Senvest Capital Inc. Annual Report 2019

FY2019 Annual Report · Senvest Capital Inc.

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SENVEST
ANNUAL REPORT

2019

Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2019

OVERALL PERFORMANCE

Senvest Capital (“Senvest” or the “Company”) has been monitoring the recent outbreak of the novel coronavirus
(“COVID-19”) and the potential impact on its financial position. The outbreak of COVID-19 has caused
tremendous volatility in the financial markets and especially the equity markets which have experienced
significant declines. While the extent and duration of the impact of COVID-19 on global and local economies,
financial markets, and issuers in which the Company may invest is uncertain at this point, the outbreak has the
potential to adversely affect the value of the Company’s assets.

Even though the market moved up very forcefully in the fourth quarter, and traded at historically high
valuations, it was susceptible to surprise shocks, such as a global pandemic scare. The coronavirus is a real hit
to economic activity, and has caused substantial declines in stock markets around the world. As stated above
visibility is very difficult and it is certain that at least the first half of 2020 will produce very weak economic
numbers. To help counter these negative effects global central banks have begun easing all around the world.

The last quarter of 2019 marked a truce in the trade hostilities between the U.S. and China following the
October announcement of an “interim” phase one agreement. The staving off of further tariff increases, a partial
rollback of certain tariffs, and provision of intellectual property protections assuaged concerns of a full-blown
trade war and its potential impact on global macro-economic conditions. The Fed cut interest rates for the
third time and re-started its open market purchases of short-term Treasury debt securities. The combination
of trade stability and monetary easing likely provided the fuel for the Q4 surge in equity markets.

In many respects, the 2019 year represented the mirror image of 2018 from the perspective of the market
environment and returns for equities in general. In Q4 2018, markets plunged in the face of the fourth Fed rate
increase, tightening liquidity from the ongoing Fed balance sheet run-off and growing recession fears as a trade
war with China heated up. The final month of 2018 capped off with the worst December stock market
performance since the Great Depression. In contrast, by Q4 2019, there was a third Fed interest rate cut,
liquidity injections with the return of treasury bond purchases and a phase one trade deal, putting to rest fears
of a tariff-induced recession. After 2018 ended with the Russell 2000 down -11.03%, it is no wonder stocks put
in their best performance this year since 2013.

The improvement in the markets in the fourth quarter of 2019 was led by the belief that the phase one trade
deal between the U.S. and China provided the first element for a turnaround in global economic growth as it
improved sentiment and removed much uncertainty from the minds of CEOs, enabling them to commit to
business plans. Global central bank accommodation represented a second element in a global economic
turnaround, and this was no ordinary level of accommodation as “…the proportion of global central banks in
easing mode has doubled to approximately 80% from approximately 40% last April” (J.P. Morgan) and
represented the “biggest cycle of rate cuts since the financial crisis (60 cuts past 6 months) and $0.7tn of
Quantitative easing is expected in 2020” (Bank of America). Early evidence of an inflection in the business
cycle had already started as noted by a number of sources. Ned Davis Research notes that “the global economy
is showing its most decisive signs of improvement in over two years…The global OECD Composite Leading
Indicators (CLI) points to improving trends in coming months…the CLI increased for a third straight month in
November, following 22 months of decreases”. Bank of America further observed “the green shoots visible in
November are now spreading over to other parts of the global economy. The turnaround is palpable in the wide
breadth of our leading indicators of growth that have either outright inflected to a “Bullish” stance in the past
two months or are on the verge of tipping over”. Finally, JP Morgan research cited the bottoming of its “US
Quant Macro Index” as a leading indicator of the US business cycle.

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Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2019

Senvest recorded net income attributable to common shareholders of $104.8 million or $39.16 per basic and
diluted common share for the year ended December 31, 2019. The fourth quarter was responsible for almost
all of the net income earned in 2019. This compares to net loss attributable to common shareholders of ($140.1)
million or ($51.72) per basic and diluted common share for the year ended December 31, 2018. For the year,
the US dollar weakened against the Canadian dollar and the result was a currency translation loss of about
($43.9) million from the net income attributable to common shareholders. This amount is not reported in the
Company’s statement of income rather it’s reflected in its statement of comprehensive income. As a result, the
comprehensive income attributable to common shareholders was $60.9 million for the year.

The Company’s income from equity investments was the biggest contributor to the results. The net change in
equity investments and other holdings including securities sold short and derivative liabilities totalled $396.6
million in the current year versus ($368.8) million in December 2018.

Some of the largest holdings as at December 31, 2019 were, Marriot Vacations (VAC), Tower Semiconductors
(TSEM), Intercept Pharmaceuticals (ICPT), and Radware (RDWR). (When the Company refers to its portfolio
of holdings, the reference is to its aggregate portfolio including those in the funds that are consolidated into
the accounts of the Company.)

Biopharmaceutical maker Intercept Pharmaceutical (“ICPT”) soared over 86% in the fourth quarter and was
our best performing position for the period. ICPT expects to have the first FDA approved drug, obeticholic acid,
for the treatment of non-alcoholic steatohepatitis (“NASH”), a liver disease. ICPT’s strong presence at a
hepatology conference and FDA acceptance of its new drug application coupled with disappointing clinical trial
results from competitors all served to highlight the company’s lead over other players in the NASH field. The
company also hosted its first-ever “commercial day” at which management outlined its commercial plan and
target market for the investment community, reinforcing our view on the drug’s blockbuster potential. Finally,
the stock benefitted from a late-year biotech rally. Slightly offsetting these positive factors, the expected FDA
approval date was pushed to the end of Q2.

Vacation ownership operator Marriot Vacations (“VAC”) gained over 24% in the fourth quarter and was our
best performing position for the 2019 year. The company hosted its first analyst day in three years and
presented its business plan for the next three years. The highlight of the presentation, in our view was free cash
flow generation over that timeframe equivalent to about one-third of the company’s market capitalization.
Management stated its plan to use most of the free cash flow to buy back stock. Offsetting the positive takeaways
from the analyst day, the company reported mixed Q3 results relative to expectations due to the impact of
hurricane Dorian. VAC benefits from a high quality, “rolling snowball” business model, in which its owner base
grows every year and in turn so does its high margin, recurring revenue stream which comprises about two-
thirds of its EBITDA. The balance of EBITDA derives from the sale of vacation ownership points, half of which
are typically purchased by existing owners. And since the owner base grows every year, VAC has a growing,
built-in base of future buyers of more points. As a result of this “rolling snowball” effect, every year VAC’s
downside goes lower, and its upside goes higher. VAC further boosts its stock price potential by using its
significant free cash flow to buy back shares at what we, and the company, believe represents a current cheap
valuation at about a 9% free-cash flow yield. Rarely have we found such a high quality, well-managed and
growing business with high barriers to entry that trades at such an attractive valuation, which explains why
VAC remains our largest holding

Analog semiconductor foundry Tower Semiconductor (“TSEM”) picked up over 25% in the fourth quarter and
was our second best performing position for the 2019 year. The company reported Q3 financial results that
topped forecasts, however guided Q4 was slightly lower than expectations. We expect that a transition to
significant growth will inflect later in 2020 after the company starts production of new products coming to
market in a number of secular growth areas, including 5G mobile phones, image sensors and data center

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Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2019

applications. We note that SMH, a semiconductor ETF, trades around -6% off its all-time highs, while TSEM
lags almost -38% off its late 2017 high. With anticipated growth that we believe should exceed the industry and
an EV/EBITDA valuation at roughly half of its direct public comps, we believe prospects for TSEM look
compelling. TSEM remains our second largest position.

PennyMac Financial Services (“PFSI”), was also one of our best performing positions for 2019. We have owned
this stock for many years. PFSI, which originates and services residential mortgages, had explosive earnings
growth spurred by the decline in interest rates and a mortgage refinance boom. Our patience in holding the
position was finally rewarded when the stock surged this year. We sold roughly half the position in the low
$30s as the stock approached our price targets, trading about 1.4x book, a one standard deviation high from its
historical average. Another 2019 winner, we exited prior core holding Northstar Realty Europe (“NRE”) after
the company was acquired, prompted by our first foray into shareholder activism. We also exited prior core
holding Mellanox Technologies (“MLNX”), which also agreed to an acquisition

The Senvest Master Fund (Senvest Partners Fund) is focused primarily on small and mid-cap companies. The
fund recorded a return of 21.5% net of fees in the fourth quarter and 17.95% for the year as a whole. With most
of the long portfolio invested in small and mid-cap stocks, the fund outperformed its most relevant benchmark,
the Russell 2000 for the quarter but trailed it for the 2019 year as a whole. The fund also underperformed the
S&P 500 index for the year, but does not consider this index as a benchmark. In the year the fund initiated an
institutional share class which requires a minimum investment of $75 million US, and includes a longer
duration element, which should further enhance the stability of our capital base and ability to make long-term
investments to help us generate returns to the benefit of all of our partners. Senvest’s internal capital is subject
to the same liquidity provisions of the institutional share class.

The Senvest Technology Partners Fund (prior name Senvest Israel Partners) was initiated in 2003 to focus on
investing in Israel related companies. Effective January 1, 2019, the Israel Fund broadened its geographic
investment mandate to focus on global technology investments. To better reflect the evolving global
complexion of its technology investments, the Israel Fund underwent a name change to Senvest Technology
Partners. After investing in Israel-related technology for 15 years, its holdings extend across the global
technology universe. The Technology Fund will maintain the same investment philosophy and continue to
leverage the existing diligence and understanding of global technology and end markets. This fund recorded a
return of 8.22% net of fees for the fourth quarter and 17.14% for the 2019 year (monthly results of both funds
can be found on the Company’s website).

The two funds had over $1.8 billion of net assets under management at December 31, 2019. Both of these funds
are consolidated into the accounts of the Company.

The Company has a portfolio of real estate investments as at December 31, 2019. One part of this amount
represents investments in different US REITs and partnerships. These REITs and partnerships are not publicly
traded and there is no established market for them. The most likely scenario for a disposal of these holdings is
an eventual sale of the underlying real estate properties of the REITs and partnerships and the distribution to
its holders. Also, there are minority interests in private entities whose main assets are real estate properties.
As described above for the REITs and partnerships, the most likely scenario for a disposal of these holdings is
an eventual sale of the underlying real estate properties.

The Company also has investment properties in lands and buildings. Investment properties are initially
measured at cost, including transaction costs. Subsequent to initial recognition, investment properties were
remeasured at fair value, using the fair value model. The fair value is based on external valuations from third
party valuators. Gains or losses arising from changes in fair value of investment properties will be included in
the Company’s net profit or loss. The Company acquired a majority of these properties pursuant to a business

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Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2019

combination. The Company (the acquirer) purchased 100% of the voting and equity interests of Bogas Costa
Del Sol SL, Globalbox Arganda SL, Globalbox Rivas SL and Coldstream SL (the acquirees) on January 16, 2017.
The transaction was accounted for under the purchase method. The net assets of the acquired companies were
valued at fair value and there was no resulting goodwill on the purchase. There was no contingent consideration
nor any non-controlling interests that arose due to the transaction. In April 2018 all the aforementioned
companies were merged into one legal entity called Coldstream SL. The amount of new purchases and
capitalized subsequent expenditures for 2019 was $6,824.

The Company consolidates the Senvest Management LLC (SML) entity that serves as the investment manager
of Senvest Partners and Senvest Technology Partners as well as the general partners of the funds. The portion
of the expected residual returns of structured entities that do not belong to the Company is reflected as a non-
controlling interest on the statement of financial position. This non-controlling interest is owned by an
executive of the Corporation. Most of the equity of Senvest Management LLC reflects its investment in the
underlying funds. On April 1 2019 SML redeemed a net amount of $90.5 million of its equity in the underlying
funds and the executive invested this same amount back in the funds under his own personal name. As such
there was a reallocation on the Company’s balance sheet out of Non-controlling interest and into Liability for
redeemable units. There was no cash withdrawal out of the funds just a transfer of ownership of the investment
in the funds from SML to the executive owner of SML. Even though the total equity of the Company was reduced
due to this transfer, the total equity attributable to common shareholders remained unchanged. This non-
controlling interest was $23.3 million as at December 31, 2019 from $104.8 million as at December 31, 2018.

At the end of December 31, 2019, Senvest had total consolidated assets of $2,885.0 million versus $2,757.0
million at the end of 2018. Equity investments and other holdings increased to $2,539.1 million from $2,155.2
million in December 2018. The Company purchased $1,459.0 million of investment holdings in the year and
sold $1,525.3 million of such holdings. The Company’s liabilities increased to $1,942.3 million this year versus
$1,787.5 million in 2018. The main contributor to this increase was a higher liability for redeemable units of
$333.2 over last year. There was also a reduction in securities sold short and derivative liabilities of $241.1 from
2018. The proceeds of securities sold short were $2,595.7 million and the amount of shorts covered was
$2,904.3 million in the year. Overall the trading figures were less than the corresponding amounts for the prior
year.

Functional currency

Items included in the ﬁnancial statements of each of the Company’s entities are measured using the currency
of the primary economic environment in which the entity operates (the functional currency). The functional
currency of the parent company is the US dollar.

Presentation currency

The Company has adopted the Canadian dollar as its presentation currency, which in the opinion of
management is the most appropriate presentation currency. Historically, the Company’s consolidated financial
statements have been presented in Canadian dollars, and since the company’s shares are listed on a Canadian
stock exchange, management believes it would better serve the use of shareholders to continue issuing
consolidated financial statements in Canadian dollars. The US dollar consolidated financial statements are
translated into the presentation currency as follows: assets and liabilities – at the closing rate at the date of the
consolidated statement of financial position; and income and expenses – at the average rate for the period. All
resulting changes are recognized in other comprehensive income (loss) as currency translation differences.
Equity items are translated using the historical rate

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Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2019

Risks

Financial risk factors

The Company’s activities expose it to a variety of financial risks: market risk (including fair value interest rate
risk, cash flow interest rate risk, currency risk and equity price risk), credit risk and liquidity risk.

