2021
21
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 14
Financial portfolio 14
Events after the Reporting Date 17
Litigation 17
Report of the Directors 18
The Board’s Objectives 18
The Board of Directors 18
Directors’ responsibilities in relation to the financial statements 19
Disclosure of information to the Auditor 19
Substantial Shareholdings 20
Corporate Governance Statement 21
Introduction 21
The Board Constitution and Procedures 21
Board Committees 21
Remuneration Committee 21
Audit Committee 21
The Quoted Company Alliance (QCA) Code 21
Communication with Investors 22
Internal Control 23
Going concern 23
Independence of Auditor 23
4
Annual Report 2021 Remuneration Report 24
Directors’ Emoluments 24
Directors’ Interests 24
Remuneration Policy 25
Review of the Business and Risks 26
Risks 26
Share Capital 27
Related Party Transactions 27
Independent Auditor’s Report to the Members of Livermore Investments Group Limited 28
Consolidated Statement of Financial Position as at 31 December 2021 33
Consolidated Statement of profit or loss for the year ended 31 December 2021 34
Consolidated Statement of Comprehensive Income for the year ended 31 December 2021 35
Consolidated Statement of changes in equity for the year ended 31 December 2021 36
Consolidated Statement of cash flows for the year ended 31 December 2021 37
Notes on the Financial Statements 39
Shareholder Information 73
Registrars 73
Website 73
Direct Dividend Payments 73
Lost Share Certificate 73
Duplicate Shareholder Accounts 73
Corporate Directory 74
5
Highlights
•
Net profit for the year was USD 24 7m (2020: net profit of USD 0 845m)
• Net Asset Value per share increased by 13 8% to USD 1 07 (2020 USD 0 94) after paying 8m
interim dividend implying a total return of 19%
• On 16 April 2021, the Company paid an interim dividend of USD 8m (USD 0 0488 per share) to
members on the register on 19 March 2021
• During the year 2021, the Company distributed net USD 6 057m to shareholders via share
buyback
• On 05 January 2022, the Company announced an interim dividend of USD 24m (USD 0 145 per
share) to members on the register on 14 January 2022 The dividend was paid on 07 February
2022
• Collateralized Loan Obligations (CLO) portfolio and warehouse generated USD 27 3m in cash
distributions and a total return of USD 30 6m in 2021
6
Annual Report 2021 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 2021 References to the Company
hereinafter also include its consolidated subsidiary (note 8) References to financial statements
hereinafter are to the Company’s consolidated financial statements
2021 was a year of continued economic recovery from the COVID pandemic Despite bouts of
new lockdowns and newer strains of the coronavirus, effective vaccinations and ample monetary
and fiscal support provided the needed impetus for most developed economies to recover to pre-
pandemic GDP levels Short and long-term rates remained at low levels supporting public equity
markets to reach record levels However, concerns about inflation due to strong consumer and
business demand straining already fragile global supply-chains prompted a change in rates outlook
by global central banks later in the year
Management was extremely active during the year optimizing the existing portfolio and deploying
capital in new investments The Company refinanced or reset seven of its CLOs and reduced their
cost of funding or extended their reinvestment period In addition, management led the pricing of
three new issue CLOs with leading managers including Blackstone Credit, Ares Management and MJX
Asset Management and had two new warehouses open as of year-end 2021 Further, management
traded certain BB and equity tranches on a relative values basis CLO equity distributions were very
strong due to the additional benefit of LIBOR floors and sustained high loan spreads Overall, the
CLO portfolio generated exceptional returns of 35 1% with USD 27 3m cash distribution from its
CLO and warehouse portfolio and an additional USD 3 3m in valuation gains amounting to total
gains of USD 30 6m
Our net profit for the year was USD 24 7m (2020 net profit: USD 0 845m) and the year-end NAV was
USD 1 07 per share (2020 NAV: USD 0 94 per share) after paying a dividend payment of USD 8m (USD
0 0488 per share) During the year, the Company bought back 10,888,577 shares and subsequently
issued 1,430,000 shares out of treasury, at a net cost of USD 6 057m
The Company recorded net gains of USD 30 6m from its US CLO and warehousing portfolio Interest
and distribution income from the financial portfolio totalled USD 27 5m (2020: USD 22 0m) The
Company ended the year with over USD 45 1m in cash at hand On 5 January 2022, the Board of
the Company announced an interim dividend of USD 24m (USD 0 145 per share) bringing the total
distribution to shareholders in the last twelve months to USD 38 057m, which represents 36 9% of
the Company’s average market capitalization over that period
Financial Review
The NAV of the Company on 31 December 2021 was USD 177 7m (2020: USD 163 9m) Net profit,
during the year was USD 24 7m, which represents earnings per share of USD 0 15 Operating expenses
were USD 8 6m (2020: USD 2 8m)
7
The overall change in the NAV is primarily attributed to the following:
Shareholders’ funds at beginning of year
Income from investments
Unrealised gains / (losses) on investments
Unrealised exchange gains
Operating expenses
Net finance income
Tax charge
Increase / (decrease) in net assets from operations
Dividends paid
Issuance / purchase of own shares
Shareholders’ funds at end of year
Net Asset Value per share
Dividend & Buyback
31 December 2021
US $m
31 December 2020
US $m
163 9
27 5
9 4
0 1
(8 6)
(0 4)
(0 1)
27 9
(8 0)
(6 1)
173 1
22 0
(22 6)
-
(2 8)
0 3
(0 1)
(3 2)
(6 0)
-
177 7
163 9
US $1 07
US $0 94
At 16 April 2021, the Company paid an interim dividend of USD 8m (USD 0 0488 per share) to members
on the register on 19 March 2021, as announced by the Board on 08 March 2021
On 05 January 2022, the Company announced an interim dividend of USD 24m (USD 0 145 per share) to
members on the register on 14 January 2022 The dividend was paid on 07 February 2022
The Board of Directors will decide future dividends based on profitability, liquidity requirements,
portfolio performance, market conditions, and the share price of the Company relative to its NAV
During 2021, the Company bought back 10,888,577 shares to be held in treasury for a total cost of USD
6 973m and re-issued 1,430,000 for a total USD 0 829m As at 31 December 2021, the Company held
9,458,577 shares in treasury
Richard B Rosenberg
Chairman
27 May 2022
Noam Lanir
Chief Executive Officer
8
Annual Report 2021
Review of Activities
Introduction and Overview
Effective vaccinations against COVID-19 and strong monetary and fiscal stimulus in most developed
economies supported a continued economic recovery in 2021 Although the effects of the pandemic
continued in 2021, the disruptions to economic activity were milder Labour markets recovered
strongly and became quite tight especially in the US as demand for services outstripped supply
Inflation trended higher and was boosted by supply-chain challenges as well as low investment in
commodity related sectors over the last several years
Risk assets were well bid most of the year with the S&P 500 Index continuing its winning streak to
end the year at an all-time high of 4766 – an increase of 207% from the pandemic low in 2020 The
NASDAQ Composite Index recorded a peak in November 2021 before ending the year with a gain of
23 2% from the beginning of the year The Euro Stoxx 50 price Index also recorded impressive gains
of 20 6% In emerging markets, India’s NIFTY 50 outperformed its peers with a gain of 23 8% versus
losses for China’s Hang Seng Index of 14 8% and losses for Brazil’s BOVESPA Index of 11 8% China’s
negative performance was a reflection of lingering default issues in its large and leveraged property
sector as well as China’s regulatory crackdown on the technology sector
With inflation higher and expectations of eventual rate increases in the US, the US Government
yield increased from 0 91% to 1 51% Returns were low to negative in the global government bond
and investment grade market as yields increased steadily though the year The US Dollar gained
against most currencies with the DXY Dollar Index gaining 6 45% for the year
Credit continued to tighten, though, as strong economic recovery and liquid and yield-hungry
markets kept default expectations at very low levels The Bloomberg US Corporate High Yield Total
Return Index gained 5 29% in 2021 despite a modest rise in US swap rates and very high levels of
new issuance Similarly, the floating rate leveraged loan market had a strong year with the Credit
Suisse Leverage Loan Index (“CSLLI”) generating a total return of 5 4% Rating agencies were busy
upgrading credits for most of the year with the Upgrade/Downgrade ratio of 2:1 Default rates
declined sharply with the Leveraged Loan Index recording a multi-year low and ending the year with
the 12-month trailing default rate of 0 29%
CLO’s performed very well in 2021 and the Company’s CLO equity and warehouse portfolio had an
excellent year generating over 35% return with cash distributions contributing USD 27 3m out of
the total return of USD 30 6m Management was proactive and busy in 2021 We refinanced or
“reset” seven of our CLO transactions reducing their cost of funding or extending their reinvestment
periods and thereby adding significant value to the existing portfolio In addition, management
converted three of its warehouses into new issue CLOs with leading CLO managers including
Blackstone Credit, Ares Management and MJX Asset Management at very attractive equity arbitrage
levels, and generated a net warehouse carry of USD 2 9m Further, management opened two new
warehouses with PGIM and Blackstone Credit As of the day of publishing this report, both of these
warehouses have been converted to a new issue CLO in 2022 generating USD 2 3m in net carry In
2021, management opportunistically took profits on some of its CLO BB and equity positions
During 2021, the Company invested USD 2 7m in technology-related start-ups in Israel and the US
