 year
Diluted earnings per share is calculated after taking into consideration other potentially dilutive
shares in existence during the relevant financial year
Profit for the year attributable to
ordinary shareholders of the parent
(USD 000)
Weighted average number of ordinary
shares outstanding
2018
US $000
2017
US $000
5,162
16,372
174,813,998
174,813,998
Basic earnings per share (USD)
0 03
0 09
Weighted average number of ordinary
shares outstanding
Dilutive effect of share options
174,813,998
174,813,998
Dilutive effect of share options
-
183,891
Weighted average number of ordinary
shares including the effect of
potentially dilutive shares
174,813,998
174,997,889
Diluted earnings per share (USD)
0 03
0 09
The Share options (note 12) had a dilutive effect on the weighted average number of ordinary
shares only for 2017, given that their exercise price was 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
59
23 Related party transactions
The Company is controlled by Groverton Management Ltd, an entity owned by Noam Lanir, which
at 31 December 2018 held 76 62% (2017: 76 62%) of the Company’s effective voting rights
2018
US $000
2017
US $000
Amounts receivable from unconsolidated
subsidiaries
Sandhirst Limited
104
24
(1)
Amounts receivable from key management
Directors’ current accounts
Loan receivable
Amounts payable to unconsolidated
subsidiaries
3,000
-
3,000
3,000
2,553
5,553
Livermore Israel Investments Ltd
(3,522)
(2,603)
Amounts payable to other related party
Loan payable
Amounts payable to other related party
Loan payable
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
(149)
(149)
(48)
(12)
(60)
795
4,804
60
71
1,084
6,814
(149)
(149)
(69)
(7)
(76)
795
2,728
59
26
994
4,602
(1)
(2)
(3)
(5)
(4)
(3)
(5)
(6)
(7)
60
Annual Report 2018
(1) The amounts receivable from unconsolidated subsidiaries and the Director’s current accounts with
debit balances are interest free, unsecured, and have no stated repayment date
(2) A loan of USD 2 500m was made to a key management employee, during 2016, for the acquisition
of shares in the Company Interest was 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, was
repayable on the earlier of the employee leaving the Company or August 2019 The loan including
interest accrued was settled during 2018 For 2017, the loan was included within trade and other
receivables (note 9)
(3) The amounts payable to unconsolidated subsidiaries and Director’s current accounts with credit
balances are interest free, unsecured, and have no stated repayment date
(4) A loan with a balance at 31 December 2018 of USD 0 149m (31 December 2017: 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 13)
(5) 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
(6) These payments were made directly to companies which are related to the Directors
(7) Other key management fees are included within professional fees (note 19)
During 2017, the Company waived receivable amounts from its subsidiaries Livermore Properties
Limited (USD: 3 103m) and Sandhirst Limited (USD: 1 040m) as a means of capital contribution to
the subsidiaries (note 8)
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 2018 or 2017
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 2018 held a total of 1 941m
shares at a value of USD 0 618m (2017: 1 941m shares at a value of USD 0 845m) which represents
4% of its effective voting rights The investment in Babylon Ltd is held through the subsidiary
Livermore Israel Investments Ltd
24 Provisions
The movement in provisions for the year is as follows:
As at 1 January
Settlements
As at 31 December
2018
US $000
2017
US $000
-
-
-
385
(385)
-
61
25 Litigation
Fairfield Sentry Ltd vs custodian bank and beneficial owners
One of the custodian banks that the Company used 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 If the claim proves to be successful Livermore will have to
compensate the custodian bank since the transaction was carried on Livermore’s 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
26 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 2018
27 Events after the reporting date
One of the two warehouse facilities that the Company invested in, during 2018, with a
carrying amount as at 31 December 2018 of USD 15 0m, was closed in May 2019 For the
closed warehouse, Livermore’s investment amount plus net carry amounting to a total of USD
15 3m became receivable in May 2019
After a successful application the Company became a tax resident in the republic of Cyprus as
at 18 January 2019
There were no other material events after the end of the reporting year, which have a bearing
on the understanding of these financial statements
28 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 29
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
62
Annual Report 2018
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 2018 is
the following:
2018
US $000
2018
US $000
2018
US $000
2017
US $000
2017
US $000
2017
US $000
Financial
assets
Financial
liabilities
Net value
Financial
assets
Financial
liabilities
Net value
British Pounds (GBP)
Euro
Swiss Francs (CHF)
Israel Shekels (ILS)
2,690
482
3,507
5,814
(140)
(27)
(50)
(3,522)
2,550
455
3,457
2,292
1,587
994
4,757
6,253
(111)
(211)
(774)
(2,603)
1,476
783
3,983
3,650
Total
12,493
(3,739)
8,754
13,591
(3,699)
9,892
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 2018 would have the following impact A 10% decrease of the following
currencies against USD would have an approximately equal but opposite impact
2018
US $000
2018
US $000
2017
US $000
2017
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
184
46
346
229
805
71
-
-
-
71
93
78
398
365
934
55
-
-
-
55
The above analysis assumes that all other variables in particular, interest rates, remain constant
63
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
As at 31 December 2018 the Company had no financial liabilities that bore an interest rate risk
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
2018
US $000
1,100
26,214
27,314
2017
US $000
1,132
34,175
35,307
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
2018
US $000
2018
US $000
2017
US $000
2017
US $000
Profit or loss
Other
comprehensive
income
Profit or loss
Other
comprehensive
income
(160)
262
102
-
-
-
(148)
342
194
-
-
-
Financial assets
•
•
fair value changes
interest changes
The above analysis assumes that all other variables, in particular currency rates, remain constant
64
Annual Report 2018
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 Investments in the equity tranche of US CLOs represent
a levered exposure to senior secured corporate loans in the US, and are thus subject to many
risks including but not limited to lack of liquidity, credit or default risk, and risks related to