The Company’s overall risk management program seeks to maximize the returns derived for the level of risk to
which the Company is exposed and seeks to minimize potential adverse effects on the Company’s financial
performance. Managing these risks is carried out by management under policies approved by the Board.

The Company uses different methods to measure and manage the various types of risk to which it is exposed;
these methods are explained below.

Market risk

Fair value and cash flow interest rate risks

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a
result of changes in market interest rates.

The majority of the Company’s debt is based on floating rates which expose the Company to cash flow interest
rate risk. The Company does not have a long-term stream of cash flows that it can match against this type of
fixed debt, so it prefers to use short-term floating rate debt. The Company does not mitigate its exposure to
interest rate fluctuation on floating rate debt. If interest rates spike, then the Company could enter into interest
rate swaps or more probably just reduce its debt level. As at December 31, 2019, the Company had listed
sufficient equity securities that it can sell to reduce its floating rate debt to zero.

Currency risks

Currency risk refers to the risk that values of monetary financial assets and liabilities denominated in foreign
currencies will vary as a result of changes in underlying foreign exchange rates. The Company’s functional
currency is the US dollar. The Company has foreign currency exposure to the Canadian dollar, the British
pound sterling, the Euro, the Swedish krone, and the Israeli shekel.

Equity price risk

Equity price risk is the risk that the fair value of equity investments and other holdings and equities sold short
and derivatives will vary as a result of changes in the market prices of the holdings. The majority of the
Company’s equity investments and other holdings and all of the securities sold short are based on quoted
market prices as at the consolidated statement of financial position date. Changes in the market price of quoted
securities and derivatives may be related to a change in the financial outlook of the investee entities or due to
the market in general. Where non-monetary financial instruments − for example, equity securities − are
denominated in currencies other than the US dollar, the price, initially expressed in a foreign currency and
then converted into US dollars, will also fluctuate because of changes in foreign exchange rates.

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Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2019

fair value, which is recorded in the financial statements. This creates a risk that the Company could settle these
instruments at a value greater or less than the amount that they have been recorded in the financial statements.

The Company’s equity investments and other holdings have a downside risk limited to their carrying value,
while the risk of equities sold short and derivatives is open ended. The Company is subject to commercial
margin requirements which act as a barrier to the open-ended risks of the securities sold short and derivatives.
The Company closely monitors both its equity investments and other holdings and its equities sold short and
derivatives.

The impact of a 30% change in the market prices of the Company’s equity holdings with quoted value and
derivatives, securities sold short and derivative liabilities as at December 31, 2019 would be as follows (in
thousands):

Equity investments and other holdings
Listed equity securities and derivatives

Securities sold short and derivative
liabilities

Pre-tax impact on net earnings

Liquidity risk

Fair value

Estimated fair value Estimated fair value
30% price decrease

30% price increase

2,295,719

2,984,435

1,607,003

(445,418)

(579,043)

555,091

(311,793)

(555,091)

Liquidity risk is the risk the Company will encounter difficulties in meeting its financial obligations. The
Company’s largest assets are equity investments and other holdings. Most of these assets are made up of
equities in public holdings which can be liquidated in a relatively short time. Due to its large holding of liquid
assets, the Company believes that it has sufficient resources to meet its obligations.

All financial liabilities other than securities sold short and derivative liabilities, liability for redeemable units
and some other payables as at the consolidated statement of financial position date mature or are expected to
be repaid within one year. The liquidity risk related to these liabilities is managed by maintaining a portfolio of
liquid investment assets.

Credit risk

Credit risk is the risk that a counterparty will fail to fulfill its obligations under a contract and will cause the
Company to suffer a loss.

All transactions in listed securities are settled or paid for upon delivery using approved brokers. The risk of
default is considered minimal, as delivery of securities sold is executed only once the broker has received
payment. Payment is made on a purchase once the securities have been received by the broker. The trade will
fail if either party fails to meet its obligations.

The Company is also exposed to counterparty credit risk on its cash and cash equivalents, restricted short-term
investment and due from brokers.

From time to time, the Company enters into derivative financial instruments consisting primarily of options
and warrants to purchase or sell equities, equity indices and currencies, equity swaps, foreign currency forward
contracts, and foreign currency futures contracts. These derivative instruments are marked to market. There is

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Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2019

deemed to be no credit risk for futures and certain options that are traded on exchanges. The warrant contracts
and certain options that are not traded on an exchange allow the Company to purchase underlying equities at
a fixed price. Equity swaps represent future cash flows that are agreed to be exchanged between the Company
and counterparties at set dates in the future. Foreign currency forward contracts are contracts to buy or sell
foreign currencies at a specified price at a future point in time.

Capital risk management

The Company’s objective when managing its capital is to maintain a solid capital structure appropriate for the
nature of its business. The Company considers its capital to be its total shareholders equity. The Company
manages its capital structure in light of changes in economic conditions. To maintain or adjust its capital
structure, the Company initiates normal course issuer bids or adjusts the amount of dividends paid. The
Company monitors capital on the basis of its net liabilities-to-capital ratio, which is as follows (in millions):

Total net liabilities

Total equity

Net liabilities to capital ratio

December 31, 2019

December 31, 2018

$1,758.5

$ 942.7

1.87

$1,429.8

$969.4

1.47

The Company’s goal is to maintain its net liabilities to capital ratio below 2.0 in order to limit the amount of
risk. The Company defines its net liabilities to equal its total liabilities less its due from brokers. The Company
believes that limiting its net liabilities to capital ratio in this manner is the best way to control risk. The
Company’s net liabilities to capital ratio was at 1.87 at the end of December 2019 from 1.47 at the end of 2018.

Investment Risk

To the extent not discussed above, the Company is subject to additional risks with respect to the investments
made.

The value of the Company’s portfolio may decrease as well as increase, due to a variety of factors, including
general economic conditions, and market factors. Additionally, investment decisions made by the Company
may not always be profitable or prove to have been correct. Investment strategies, at any given time, may incur
significant losses. Losses can occur for a number of reasons, including but not limited to, an overall decline in
the underlying market, a lack of liquidity in the underlying markets, excessive volatility in a particular market,
government intervention or monetary and/or fiscal policies of a specific region or country. The profitability of
a significant portion of the Company’s investments also depends to a great extent upon the Company’s ability
to correctly assess the future course of the price movements of securities and other investments. There can be
no assurance that the Company will be able to accurately predict these price movements.

The Company’s investment strategy is speculative and involves risk. The Company trades in options and other
derivatives, as well as using short sales and utilizing leverage. The portfolio may not be diversified among a
wide range of issuers or industries. In addition, the Company may take concentrated positions in its high
conviction ideas, invest in high yield securities or invest in foreign markets outside the US and Canada.
Accordingly, the investment portfolio may be subject to more rapid change in value than would be the case if
the Company were required to maintain a wide diversification in the portfolios among industries, areas, types
of securities and issuers.

The Company may make investments in the securities of high growth companies. More specifically, the
Company may have significant investments in smaller-to-medium sized companies with market capitalizations

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Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2019

of less than $2 billion US. While smaller companies may have potential for rapid growth, they often involve
higher risks because they lack the management experience, financial resources, product diversification, and
competitive strengths of larger corporations. These factors make smaller companies far more likely than their
larger counterparts to experience significant operating and financial setbacks that threaten their short-term
and long-term viability. In addition, in many instances, the frequency and volume of their trading is
substantially less than is typical of larger companies. As a result, the securities of smaller companies may be
subject to wider price fluctuations and exiting investments in such securities at appropriate prices may be
difficult, or subject to substantial delay. Furthermore, some of the portfolio may be invested in technology,
technology-related markets and biotech. These types of companies may allocate greater than usual amounts to
research and product development. The securities of such companies may experience above-average price
movements associated with the perceived prospects of success of the research and development programs.
Also, these companies could be adversely affected by lack of commercial acceptance of a new product or
products or by technological change and obsolescence. Some of these companies may have limited operating
histories. As a result, these companies may face undeveloped or limited markets, have limited products, have
no proven profit-making history, operate at a loss or with substantial variations in operating results from period
to period, have limited access to capital and/or be in the developmental stages of their businesses.

The Company tries to manage the above risks by monitoring its leverage, actively following its investee
companies and trying to react to market conditions. At the same time the Company expects its portfolio to
exhibit a higher degree of volatility than portfolios that invest in larger more stable companies and that invest
within more defined limits. As at December 31, 2019, approximately 88% of the Company’s portfolio was
invested in Level 1 securities. The Company monitors its Level 1 securities as percentage of its total investments;
however, it does not have a fixed number that this percentage cannot fall below.

Climate Change Risk

Climate change risk refer to the physical risks and transition-related risks related to the changes in climate
patterns that may have a significant impact on communities and the economy. While the direct exposure of the
Corporation’s operations to climate change risk is relatively low, as an investor in equities and other assets, the
Corporation could indirectly be impacted by this risk through its portfolio investments.

The Corporation’s portfolio investments face the potential direct impact of more frequent and more intense
extreme weather events, as well as the potential indirect impact of any related supply chain disruptions. The
exposure of the Corporation’s portfolio investments to climate change risk also arises from the movement
toward a low-emission economy, which may result in increased reputational, market, regulatory, policy, legal
and technology-related risks. Existing portfolio investments in carbon-intensive industries and in other
markets which are dependent on such industries may be more exposed to such transitional risks as a result of
significant changes in customer perceptions and preferences, the increasing cost of carbon emissions and
competition from renewable energy.

Critical accounting estimates and judgments

The Company makes estimates and assumptions concerning the future that will, by definition, seldom equal
actual results. The following are the estimates applied by management that most significantly affect the
Company’s consolidated financial statements. These estimates have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year.

Consolidation of entities in which the Company holds less than 50% of the voting rights.

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Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2019

Management considers that the Company has de facto control of Senvest Management LLC (SML), RIMA
Senvest Master Fund GP LLC, and Senvest Technology Partners GP LLC., three legal entities wholly owned by
an executive of the Company, because of the Company’s board representation and the contractual terms of the
investment advisory agreement. SML is the investment adviser to the Funds, whereas RIMA Senvest Master
Fund GP LLC is the General Partner of Senvest Master Fund LP and Senvest Technology Partners GP LLC is
the General Partner of Senvest Technology Partners Master Fund LP.

Management considers that the Company has control of Senvest Master Fund LP, Senvest Technology Partners
Master Fund LP and Senvest Cyprus Recovery Investment Partners LP even though the Company has less than
50% of the voting rights in each of the Funds. The Company assessed that the removal rights of non-affiliated
unitholders are exercisable but not strong enough given the Company’s decision-making authority over
relevant activities, the remuneration to which it is entitled and its exposure to returns. The Company, through
its structured entity, is the majority unitholder of each of the Funds and acts as a principal while there are no
other unitholders forming a group to exercise their votes collectively.

Fair value estimates of investment properties

The Company has adopted the fair value model in measuring its investment properties. The fair value of the
investment properties is performed by external independent valuators located in the area of the properties.
Inputs used in the property valuation models are based on appropriate assumptions that reflect the type of
property and location. Management reviews the assumptions made and models used to ensure they correlate
with their expectation and understanding of the market. Changes in assumptions about these factors could
affect the reported fair value of financial instruments.

Fair value estimates of financial instruments

The fair value of financial instruments where no active market exists or where quoted prices are not otherwise
available are determined by using valuation techniques. In these cases, the fair values are estimated from
observable data in respect of similar financial instruments or by using models. Where market observable inputs
are not available, they are estimated based on appropriate assumptions. To the extent practical, models use
only observable data; however, areas such as credit risk (both the company’s own credit risk and counterparty
credit risk), volatilities and correlations require management to make estimates. Changes in assumptions about
these factors could affect the reported fair value of financial instruments.

Financial instruments in Level 1

The fair value of financial assets and financial liabilities traded in active markets are based on quoted market
prices at the close of trading on the consolidated statement of financial position date. The quoted market price
used for financial assets and financial liabilities held by the Company is the close price. Investments classified
in Level 1 include active listed equities and derivatives traded on an exchange. The financial assets classified as
Level 1 were approximately 88% of the total financial assets.

Financial instruments in Level 2

Financial instruments classified with Level 2 trade in markets that are not considered to be active but are valued
based on quoted market prices, dealer quotations or valuation techniques that use market data. These valuation
techniques maximize the use of observable market data where available and rely as little as possible on entity-
specific estimates. If all significant inputs required to fair value an instrument are observable, the instrument
is included in Level 2. These include corporate bonds, thinly traded listed equities, over-the-counter derivatives
and private equities.

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Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2019

The Company uses a variety of methods and makes assumptions that are based on market conditions existing
at each year-end date. Valuation techniques used for non-standardized financial instruments such as options
and other over-the-counter derivatives include the use of comparable recent arm’s length transactions,
reference to other instruments that are substantially the same, discounted cash flow analyses, option pricing
models and other valuation techniques commonly used by market participants, making maximum use of
market inputs and relying as little as possible on entity-specific inputs. The financial assets classified as Level
2 were approximately 5% of the total financial assets.

Financial instruments in Level 3

Investments classified in Level 3 have significant unobservable inputs, as they trade infrequently. Level 3
instruments consist mainly of unlisted equity investments and real estate investments. As observable prices
are not available for these securities, the Company has used valuation techniques to derive the fair value. The
financial assets classified as Level 3 were approximately 7% of the total fair value of financial assets.

Level 3 valuations are reviewed by the Company’s Chief Financial Officer (CFO), who reports directly to the
Board on a quarterly basis in line with the Company’s reporting dates. On an annual basis, close to the year-
end date, the Company obtains independent, third party appraisals to determine the fair value of the
Company’s most significant Level 3 holdings. The annual valuations of the significant level 3 holdings are
carried out externally. The Company’s CFO reviews the results of the independent valuations. Emphasis is
placed on the valuation model used to determine its appropriateness, the assumptions made to determine
whether it is consistent with the nature of the investment, and market conditions and inputs such as cash flow
and discount rates to determine reasonableness.