In addition, the Company invested USD 4m in a digital assets focussed fund and generated gains of
52% in 2021 As of April 2022, the fund is up 1 1% in 2022
9
For 2021, the Company reported a NAV/share of USD 1 07 and net profit of USD 24 7m Interest and
distribution income amounted to USD 27 5m, of which, USD 27 3m was generated from the CLO
and warehousing portfolio The net return of the CLO and warehousing portfolio was USD 30 6m
as mark-to-market changes contributed to a gain of USD 3 3m In addition, our investment in the
digital assets focussed fund grew by 52 % contributing USD 2 8m to the net profit Operating
expenses amounted to USD 8 6m The Company ended the year with over USD 45m of cash at hand
in advance of an interim dividend of USD 24m that was declared in January 2022 Including the
interim dividend in January 2022, the Company has distributed USD 38 14 or 36 1% of its average
market capitalization in 2021
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 positions of Livermore, together with its strong foothold in the
US CLO markets as well as the robustness of its investment portfolio and the alignment of the
management’s interests with those of its shareholders, management believes that the company is
well positioned to benefit from current conditions
Global Investment Environment
In 2021, the global economy recovered from the sharp but short COVID-19 lockdown-driven
recession the year before amid progress on vaccinations and supported by ample accommodative
monetary and fiscal policy While the coronavirus pandemic continued in its second year, the effects
of the pandemic weighed less strongly on economic activity than the year before and the periods
of re-opening in most economies saw strong demand from consumers Financial markets continued
their late 2020 exuberant mood into early 2021 and, despite small pull-backs, equity markets
continued to make new highs through the year supported by strong corporate earnings and a low
rate outlook Inflation in developed economies continued to pick up throughout the year, and as the
year progressed, the higher inflation narrative started to shift from “transitory” to “structural” with
strong consumer and rising earnings increasing demand in the face of still-recovering supply chain
issues Energy and commodity prices increased notably on demand pressures and low supply due
to persistently low investment in prior years in these sectors In advanced economies, government
yields started to increase since the first half of last year on higher inflation and firming expectations
for higher policy rates In November 2021, the US Federal Reserve acknowledged that inflation in
the US was much higher than anticipated and that significant monetary tightening from the very
accommodative levels may be needed The recent Russian invasion of Ukraine adds a significant risk
to the inflation and growth problem with both countries being significant exporters of agricultural
commodities and given Europe’s reliance of Russian energy imports Looking forward, we anticipate
central banks in developed economies to tighten financial conditions to reign in high inflation and
potentially doing so into an already slowing global economy
USA: After the severe recession in 2020, the US economy rebounded strongly in 2021 with its
GDP growing by 5 7% The US GDP exceeded its pre-COVID level in the second quarter of 2021 The
recovery was attributable to progress of vaccinations leading to a reopening of the economy and the
significant monetary and fiscal policy measures implemented since the outbreak of the pandemic
However, supply bottlenecks weighed on industrial production in the second half of the year Labour
market conditions improved significantly with the unemployment rate in December 2021 reaching
3 9%, compared with 3 5% before the pandemic The US Federal Reserve kept the main interest rate
10
Annual Report 2021 near zero and continued its bond buying program (Quantitative Easing) throughout 2021 to support
the economy Inflation continued to tick-up during the year The personal consumption expenditures
(PCE) price index rose 5 8% over the 12 months ending in December, and the index that excludes
food and energy items (so-called core inflation) was up 4 9%—the highest levels for both measures
in roughly 40 years In November 2021, the US Federal Reserve acknowledged high inflation as a
potential problem and signalled an end of their bond buying program while bringing forward their
projections for interest rate increases With regard to fiscal policy, the Build Back Better Act has
been stalled in the Senate since November, and the fiscal impulse to growth is expected to fade
much faster than previously anticipated
Eurozone: The euro area economy also recovered and GDP returned to its pre-crisis level by the
year-end 2021 Economic activity initially declined in the first quarter, before rebounding strongly in
the second and third quarters owing to the more favourable development in the pandemic situation
and a reopening of economies in most member states The recovery slowed down again thereafter
with supply bottlenecks negatively affecting industrial production and renewed lockdowns in some
member states to slow the advance of a rapid spread coronavirus variant Average GDP growth for
the year stood at 5 2%, following a 6 5% decline in 2020 The unemployment rate fell significantly,
and at 7 0% in December 2021 was below its pre-crisis level Headline inflation in the euro area rose
to 2 6% (2020: 0 3%) while core inflation was also higher at 1 5% Inflation rose markedly from the
Spring onwards and by year-end had reached 2 6%, the highest level in the euro area’s history In
Germany, VAT was restored to its previous level after having been temporarily lowered in the second
half of 2020 This also contributed to the higher rate of inflation in addition to the global factors
mentioned above In July, the ECB presented the results of its monetary policy strategy review
and announced that it would aim for consumer price inflation of 2% over the medium term The
previous inflation target had stood at below, but close to, 2% In addition, the ECB allowed itself
the flexibility, under certain circumstances, for a transitory period in which inflation is moderately
above target
Japan: Japan’s GDP grew by 1 7% compared to a decline of 4 5% in 2020 Economic activity fluctuated
as a result of the repeated waves of the pandemic and the corresponding responses to contain them
Further, procurement issues in the automotive industry, particularly in the second half of the year,
affected the economic activity in Japan Against this backdrop, GDP remained below its pre-crisis
level through to the end of the year The unemployment rate stood at 2 7% in December, still around
half a percentage point higher than before the pandemic Having stagnated in 2020, consumer
prices declined slightly for the 2021 year (– 0 3%) Core inflation was significantly negative (– 0 8%)
due to large price reductions for mobile communications Broader inflation fluctuated significantly
over the course of 2021, with higher energy prices lifting it to 0 8% by the end of the year The
Bank of Japan (BoJ) maintained its highly accommodative monetary policy throughout 2021 and
left its short-term deposit rate at -0 10% and the target for the 10-year government bond yields
to 0% However, In December, the BoJ announced a scale-back of its corporate debt purchases to
pre-pandemic levels
China: After historically low growth of 2 2% in 2020, China’s GDP expanded by 8 1% in 2021 The
development through the year was volatile Strict regional containment measures per its zero-COVID
strategy repeatedly weighed on economic activity In addition, supply bottlenecks and temporary
power outages adversely affected its manufacturing sector Urban unemployment rate was little
changed, which had returned to its pre-crisis level at the end of 2020 at 5 2% The government’s
regulatory reforms, such as the deleveraging in the real estate sector, also had a curbing effect with
several of its large property developers starting to teeter at the edge of default In 2021, China
announced its focus on of achieving more equal income distribution (termed “Common Prosperity”)
and, amongst many internal changes, targeted large technology platforms that it believed created
11
wealth and concentrated power in the hands of a few people As a result, investors pulled capital
from Chinese technology companies resulting in large declines in their market capitalization In
response to the tighter financial conditions, the People’s Bank of China left its policy interest
rates unchanged, but lowered the reserve requirement rate in July and December by a total of one
percentage point
Commodities: Commodity prices rose significantly as a result of the global economic recovery
coupled with tight supply and persistently low investment in the sector in prior years A strong
investor focus on ESG (Environment, Social, and Governance) criteria also curtailed capital flow
into fossil fuels and energy intensive industries Further, the member countries of the Organization
of the Petroleum Exporting Countries and Russia (OPEC+) made only a moderate increase in output
despite the strong rise in demand for crude oil In November, the price of Brent crude temporarily
reached its highest level since mid-2018 at over USD 85 per barrel At the end of 2021, it still
stood at just under USD 80, having started the year at USD 50 Oil and commodity prices have
continued to rise in 2022 due to Russia-Ukraine conflict as both countries are significant exporters
of agricultural commodities and Russia is significant exporter of Oil and Natural Gas especially to
European countries Prices for industrial metals also ended the year higher
Equities and Bonds: US equity markets continued their buoyant move up from their 2020 lows as
continued and plentiful monetary and fiscal policy supported demand for financial assets Large
cap stocks in the US led the charge ending 2021 near a record high The S&P 500 Index generated
returns of 28 7% for the year buoyed by a number of positive developments, including effective