movements in market prices as well as the variations of risk premium in the market
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 99% change in the net asset value as at 31 December
2018 (2017: 7 24%), and would have the following impact (either positive or negative,
depending on the corresponding sign of the change):
2018
US $000
2018
US $000
2017
US $000
2017
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
-
13,815
13,815
112
-
112
-
12,585
12,585
112
-
112
Derivatives
The Investment Manager may use derivative instruments in order to mitigate market risk
or to take a directional investment These provide a limited degree of protection and
would not materially impact the portfolio returns if a large market movement did occur
65
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 2018 is as follows:
2018
US $000
2017
US $000
Financial assets:
At amortised cost
•
•
Trade and other receivables
Cash at bank
3,105
26,214
29,319
Financial assets at fair value through profit or loss
136,671
165,990
5,579
34,175
39,754
123,884
163,638
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
66
Annual Report 2018
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 2018 or 2017
At 31 December the credit rating distribution of the Company’s asset portfolio subject to
credit risk was as follows:
Rating
AA
A
A-
B
BB+
BBB
Not Rated
2017 Amount
US $000
Percentage
2016 Amount
US $000
Percentage
18,632
11 2%
16,563
2,703
3,570
2,073
1,101
1,309
136,602
165,990
1 6%
2 2%
1 2%
0 7%
0 8%
82 3%
100%
9,768
7,111
-
1,132
734
128,330
163,638
10 1%
6 0%
4 4%
-
0 7%
0 4%
78 4%
100%
Included within “not rated” amounts are investments in loan market through CLOs (equity
tranches) of USD 97 080m and open warehouses of USD 38 490m (2017: CLOs of USD 97 237m
and open warehouses of USD 25 139m)
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
67
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 2018
Trade and other payables
5,927
Total
5,927
5,927
5,927
-
-
-
-
-
-
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
-
-
-
-
-
-
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
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 2018, the Company had liquid investments totalling USD 127 0m, comprising of USD
26 2m in cash and cash equivalents, USD 97 1m in investments in loan market through CLOs, USD
1 1m in other fixed income investments, USD 1 5m 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
68
Annual Report 2018
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:
Cash at bank
Net Debt
Total equity
Net debt to equity ratio
29 Financial assets and liabilities by class
2018
US $000
(26,214)
(26,214)
174,333
(0 15)
2017
US $000
(34,175)
(34,175)
175,445
(0 19)
Note
2018
US $000
2017
US $000
Financial assets:
Financial assets at amortised cost
9,10
29,382
39,754
Financial assets at fair value through
profit or loss
Financial assets designated at fair value
through other comprehensive income
4
5
138,148
125,847
7,504
8,247
175,034
173,848
Financial liabilities:
Financial liabilities at amortised cost
13
5,927
3,977
The carrying amount of the financial assets and liabilities at amortised cost approximates to
their fair value
69
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 0300who 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
70
Annual Report 2018 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 20 August 2019 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 2018
To re-elect Mr Ron Baron, who is due to retire as Director in accordance with the Articles of
Association of the Company
To re-elect Mr Augoustinos Papathomas, who is due to retire as Director in accordance with
the Articles of Association of the Company
To re-appoint Grant Thornton Cyprus as auditor of the Company to hold office from the
conclusion of this Meeting until the conclusion of the next general meeting at which financial
statements are laid before the Company
5
To authorise the Directors to determine the auditor’s remuneration
6
That for the purposes of article 5 1 of the Articles of Association of the Company:
(a)
(b)
the Directors be and are generally and unconditionally authorised to allot up to a maximum
aggregate amount of 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 2020 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
the Company be and is hereby authorised to make prior to the expiry of such period any
offer or agreement which would or might require such ordinary shares to be issued in
pursuance of any such offer or agreement notwithstanding the expiry of the authority
given by this resolution,
so that all previous authorities of the Directors pursuant to the said article 5 1 be and are
hereby revoked
7
THAT, subject to the passing of resolution 6 set out in the Notice convening this Meeting, the
Directors be and are empowered in accordance with article 5 2 of the Articles of Association
of the Company to allot new ordinary shares of no par value in the capital of the Company
(“ordinary shares”) for cash, pursuant to the authority conferred on them to allot such shares
by that resolution 6 as if the pre-emption provisions contained in article 5 2 did not apply to
any such allotment, provided that the power conferred by this resolution shall be limited to:
(a) the allotment of ordinary shares in connection with an issue or offering in favour of
71
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 2020 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) 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
(c)
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
28 June 2019
72
Annual Report 2018 Notes
(i)
(ii)
(iii)
(iv)
A member entitled to attend and vote at the Meeting convened by the above Notice is
entitled to appoint one or more proxies to attend and, on a poll, to vote in his place A
proxy need not be a member of the Company Completion of the Form of Proxy will not
prevent you from attending and voting in person
To appoint a proxy you should complete the Form of Proxy enclosed with this Notice of
Annual General Meeting To be valid, the Form of Proxy, together with the power of attorney
or other authority (if any) under which it is signed or a notarially certified or office copy of
the same, must be delivered to the offices of 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)
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,
b)
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
73
Principal Bankers
Banque J Safra Sarasin (Luxembourg) SA
17 - 21, Boulevard Joseph II L-1840
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 Services34 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
74
Annual Report 2018
8