As at December 31, 2019, Level 3 instruments are in various entities and industries. The real estate investments
are made up of investments in private real estate companies, and in real estate income trusts and partnerships.
For the main Level 3 instruments, the Company relied on appraisals carried out by independent third party
valuators or on recent transactions. There was no established market for any of these investments, so the most
likely scenario is a disposal of the underlying assets. For the investments in real estate income trusts and
partnerships, the Company relied mainly on audited financial statements, valuing the assets at fair value. The
most likely scenario is an eventual sale of the underlying properties and their subsequent distribution to the
holders.

Liability for redeemable units

Liability for redeemable units represents the units in Senvest Master Fund, L.P., Senvest Technology Partners
Master Fund, L.P. (formerly Senvest Israel Partners Master Fund, L.P.) and Senvest Cyprus Recovery
Investment Partners, L.P. Fund (collectively the Funds or individually a Fund) that are not owned by the
Company. Senvest Master Fund, L.P. and Senvest Technology Partners Master Fund, L.P. units may be
redeemed as of the end of any calendar quarter, however for a particular class the there is a maximum quarterly
redemption of 17% of the investor units and a maximum annual redemption of 34% of the investor units.
Redemptions made within the first 24 months will be subject to a redemption fee of 3% to 5% which is payable
to Senvest Master Fund, L.P. and Senvest Technology Partners Master Fund, L.P. In addition, there are notice
periods of 60 days that must be given prior to any redemption. Senvest Cyprus Recovery Investment Partners,
L.P. Fund has units that can be redeemed semi-annually with a 120 day notice. These units are recognized
initially at fair value, net of any transaction costs incurred, and subsequently units are measured at the
redemption amount.

10
Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2019

Redeemable units are issued and redeemed at the holder’s option at prices based on each Fund’s net asset value
per unit at the time of subscription or redemption. Each Fund’s net asset value per unit is calculated by dividing
the net assets attributable to the holders of each class of redeemable units by the total number of outstanding
redeemable units for each respective class. In accordance with the provisions of the Funds’ offering documents,
investment positions are valued at the close price for the purpose of determining the net asset value per unit
for subscriptions and redemptions.

Income taxes

The Company is subject to income taxes in numerous jurisdictions. Significant judgment is required in
determining the worldwide provisions for income taxes. There are many transactions and calculations for
which the ultimate tax determination is uncertain. The Company recognizes liabilities for anticipated tax audit
issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters
is different from the amounts that were initially recorded, such differences will impact the current and deferred
income tax assets and liabilities in the year in which such determination is made.

QUARTERLY RESULTS

(In thousands except for earnings(loss) per share information)

Total revenue and
investment gains(losses)

Net income(loss)-
Common shareholders

Earnings (loss)
Per share

354,560

76,376

(169,458)

164,672

(428,534)

21,225

67,359

23,331

85,508

21,091

(56,556)

54,751

(152,197)

2,478

19,337

(9,704)

31.98

7.86

(21.04)

20.36

(56.19)

0.92

7.10

(3.55)

Year

2019-4

2019-3

2019-2

2019-1

2018-4

2018-3

2018-2

2018-1

Commitments

On December 20, 2019, the Company entered into an equity financing commitment. Per the equity financing
commitment letter and the Stock Purchase Agreement (the “Purchase Agreement”), the Investors agreed and
committed to contribute, directedly or indirectly, an aggregate amount of cash equal to Canadian $50,000,000
to fund a portion, along with other committed capital providers, of the following amounts at closing: (a) the
obligations under the Purchase Agreement to pay the aggregate purchase price and (b) the payment of any fees
and expenses in connection with the closing and the debt financing, pursuant to and in accordance with the
Purchase Agreement. In addition, per the equity financing commitment letter, the parties have agreed that the
Investors shall not be obligated to contribute, purchase equity or debt, or otherwise provide funds in any
amount in excess of its commitment.

In addition to the above, as required by certain of the Company’s other equity investments and other holdings,
the Company has capital commitments of $10,627 and has real estate equity investment capital commitments
of $9,244.

11
Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2019

SELECTED ANNUAL INFORMATION

(In thousands except for earnings (loss) per share information)

Total Revenue and investment

gains(losses)

Net income (loss) – common

shareholders

Earnings (loss) per share

2019

2018

2017

426,150

(316,619)

488,972

104,794

(140,086)

165,967

39.16

(51.72)

60.03

Total assets

2,884,999

2,756,970

2,976,026

The Company has had wide swings in profitability from quarter to quarter in the past two years, as seen above.
The profit has fluctuated a significant amount quarter to quarter. The highest earning quarter showed a profit
of over $85 million and the least profitable quarter had a loss of over $150 million. These wide swings are
primarily due to the large quarterly mark to market adjustments in the Company’s portfolio of public holdings.
However, we expect the volatility and choppiness of the markets to result in wide profit swings from year to
year and from quarter to quarter. Reference is made to the section on Investment risk above.

The Company maintains accounts with several major financial institutions in the U.S. who function as the
Company’s main prime brokers. The Company has assets with the prime brokers pledged as collateral for
leverage. Although the prime brokers are large financial institutions, there is no guarantee that any financial
institution will not become insolvent. In addition, there may be practical or time problems associated with
enforcing the Company’s rights to its assets in the case of such insolvency.

While both the U.S. Bankruptcy Code and the Securities Investor Protection Act seek to protect customer
property in the event of a failure, insolvency or liquidation of a broker dealer, there is no certainty that, in the
event of a failure of a broker dealer that has custody of the Company’s assets, the company would not incur
losses due to its assets being unavailable for a period of time, ultimately less than full recovery of its assets, or
both. As a significant majority of the Company’s assets are in custody with four prime brokers, such losses
could be significant.

On August 14, 2019, Senvest commenced a new normal course issuer bid to purchase a maximum of 60,000 of
its own common shares until August 13, 2020. This bid replaced last year’s one that expired. There were 36,200
shares repurchased during the year under both the old and new bid. The number of common shares
outstanding as at December 31, 2019 was 2,652,424 and as at March 26, 2020 was 2,634,124. There were no
stock options outstanding as at December 31, 2019 and none have been issued since 2005.

The Company has financing with a bank, composed of a credit facility and a guarantee facility. A first ranking
movable hypothec in the amount of $30 million on all of its assets has been granted as collateral for both of the
facilities. According to the terms of the facilities, the Company is required to comply with certain financial
covenants. During the period, the Company met the requirements of all the covenants. The Company also has
margin facilities with brokers.

12
Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2019

New Accounting standards adopted in 2019

IFRS 16, ‘Leases’ replaces the requirements in IAS 17, Leases, and three related interpretations; it requires the
lessees to recognize an asset and a liability reflecting a “right-of-use asset” and future lease payments for
virtually all lease contracts. The Company adopted IFRS 16 on a modified retrospective basis whereby the
adjustments are recorded on January 1, 2019 without adjustments to prior periods. Starting from that date, the
Company recorded a right-of-use asset and a lease liability; lease expense is replaced by amortization of the
right-of-use asset and interest expense on the lease liability and principal payments towards the lease liability
are presented as financing cash outflows.

The Company’s leasing activities include the rental of office space. The modified retrospective application of
IFRS 16 allows for certain expedients to facilitate the implementation of the requirements. The Company has
elected to apply the practical expedient to account for leases for which the lease term ends within 12 months of
the date of initial application as short-term leases.

On January 1, 2019, the Company recorded a right-of-of use asset based on the corresponding operating lease
liability which was measured at the net present value of the future lease payments. The right-of-use asset was
adjusted for prepaid rents and lease incentives which were already recorded in the Company’s consolidated
statement of financial position. On January 1, 2019, the lease liability was $5,867 and the right-of-use asset
was $5,686. The resulting additions and reclassification in the statement of financial position did not impact
prior year results. On the consolidated statements of financial position the right-of-use asset is presented in
Other assets and the lease liability is presented with Trade and other payables and in note 11.

When calculating the net present value of the future lease payments, the Company used its incremental
borrowing rate at January 1, 2019. The weighted-average rate applied is 4.5%.

The following table reconciles the Company’s lease obligations at December 31, 2018, as previously disclosed
in the notes to the Company’s consolidated financial statements, to the lease liability recognized on initial
application of IFRS 16 at January 1, 2019.

Operating lease commitments at December 31 2018
Discounted using the incremental borrowing rate at January 1 2019
Variable lease payments that do not depend on an index or rate
Operating lease liability recognized at January 1, 2019

7,066
6,144
(277)
5,867

Related party transactions

The Company consolidates the Senvest Management LLC entity that serves as the investment manager of
Senvest Partners and Senvest Israel Partners as well as the general partners of the funds. The portion of the
expected residual returns of structured entities that do not belong to the Company is reflected as a non-
controlling interest on the statement of financial position. This non-controlling interest is owned by an
executive of the Company and totalled $23.2 million as at December 31, 2019 from $104.8 million as at
December 31, 2018.

13
Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2019

Significant Equity Investments

For information on a summary of financial information from certain significant investees please refer to the
2019 audited financial statements. The accounts of Senvest Partners, Senvest Technology Partners and Senvest
Cyprus Recovery Investment Fund are consolidated with the Company’s accounts.
Subsequent events

Since the latter part of February 2020, the financial markets have been very volatile in response to the
developing COVID-19 pandemic and the equity markets in particular have experienced significant declines and
the fixed income markets have experienced significant volatility due to concerns about credit risk and liquidity
amongst others. The Company is monitoring the situation and its potential impact on itself and on the Funds
in particular. While the extent and duration of the impact of COVID-19 on global and local economies, financial
markets, and sectors and issuers in which the Company invests directly and through the Funds is uncertain at
this point, the outbreak has the potential to adversely affect the value of the consolidated portfolios, a portion
of which will be compensated by proportionate changes in the liability for redeemable units.

FORWARD LOOKING STATEMENTS

This MD&A contains “forward looking statements” which reflect the current expectations of management
regarding our future growth, results of operations, performance and business prospects and opportunities.
Wherever possible, words such as “may”, “would”, “could”, “will”, “anticipate”, “believe”, “plan”, “expect”,
“intend”, “estimate”, “aim”, “endeavour”, “likely”, “think” and similar expressions have been used to identify
these forward looking statements. These statements reflect our current beliefs with respect to future events and
are based on information currently available to us. Forward looking statements involve significant known and
unknown risks, uncertainties and assumptions. Many factors could cause our actual results, performance or
achievements to be materially different from any future results, performance or achievements that may be
expressed or implied by such forward looking statements including, without limitation, those Risk Factors
listed in the Company's annual information form. Should one or more of these risks or uncertainties
materialize, or should assumptions underlying the forward looking statements prove incorrect, actual results,
performance or achievements could vary materially from those expressed or implied by the forward looking
statements contained in this MD&A. These forward looking statements are made as of March 27, 2020 and will
not be updated or revised except as required by applicable securities law.

OTHER FINANCIAL INFORMATION

There is additional financial information about the Company on Sedar at http://www.sedar.com/ the
Company’s website at www.senvest.com, as well the Company’s or Senvest Management’s U.S. SEC section 13
and other filings on www.sec.gov.

14
Senvest Capital Inc.
Management’s Discussion and Analysis
December 31, 2019

INTERNAL CONTROLS

Disclosure controls and procedures

Our disclosure controls and procedures are designed to provide reasonable assurance that information
required to be disclosed by us in reports filed or submitted under Canadian securities laws is recorded,
processed, summarized and reported within the time periods specified under those laws, and include controls
and procedures that are designed to ensure that the information is accumulated and communicated to
management, including Senvest’s President and CEO and Vice-President and CFO, to allow timely decisions
regarding required disclosure. As at December 31, 2019, management evaluated, under the supervision of and
with the participation of the CEO and the CFO, the effectiveness of our disclosure controls and procedures,
under National Instrument 52-109 – Certification of Disclosure in Issuers’ Annual and Interim Filings. Based
on that evaluation, the CEO and CFO concluded that our disclosure controls and procedures were effective as
at December 31, 2019.

Internal control over financial reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting
under National Instrument 52-109. Our internal control over financial reporting is a process designed under
the supervision of the CEO and CFO to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with IFRS. However,
because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements on a timely basis. Management evaluated, under the supervision of and with the participation
of the CEO and the CFO, the effectiveness of our internal control over financial reporting as at December 31,
2019, based on the criteria established in the Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, the
CEO and CFO concluded that our internal control over financial reporting was effective as at December 31,
2019. There have been no changes during the year ended December 31, 2019 in our internal control over
financial reporting that have materially affected, or are reasonably likely to materially affect, our internal
control over financial report.

Victor Mashaal

Chairman of the Board and President

March 27, 2020

(Management Discussion and Analysis (“MD&A”) provides a review of Senvest Capital Inc.’s operations, performance and financial condition for the
year ended December 31, 2019, and should be read in conjunction with the 2019 annual filings. Readers are also requested to visit the SEDAR website
at www.sedar.com for additional information. This MD&A also contains certain forward-looking statements with respect to the Corporation. These
forward-looking statements, by their nature necessarily involve risks and uncertainties that could cause actual results to differ materially from those
contemplated by these forward-looking statements. We consider the assumptions on which these forward-looking statements are based to be
reasonable, but caution the reader that these assumptions regarding future events, many of which are beyond our control may ultimately prove to be
incorrect.)

15
Senvest Capital Inc.
Management’s Report
December 31, 2019

The Consolidated financial statements for the fiscal year ended December 31, 2019 and December 31, 2018,
were prepared by the management of Senvest Capital Inc., reviewed by the Audit Committee and approved by
the Board of Directors. They were prepared in accordance with International Financial Reporting Standards
and are consistent with the Company’s business.