vaccinations driving the reopening of the economy, strong corporate earnings and increased
consumer demand Likewise, global markets continued to rise alongside those in the US, despite
some setbacks Global equities, as measured by the MSCI All Country World Index increased 18 54%
Developed international stocks, as represented by the MSCI World ex USA Index, rose 12 62%,
notably stronger than emerging markets The MSCI Emerging Markets Index fell –2 54% largely
driven by the property and technology sector losses in China Exuberant stock markets globally
allowed a record number of new IPOs and SPACs to enter the market in 2021 However, as inflation
and rate expectations increased in November with the US Federal Reserve signalling an end to
pandemic era highly accommodative monetary policy, SPAC mergers and high-growth technology
companies with very high valuations quickly fell out of favour resulting in steep stock price declines
Losses in this sector have accelerated into the first quarter of 2022 as investors price in ever higher
rates to reign in high inflation
Developed world bond markets faced a difficult 2021 characterized by rising inflation, continued but
waning effects of the pandemic, and the start of monetary policy tightening US government bond
interest rates rose in the first quarter with a steeper curve as investors anticipated strong growth
with transitorily high inflation with the 10-year government bond yield rising 81 basis points to
1 74% However, as the coronavirus mutations spread, concerns over an uneven recovery but still
high inflation resulted in some reversal of the steepness with short-term yields modestly higher and
the 10-year government bond falling to 1 52% as of year-end 2021 The Morningstar U S Core Bond
Index, a proxy for typical U S bond exposure, dropped by 1 6% for the year - its worst annual return
since the taper tantrum in 2013
Foreign exchange: The U S dollar enjoyed a strong 2021, gaining 6 7% for the year against a basket
of developed-markets currencies, driven by the US economy’s relative strength and the US Fed
Reserve’s tighter policy outlook European Central Bank more gradual approach to tightening and
slower growth expectations in part from continued supply chain issues caused the Euro to decline
6 9% against the US Dollar With no end in sight to Japan’s low rate and highly accommodative
12
Annual Report 2021 monetary policy, the Japanese Yen weakened from 103 to 115 versus the US Dollar The Swiss Franc
fared relatively well against the Euro and the Japanese Yen but fell a modest 3 7% against the US
Dollar
Loan Market: US Leveraged Loans continued their recovery from their pandemic lows into 2021
For the full year, the Credit Suisse Leveraged Loan Index (“CSLLI”) generated a total return
of 5 4% - its 28th positive year return in its 30 years of existence Strong demand for yield
in an otherwise low yield fixed income world allowed the institutional loan market to eclipse
its previous new issuance record (including loans for refinancing and repricing) to finish the
year at USD 613 billion (2020: USD 287 8 billion), with the total market size swelling to USD
1 35 trillion (2020: USD 1 2 trillion) During the year, net inflows into loan mutual funds
and ETFs amounts to USD 47 billion as compared to net outflows of USD 27 billion in 2020
Strong corporate profits, loose financing conditions, and a reopening of the US economy allowed
ratings upgrades to outpace downgrades by a 2:1 ratio
The 12-month trailing par-weighted default rate as of December 2021 dropped to 0 29% (2020:
3 83%), its lowest level in a decade Looking ahead, we expect the default rate to increase
somewhat from the current very low levels but remain below the historical average of 2 8% as
the inflation and increasing rate expectations cloud the economic outlook
CLO Market: The CLO market was on fire in 2021 with demand for absolute yield and floating
rate investments exceeding any prior time in history In the US, 920 US CLOs priced totalling
$421 1bn (374/$183 7bn new issue and 546/$237 4bn refi/reset/re-issue) which compares to the
previous record in 2018 when 563 US CLOs priced totalling $278 9bn (242/$129 3bn new issue
and 321/$149 7bn refi/reset/re-issue) CLO equity arbitrage was strong as plentiful new issue loan
supply and an expanded investor base balanced the strong supply of new issue CLOs
During the year, CLO debt spreads remained low and rangebound with the average AAA spread
inside of 120 basis points of LIBOR The extremely strong CLO refinancing and reset volumes are not
sustainable and we expect a marked decline in 2022 as most of the refinancing and reset candidates
were already executed in 2021
CLO equity distributions were strong in 2021 as new loans provided decent spread compensation
and came with LIBOR floors that boosted the pay-outs to equity investors CLO equity valuations
were stable to slightly higher and our portfolio of mainly CLO equity investments generated over
35% total return in 2021
As we look ahead in 2022, the transition from LIBOR to SOFR is expected to create some basis risk
to equity distributions Further, rising rates are expected to erode the benefit of LIBOR/SOFR floors
leading to lower equity distributions as compared to 2021
Sources: Swiss National Bank, Bloomberg, Board of Governors of the Federal Reserve System, European Central Bank (ECB),
Morningstar,JP Morgan, Credit Suisse
13
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 164 4m as of 31 December 2021, which is
composed mainly of cash and investments in fixed income and credit related securities
The following is a table summarizing the financial portfolio as of year-end 2021
Name
Investment in the loan market through CLOs
Open Warehouse facilities
Public Equities
Invested total
Cash
Total
2021
US $m
101 7
7 6
10 0
119 3
45 1
164 4
2020
US $m
77 0
10 1
12 5
99 6
50 4
150 0
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
In 2021, the US senior secured loan market (leveraged loan market) continued its strong recovery that
started in the middle of 2020 Existing borrowers accessed the market to extend their maturities or refinance
the cost of margin and new borrowers came to market on the back of strong merger and acquisitions and
buyout activity
Strong demand for loans was supported by new issue CLO creation as well as retail fund inflows The
resilient performance of CLO’s during the pandemic as well as previous credit cycles such as the global
financial crisis has cemented its position as a mainstream asset class drawing in new capital seeking higher
yields than comparable risk assets and CLO debt spreads tightened across all rated tranches Improving
fundamentals, yield hungry investors in a low yield environment, and strong economic growth provided the
perfect backdrop for CLO market growth and performance 920 new US CLOs priced in 2021 for a total of
$421 1bn (374/$183 7bn new issue and 546/$237 4bn refi/reset/re-issue) which compares to the previous
14
Annual Report 2021
record in 2018 when 563 US CLOs priced totalling $278 9bn (242/$129 3bn new issue and 321/$149 7bn
refi/reset/re-issue) CLO equity arbitrage was strong as plentiful new issue loan supply and an expanded
investor base balanced the strong supply of new issue CLOs Defaults stayed low and hit a decade low in
2021 ending the year at 0 29% on a trailing twelve-month rolling basis Ample demand and liquid markets
allowed most borrowers to extend their maturities further reducing near term default risk
Our CLO portfolio and warehouse performed strongly generating 35 1% return over the 2021 starting
valuation The Company received USD 27 3m in cash distributions, of which USD 2 9m were from warehouse
carry CLO equity further benefitted from re-emergence of LIBOR floors in new issue loans and better spread
than average loan spreads Valuations for CLO equity increased somewhat but remained steady all the while
distributing cash returns of about 30% on 2020 valuations Tighter debt spreads in the CLO debt market
allowed management to aggressively refinance several of its existing CLOs and lower their cost of funding
thereby increasing future cash-flows and valuations During the year, management refinanced or reset
about half of the CLO transactions where it has anchor positions During the year, management opened four
new warehouses (in addition to one open warehouse at the beginning of this year) and converted three of
them to new issue CLOs at very attractive arbitrage levels The remaining two open warehouses have been
converted to new issue CLOs by April 2022
Management also took advantage of strong demand in the secondary market and opportunistically took
profits of some of its CLO BB and equity positions
As of the end of the year, all of the Company’s US CLO equity positions were passing their Junior
Overcollateralization (OC) tests 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
As we look ahead in 2022, we expect the US Federal Reserve in increase rates to reign in high inflation
Further, they may reduce their bond holdings and remove liquidity from financial markets Higher rates
will reduce the benefit of LIBOR floors over time and we expect distributions to reduce in 2022 until
LIBOR or SOFR reach about 2% The invasion of Ukraine by Russia is expected to add an additional source
of higher input costs of business and consumers in the near-mid-term Although leverage loan borrower
fundamentals are currently strong, we expect high rates to put more pressure on their interest coverage
covenants Tighter financial conditions in the future can increase refinancing and default risk for certain
borrowers The counter-balance to this is most borrowers have addressed their near-term financing needs
and very few of them have near-term maturities
We expect loan default rates to moderately increase from the very low 2021 levels but stay below their
long-term averages
The Company’s CLO portfolio is divided into the following geographical areas:
2021
Amount
US $000
Percentage
US CLOs
101,667
100%
2020
Amount
US $000
77,006
Percentage
100%
15
Fund Investments (previously described as Private Equities)