The Company and its subsidiaries maintain a high level of quality of internal controls, designed to provide
reasonable assurance that the financial information is accurate and reliable. The information included in this
Annual Report is consistent with the financial statements contained herein.

The financial statements have been audited by PricewaterhouseCoopers LLP, the company’s auditors, whose
report is provided herein.

Victor Mashaal

Chairman of the Board and President

Senvest Capital Inc.

March 27, 2020

16Independent auditor’s report

To the Shareholders of
Senvest Capital Inc.

Our opinion

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects,
the financial position of Senvest Capital Inc. and its subsidiaries (together, the Company) as at
December 31, 2019 and 2018, and its financial performance and its cash flows for the years then ended in
accordance with International Financial Reporting Standards as issued by the International Accounting
Standards Board (IFRS).

What we have audited
The Company’s consolidated financial statements comprise:



the consolidated statements of financial position as at December 31, 2019 and 2018;

the consolidated statements of income (loss) for the years then ended;

the consolidated statements of comprehensive income (loss) for the years then ended;

the consolidated statements of changes in equity for the years then ended;

the consolidated statements of cash flows for the years then ended; and

the notes to consolidated financial statements, which include a summary of significant
accounting policies.

Basis for opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. 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 believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.

Independence
We are independent of the Company in accordance with the ethical requirements that are relevant to our
audit of the consolidated financial statements in Canada. We have fulfilled our other ethical
responsibilities in accordance with these requirements.

PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l.
1250 René-Lévesque Boulevard West, Suite 2500, Montréal, Quebec, Canada H3B 4Y1
T: +1 514 205 5000, F: +1 514 876 1502

“PwC” refers to PricewaterhouseCoopers LLP/s.r.l./s.e.n.c.r.l., an Ontario limited liability partnership.

17Other information

Management is responsible for the other information. The other information comprises the Management’s
Discussion and Analysis, which we obtained prior to the date of this auditor’s report and the information,
other than the consolidated financial statements and our auditor’s report thereon, included in the annual
report, which is expected to be made available to us after that date.

Our opinion on the consolidated financial statements does not cover the other information and we do not
and will not express an opinion or any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information identified above 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 on the other information that we obtained prior to the date of
this auditor’s report, 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. When we read the information, other
than the consolidated financial statements and our auditor’s report thereon, included in the annual report,
if we conclude that there is a material misstatement therein, we are required to communicate the matter to
those charged with governance.

Responsibilities of management and those charged with governance for the
consolidated financial statements

Management is responsible for the preparation and fair presentation of the consolidated financial
statements in accordance with IFRS, and for such internal control as management 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, management is responsible for assessing the
Company’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 management either intends to liquidate
the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

18Auditor’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 Canadian generally accepted auditing standards 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 Canadian generally accepted auditing standards, we exercise
professional judgment and maintain professional skepticism throughout the audit. We also:



Identify and assess the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher than for one resulting from error,
as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.

 Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control.



Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.

Conclude on the appropriateness of management’s 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 Company’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 Company 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 fair presentation.

 Obtain sufficient appropriate audit evidence regarding the financial information of the entities or

business activities within the Company 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.

19We 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.

The engagement partner on the audit resulting in this independent auditor’s report is Jean-Luc Tremblay.

/s/PricewaterhouseCoopers LLP1

Montréal, Quebec
March 27, 2020

1 CPA auditor, CA, public accountancy permit No. A125840

20Senvest Capital Inc.
Consolidated Statements of Financial Position
As at December 31, 2019 and 2018

(in thousands of Canadian dollars)

Assets

Cash and cash equivalents
Restricted short-term investments
Due from brokers
Equity investments and other holdings
Investments in associates
Real estate investments
Investment properties
Income taxes receivable
Deferred income tax assets
Other assets

Total assets

Liabilities
Bank advances
Trade and other payables
Due to brokers
Securities sold short and derivative liabilities
Redemptions payable
Subscriptions received in advance
Income taxes payable
Deferred income tax liabilities
Liability for redeemable units

Total liabilities

Equity

Equity attributable to common shareholders
Share capital
Accumulated other comprehensive income
Retained earnings

Total equity attributable to common shareholders

Non-controlling interest

Total equity

Total liabilities and equity

Approved by the Board of Directors

____________________________
Victor Mashaal
Director

2019
$

2018
$

17,277
465
183,848
2,539,068
20,361
51,328
41,418
13,297
-
17,937

120,555
462
357,754
2,155,198
20,479
41,161
39,786
12,116
11
9,448

2,884,999

2,756,970

720
31,174
85,153
507,867
70,194
65
438
34,329
1,212,404

5,602
13,026
6,480
748,964
5,755
101,838
918
25,782
879,184

1,942,344

1,787,549

Note

4
5(a)
5(b)
6
7
8
9
12(b)
12(b)
11(b)

5(a)
11
5(b)
6

12(b)
12(b)
10

22,051
151,070
746,269

919,390

23,265

942,655

22,341
194,938
647,357

864,636

104,785

969,421

2,884,999

2,756,970

______________________________
Frank Daniel
Director

The accompanying notes are an integral part of these consolidated financial statements.

21
Senvest Capital Inc.
Consolidated Statements of Income (Loss)
For the years ended December 31, 2019 and 2018

(in thousands of Canadian dollars, except per share data)

Note

Revenue
Interest income
Dividend income
Other income

Investment gains (losses)
Net change in fair value of equity investments and other holdings
Dividend expense on securities sold short
Net change in fair value of real estate investments
Net change in fair value of investment properties
Share of profit of associates
Foreign exchange gain (loss)

Total revenue and net investment gains (losses)

Operating costs and other expenses
Employee benefit expense
Interest expense
Transaction costs
Other operating expenses

Change in redemption amount of redeemable units

Income (loss) before income tax

2019
$

20,059
13,257
3,067

36,383

396,564
(5,195)
7,298
(1,862)
1,856
(8,894)

389,767

426,150

35,102
47,766
13,476
14,942

111,286

186,254

128,610

2018
$

15,991
10,755
1,250

27,996

(368,796)
(6,186)
2,088
2,379
7,325
18,575

(344,615)

(316,619)

29,211
36,165
13,572
15,287

94,235

(232,312)

(178,542)

Income tax expense (recovery)

12(a)

11,946

(14,145)

Net income (loss) for the year

Net income (loss) attributable to:
Common shareholders
Non-controlling interest

116,664

(164,397)

104,794
11,870

(140,086)
(24,311)

Earnings (loss) per share attributable to common

shareholders

Basic and diluted

39.16

(51.72)

The accompanying notes are an integral part of these consolidated financial statements.

22
Senvest Capital Inc.
Consolidated Statements of Comprehensive Income (Loss)
For the years ended December 31, 2019 and 2018

(in thousands of Canadian dollars)

Net income (loss) for the year

Other comprehensive income (loss)
Currency translation differences

Comprehensive income (loss) for the year

Comprehensive income (loss) attributable to:
Common shareholders
Non-controlling interest

2019
$

2018
$

116,664

(164,397)

(46,801)

69,863

60,926
8,937

82,118

(82,279)

(67,167)
(15,112)

Other comprehensive income (loss) includes currency translation differences arising from the Company’s interest in
foreign entities. Accumulated other comprehensive income (loss) arising from currency translation differences
arising from the Company’s interest in foreign entities will be reclassified to profit and loss upon the disposal of such
entities. Currency translation differences arising from the translation of the parent company’s consolidated
financial statements’ translation to the presentation currency will not be subsequently reclassified to profit and loss.

The accompanying notes are an integral part of these consolidated financial statements.

23Senvest Capital Inc.
Consolidated Statements of Changes in Equity
For the years ended December 31, 2019 and 2018

(in thousands of Canadian dollars)

Equity attributable to owners of the parent

Note

Share
capital
$

Accumulated
other
comprehensive
income(loss)
$

Retained
earnings
$

Non-
controlling
interests
$

Total
$

Total
equity
$

Balance – December 31, 2017

22,751

122,019

798,718

943,488

119,897

1,063,385

Net loss for the year
Other comprehensive income

Comprehensive income (loss)

for the year

-
-

-
72,919

(140,086)

(140,086)
72,919

(24,311)
9,199

(164,397)
82,118

72,919

(140,086)

(67,167)

(15,112)

(82,279)

Repurchase of common shares

(410)

(11,275)

(11,685)

Balance – December 31, 2018

22,341

194,938

647,357

864,636

104,785

969,421

Net income for the year
Other comprehensive income

Comprehensive income (loss)

for the year

-
-

-
(43,868)

104,794
-

104,794
(43,868)

11,870
(2,933)

116,664
(46,801)

(43,868)

104,794

60,926

8,937

69,863

Repurchase of common shares
Distributions to non-controlling interests

13
17

(290)
-

-
-

(5,882)
-

(6,172)
-

(90,457)

(6,172)
(90,457)

Balance – December 31, 2019

22,051

151,070

746,269

919,390

23,265

942,655

The accompanying notes are an integral part of these consolidated financial statements.

24Senvest Capital Inc.
Consolidated Statements of Cash Flows
For the years ended December 31, 2019 and 2018

(in thousands of Canadian dollars)

Note

2019
$

2018
$

Cash flows provided by (used in)

Operating activities
Net income (loss) for the year
Adjustments for non-cash items
Purchase of equity investments and other holdings held for trading
Purchase of securities sold short and derivative liabilities
Proceeds on sale of equity investments and other holdings held for trading
Proceeds from securities sold short and derivative liabilities
Dividends and distributions received from real estate investments
Changes in working capital items

15(a)

15(b)

116,664
(206,718)
(1,459,036)
(2,904,343)
1,525,274
2,595,692
7,813
250,091

(164,397)
104,266
(2,143,846)
(4,061,860)
2,315,794
3,901,138
9,663
(58,060)

Net cash used in operating activities

(74,563)

(97,302)

Investing activities
Transfers to restricted short-term investments
Purchase of real estate investments
Purchase of investment properties
Purchase of equity investments and other holdings at

fair value through profit or loss

Proceeds on sale of equity investments and other holdings at

fair value through profit or loss
Proceeds from investments in associates

(25)
(12,917)
(6,824)

(69,704)

1,198
973

36
(14,869)
(9,909)

(60,149)

13,228
972

Net cash used in investing activities

(87,299)

(70,691)

Financing activities
Increase (decrease) in bank advances
Payment of lease liability
Repurchase of common shares
Proceeds from issuance of redeemable units
Amounts paid on redemption of redeemable units

Net cash provided by financing activities

Increase (decrease) in cash and cash equivalents during the year

Effect of changes in foreign exchange rates on cash and

cash equivalents

Cash and cash equivalents – Beginning of year

11(b)

(4,713)
(1,082)
(6,172)
133,758
(59,503)

62,288

(99,574)

(3,704)

120,555

2,970
-
(11,685)
265,950
(29,536)

227,699

59,706

7,727

53,122

Cash and cash equivalents – End of year

17,277

120,555

Amounts of cash flows classified in operating activities:
Cash paid for interest
Cash paid for dividends on securities sold short
Cash received on interest
Cash received on dividends
Cash paid for income taxes

41,277
4,527
14,617
7,942
4,113

38,853
6,401
14,859
9,301
4,599

The accompanying notes are an integral part of these consolidated financial statements.

25Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

1 General information

Senvest Capital Inc. (the “Company”) was incorporated under Part I of the Canada Corporations Act on
November 20, 1968 under the name Sensormatic Electronics Canada Limited, and was continued under the
Canada Business Corporations Act under the same name effective July 23, 1979. On April 21, 1991, the
Company changed its name to Senvest Capital Inc. The Company and its subsidiaries hold investments in equity
and real estate holdings that are located predominantly in the United States. The Company’s head office and
principal place of business is located at 1000 Sherbrooke Street West, Suite 2400, Montréal, Quebec H3A 3G4.
The Company’s shares are traded on the Toronto Stock Exchange under the symbol “SEC”. Refer to note 17 for
the composition of the Company.

2 Summary of significant accounting policies

Basis of preparation

The Company prepares its consolidated financial statements in accordance with International Financial
Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). Certain
comparative figures in the notes have been reclassified to conform with the presentation of the consolidated
financial statements for the current year. These reclassifications had no impact on the Company’s profit or loss
or total assets and liabilities.

The Board of Directors (Board) approved these consolidated financial statements for issue on March 27, 2020.

The preparation of consolidated financial statements in conformity with IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its judgment in the process of applying the
Company’s accounting policies. The areas involving a higher degree of judgment or complexity or areas where
assumptions and estimates are significant to the consolidated financial statements are disclosed in note 3.

New and amended accounting standards adopted in 2019

26Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

On January 1, 2019, the Company recorded a right-of-of use asset based on the corresponding operating lease
liability which was measured at the net present value of the future lease payments. The right-of-use asset was
adjusted for prepaid rents and lease incentives which were already recorded in the Company’s consolidated
statement of financial position. On January 1, 2019, the lease liability was $5,867 and the right-of-use asset was
$5,686. The resulting additions and reclassification in the statement of financial position did not impact prior
year results. On the consolidated statements of financial position the right-of-use asset is presented in Other
assets and the lease liability is presented with Trade and other payables and in note 11.

When calculating the net present value of the future lease payments, the Company used its incremental
borrowing rate at January 1, 2019. The weighted-average rate applied is 4.5%.

The following table reconciles the Company’s lease obligations at December 31, 2018, as previously disclosed in
the notes to the Company’s consolidated financial statements, to the lease liability recognized on initial
application of IFRS 16 at January 1, 2019.

7,066
6,144
(277)
5,867

Basis of measurement

The consolidated financial statements have been prepared under the historical cost convention, except for
financial assets and financial liabilities at fair value through profit or loss, including derivative instruments, and
investment properties which have been measured at fair value.

Consolidation

Business Combinations

The acquisition method of accounting is used to account for all business combinations. The consideration
transferred for the acquisition of a subsidiary comprises the fair values of the assets transferred. Identifiable assets
acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions,
measured initially at their fair values at the acquisition date. The company recognizes any non-controlling interest
in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s
proportionate share of the acquired entity’s net identifiable assets.

Acquisition-related costs are expensed as incurred. The excess of the consideration transferred, amount of any
non-controlling interest in the acquired entity, and acquisition-date fair value of any previous equity interest in the
acquired entity over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts
are less than the fair value of the net identifiable assets of the business acquired, the difference is recognized
directly in profit or loss as a bargain purchase. If the business combination is achieved in stages, the acquisition
date carrying value of the acquirer’s previously held equity interest in the acquiree is remeasured to fair value at
the acquisition date. Any gains or losses arising from such remeasurement are recognized in profit or loss.

27Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

Subsidiaries

Subsidiaries are all entities (including structured entities) over which the Company has control. The Company
controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity
and has the ability to affect those returns through its power over the entity. Subsidiaries are consolidated from
the date on which control is transferred to the Company. They are deconsolidated from the date that control
ceases.

The financial statements of the Company consolidate the accounts of the Company, its subsidiaries and its
structured entities. All intercompany transactions, balances and unrealized gains and losses from intercompany
transactions are eliminated on consolidation. Where applicable, amounts reported by subsidiaries, associates
and structured entities have been adjusted to conform with the Company’s accounting policies.

Investments in associates

Associates are entities over which the Company has significant influence but not control, generally
accompanying a holding of between 20% to 50% of the voting rights. The financial results of the Company’s
investments in its associates are included in the Company’s consolidated financial statements according to the
equity method.

Subsequent to the acquisition date, the Company’s share of profits or losses of associates is recognized in the
consolidated statement of income (loss). The cumulative post-acquisition movements are adjusted against the
carrying amount of the investment. When the Company’s share of losses in an associate equals or exceeds its
interest in the associate, including any other unsecured receivables, the Company does not recognize further
losses, unless it has incurred obligations or made payments on behalf of the associate.

Dilution gains and losses arising from changes in interests in investments in associates are recognized in the
consolidated statement of income (loss).

The Company assesses at each year-end whether there is any objective evidence that its interests in associates
are impaired. If impaired, the carrying value of the Company’s share of the underlying assets of associates is
written down to its estimated recoverable amount (being the higher of fair value less cost to sell and value in
use) and charged to the consolidated statement of income (loss). In accordance with IAS 36, ‘Impairment of
Assets’, impairment losses are reversed in subsequent years if the recoverable amount of the investment
subsequently increases and the increase can be related objectively to an event occurring after the impairment
was recognized.

Liability for redeemable units

Liability for redeemable units represents the units in Senvest Master Fund, L.P., Senvest Technology Partners
Master Fund, L.P. and Senvest Cyprus Recovery Investment Partners, L.P. Fund (collectively the Funds or
individually a Fund) that are not owned by the Company. Senvest Master Fund, L.P. and Senvest Technology
Partners Master Fund, L.P. units may be redeemed as of the end of any calendar quarter, however for a
particular class there is a maximum quarterly redemption of 17% of the investor units and a maximum annual
redemption of 34% of the investor units. Redemptions made within the first 24 months will be subject to a
redemption fee of 3% to 5% which is payable to Senvest Master Fund, L.P. and Senvest Technology Partners
Master Fund, L.P. In addition, there are notice periods of 60 days that must be given prior to any redemption.

28
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

Senvest Cyprus Recovery Investment Partners, L.P. Fund has units that can be redeemed semi-annually with a
120 day notice. These units are recognized initially at fair value, net of any transaction costs incurred, and
subsequently units are measured at the redemption amount.

Non-controlling interests

Non-controlling interests represent equity interests in the consolidated structured entity owned by outside
parties. The share of net assets of the structured entity attributable to non-controlling interests is presented as a
component of equity. Their share of net income (loss) and comprehensive income (loss) is recognized directly in
equity. Changes in the parent company’s ownership interest in the structured entity that do not result in a loss
of control are accounted for as equity transactions.

Foreign currency translation

Functional currency

Items included in the ﬁnancial statements of each of the Company’s entities are measured using the currency of
the primary economic environment in which the entity operates (the functional currency). The functional
currency of the parent company is the US dollar.

Transactions and balances

Foreign currency transactions are translated into the relevant functional currency using the exchange rates
prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of
foreign currency transactions and from the translation at year-end exchange rates of monetary assets and
liabilities denominated in currencies other than an entity’s functional currency are recognized in the
consolidated statement of income (loss).

All foreign exchange gains and losses are presented in the consolidated statement of income (loss) in foreign
exchange gain (loss).

Consolidation and foreign operations

The financial statements of an entity that has a functional currency different from that of the parent company
are translated into US dollars as follows: assets and liabilities – at the closing rate at the date of the
consolidated statement of financial position; and income and expenses – at the average rate for the period (as
this is considered a reasonable approximation of actual rates). All resulting changes are recognized in other
comprehensive income (loss) as currency translation differences.

When an entity disposes of its interest in a foreign operation, or loses control or significant influence over a
foreign operation, the foreign exchange gains or losses accumulated in other comprehensive income (loss)

29Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

related to the foreign operation are recognized in net income (loss). If an entity disposes of part of an interest in
a foreign operation which remains a subsidiary, a proportionate amount of foreign exchange gains or losses
accumulated in other comprehensive income (loss) related to the subsidiary are reallocated between controlling
and non-controlling interests.

Presentation currency

The Company has adopted the Canadian dollar as its presentation currency, which in the opinion of
management is the most appropriate presentation currency. Historically, the Company’s consolidated financial
statements have been presented in Canadian dollars, and since the Company’s shares are listed on a Canadian
stock exchange, management believes it would better serve the use of shareholders to continue issuing
consolidated financial statements in Canadian dollars. The US dollar consolidated financial statements
described above are translated into the presentation currency as follows: assets and liabilities – at the closing
rate at the date of the consolidated statement of financial position; and income and expenses – at the average
rate for the period. All resulting changes are recognized in other comprehensive income (loss) as currency
translation differences. Equity items are translated using the historical rate.

Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, deposits held with banks and other short-term highly liquid
investments with original maturities of three months or less.

Financial assets and liabilities

Classification and measurement

The classification of financial assets is based on an entity’s business models and the financial asset’s contractual
cash flow characteristics. Business models are reassessed periodically and contractual cash flows characteristics
are assessed to determine whether they are “Solely payments of principal and interest” (SPPI).

Financial assets, including hybrid contracts, are classified as either amortized cost, fair value through other
comprehensive income (FVOCI), or the residual classification of fair value through profit and loss (FVTPL).

Financial assets with cash flows that are SPPI and are held within a business model where the objective is to
hold the financial assets in order to collect contractual cash flows (“Hold to collect” business model) are
measured at amortized cost.

Financial assets with cash flows that are SPPI and are held within a business model where the dual objective is
to hold the financial assets in order to collect contractual cash flows and selling financial assets (“Hold to collect
and sell” business model) are measured at FVOCI.

Financial assets with cash flows that are SPPI but are not held within the “Hold to collect” or “Hold to collect
and sell” business models are measured at FVTPL.

Financial assets that do not meet the SPPI conditions are measured at FVTPL.

30Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

Equity investments held for trading are classified as FVTPL. For all other equity investments that are not held
for trading, the Company, on initial recognition, may irrevocably elect to present subsequent changes in the
investment’s fair value in other comprehensive income (loss). This election is made on an investment-by-
investment basis.

Financial liabilities are measured at amortized cost unless they must be measured at fair value through profit or
loss (such as instruments held for trading or derivatives) or if the Company elects to measure them at fair value
through profit or loss.

The Company assesses its business models individually at the level of the subsidiaries and the associated
companies. Information that is considered in determining the business models includes policies and objectives
for the financial instrument held in each entity, how risk and performance is measured at the entity level and
reported to management and expected future events for the financial instrument with respect to valuation,
holding period and selling. All of the group entities’ financial assets are managed on a fair value basis with the
exception of bank balances and short-term trade receivables. The Company does not hold any long-term
financial assets with the intent of solely collecting payments of principal and interest or collecting such
payments and selling the assets.

Financial assets and financial liabilities held for trading

A financial asset or financial liability is classified as held for trading if it is acquired or incurred
principally for the purpose of selling or repurchasing in the near term or if on initial recognition it is
part of a portfolio of identifiable financial investments that are managed together and for which there
is evidence of a recent actual pattern of short-term profit taking. Derivatives are also categorized as
held for trading. The Company does not classify any derivatives as hedges in a hedging relationship.

The Company makes short sales in which a borrowed security is sold in anticipation of a decline in the
market value of that security, or it may use short sales for various arbitrage transactions.

From time to time, the Company enters into derivative financial instruments for speculative purposes.
These instruments are marked to market, and the corresponding gains and losses for the year are
recognized in the consolidated statement of income (loss). The carrying value of these instruments is
fair value, which approximates the amount that would be received or paid if the derivative were to be
transferred to a market participant at the consolidated statement of financial position date. The fair
value is included in equity investments and other holdings if in an asset position or equities sold short
and derivative liabilities if in a liability position.

ii) Financial assets managed as fair value through profit or loss

Financial assets managed as fair value through profit or loss are financial instruments that are not
classified as held for trading but form part of a portfolio that is managed and whose performance is
evaluated on a fair value basis in accordance with the Company’s documented investment strategy.

The Company’s policy requires management to evaluate the information about these financial assets
and financial liabilities on a fair value basis together with other related financial information

31Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

Recognition, derecognition and measurement

Regular way purchases and sales of investments are recognized on the trade date – the date on which
the Company commits to purchase or sell the investment. Financial assets and financial liabilities at
fair value through profit or loss are initially recognized at fair value. Transaction costs are expensed as
incurred in the consolidated statement of income (loss).

Subsequent to initial recognition, all financial assets and financial liabilities at fair value through
profit or loss are measured at fair value. Gains and losses arising from changes in the fair value of
financial assets or financial liabilities at fair value through profit or loss are presented in the
consolidated statement of income (loss) in net change in fair value of equity investments and other
holdings or net change in fair value of real estate investments in the period in which they arise.

Dividend income from financial assets at fair value through profit or loss is recognized in the
consolidated statement of income (loss) as dividend income when the company’s right to receive
payment is established. Interest on debt securities at fair value through profit or loss is recognized in
the consolidated statement of income (loss) in interest income based on the contractual rate on an
accrual basis. Dividend expense from equities sold short is recognized in the consolidated statement
of income (loss) as dividend expense on equities sold short.

Financial assets and financial liabilities are recognized when the company becomes a party to the
contractual provisions of the instrument. Financial assets are derecognized when the rights to receive
cash flows from the assets have expired or have been transferred and the company has transferred
substantially all risks and rewards of ownership.

Financial assets and financial liabilities are offset and the net amount reported in the consolidated
statement of financial position when there is a legally enforceable and unconditional right to offset the
recognized amounts and when there is an intention to settle on a net basis or realize the asset and
settle the liability simultaneously.

Financial assets at amortized cost

Classification

Financial assets at amortized cost are non-derivative financial assets with cash flows that are “solely from
the payment of principal and interest” (SPPI) and that are managed under a “held to collect” business
model.

The company’s financial assets at amortized cost consist of cash and cash equivalents, restricted short-term
investment and due from brokers, as well as loans to employees, which are included in other assets.

Recognition and measurement

At initial recognition, the Company measures its financial assets at its fair value plus transactions costs
incurred. The amortized cost is the amount at which the financial asset is measured at initial recognition
minus the principal repayments, plus or minus the cumulative amortisation using the effective interest
method of any difference between that initial amount and the maturity amount and adjusted for any loss
allowance.

32
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

The effective interest rate is the rate that exactly discounts the estimated future cash receipt through the
expected life of the financial asset to the gross carrying amount of a financial asset. The calculation does not
consider expected credit losses and includes transaction costs premiums or discounts and fees paid that are
integral to the effective interest rate, such as origination fees.

When the Company revises the estimate of future cash flows, the carrying amount of the respective
financial asset is adjusted to reflect the new estimate discounted using the original effective interest rate.
Any changes are recognised in profit or loss.

Interest income is calculated by applying the effective interest rate to the gross carrying amount of financial
assets.

Financial liabilities at amortized cost

Classification

The Company’s financial liabilities at amortized cost are non-derivative liabilities that comprise bank
advances, trade and other payables, due to brokers, redemptions payable, subscriptions received in advance
and liability for redeemable units.

Recognition and measurement

Trade and other payables are initially recognized at fair value. Subsequently, trade and other payables are
measured at amortized cost using the effective interest method. Bank advances, due to brokers,
redemptions payable and subscriptions received in advance are recognized initially at fair value, net of any
transaction costs incurred, and subsequently at amortized cost using the effective interest method.

The effective interest rate is the rate that exactly discounts the estimated future cash payments through the
expected life of the financial liability to the amortized cost of a financial liability. The calculation includes
transaction costs that are integral to the effective interest rate.

When the Company revises the estimate of future cash flows, the carrying amount of the respective
financial liability is adjusted to reflect the new estimate discounted using the original effective interest rate.
Any changes are recognised in profit or loss.

Impairment

Substantially all of the Company’s financial assets at amortized cost are short-term assets and from
sources with low credit risk. The Company will continue to monitor its financial assets measured at
amortized cost and counterparty risk.

Hedging

The Company did not enter any hedge arrangements and as such does not apply hedge accounting.

33Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

Due from and to brokers

Amounts due from and to brokers represent positive and negative cash balances or margin accounts, and
pending trades on the purchase or sale of securities.

Where terms in the prime brokerage agreements permit the prime broker to settle margin balances with cash
accounts or collateral, the due from brokers cash balances are offset against the due to brokers margin balances
at each prime broker.

Investment properties

Investment properties are properties held to earn rental income and/or for capital appreciation and are not
occupied by the Company. Investment properties are measured initially at cost, including transaction costs.
Subsequent to initial recognition, investment properties are measured at fair value. Changes in fair values are
recognized in the consolidated statement of income (loss) as part of net change in fair value of investment
properties in the period in which they arise.