The fund investments held by the Company are mainly incorporated in the form of Managed Funds (mostly
closed end funds) in Israel and the emerging economies In addition, the Company has some direct venture
capital investments
The following summarizes the book value of the private equity funds as at 31 December 2021
Name
Cole Capital Fund
Fetcherr Ltd
Phytech (Israel)
Say2eat Inc
Other investments
Total
US $m
6 0
3 3
1 9
0 8
0 4
12 4
Cole Capital: Cole Capital is a fund that trades in digital assets such as Bitcoin and it is advised
by Frequants The advisor has developed automated trading algorithms that have outperformed
the underlying digital assets performance by consistently avoiding large drawdowns The Company
invested USD 4m in Cole Capital on March 10, 2021 and as of end of the year, the fund had
generated 51 7% return
Fetcherr Ltd: Fetcherr is the Israeli start-up that has developed a proprietary AI-powered goal-
based enterprise pricing and workflow optimization system Founded in 2019 by experts in deep
learning, Algo-trading, e-commerce, and digitization of legacy architecture, Fetcherr aims to disrupt
traditional rule-based (legacy) revenue systems through reinforcement learning methodologies,
beginning with the airline industry The Company invested USD 2m in 2021
Phytech: Phytech is an agriculture-technology company in Israel providing end-to-end solutions
for achieving higher yields on crops and trees Livermore continues to hold 12 2% in Phytech Global
Advisors Ltd, which in turns now holds 11 95% on a fully diluted basis in Phytech Ltd
Say2eat Inc: Say2eat is a company that has proved they can disrupt the existing food delivery (3rd
party) marketplace model, with a first party, direct delivery model that is commission free The
company has shown rapid growth in 2020 and is now active in over 20 US states from the east coast
all the way to Hawaii working with 200 restaurants The Company invested USD 0 750m in 2020
16
Annual Report 2021 The following table reconciles the review of activities to the Company’s financial assets as at 31
December 2021:
Name
Financial Portfolio
Fund investments
Total
Financial assets at fair value through profit or loss (note 4)
Financial assets at fair value through other comprehensive
income (note 5)
Total
US $m
119 3
12 4
131 7
119 3
12 4
131 7
Events after the reporting date
Details of materials events after the reporting date are disclosed in note 27 to the financial
statements
Litigation
At the time of this Report, there is one matter in litigation that the Company is involved in Further
information is provided in note 23 to the financial statements
17
Report of the Directors
The Directors submit their annual report and audited financial statements of the Company for the
year ended 31 December 2021
This report has been prepared on a voluntary basis and it does not contain all of the information
that would have been required had it been prepared in accordance with the UK Companies Act 2006
guidance
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 66) independent, 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 55), 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 54), Executive Director and Chief Investment Officer
Ron was appointed as Executive Director and Chief Investment Officer in 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 buyouts 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 an LLB (LAW) and BA in Economics from
Tel Aviv University Ron is also the founder and owner of the Israel Cycling Academy a non-profit
professional cycling team
Augoustinos Papathomas (age 59) independent, 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
18
Annual Report 2021 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
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
19
Substantial Shareholdings
As at 09 May 2022 the Directors are aware of the following interests in 3 per cent or more of the
Company’s issued ordinary share capital:
Number of Ordinary
Shares
% of issued ordinary
share capital
% of voting rights*
Groverton Management Ltd
123,048,011
Ron Baron
25,456,903
70 39
14 56
74 41
15 40
* after consideration of the treasury shares
Save as disclosed in this report and in the remuneration report, the Company is not aware of any other
person or entity that 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 22 to the financial statements
20
Annual Report 2021
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 comprises of two independent Non-
Executive Directors (one of which is the Board’s Chairman) 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 29 December 2006 and adopted pursuant to shareholder approval
at the Company’s EGM on 17 January 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 The Remuneration Committee considers the terms of employment and overall
remuneration of the Executive Directors and key members of Executive management regarding
share options, salaries, incentive payments and performance related pay The remuneration of Non-
Executive Directors is determined by the Board
Audit Committee
The Audit Committee comprises of the Non-Executive Chairman of the Board and a Non-Executive
Director and is chaired by the Chairman of the Board The duties of the Committee include monitoring
the auditor’s performance and reviewing accounting policies and financial reporting procedures
The Audit Committee’s key objectives are the provision of effective governance over the
appropriateness of the Group’s financial reporting, including the adequacy of related disclosures,
the performance of external audit function, and the management of the Group’s systems of internal
control and business risks
The primary roles and responsibilities delegated to, and discharged by, the Committee include:
• Monitoring and challenging the effectiveness of internal control and associated functions
• Approving and amending Group accounting policies
21
• Reviewing, monitoring, and ensuring the integrity of interim and annual financial statements,
•
and any formal announcements relating to the Company’s financial performance
Providing advice (where requested by the Board) on whether the Annual Report and Accounts,
taken, is fair, balanced, and understandable, and provides the information necessary for
shareholders to assess the Company’s position and performance
• Reviewing and monitoring the external auditor’s independence, objectivity, and effectiveness
of the audit services
• Monitoring and approving the scope and costs of audit
Board and committee meetings – 2021 attendance
Number of meetings attended
Board
Audit
Remuneration
Richard Barry Rosenberg
Noam Lanir
Ron Baron
Augoustinos Papathomas
4 of 4
4 of 4
4 of 4
4 of 4
2 of 2
1 of 1
-
-
-
-
2 of 2
1 of 1
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, which was last reviewed and updated in April 2022
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
22
Annual Report 2021 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
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
23
Remuneration Report
The remuneration report has been formed in accordance with the requirements of AIM rule 19 and
is not intended to comply with the UK statutory requirements
The Directors’ emoluments, benefits and shareholdings during the year ended 31 December 2021
were as follows:
Directors’ Emoluments
Each of the Directors has a service contract with the Company
Total emoluments
Director
Date of
agreement
Fees
US $000
Benefits
US $000
Reward
payments
US $000
2021
US $000
2020
US $000
Richard Barry
Rosenberg
10/06/05
Noam Lanir
10/06/05
Ron Baron
01/09/07
Augoustinos
Papathomas
01/02/19
73
400
350
35
-
45
-
-
-
73
1,000
2,000
1,445
2,350
-
35
69
445
350
37
The dates are presented in day / month / year format
Directors’ Interests
Interests of Directors in ordinary shares
As at 31 December 2021
As at 31 December 2020
Number of
Ordinary
Shares
Percentage
of ordinary
share capital
Percentage of
voting rights *
Number of
Ordinary Shares
Percentage of
ordinary share
capital
Percentage of
voting rights *
Noam Lanir
123,048,011
70 39%
74 41%
133,936,588
76 62%
Ron Baron
25,456,903
14 56%
15 40%
25,456,903
14 56%
76 62%
14 56%
Richard
Barry
Rosenberg
15,000
0 01%
0 01%
15,000
0 01%
0 01%
24
Annual Report 2021 *after consideration of the treasury shares
Noam Lanir has his interest in ordinary shares through direct or indirect ownership of all of the
issued share capital of Groverton Management Limited Further information is provided in note 22
to the financial statements
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
25
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
As of the date of this report, large-scale vaccination programs and huge fiscal and monetary stimulus
seem to have been successful in reducing the spread and health impact of the virus, as well as put
most developed countries on a strong recovery course At the same time, high inflation seems to be
persisting as global supply chain issues and the Russian invasion of Ukraine add further fuel to fire We
anticipate a sharp interest rate tightening cycle in the US as well as withdrawal of liquidity to slow the
demand and bring inflation under control The Company is primarily exposed to the US economy and
has benefitted from the economic recovery The Company continues to be conservatively positioned
with cash in excess of USD 45 1m as of 31 December 2021 and plans to maintain strong liquidity and
stay debt free
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 25 of the financial statements
26
Annual Report 2021 Share Capital
There was no change in the authorised share capital during the year to 31 December 2021 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
2021 are disclosed in note 22 to the financial statements
By order of the Board of Directors
Chief Executive Officer
27 May 2022
27
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
and its subsidiary Livermore Capital AG (the ‘’Group’’), which are presented in pages 25 to 54
and comprise the Consolidated statement of financial position as at 31 December 2021, and
the consolidated statement of profit or loss, Consolidated statement of comprehensive income,