Provision

A provision is recognized if, as a result of a past event, the Company has a present legal or constructive
obligation that can be estimated reliably and it is probable that an outflow of economic benefits will be required
to settle the obligation.

Income tax

Income tax comprises current and deferred tax. Income tax is recognized in the consolidated statement of
income (loss) except to the extent that it relates to items recognized directly in equity, in which case the income
tax is also recognized directly in equity.

Current income tax is calculated on the basis of the tax laws enacted or substantively enacted at the
consolidated statement of financial position date in the countries where the Company and its subsidiaries
operate and generate taxable income (loss). Management periodically evaluates positions taken in tax returns
with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions
where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However,
deferred tax liabilities are not recognized if they arise from the initial recognition of goodwill; deferred income
tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a
business combination that at the time of the transaction affects neither accounting nor taxable profit or loss.
Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted at
the consolidated statement of financial position date and will apply when it is expected that the related deferred
income tax asset will be realized or the deferred income tax liability settled.

Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be
available against which the temporary differences can be used.

34Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates,
except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled
by the Company and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax
assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income
taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where
there is an intention to settle the balances on a net basis.

Interest income and dividend income

Interest income

Interest income on debt financial assets measured at amortized cost or fair value through other comprehensive
income is recognized using the effective interest method. It includes interest income from cash and cash
equivalents.

Dividend income

Dividend income is recognized when the Company’s right to receive payments is established.

Transaction costs

Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of an
investment.

Transaction costs related to financial assets and financial liabilities at fair value through profit or loss are
expensed as incurred. Transaction costs for all other financial instruments are capitalized.

Employee benefits

Post-employment benefit obligations

Employees of companies included in these consolidated financial statements have entitlements under Company
pension plans which are defined contribution pension plans. The cost of defined contribution pension plans is
charged to expense as the contributions become payable and is included in the same line item as the related
compensation cost in the consolidated statement of income (loss).

Share capital

Common shares are classified as equity. Incremental costs directly attributable to the issue of new common
shares or options are recorded in equity as a deduction, net of tax, from the proceeds.

Dividend distribution

Dividends on the Company’s common shares are recognized in the Company’s consolidated statement of
changes in equity in the year in which the dividends are declared and approved by the Company’s Board.

35
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

Earnings per share

Basic earnings per share is calculated by dividing the net income (loss) for the year attributable to equity
owners of the parent by the weighted average number of common shares outstanding during the year.

Diluted earnings per share are calculated by adjusting the weighted average number of common shares
outstanding to assume conversion of all potentially dilutive instruments. The Company currently does not have
any dilutive instruments.

Accounting standards and amendments issued but not yet adopted

The Company presents the developments that are relevant to its activities and transactions. The following
revised standards and amendments are not mandatory for the December 31, 2019 reporting periods and the
Company has not early adopted these standards and amendments.

•

IFRS 10, ‘Consolidated Financial Statements’, and IAS 28, ‘Investments in Associates and Joint Ventures’,
were amended in 2014 to address an inconsistency between those standards when accounting for the sale or
a contribution of assets between an investor and its associate or joint venture. The main consequence of the
amendments is that a full gain or loss is recognized when the transaction involves a business combination,
whereas a partial gain is recognized when the transaction involves assets that do not constitute a business.
The mandatory effective date of this amendment will be determined by the IASB at a future date. Voluntary
application is permitted.

3 Critical accounting estimates and judgments

Critical accounting estimates

The Company makes estimates and assumptions concerning the future that will, by definition, seldom equal
actual results. The following are the estimates applied by management that most significantly affect the
Company’s consolidated financial statements. These estimates have a significant risk of causing a significant
adjustment to the carrying amounts of assets and liabilities within the next fiscal year.

Fair value of financial instruments

The fair value of financial instruments where no active market exists or where listed prices are not otherwise
available are determined by using valuation techniques. In these cases, the fair values are estimated from
observable data in respect of similar financial instruments or by using models. Where market observable inputs
are not available, they are estimated based on appropriate assumptions. To the extent practical, models use only
observable data; however, areas such as credit risk (both the Company’s own credit risk and counterparty credit
risk), volatilities and correlations require management to make estimates.

Changes in assumptions about these factors could affect the reported fair value of financial instruments.

Refer to note 16 for risk sensitivity information for the Company’s financial instruments.

36Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

Fair value of investment properties

The Company has adopted the fair value model in measuring its investment properties. The fair value of the
investment properties is performed by external independent knowledgeable valuators located in the area of the
properties. Inputs used in the property valuation models are based on appropriate assumptions that reflect the
type of property and location. Management reviews the assumptions made and models used to ensure they
correlate with their expectation and understanding of the market.

Changes in assumptions about these factors could affect the reported fair value of investment properties.

Refer to note 9 for risk sensitivity information for the Company’s investment properties

Income taxes

The Company is subject to income taxes in numerous jurisdictions. Significant judgment is required in
determining the consolidated provision for income taxes. There are many transactions and calculations for
which the ultimate tax determination is uncertain. The Company recognizes liabilities for anticipated tax audit
issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters
is different from the amounts that were initially recorded, such differences will impact the current and deferred
income tax assets and liabilities in the year in which such determination is made.

Critical accounting judgments

Consolidation of entities in which the Company holds less than 50% of the voting rights

Management considers the Company to have de facto control of Senvest Management L.L.C. (RIMA), RIMA
Senvest Master Fund GP, L.L.C., and Senvest Technology Partners GP, L.L.C. three legal entities wholly owned
by an executive of the Company, because of the Company’s Board representation and the contractual terms of
the investment advisory agreement. RIMA is the investment adviser to the Funds, whereas RIMA Senvest
Master Fund GP, L.L.C. is the General Partner. As compensation for its sub-advisory services, the Company is
entitled to receive 60% of the management and incentive fees earned by RIMA each fiscal year.

Management considers the Company to have control of Senvest Master Fund, L.P., Senvest Technology
Partners, Master Fund L.P. (formerly Senvest Israel Master Fund L.P.) and Senvest Cyprus Recovery
Investment Fund, L.P. even though the Company has less than 50% of the voting rights in each of the Funds.
The Company assessed that the removal rights of non-affiliated unitholders are exercisable but not strong
enough given the Company’s decision-making authority over relevant activities, the remuneration to which it is
entitled and its exposure to returns. The Company, through its structured entities, is the majority unitholder of
each of the Funds and acts as a principal while there are no other unitholders forming a group to exercise their
votes collectively.

37Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

4 Cash and cash equivalents

Cash on hand and on deposit
Short-term investments

5 Credit facilities and due from and due to brokers

a) Credit facilities

Bank advances

2019
$

11,877
5,400

17,277

2018
$

117,587
2,968

120,555

In 2014, the Company renegotiated its credit facility with a bank and has available a demand revolving
loan (credit facility) and a guarantee facility. The credit facility is in the amount of $3,000 and is payable
on demand. As at December 31, 2019, $720 was outstanding (2018 – $5,602). Under the credit facility, the
Company may, upon delivery of a required notice, opt to pay interest at the bank’s prime rate plus 0.25%,
the bank’s US base rate plus 0.25% or LIBOR plus 1.75% per annum. All of the credit facility available is
also available by way of banker’s acceptances plus a stamping fee of 1.75% per annum, or by US dollar
advances.

Guarantee facility

The Company also has available a EUR 450 thousand guarantee facility (2018 – EUR 450 thousand) to
issue standby letters of credit. A fee of 1.00% per annum on the face amount of each standby letter of credit
applies. All amounts paid by the bank under the guarantee facility are payable on demand. As at
December 31, 2019, no standby letters of credit were outstanding; however, the Company has provided a
$465 (2018 – $462) term deposit to guarantee future letters of credit. This term deposit has been disclosed
in restricted short-term investments on the consolidated statement of financial position.

In addition, a first-ranking movable hypothec in the amount of $30,000 on all of the Company’s assets has
been granted as collateral for both the credit and guarantee facilities. According to the terms of the
facilities, the Company is required to comply with certain financial covenants. As at December 31, 2019
and 2018, the Company had met the requirements of all the covenants.

b) Due from and due to brokers

The Company has margin facilities with its prime brokers. As at December 31, 2019 and 2018, the
Company’s amounts due to brokers have no specific repayment terms, and they are governed by the
margin terms set forth in the prime brokerage agreements. As at December 31, 2019, listed equity
securities and due from brokers amounting to $2,460,813 have been pledged as collateral (2018 –
$2,290,774). The fair value of the collateral-listed equity securities is calculated daily and compared to the
Company’s margin limits. The prime brokers can at any time demand full or partial repayment of the
margin balances and any interest thereon or demand the delivery of additional assets as collateral.

38Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

Due from and due to brokers balances are presented on a net basis by broker in the consolidated statement
of financial position. Under the prime broker agreements, the broker may upon events of default offset, net
and/or regroup any amounts owed by the Company to the broker by amounts owed to the Company by the
broker. The following tables set out the offsetting of the Company’s various accounts with prime brokers.

Gross
amounts due
from brokers
$

Gross
amounts due
to brokers
$

260,102
30,023

76,254
115,176

Gross
amounts due
from brokers
$

Gross
amounts due
to brokers
$

602,012
19,054

244,258
25,534

2019

Net
amount
$

183,848
(85,153)

2018

Net
amount
$

357,754
(6,480)

Due from brokers
Due to brokers

6 Equity investments and other holdings, securities sold short and derivative liabilities

Equity investments and other holdings

Assets
Financial assets at fair value through profit or loss

Held for trading

Equity securities
Debt securities
Derivative financial assets

Financial assets at fair value through profit or loss

Other

Equity securities
Debt securities

Current portion

Non-current portion

Note

2019
$

2018
$

2,274,271
70,179
32,885

6(a)

1,930,810
92,931
29,588

2,377,335

2,053,329

110,681
51,052

94,921
6,948

2,539,068

2,155,198

2,377,335

161,733

2,053,329

101,869

39Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

Securities sold short and derivative liabilities

Liabilities
Financial liabilities

Held for trading

Securities sold short
Listed equity securities (proceeds of $463,058;

2018 – $768,378)

Debt securities (proceeds of $59,209; 2018 – $71,025)
Derivative financial liabilities (proceeds of $1,073;

2018 – $390)

Note

2019
$

2018
$

419,618
62,449

6(a)

25,800

507,867

637,121
69,275

42,568

748,964

From time to time, the Company enters into derivative financial instruments consisting primarily of
warrants and options to purchase or sell equity indices and currencies, equity swaps, foreign currency
forward contracts and foreign currency futures contracts. The following tables list the notional
amounts, fair values of derivative financial assets and financial liabilities and net change in fair value
by contract type, including swaps, options, warrants, rights, foreign currency futures contracts,
foreign currency forward contracts and swaps and options sold short included in equity investments
and other holdings or securities sold short and derivative liabilities:

Fair value
of derivative
financial
assets
$

18,235
4
11,656

2,990

Notional
value
$

114,123
1,064
81,765

143,000

Notional
value
$

87,597
21,162
-

As at
December 31,
2019

Fair value
of derivative
financial
liabilities
$

24,364
1,436
-

For the
year ended
December 31,
2019

Net
change in
fair value
$

7,883
2,767
2,076

7,374

339,952

32,885

108,759

25,800

20,100

Equity swaps
Equity options
Warrants and rights
Foreign currency futures

contracts

40Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

Fair value
of derivative
financial
assets
$

16,775
75
12,738
-

Notional
value
$

148,986
4,229
39,382
-

193,000

Notional
value
$

66,955
9,660
-
-

As at
December 31,
2018

Fair value
of derivative
financial
liabilities
$

37,843
504
-
-

4,221

For the
year ended
December 31,
2018

Net
change in
fair value
$

(39,840)
6,829
731
(32)

(14,418)

(3,715)

385,597

29,588

76,615

42,568

(50,445)

Equity swaps
Equity options
Warrants and rights
Foreign currency options
Foreign currency futures

contracts

Foreign currency forward

contracts

Investments in associates

The following have been included in the consolidated financial statements using the equity method.

Grant and Geary Partners LP(i)
Other immaterial associates

The Company’s share of:

Net income and comprehensive income
Grant and Geary Partners LP(i)
Other immaterial associates

2019
$

18,777
1,584

20,361

1,050
806

1,856

2018
$

19,128
1,351

20,479

6,271
1,054

7,325

Grant & Geary Partners LP is a limited partnership in which the company has an approximate 28.5%
economic interest in the underlying property, which is commercial real estate property held in the
United States. The Company’s share of Grant & Geary Partners LP’s assets and liabilities are
approximately 28.5% of assets totalling $82,830 (2018 – $87,284) and liabilities totalling $16,947
(2018 – $20,139).

Commitments, contingent liabilities and borrowing arrangements of associates

There are no commitments, contingent liabilities or borrowing arrangements relating to the Company’s
interests in these associates.

41Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

8 Real estate investments

Real estate investments comprise the following:

Financial assets at fair value through profit or loss

Investments in private entities
Investments in real estate income trusts and

partnerships

Non-current portion

Note

8(a)

8(b)

2019
$

18,131

33,197

51,328

2018
$

19,467

21,694

41,161

a) These investments are minority interests in private entities whose main assets are real estate

properties. There is no established market for these investments. The most likely scenario for a
disposal of these investments is an eventual sale of the underlying real estate properties.

b) These real estate investments are in US real estate income trusts (commonly referred to as REITs)
and partnerships. A REIT is an entity that owns and operates income-producing real estate and
annually distributes to its holders at least 90% of its taxable income. The Company’s investments are
non-publicly-traded REITs. There is no established market for these REITs and partnerships. The
most likely scenario for a disposal of these holdings is an eventual sale of the underlying real estate
properties of the REITs and partnerships and the distribution to their holders.