Consolidated statement of changes in equity and Consolidated statement of 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 2021, 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’
International Code of Ethics for Professional Accountants (including International Independence
Standards) (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 23 of the consolidated financial statements which describes the
uncertainty outcome of a legal claim against one of the custodian banks that the Group uses on
its behalf Our opinion is not modified in respect of this matter
28
Annual Report 2021 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 This is
not a complete list of all risks identified by our audit
Investments’ valuation Level 3
Refer to note 7 of the consolidated financial statements
The Key audit matter
How the matter was addressed in our audit
The Group has financial assets of $27m (2020:
$21m) classified within fair value hierarchy at
level 3, as disclosed in note 7 The fair value of
level 3 financial assets is generally determined
either based on third party valuations, or when
not available based on adjusted Net Asset Value
(NAV) calculations using inputs from third
parties
Due to the use of significant
judgments
by the Board of 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
•
Our audit work included, but was not restricted to:
obtaining an understanding of the valuation
•
methodologies applied by the Board of
directors and assessing their appropriateness
for each investment;
obtaining third party confirmations indicating
the NAV / fair value of the financial assets
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 Board of Directors,
evaluating the reasonableness of the
underlying assumptions and verifying the
inputs used by checking them to 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
•
•
Key observations
We concluded that the judgements and estimates
used by the management in determining the fair
value of investments were reasonable and the
disclosures made in relation to these matters in the
consolidated financial statements were appropriate
29
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, 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
Those charged with governance are 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
30
Annual Report 2021 for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control
• Obtain an understanding of internal control relevant to the audit in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Group’s internal control
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by the Board of Directors
•
• Conclude on the appropriateness of the Board of Directors’ use of the going concern basis
of accounting and, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the Group’s ability to
continue as a going concern If we conclude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related disclosures in the consolidated financial
statements or, if such disclosures are inadequate, to modify our opinion Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report However, future
events or conditions may cause the Group to cease to continue as a going concern
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements represent the
underlying transactions and events in a manner that achieves a true and fair view
•
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities
or business activities within the Group to express an opinion on the consolidated financial
statements We are responsible for the direction, supervision and performance of the group
audit We remain solely responsible for our audit opinion
We communicate with those charged with governance 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 those charged with governance 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 those charged with governance, 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
31
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 Mrs Froso
Yiangoulli
Froso Yiangoulli
Certified Public Accountant and Registered Auditor
for and on behalf of
Grant Thornton (Cyprus) Ltd
Certified Public Accountants and Registered Auditors
Nicosia, 27 May 2022
32
Annual Report 2021 Livermore Investments Group Limited
Consolidated Statement of Financial Position as at 31 December 2021
Note
2021
US $000
2020
US $000
Assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Financial assets at fair value through profit or loss
Financial assets at fair value through other
comprehensive income
Investments in subsidiaries
Current assets
Trade and other receivables
Financial assets at fair value through profit or loss
Cash and cash equivalents
Total assets
Equity
Share capital
Share premium and treasury shares
Other reserves
Retained earnings
Total equity
Liabilities
Non-current liabilities
Lease liability
Current liabilities
Trade and other payables
Lease liability – current portion
Current tax payable
Total liabilities
Total equity and liabilities
Net asset value per share
4
5
8
9
4
10
11
11
12
52
176
101,667
12,435
7,196
121,526
366
17,553
45,130
63,049
32
272
77,006
3,729
6,813
87,852
8,238
22,577
50,407
81,222
184,575
169,074
-
163,130
(18,026)
32,618
-
169,187
(21,285)
16,005
177,722
163,907
88
181
6,641
88
36
6,765
4,868
91
27
4,986
6,853
184,575
5,167
169,074
Basic and diluted net asset value per share (US $)
14
1 07
0 94
These financial statements were approved by the Board of Directors on 27 May 2022
The notes 1 to 27 form part of these consolidated financial statements
33
Livermore Investments Group Limited
Consolidated Statement of Profit or Loss for the year ended 31 December 2021
Investment income
Interest and distribution income
Fair value changes of investments
Note
16
17
2021
US $000
2020
US $000
27,495
6,250
33,745
22,010
(18,483)
3,527
Operating expenses
18
(8,599)
(2,808)
Operating profit
Finance costs
Finance income
Profit before taxation
Taxation charge
Profit for the year
Earnings per share
19
19
20
25,146
(398)
18
24,766
(66)
24,700
719
(40)
293
972
(127)
845
Basic and diluted earnings per share (US $)
21
0 15
0 005
The profit for the year is wholly attributable to the owners of the parent
The notes 1 to 27 form part of these consolidated financial statements
34
Annual Report 2021
Livermore investments Group Limited
Consolidated Statement of Comprehensive Income for the year ended 31 December 2021
Profit for the year
Note
2021
US $000
24,700
2020
US $000
845
Other comprehensive income:
Items that will be reclassified subsequently to profit or loss
Foreign exchange gains on translation of consolidated subsidiary
59
4
Items that are not reclassified subsequently to profit or loss
Financial assets designated at fair value through other
comprehensive income – fair value gains / (losses)
5
3,200
(4,022)
Total comprehensive income / (loss) for the year
27,959
(3,173)
The total comprehensive income / (loss) for the year is wholly attributable to the owners of the parent
The notes 1 to 27 form part of these consolidated financial statements
35
Livermore Investments Group Limited
Consolidated Statement of Changes in Equity for the year ended 31 December 2021
Note
Share
premium
US
$000
169,187
Treasury
Shares
US
$000
Translation
reserve
US
$000
Investments
revaluation
reserve
US
$000
Retained
earnings
US
$000
Total
US
$000
Balance at 1 January 2020
Dividends
Transactions with owners
Profit for the year
Other comprehensive income:
Financial assets at fair value through OCI -
fair value losses
Foreign exchange gains on translation of
consolidated subsidiary
Transfer of realised gains
Total comprehensive loss for the year
Balance at 31 December 2020
Dividends
Purchase of own shares
Re-issue of shares
Transactions with owners
Profit for the year
Other comprehensive income:
Financial assets at fair value through
OCI - fair value gains
5
Foreign exchange gains on translation
of consolidated subsidiaries
Total comprehensive income for the year
169,187
17
13
11
11
-
-
-
-
-
-
-
-
-
(6,973)
916
(6,057)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balance at 31 December 2021
169,187
(6,057)
The notes 1 to 27 form part of these consolidated financial statements.
21
(20,619)
24,491
174,333
-
-
-
-
4
-
4
-
-
-
(6,000)
(6,000)
(6,000)
(6,000)
845
845
(4,022)
-
-
-
3,331
(3,331)
(4,022)
4
-
(691)
(2,486)
(3,173)
25
(21,310)
16,005
163,907
-
-
-
-
-
59
59
84
-
-
-
-
(8,000)
(8,000)
-
(6,973)
(87)
829
(8,087)
(14,144)
-
-
24,700
24,700
3,200
-
-
-
3,200
59
3,200
24,700
27,959
(18,110)
32,618
177,722
36
Annual Report 2021
Livermore Investments Group Limited
Consolidated Statement of Cash Flows for the year ended 31 December 2021
Note
2021
US $000
2020
US $000
Cash flows from operating activities
Profit before tax
Adjustments for
Depreciation
Interest expense
Interest and distribution income
Bank interest income
Fair value changes of investments
Exchange differences
Changes in working capital
Decrease / (increase) in trade and other receivables
Increase / (decrease) in trade and other payables
Cash flows from / (used in) operations
Interest and distributions received
Tax paid
Net cash from operating activities
Cash flows from investing activities
Acquisition of investments
Proceeds from sale of investments
Net cash used in investing activities
Cash flows from financing activities
Lease liability payments
Interest paid
Dividends paid
Purchases of own shares
24,766
109
35
972
102
40
(27,495)
(22,010)
(18)
(6,250)
363
(8,490)
7,817
1,774
1,101
27,512
(50)
28,563
(119,905)
100,629
(19,276)
(109)
(35)
(8,000)
(6,057)
(119)
18,483
(174)
(2,706)
(60)
(78)
(2,844)
22,204
(133)
19,227
(49,552)
30,201
(19,351)
(102)
(40)
(6,000)
-
19
16
19
17
19
19
13
11
Net cash used in financing activities
(14,201)
(6,142)
37
Note
2021
US $000
2020
US $000
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Exchange differences on cash and cash equivalents
Cash and cash equivalents at the end of the year
19
10
(4,914)
50,407
(363)
45,130
(6,266)
56,499
174
50,407
The notes 1 to 27 form part of these consolidated financial statements
38
Annual Report 2021
Notes on the Consolidated
Financial Statements
1 General Information
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 The principal