Investment properties

Note

Opening balance as at January 1
Purchases
Capitalized subsequent expenditure
Net gain (loss) from fair value adjustment
Currency translation adjustments

Closing balance as at December 31

Non-current portion

a) Amounts recognized in profit or loss for investment properties

Rental income
Direct operating expenses from property that generated rental

income

Direct operating expenses from property that does not generate

rental income

Net change in fair value of investment properties

2019
$

39,786
3,144
3,680
(1,862)
(3,330)

41,418

2019
$

4,365

3,195

1,064
(1,862)

2018
$

26,738
8,494
1,416
2,379
759

39,786

2018
$

3,599

2,939

1,163
2,379

42
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

b) Contractual obligations

Refer to note 19 for disclosure of contractual obligations to purchase, construct or develop investment
property or for repairs, maintenance and enhancements.

Leasing arrangements

The investment properties are leased to tenants under short-term month-to-month operating leases with
rentals payable monthly.

Fair value measurements

Investment properties are measured at fair value in these consolidated financial statements. Assumptions
and estimates are made in determining the fair values of the investment properties. Based on the source of
the inputs used in determining the fair value, the Company has classified its investment properties in
Level 3 of the fair value hierarchy (a description of the levels is provided in note 16). There was no transfers
between levels for recurring fair value measurements of investment properties during the years ended
December 31, 2019 and 2018.

Valuation techniques used to determine Level 3 fair values

The Company obtains independent valuations for its investment properties annually. At the end of
each reporting period, the managers update their assessment of the fair value of each property, taking
into account the most recent independent valuations. The managers determine a property’s value
within a range of reasonable fair value estimates.

The best evidence of fair value is current prices in an active markets for similar properties. Where
such information is not available the independent valuators consider information from a variety of
sources including:

•

current prices in active markets for similar properties in similar markets and in less active
market, adjusted to reflect those differences;

discounted cash flow projections based on reliable estimates of future cash flows; and

capitalized income projections based upon a property’s estimated net market income, and a
capitalization rate derived from an analysis of market evidence.

43Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

ii) Fair value measurements using significant unobservable inputs (Level 3)

The following table summarizes the quantitative information about the significant unobservable
inputs used in recurring Level 3 fair value measurement. See (i) above for the valuation technique
adopted.

Description

Fair value
2019
$

Valuation
technique

Significant
unobservable
inputs

Weighted
average
input
$

Reasonably
possible
shifts +/−

Change
in value
$

Leased buildings and

30,707

Comparable
sales approach

Value/m2

1,097

10% +/-3,061

land
–Storage facilities

10,711

Recent
Transaction

Value/m2

570

Description

Fair value
2018
$

Valuation
technique

Significant
unobservable
inputs

Weighted
average
input
$

Reasonably
possible
shifts +/−

Change
in value
$

Leased buildings and

land
–Storage facilities

39,786

Comparable
sales approach

Value/m2

1,144

10% +/-4,000

44Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

10 Financial instruments by category and related income, expenses and gains and losses

Assets (liabilities)
at fair value through
profit or loss

Held for
trading
$

-
-
-
2,377,335
-
-
-
-
-

(507,867)
-
-
-

Other
$

-
-
-
161,733
51,328
-
-
-
-

-
-
-
-

Financial
Assets at
amortized
cost
$

Financial
liabilities at
amortized
cost
$

2019

Total
$

17,277
465
183,848
-
-
8,079
-
-
-

-
-
-
-
-
-
(720)
(31,174)
(85,153)

17,277
465
183,848
2,539,068
51,328
8,079
(720)
(31,174)
(85,153)

-
-
-
-

-
(70,194)
(65)
(1,212,404)

(507,867)
(70,194)
(65)
(1,212,404)

1,869,468

213,061

209,669

(1,399,710)

892,488

398,354
(11,595)
7,454

394,213

5,508
29
608

6,145

-
870
-

870

-
(16,586)
-

403,862
(27,282)
8,062

(16,586)

384,642

Assets (liabilities) as per consolidated

statement of financial position

Cash and cash equivalents
Restricted short-term investments
Due from brokers
Equity investments and other holdings
Real estate investments
Other assets*
Bank advances
Trade and other payables
Due to brokers
Securities sold short and derivative

liabilities

Redemptions payable
Subscriptions received in advance
Liability for redeemable units

Amounts recognized in consolidated

statement of income

Net change in fair value
Interest income (expense)
Net dividend income

* Includes other financial receivables but excludes capital assets and other non-financial assets.

45Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

Assets (liabilities)
at fair value through
profit or loss

Held for
trading
$

-
-
-
2,053,329
-
-
-
-
-

(748,964)
-
-
-

Other
$

-
-
-
101,869
41,161
-
-
-

-
-
-
-

Financial
Assets at
amortized
cost
$

Financial
liabilities at
amortized
cost
$

2018

Total
$

120,555
462
357,754
-
-
4,420
-
-
-

-
-
-
-

-
-
-
-
-
-

(5,602)
(13,026)
(6,480)

-
(5,755)
(101,838)
(879,184)

120,555
462
357,754
2,155,198
41,161
4,420
(5,602)
(13,026)
(6,480)

(748,964)
(5,755)
(101,838)
(879,184)

1,304,365

143,030

483,191

(1,011,885)

918,701

(368,990)
15,477
4,195

(349,318)

(350)
68
374

-
453
-

453

-
(36,020)
-

(369,340)
(20,022)
4,569

(36,020)

(384,793)

Assets (liabilities) as per consolidated

statement of financial position

liabilities

Redemptions payable
Subscriptions received in advance
Liability for redeemable units

Amounts recognized in consolidated

statement of income

Net change in fair value
Interest income (expense)
Net dividend income

* Includes other financial receivables but excludes capital assets and other non-financial assets.

11 Trade and other payables

Trade payables
Employee benefits accrued
Mortgages
Lease Liability
Interest payable
Other

a)
b)

2019
$

206
10,724
7,361
4,695
4,407
3,781

31,174

2018
$

684
4,283
3,524
-
2,044
2,491

13,026

a) Mortgages of $7,361 (2018 – $3,524) are on investment properties. The terms of the mortgages range
from four to seven years and bear interest rates of 0.8% to 1.25%. Investment properties of $26,727
(2018 – $25,735) are pledged as collateral against the mortgages.

46Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

b) Lease liabilities of $4,695 represent future lease payments for the Company's office spaces. Total lease
payments during the year totaled $ 1,082 including interest of $223. The right-of-use asset resulting
from the Company's leases is valued at $4,602, which is net of accumulated amortization of $880. The
right-of-use asset is grouped with other assets in these financial statements

12 Income taxes

Income tax expense

Current tax
Current tax on income for the year
Adjustments in respect of prior years

Deferred tax
Origination and reversal of temporary differences

2019
$

3,248
(1,306)

1,942

10,004

11,946

2018
$

8,791
(2,510)

6,281

(20,426)

(14,145)

The tax on the Company’s income before income tax differs from the theoretical amount that would arise
using the federal and provincial statutory tax rate applicable to income of the consolidated entities. The
statutory tax rate for 2019 decreased from 26.7% to 26.6% (2018 – from 26.8% to 26.7%). This decrease is
in line with Quebec’s tax rate reduction from 11.7% to 11.6%. The difference between the Company’s
income tax and theoretical tax is as follows:

Income (loss) before income tax

128,610

(178,542)

2019
$

2018
$

Income tax expense (recovery) based on statutory rate

of 26.6% (2018 – 26.7%)

Prior year adjustments
Difference in tax rate
Portion of income (loss) recoverable in hands

of non-controlling interests

Non-taxable dividend
Non-taxable portion of capital gains
Non-deductible expenses
Foreign exchange
Unrecognized deferred income tax assets
Other

Income tax expense (recovery)

34,210
(1,127)
1,337

(3,151)
55
(11,075)
70
(9,778)
726
679

11,946

(47,671)
(516)
3,863

5,933
(604)
9,568
77
15,172
473
(440)

(14,145)

47Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

b) The analysis of deferred income tax assets and liabilities is as follows:

Deferred income tax assets
Deferred tax assets to be recovered
After more than 12 months
Within 12 months

Deferred income tax assets

Deferred income tax liabilities
Deferred tax liabilities to be settled
After more than 12 months
Within 12 months

Deferred income tax liabilities

2019
$

-
-

34,329
-

34,329

2018
$

11
-

25,782
-

25,782

The movement in deferred income tax assets and liabilities during the year, without taking into consideration
the offsetting of balances within the same tax jurisdiction, is as follows.

Deferred income tax assets

Equity
investments
and other
holdings
$

Investments
in
associates
$

Real estate
investments
$

Deferred
Performance
Compensation
$

Tax loss
carry-
forward
$

Total
$

As at December 31, 2017

659

Charged to consolidated
statement of income

Foreign exchange

differences

As at December 31, 2018

Charged to consolidated
statement of income

Foreign exchange

differences

As at December 31, 2019

1,407

132

2,198

(990)

(84)

1,124

6,495

344

6,839

(2,399)

(280)

4,160

706

829

722

(55)

738

1,015

9,623

520

1,015

10,881

1,160

2,659

1,152

(105)

(524)

1,496

1,160

3,569

11,509

48Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

Deferred income tax liabilities

Equity
investments
and other
holdings
$

Investments
in
associates
$

Real estate
investments
$

Investment
properties
$

Other
$

Total
$

As at December 31, 2017

4,011

38,432

1,596

184

44,223

Charged (credited) to

consolidated statement
of income

(1,395)

(10,224)

Foreign exchange differences

277

2,818

As at December 31, 2018

2,893

31,026

(723)

102

975

1,015

516

(10,811)

3,240

1,015

743

36,652

Charged (credited) to

consolidated statement
of income

Foreign exchange differences

As at December 31, 2019

1,467

(170)

4,190

8,083

2,290

(532)

(122)

11,186

(1,661)

(97)

37,448

3,168

(39)

444

(33)

588

(2,000)

45,838

Deferred income tax assets for temporary differences totalling $9,865 (2018 – $9,584), non-expiring
capital loss carry-forwards totalling $9,889 (2018 – $9,837) and non-expiring operating loss carry-
forwards of $4,374 (2018 – $6,012) have not been recognized in the consolidated financial statements.
Deferred income tax assets of $444 (2018 – $1,015) not recognized at the time of a business combination
have been recognized in 2019 and recorded against deferred income tax liability of $444 (2018 – $1,015)
resulting from unrealized gains on investment properties.

Deferred income tax liabilities have not been recognized on unremitted earnings totalling $55,347 as at
December 31, 2019 (2018 – $84,950) with respect to the investment in subsidiaries, branches and
associates and interest in joint arrangements because the Company controls whether the liability will be
incurred, and it is satisfied that it will not be incurred in the foreseeable future. During the year, the
Company distributed earnings of $33,035 from its Subsidiaries. All distributions were paid out of
substantially pre-taxed surplus which resulted in no tax to the Company.

49Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

13 Share capital

Authorized

Unlimited number of common shares, without par value

Movements in the Company’s share capital are as follows:

Balance – Beginning of year
Shares repurchased

Number
of shares

2,688,624
(36,200)

2019

Amount
$

22,341
(290)

Number
of shares

2,739,724
(51,100)

2018

Amount
$

22,751
(410)

Balance – End of year

2,652,424

22,051

2,688,624

22,341

In 2019, the Company began a normal course issuer bid to purchase a maximum of 60,000 of its own common
shares before August 13, 2020. In 2019, the Company purchased 36,200 common shares (2018 – 51,100) for a
total cash consideration of $6,173 (2018 – $11,685. The excess of the consideration paid over the stated capital
was charged to retained earnings in the consolidated statement of changes in equity.

No dividends were declared in 2019 and 2018.

14 Earnings per share

a) Basic

Net income (loss) attributable to common shareholders
Weighted average number of outstanding common shares

$104,794
2,675,723

$(140,086)
2,708,761

Basic earnings (loss) per share

39.16

(51.72)

2019

2018

b) Diluted

For the years ended December 31, 2019 and 2018, there were no dilutive instruments.

50Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

15 Supplementary information to consolidated statements of cash flows

a) Adjustments for non-cash items are as follows:

Note

2019
$

2018
$

Net change in fair value of equity investments and

other holdings

Net change in fair value of real estate investments
Net change in fair value of investment properties
Share of profit (loss) of associates, adjusted for

distributions received
Amortization and depreciation
Change in redemption amount of redeemable units
Deferred income tax

11(b)

12(a)

b) Changes in working capital items are as follows:

Decrease (increase) in
Due from brokers
Income taxes receivable
Other assets

Increase (decrease) in

Trade and other payables
Due to brokers
Income taxes payable

(396,564)
(7,298)
1,862

(1,856)
880
186,254
10,004

368,796
(2,088)
(2,379)

(7,325)
-
(232,312)
(20,426)

(206,718)

104,266

2019
$

160,134
(1,799)
(8,818)

20,332
80,687
(445)

250,091

2018
$

(29,942)
2,716
(3,789)

(16,737)
(11,180)

872

(58,060)

51Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

16 Financial risks and fair value

Financial risk factors

The Company uses different methods to measure and manage the various types of risk to which it is exposed;
these methods are explained below.

Market risk

Fair value and cash flow interest rate risks

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate as a
result of changes in market interest rates.

The majority of the Company’s debt is based on floating rates, which exposes the Company to cash flow interest
rate risk. The Company does not have a long-term stream of cash flows that it can match against this type of
fixed debt, so it prefers to use short-term floating rate debt. The Company does not mitigate its exposure to
interest rate fluctuation on floating rate debt. If interest rates spike, then the Company could enter into interest
rate swaps or more probably just reduce its debt level. As at December 31, 2019, the Company has listed equity
securities of $ 2,277,480 (2018 – $1,933,139). It can sell these securities to reduce its floating rate debt. As at
December 31, 2019, a 1% (2018 – 1%) increase or decrease in interest rates, with all other variables remaining
constant, would impact interest expense by approximately $859 over the next 12 months (2018 – $121).