legislation under which the Company operates is the BVI Business Companies Act, 2004
The liability of the members of the Company is limited
1 2 The principal activity of the Company is to carry out investment activities
1 3 The Company is tax resident in the Republic of Cyprus
1 4 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 (EU) 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 subsidiary (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 2021, the Company adopted any applicable new or revised IFRS and
relevant amendments and interpretations which became effective, and also were endorsed
by the EU
The following IASB or IFRIC documents were issued by the date of authorisation of these
financial statements but are not yet effective for the year ended 31 December 2021, or
have not yet been endorsed by the EU by 31 December 2021:
39
Endorsed by
EU
IASB
Effective date
• Amendments to IFRS 3: “Reference to the
Conceptual Framework”
Yes
1 January 2022
• Amendment to IFRS 10, and IAS 28: “Sale or
Contribution of Assets between an Investor
and its Associate or Joint Venture”
•
IFRS 14: “Regulatory Deferral Accounts”
• Amendment to IFRS 16: “COVID-19 Related
Rent Concessions beyond 30 June 2021”
•
IFRS 17: “Insurance Contracts”,
amendments of 2020
including
• Amendment to IFRS 17: “Initial Application of
IFRS 17 and IFRS 9 – Comparative Information”
No
No
Yes
Yes
No
to be
determined
1 January
2016
1 April 2021
1 January 2023
1 January 2023
• Amendments to
IAS 1: “Classification of
Liabilities as Current or Non-current”
No
1 January 2023
• Amendments to
Statement 2:
policies”
IAS 1 and
IFRS Practice
“Disclosure of Accounting
Yes
1 January 2023
• Amendments to IAS 8: “Definition of Accounting
Estimates”
Yes
1 January 2023
• Amendment to IAS 12: “Deferred Tax related
to Assets and Liabilities arising from a Single
Transaction”
• Amendments to IAS 16: “Property, Plant and
Equipment: Proceeds before Intended Use”
• Amendments to IAS 37: “Onerous Contracts –
Cost of Fulfilling a Contract”
• Annual Improvements to IFRS Standards 2018-
2020
No
1 January 2023
Yes
Yes
Yes
1 January 2022
1 January 2022
1 January 2022
The Board of Directors expects that when the above 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
40
Annual Report 2021
over the subsidiary
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 one
of 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 subsidiary are prepared using uniform
accounting policies Where necessary, adjustments are made to the financial statements
of consolidated subsidiary to bring its accounting policies into line with those used by the
Company The consolidated subsidiary has 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 subsidiary 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 Interest and distribution income
•
•
Interest income is recognised based on the effective interest method
Distribution income is recognised on the date that the Company’s right to receive payment
is established, which in the case of quoted securities is the ex-dividend date
3 4 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)
41
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 subsequently 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 5 Taxation
Current tax is the tax currently payable based on taxable profit for the year in accordance
with the applicable tax laws
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 6 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
3 7 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
42
Annual Report 2021
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 through profit or loss;
(b) those to be measured at fair value through other comprehensive income; and
(c)
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
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
43
flows are solely payment of principal and interest
Impairment
The Company assesses the expected credit losses associated with its assets carried at
amortised cost, on a forward-looking basis 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 8 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 at amortised cost
Financial liabilities are measured initially at fair value plus transaction costs
After initial recognition financial liabilities are measured at amortised cost using the
effective interest rate method
3 9 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
Any 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 10 Segment reporting
In making investment decisions, Management assesses individual investments and then, in
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 all the Company’s activities fall under a single operating segment
3 11 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
44
Annual Report 2021
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 subsidiary
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
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
45
4 Financial assets at fair value through profit or loss
Non-current assets
Fixed income investments (CLOs)
101,667
77,006
2021
US $000
2020
US $000
Current assets
Fixed income investments
Public equity investments
7,584
9,969
17,553
10,036
12,541
22,577
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
The movement in financial assets at fair value through profit or loss during the year was as
follows:
At 1 January
Purchases
Sales
Settlements
Fair value gains / (losses)
2021
US $000
99,583
114,399
(28,408)
(72,221)
5,867
2020
US $000
101,255
47,892
(30,574)
-
(18,990)
At 31 December
119,220
99,583
46
Annual Report 2021
5 Financial assets at fair value through other comprehensive income
Non-current assets
Fund investments
2021
US $000
2020
US $000
12,435
3,729
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
The movement in financial assets at fair value through other comprehensive income during
the year was as follows:
At 1 January
Purchases
Settlements
Fair value gains / (losses)
2021
US $000
3,729
5,506
-
3,200
2020
US $000
6,204
1,650
(103)
(4,022)
At 31 December
12,435
3,729
Dividends of USD 0 128m were received in 2021 (2020: USD 0m), in relation to financial assets
at fair value through other comprehensive income that are held at the reporting date
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
Public equity investments relate to investments in shares of companies listed on public
stock exchanges
Fund investments (previously described as 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
•
•
7 Fair value measurements of financial assets and liabilities
The table in 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
47
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 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
impacts the future cash flows that the CLO may generate
collateral prepays
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
• Fund investments are valued using market valuation techniques as determined by
the Directors, mainly on the basis of valuations reported by third-party managers
48
Annual Report 2021
of such
independent qualified
investments
property
Underlying property values are determined based on their estimated market values
Real Estate entities are valued by
investments
valuers with
relevant experience on
substantial
such
•
Investments in subsidiaries are valued at fair value as determined on a net asset
valuation basis The Company has determined that the reported net asset value
of each subsidiary represents its fair value at the end of the reporting period
7 2 Fair value hierarchy
Financial assets measured at fair value are grouped into the fair value hierarchy as follows:
2021
US
$000
Level 1
2021
US
$000
Level 2
2021
US
$000
Level 3
2021
US
$000
Total
2020
US
$000
Level 1
2020
US
$000
Level 2
2020
US
$000
Level 3
2020
US
$000
Total
Fixed income
investments
Fund investments
-
-
Public equity investments
9,969
Investments in
subsidiaries
-
101,667
7,584
109,251
-
-
-
12,435
12,435
-
9,969
12,541
7,255
7,255
-
-
-
77,006
10,036
87,042
-
-
-
3,729
3,729
-
12,541
6,813
6,813
9,969
101,667
27,274
138,910
12,541
77,006
20,578
110,125
The Company has no financial liabilities measured at fair value
The methods and valuation techniques used for the purpose of measuring fair value are
unchanged compared to the previous reporting year
No financial assets have been transferred between different levels
49
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
Fund
investment
US $000
Fixed Income
investments
US $000
As at 1 January 2020
Purchases
Settlement
Gains / (losses)
recognised in:
6,204
1,650
(103)
-
Profit or loss
-
- Other
comprehensive
income
As at 1 January 2021
Purchases
Settlement
Gains recognised
in:
-
Profit or loss
- Other
comprehensive
income
(4,022)
3,729
5,506
-
-
3,200
-
25,000
(15,000)
36
-
10,036
69,805
(72,221)
(36)
-
US $000
5,787
-
-
1,026
-
6,813
-
-
442
-
Total
US $000
11,991
26,650
(15,103)
1,062
(4,022)
20,578
75,311
(72,221)
406
3,200
As at 31 December 2021
12,435
7,584
7,255
27,274
50
Annual Report 2021
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
Fund
investment
US $000
Fixed Income
investments
US $000
US $000
Total
US $000
-
36
1,026
1,062
2020
Profit or loss
-
Financial assets held at
year-end
Other comprehensive income
-
Financial assets held at
year-end
Total gains / (losses) for 2020
(4,022)
(4,022)
-
36
-
(4,022)
1,026
(2,960)
At fair value
through OCI
At fair value
through
profit or loss
Investments in
subsidiaries
Fund
investment
US $000
Fixed Income
investments
US $000
US $000
Total
US $000
2021
Profit or loss
-
Financial assets held at
year-end
Other comprehensive income
-
Financial assets held at
year-end
Total gains / (losses) for 2021
-
(36)
442
406
3,200
3,200
-
(36)
-
442
3,200
3,606
51
The Company has not developed any quantitative unobservable inputs for measuring the fair
value of its level 3 financial assets at 31 December 2021 and 2020 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
Fund investments 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 as well as third parties 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
Fair value gains
As at 31 December
2021
US $000
2020
US $000
6,813
383
7,196
5,787
1,026
6,813
52
Annual Report 2021
Details of the investments in which the Company has a controlling interest as at 31 December
2021 are as follows:
Name of Subsidiary
Place of
incorporation
Holding
Voting
rights and
shares held
Principal
activity
Consolidated subsidiary
Livermore Capital AG
Switzerland
Ordinary shares
100%
Administration
services
Unconsolidated subsidiaries
Livermore Properties Ltd
Mountview Holdings Ltd
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%
Holding of
investments
Investment
vehicle
Investment
vehicle
Holding of
investments
Holding of
investments
53
9 Trade and other receivables
Financial items
Amounts due by related parties
(note 22)
Non-financial items
Prepayments
VAT receivable
2021
US $000
2020
US $000
289
65
12
366
8,151
67
20
8,238
For the Company’s 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 2021 or 2020
10 Cash and cash equivalents
Cash and cash equivalents included in the consolidated statement of cash flows comprise the
following at the reporting date:
Demand deposits
Cash at bank
2021
US $000
45,130
45,130
2020
US $000
50,407
50,407
54
Annual Report 2021
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
Number of
shares
Share premium
US $000
As at 31 December 2021 and 2020
174,813,998
169,187
Treasury shares
As at 1 January 2021
Additions (note 22)
Re-issued
As at 31 December 2021
Number of
shares
Share premium
US $000
-
10,888,577
1,430,000
9,458,577
-
6,973
(916)
6,057
During the year 1,430,000 of the Company’s treasury shares were re-issued to a key
management member (note 22) in full settlement of an accrued amount of USD 0 7m The
re-issued shares had an average cost of USD 0 916m and a fair value of USD 0 829m, as
determined based on their market price, resulting in the recognition of a loss in retained
earnings of USD 0 087m The difference between the fair value and the accrued amount is
included in professional fees (note 18)
In the consolidated statement of financial position, the amount included as share premium
and treasury shares comprises of:
Share premium
Treasury shares
12 Trade and other payables
Financial items
Trade payables
Amounts due to related parties (note 22)
Accrued expenses
2021
US $000
169,187
(6,057)
163,130
2020
US $000
169,187
-
169,187
2021
US $000
2020
US $000
36
6,193
412
6,641
34
4,464
370
4,868
55
13 Dividend
At 8 March 2021, the Company paid an interim dividend of USD 8m (USD 0 0488 per share) to
members on the register on 19 March 2021, as announced by the Board on 08 March 2021 The
dividend was paid on 16 April 2021
14 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 in issue during the relevant
financial periods
Net assets attributable to
ordinary shareholders (USD 000)
Closing number of ordinary
shares in issue
Basic net asset value per share
(USD)
Number of Shares
Ordinary shares
Treasury shares
Closing number of ordinary
shares in issue
2021
177,722
2020
163,907
165,355,421
174,813,998
1 07
0 94
174,813,998
(9,458,577)
174,813,998
-
165,355,421
174,813,998
The diluted net asset value per share equals the basic net asset value per share since no
potentially dilutive shares exist as at 31 December 2021 and 2020
56
Annual Report 2021
15 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
Asia
Investments
Other European countries
United States
Asia
2021
US $000
94
33,109
542
33,745
3,435
127,071
8,345
138,851
2020
US $000
(486)
3,384
629
3,527
3,102
98,985
8,038
110,125
Investment income, comprising interest and distribution income as well as fair value 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
16 Interest and distribution income
Interest from investments
Distribution income
2021
US $000
669
26,826
27,495
2020
US $000
782
21,228
22,010
57
Interest and distribution income is analysed between different categories of financial assets,
as follows:
2021
2020
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
669
26,632
27,301
782
21,195
21,977
-
194
194
-
33
33
669
26,826
27,495
782
21,228
22,010
The Company’s distribution income derives from multiple issuers The Company does not have
concentration to any single issuer
17 Fair value changes of investments
Fair value gains / (losses) on
financial assets through profit
or loss
Fair value gains on investments
in subsidiaries
Fair value losses on derivatives
2021
US $000
5,867
383
-
6,250
2020
US $000
(18,990)
1,026
(519)
(18,483)
58
Annual Report 2021
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:
Disposed in 2021
Disposed in 2020
Realised
(losses)/
gains*
US $000
Cumulative
distribution or
interest
US $000
Total
financial
impact
US $000
Realised
(losses)/
gains*
US $000
Cumulative
distribution
or interest
US $000
Total
financial
impact
US $000
Financial assets
at fair value
through profit or
loss
Fixed income
investments
Public equities
Derivatives
Financial assets
at fair value
through OCI
Private equities
1,099
1,454
-
2,553
-
2,553
2,237
3,336
111
1,565
-
-
2,384
4,901
324
84
(519)
(111)
2,683
3,007
11
-
2,694
95
(519)
2,583
-
-
2,384
4,901
(3,331)
(3,442)
752
3,446
(2,579)
4
* difference between disposal proceeds and original acquisition cost
18 Operating expenses
Directors’ fees and expenses
Other salaries and expenses
Professional fees
Legal expenses
Bank custody fees
Office costs
Depreciation
Other operating expenses
Audit fees
Tax fees
2021
US $000
3,903
201
3,528
53
102
277
109
349
75
2
2020
US $000
900
177
851
9
99
240
102
352
76
2
8,599
2,808
59
Professional fees include a share-based payment to a key management member of USD 0 129m
(notes 11 and 22)
Throughout 2021 the Company employed 4 members of staff (2020: 4) Two of those members are
the Company’s executive Directors
Other salaries and expenses include USD 18,977 of social insurance and similar contributions (2020:
USD 16,527), as well as USD 3,461 of defined contributions plan costs (2020: USD 3,148)
19 Finance costs and income
Finance costs
Bank interest expense
Foreign exchange loss
Finance income
Bank interest income
Foreign exchange gain
20 Taxation
Current tax charge
2021
US $000
2020
US $000
35
363
398
18
-
18
40
-
40
119
174
293
2021
US $000
66
2020
US $000
127
The Company is a tax resident in the Republic of Cyprus and is subject to taxation under the tax
laws and regulations in Cyprus
The current tax charge relates to the results of the Company for 2021, as explained above, and
the Company’s consolidated subsidiary in Switzerland (note 8)
60
Annual Report 2021
21 Earnings per share
The 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
Profit for the year attributable to
ordinary shareholders of the parent
(USD 000)
Weighted average number of ordinary
shares outstanding
2021
24,700
2020
845
165,327,512
174,813,998
Basic earnings per share (USD)
0 15
0 005
The diluted earnings per share equals the basic earnings per share since no potentially dilutive
shares were in existence during 2021 and 2020
61
22 Related party transactions
The Company is controlled by Groverton Management Ltd, an entity owned by Noam Lanir, which
at 31 December 2021 held 74 41% (2020: 76 62%) of the Company’s voting rights
2021
US $000
2020
US $000
Amounts receivable from unconsolidated
subsidiary
Sandhirst Ltd
289
221
(1)
Amounts receivable from key management
Loan receivable
Amounts receivable from parent company
Loan receivable
Amounts payable to unconsolidated
subsidiary
-
-
1,000
6,930
Livermore Israel Investments Ltd
(3,046)
(3,522)
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
Other key management fees
(149)
(1,011)
(1,987)
(2,998)
795
3,000
108
2,829
6,732
(149)
(93)
(700)
(793)
795
-
105
408
1,308
(2)
(3)
(4)
(5)
(4)
(6)
(7)
(8)
(1) The amounts receivable from unconsolidated subsidiary are interest free, unsecured, and have no
stated repayment date
(2) A loan of USD 1m was made during 2019 to a key management employee and a Company’s Director
The loan was free of interest, unsecured and was repayable on demand The loan was fully settled
62
Annual Report 2021
during 2021 This loan was included within trade and other receivables (note 9)
(3) A loan of USD 6 93m was made to the Company’s parent, Groverton Management Ltd The loan was
free of interest, unsecured and was repayable on demand The loan was fully settled during 2021
This loan was included within trade and other receivables (note 9)
(4) The amounts payable to unconsolidated subsidiary and Director’s current accounts with credit
balances are interest free, unsecured, and have no stated repayment date
(5) A loan with a balance at 31 December 2021 of 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 12)
(6) The amount payable to other key management personnel relates to payments made on behalf of
the Company for investment purposes and accrued consultancy fees During the year, an accrued
amount of USD 0 7m was settled by re-issuing 1,207,624 of the Company’s treasury shares at their
fair value as at the date of transfer
(7) These payments were made directly to companies which are related to the Directors
(8) During the year 222,376 of the Company’s treasury shares were re-issued to a key management
member for no consideration and no vesting conditions The fair value of these shares at the date of
transfer was USD 0 129m Other key management fees are included within professional fees (note
18)
During 2021, the Company bought back 10,888,577 shares from Groverton Management Ltd,
to be held in treasury, for a total cost of USD 6 973m, as determined based on the market
price of the shares
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
2021 or 2020
23 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,
the Directors cannot form an estimate of the outcome for this case and therefore no provision
has been made
24 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
2021
63
26 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 26
Risk objectives and policies
The objective of the Company is to achieve growth of shareholder value, in line with
reasonable risk, taking into consideration that the protection of long-term shareholder value
is paramount The policy of the Board is to provide a framework within which the investment
manager can operate and deliver the objectives of the Company
Risks associated with financial instruments
Foreign currency risk
Foreign currency risks arise in two distinct areas which affect the valuation of the investment
portfolio, 1) where an investment is denominated and paid for in a foreign currency; and
2) where an investment has substantial exposure to non-US Dollar underlying assets or
cash flows denominated in a foreign currency The Company in general does not hedge its
currency exposure The Company discretionally and partially hedges against foreign currency
movements affecting the value of the investment portfolio based on its view on the relative
strength of certain currencies Any hedging transactions represent economic hedges; the
Company does not apply hedge accounting in any case Management monitors the effect of
foreign currency fluctuations through the pricing of the investments The Company’s exposure
to financial instruments denominated in foreign currencies is the following:
2021
US $000
2021
US $000
2021
US $000
2020
US $000
2020
US $000
2020
US $000
Financial
assets
Financial
liabilities
Net value
Financial
assets
Financial
liabilities
Net value
British Pounds (GBP)
1,677
Euro
Swiss Francs (CHF)
Israel Shekels (ILS)
417
22
6,203
(110)
(21)
(2,099)
(3,046)
1,567
396
(2,077)
3,157
1,911
367
14
(114)
(68)
(27)
1,797
299
(13)
6,175
(3,522)
2,653
Total
8,319
(5,276)
3,043
8,467
(3,731)
4,736
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
64
Annual Report 2021
A 10% increase of the following currency rates against the rate of United States Dollar (USD)
at 31 December would have the following impact A 10% decrease of the following currencies
against USD would have an approximately equal but opposite impact
2021
US $000
2021
US $000
2021
US $000
2020
US $000
2020
US $000
2020
US $000
Profit
or loss
Other
comprehensive
income
British Pounds (GBP)
Euro
Swiss Francs (CHF)
Israel Shekels (ILS)
Total
157
40
(208)
316
305
-
-
-
-
-
Equity
157
40
(208)
316
305
Profit
or loss
Other
comprehensive
income
Equity
180
30
(1)
265
474
-
-
-
-
-
180
30
(1)
265
474
The above analysis assumes that all other variables in particular, interest rates, remain constant
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 2021 and 31 December 2020, 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 affected by interest rate changes are as follows:
65
2021
US $000
2020
US $000
Financial assets – subject to:
•
interest changes
45,130
50,407
An increase of 1% (100 basis points) in interest rates would have the following impact in
profit or loss and consequently to equity as well An equivalent decrease would have an
approximately equal but opposite impact There would be no impact in other comprehensive
income
Financial assets
•
interest changes
2021
US $000
2020
US $000
Profit or loss
Profit or loss
451
504
The above analysis assumes that all other variables, in particular currency rates, remain constant
66
Annual Report 2021
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 6 28% change in the net asset value as at 31 December
2021 (2020: 5 46%), and would have the following impact in profit or loss and consequently
to equity as well (either positive or negative, depending on the corresponding sign of the
change) There would be no impact in other comprehensive income
2021
US $000
Profit or
loss
11,163
2020
US $000
Profit or loss
8,955
Financial assets at fair value through
profit or loss
Derivatives
The Investment Manager may use derivative instruments in order to mitigate market risk or
to take a directional investment These provide a limited degree of protection and would not
materially impact the portfolio returns if a large market movement did occur
No derivatives were held either at 31 December 2021 or 2020
67
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 is as follows:
Financial assets:
At amortised cost
Trade and other receivables
Cash at bank
At fair value through profit or loss
2021
US $000
2020
US $000
289
45,130
45,419
109,251
154,670
8,151
50,407
58,558
87,042
145,600
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
68
Annual Report 2021
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 2021 or 2020
At 31 December the credit rating distribution of the Company’s asset portfolio subject to
credit risk was as follows:
Rating
US $000
Percentage
US $000
Percentage
2021
2020
AA
A
B
BBB
B-
BB-
Not Rated
26,063
12,872
922
6,195
4,576
5,280
98,762
154,670
16 9%
8 3%
0 6%
4 0%
3 0%
3 4%
63 8%
100%
31,415
16,350
3,998
2,642
1,148
8,818
81,229
145,600
21 6%
11 2%
2 7%
1 8%
0 8%
6 1%
55 8%
100%
Included within “not rated” amounts are investments in loan market through CLOs (equity
tranches) of USD 91 179m and open warehouses of USD 7 583m (2020: CLOs of USD 77 006m
and open warehouses of USD 10 036m)
The modelled internal rates of return on the CLO portfolio as well as the warehouse first loss
tranches are in low teens percentage points
69
Liquidity risk
The following table summarizes the contractual cash outflows in relation to the Company’s
financial liabilities according to their maturity
Carrying amount
US $000
Less than 1 year
US $000
31 December 2021
Trade and other payables
6,641
6,641
Carrying amount
US $000
Less than 1 year
US $000
31 December 2020
Trade and other payables
4,868
4,868
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 2021, the Company had liquid investments totalling USD 156 7m, comprising of USD
45 1m in cash and cash equivalents, USD 101 7m in investments in loan market through CLOs, USD
9 9m in public equities Management structures and manages the Company’s portfolio based on those
investments which are considered to be long term, core investments and those which could be readily
convertible to cash, are expected to be realised within normal operating cycle and form part of the
Company’s treasury function
Capital management
The Company considers its capital to be its total equity (i e , its share capital and all of its
reserves)
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Annual Report 2021
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 During 2021 and 2020, the Company’s only borrowing is a loan payable
to a related party of USD 0 149m (note 22) and therefore to a significant extent it is capital
funded
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:
Borrowings
Cash at bank
Net Debt
Total equity
Net debt to equity ratio
26 Financial assets and liabilities by class
2021
US $000
149
(45,130)
(44,981)
177,722
(0 25)
2020
US $000
149
(50,407)
(50,258)
163,907
(0 31)
Note
2021
US $000
2020
US $000
Financial assets:
Financial assets at amortised cost
9,10
45,419
Financial assets at fair value through
profit or loss
Financial assets designated at fair value
through other comprehensive income
4
5
119,220
58,558
99,583
12,435
3,729
177,074
161,870
Financial liabilities:
Financial liabilities at amortised cost
12
6,641
4,868
The carrying amount of the financial assets and liabilities at amortised cost approximates to
their fair value
27 Events after the reporting date
The following non-adjusting events occurred after 31 December 2021:
• On 5 January 2022, the Board announced an interim dividend of USD 24m (USD 0 145 per
71
•
•
share) to members on the register on 13 January 2022 The dividend was paid on 07
February 2022
The Company invested an additional amount of USD 8 9m to the open warehouse facilities as
at 31 December 2021, increasing its total investment to USD 16 5m Livermore’s investment
amount plus net carry amounting to a total of USD 17 6m became receivable in April and May
2022
In February 2022, Russia attacked Ukraine and the ensuing conflict has resulted in significant
humanitarian losses for the Ukrainian people In response, the US, UK, Japan and European
member states have enacted significant sanctions against Russia including exclusion of Russia
from the SWIFT system and access to hard currencies Russia and Ukraine and significant
exporters of agricultural commodities and Russia is a significant export of Oil and Gas,
especially to Europe The conflict has led to large increases in commodity prices and loss of
agricultural supply This is expected to have potentially significant and unexpected negative
impact to global growth and business performance We expect the most direct and significant
impact to European member states and less developed economies while US is expected to fare
better with somewhat delayed and muted affects The Company does not have direct exposure
to European or emerging markets with most of the portfolio exposed to US domestic market
companies Still, the conflict has only recently begun and given the uncertain outcome, it
is difficult to quantify the impact on the Company’s portfolio at this stage In response, the
Company intends to be conservatively positioned with sufficient cash balances and cashflow
to whether the uncertainty and position itself to take advantage of potential dislocations in
the market
• During 2022, the Board decided to waive the amount receivable of USD: 0 289m from its
unconsolidated subsidiary Sandhirst Limited (note 22), as a means of capital contribution to
the subsidiary
There were no other material events after the end of the reporting year, which have a bearing
on the understanding of these financial statements
72
Annual Report 2021
Shareholder Information
Registrars
All enquiries relating to shares or shareholdings should be addressed to:
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds LS1 4DL
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
73
Corporate Directory
Secretary
Chris Sideras
Registered Office
Trident Chambers
PO Box 146
Road Town
Tortola
British Virgin Islands
Company Number
475668
Registrars
Link Group
10th Floor
Central Square
29 Wellington Street
Leeds LS1 4DL
Auditor
Grant Thornton (Cyprus) Ltd
41-49, Agiou Nicolaou Street
Nemeli Court – Block C
2408 Engomi Nicosia
P O Box 239071687
1687 Nicosia Cyprus
Solicitors
Travers Smith
10 Snow Hill
London
EC1A 2AL
England
Broker
Arden Partners plc
125 Old Broad Street
London
EC2N 1AR
England
Nominated And Financial Adviser
Strand Hanson Limited
26 Mount Row
W1K 35Q
England
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
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Annual Report 2021
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