The Company’s exposure to interest rate risk is summarized as follows:

2019

2018

Cash and cash equivalents
Restricted short-term investments
Debt securities
Credit facilities

Bank advances
Guarantee facility
Trade and other payables
Due to brokers
Mortgages

Between nil and 2.53%
Between 0.60% and 1.47%
Between 0.75% and 12.50%

Between nil and 2.50%
Between 0.50% and 0.60%
Between 0.75% and 12.50%

Prime rate plus 0.25%
1.00%
Non-interest bearing
0.00% to 2.86%
0.8% to 1.25%

Prime rate plus 0.25%
1.00%

Non-interest bearing

0.00% to 2.15%
0.80% to 1.00%

The Company holds held for trading financial assets in debt securities $ 70,179 (2018 – $92,931) and held for
trading financial liabilities in debt securities of $62,449 (2018 – $69,275).

52Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

Debt securities are usually highly sensitive to interest rate changes. Theoretically, when interest rates rise, it
causes the value of debt securities to decline. The opposite generally happens when interest rates fall, then debt
securities usually rise in value. A change of 100 basis points in the yield to maturity will affect the fair value of
the debt securities held for trading as follows.

Estimated effect on the fair value of debt securities due to:

2019

Financial assets
Held for trading
Debt securities
$

Financial liabilities
Held for trading
Debt securities
$

An increase of 100 basis points in the yield to maturity
A decrease of 100 basis points in the yield to maturity

(2,571)
2,757

4,171
(4,513)

2018

Financial assets
Held for trading
Debt securities
$

Financial liabilities
Held for trading
Debt securities
$

An increase of 100 basis points in the yield to maturity
A decrease of 100 basis points in the yield to maturity

(2,681)
2,848

5,830
(6,469)

Currency risk

Currency risk is the risk that the value of monetary financial assets and financial liabilities denominated in
foreign currencies will vary as a result of changes in underlying foreign exchange rates. The Company is
exposed to currency risk due to potential variations in currencies other than the US dollar. The following tables
summarize the Company’s main monetary financial assets and financial liabilities whose fair value is
predominantly determined in currencies other than the US dollar, the Company’s functional currency, and the
effect on pre-tax net income of a 10% change in currency exchange rates:

Canadian dollar
Euro
British pound sterling
Israeli shekel
Swedish Krone

Financial
assets
$

Financial
liabilities
$

Net
exposure
$

2019

Net effect of a
10% increase
or decrease
$

827
31,747
-
331
-

(188,941)
(29,254)
(4,378)
(5,703)
(7,827)

(188,114)
2,493
(4,378)
(5,372)
(7,827)

(18,811)
249
(438)
(537)
(783)

32,905

(236,103)

(203,198)

(20,320)

53Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

Financial
assets
$

Financial
liabilities
$

Net
exposure
$

2018

Net effect of a
10% increase
or decrease
$

1,334
18,245
1,712
321
-

(185,650)
(5,037)

(6681)
(6,998)

(184,316)
13,208
1,712
(6,360)
(6,998)

(18,432)
1,321
171
(636)
(700)

21,612

(204,366)

(182,754)

(18,276)

Canadian dollar
Euro
British pound sterling
Israeli shekel
Swedish Krone

Equity price risk

Equity price risk is the risk that the fair value of equity investments and other holdings and equities sold short
and derivatives will vary as a result of changes in the market prices of the holdings. The majority of the
Company’s equity investments and other holdings and all of the equities sold short and derivatives are based on
quoted market prices as at the consolidated statement of financial position date. Changes in the market price of
quoted securities and derivatives may be related to a change in the financial outlook of the investee entities or
due to the market in general. Where non-monetary financial instruments − for example, equity securities − are
traded in currencies other than the US dollar, the price, initially expressed in a foreign currency and then
converted into US dollars, will also fluctuate because of changes in foreign exchange rates.

Securities sold short represent obligations of the Company to make future delivery of specific securities and
create an obligation to purchase the security at market prices prevailing at the later delivery date. This creates
the risk that the Company’s ultimate obligation to satisfy the delivery requirements will exceed the amount of
the proceeds initially received or the liability recorded in the consolidated financial statements. In addition, the
Company has entered into derivative financial instruments which have a notional value greater than their fair
value which is recorded in the consolidated financial statements. This information is disclosed in note 6(a) to
these consolidated financial statements. This creates a risk that the Company could settle these instruments at a
value greater or less than the amount that they have been recorded in the consolidated financial statements.

The Company’s equity investments and other holdings have a downside risk limited to their carrying value,
while the risk of equities sold short and derivatives is open-ended. The Company is subject to commercial
margin requirements which act as a barrier to the open-ended risks of the equities sold short and derivatives.
The Company closely monitors both its equity investments and other holdings and its equities sold short and
derivatives.

54Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

The impact of a 30% change in the market prices of the Company’s listed equity investments and other holdings
and equities sold short and derivatives would be as follows:

2019

Estimated
fair value
with a 30%
price increase
$

Estimated
fair value
with a 30%
price decrease
$

Fair
value
$

2,295,719
(445,418)

2,984,435
(579,043)

1,607,003
(311,793)

Equity investments and other holdings

Listed equity securities and derivatives

Equities sold short and derivative liabilities

Pre-tax impact on net income

555,091

(555,091)

2018

Estimated
fair value
with a 30%
price increase
$

Estimated
fair value
with a 30%
price decrease
$

Fair
value
$

Equity investments and other holdings

Listed equity securities and derivatives

Equities sold short and derivative liabilities

1,949,989
(675,468)

2,534,985
(878,108)

1,364,993
(472,828)

Pre-tax impact on net income

382,356

(382,356)

The above analysis assumes that listed equity securities, derivatives equities sold short and derivative liabilities
would increase or decrease at the same rate. As these portfolios are not hedged together, a change in market
prices will affect each one differently.

Credit risk

Credit risk is the risk that a counterparty will fail to fulfill its obligations under a contract and will cause the
Company to suffer a loss.

The Company is exposed to credit risk from cash and cash equivalents, due from broker and debt investments.
Credit risk arising from funds held at financial institutions are managed by only investing with financial
institutions with a minimum A rating The Company manages its credit risk exposure from debt securities by
closely monitoring the debt issuer and the ratings issued by various bond rating agencies. All debt security
investments measured at fair value through profit or loss are traded over stock exchanges therefore exiting a
position with increased risk is relatively easy if the credit worthiness of an issuer falls below the company’s
threshold for credit risk exposure. All non-trading convertible debt securities are convertible into equity of the
issuer and are measured at fair value using independent third party appraisals. The Company closely monitors
the debt issuer in order to identify when the credit risk falls below the company’s threshold at which point the
company may exercise its option to redeem its debt holdings or dispose of it in the less liquid private markets.

55Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

Credit ratings are presented using Standard & Poor’s rating scale as follows:

Financial assets

Rating

Cash and cash equivalents
Restricted short-term investments
Due from brokers
Debt securities
Debt securities

A
A
A
B-
CCC and below

2019
$

17,277
465
183,848
-
121,231

2018
$

120,555
462
357,754
4,592
88,339

Liquidity risk

Liquidity risk is the risk the Company will encounter difficulties in meeting its financial obligations. The
Company’s largest assets are equity investments and other holdings. Most of these assets are made up of
equities in listed companies which can be liquidated in a relatively short time. Due to its large investments in
liquid assets, the Company believes that it has sufficient resources to meet its obligations as they come due.

All financial liabilities other than equities sold short, derivative liabilities, mortgages, lease liabilities and
liability for redeemable units as at the consolidated statement of financial position date mature or are expected
to be repaid within one year (2018 – one year). The liquidity risk related to these liabilities is managed by
maintaining a portfolio of liquid investment assets.

Capital risk management

The Company’s objective when managing its capital is to maintain a solid capital structure appropriate for the
nature of its business. The Company considers its capital to be its equity. The Company manages its capital
structure in light of changes in economic conditions. To maintain or adjust its capital structure, the Company
initiates normal course issuer bids or adjusts the amount of dividends paid. The Company monitors capital on
the basis of its net debt-to-capital ratio. Net liabilities used in the net debt-to-capital ratio is calculated by
subtracting the due from broker balances from total liabilities. The net debt-to-capital ratio is as follows:

Net total liabilities
Total equity
Debt-to-capital ratio

2019

2018

1,758,496
$942,655
1.87

$1,429,795
$969,421
1.47

The Company’s objective is to maintain a debt-to-capital ratio below 2.0. The Company believes that limiting its
debt-to-capital ratio in this manner is the best way to monitor risk. The Company does not have any externally
imposed restrictive covenants or capital requirements, other than those included in the credit facilities (note 5).

56Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

Fair value estimation

The tables below analyze financial instruments carried at fair value by the inputs used in the valuation method.
The different levels have been defined as follows:

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2 – Inputs other than quoted prices included in Level 1 that are observable for the asset or liability

either directly (that is, as prices) or indirectly (that is, derived from prices); and

Level 3 – Inputs that are not based on observable market data.

The level in the fair value hierarchy within which the fair value measurement is categorized in its entirety is
determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety.
For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a
fair value measurement uses observable inputs that require significant adjustment based on unobservable
inputs, that measurement is a Level 3. Assessing the significance of a particular input to the fair value
measurement in its entirety requires judgment, considering factors specific to the asset or liability.

The determination of what constitutes “observable” requires significant judgment by the Company. The
Company considers observable data to be that market data that is readily available, regularly distributed or
updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved
in the relevant market.

The following tables analyze within the fair value hierarchy the Company’s financial assets and financial
liabilities measured at fair value as at December 31, 2019 and 2018:

Assets
Financial assets at fair value through profit or

loss
Held for trading

Equity securities
Debt securities
Derivative financial assets

Other

Equity securities
Debt securities
Real estate investments

Liabilities
Financial liabilities

Held for trading

Equity holdings sold short
Debt securities
Derivative liabilities

Level 1
$

Level 2
$

Level 3
$

2019

Total
$

2,274,271
-
2,990

1,378
-
-

-
70,179
29,895

33,374
2,922
-

-
-
-

2,274,271
70,179
32,885

75,929
48,130
51,328

110,681
51,052
51,328

2,278,639

136,370

175,387

2,590,396

419,618
-
-

-
62,449
25,800

419,618

88,249

-
-
-

419,618
62,449
25,800

507,867

57Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

Assets
Financial assets at fair value through profit or

loss
Held for trading

Equity securities
Debt securities
Derivative financial assets

Other

Equity securities
Debt securities
Real estate investments

Liabilities
Financial liabilities

Held for trading

Equity holdings sold short
Debt securities
Derivative liabilities

Level 1
$

Level 2
$

Level 3
$

2018

Total
$

1,929,381
-
-

2,014
-
-

1,429
92,931
29,588

8,425
2,824

-
-
-

1,930,810
92,931
29,588

84,482
4,124
41,161

94,921
6,948
41,161

1,931,395

135,197

129,767

2,196,359

637,121
-
4,221

-
69,275
38,347

641,342

107,622

-
-
-

637,121
69,275
42,568

748,964

Financial instruments in Level 1

The fair value of financial assets and financial liabilities traded in active markets are based on quoted market
prices at the close of trading on the year-end date. The quoted market price used for financial assets and
financial liabilities held by the Company is the close price. Investments classified in Level 1 include active listed
equities and derivatives traded on an exchange.

Financial instruments in Level 2

Financial instruments classified with Level 2 trade in markets that are not considered to be active but are
valued based on quoted market prices, broker quotations or valuation techniques such as financial models that
use market data. These valuation techniques maximize the use of observable market data where available and
rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument
are observable, the instrument is included in Level 2. These include corporate bonds, thinly traded listed
equities and derivatives, over-the-counter derivatives and private equities.

The Company uses a variety of methods and makes assumptions that are based on market conditions existing at
each year-end date. Valuation techniques used for non-standardized financial instruments such as options and
other over-the-counter derivatives include the use of comparable recent arm’s length transactions, reference to
other instruments that are substantially the same, discounted cash flow analyses, option-pricing models and
other valuation techniques commonly used by market participants, making maximum use of market inputs and
relying as little as possible on entity-specific inputs:

58Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

Description

Equity securities
Private equities

Debt securities
Derivatives

Valuation technique

Quoted market prices or broker quotes for similar instruments
Valuation techniques or net asset value
based on observable inputs
Quoted market prices or broker quotes for similar instruments
Quoted market prices or broker quotes for similar instruments

Financial instruments in Level 3

Investments classified in Level 3 have significant unobservable inputs, as they trade infrequently. Level 3
instruments consist of unlisted equity investments, debt securities and real estate investments. As observable
prices are not available for these securities, the Company has used valuation techniques to derive the fair value.

Level 3 valuations are reviewed by the Company’s chief financial officer (CFO), who reports directly to the
Board on a quarterly basis in line with the Company’s reporting dates. The Board considers the appropriateness
of the valuation models and inputs used. On an annual basis, close to the year-end date, the Company obtains
independent, third party appraisals to determine the fair value of the Company’s most significant Level 3
holdings. The Company’s CFO reviews the results of the independent valuations. Emphasis is placed on the
valuation model used to determine its appropriateness, the assumptions made to determine whether it is
consistent with the nature of the investment, and market conditions and inputs such as cash flow and discount
rates to determine reasonableness.

As at December 31, 2019 and 2018, Level 3 instruments are in various entities and industries.

Real estate investments are disclosed in more detail in note 8, comprising investments in private real estate
companies and in real estate income trusts and partnerships. The real estate companies are involved with
various types of buildings in different geographical locations. For the main Level 3 instruments, the Company
relied on appraisals carried out by independent third party valuators. There was no established market for any
of these investments, so the most likely scenario is a disposal of the underlying assets. For the investments in
real estate income trusts and partnerships, the Company relied mainly on audited financial statements, valuing
the assets at fair value. The most likely scenario is an eventual sale of the underlying properties and the
subsequent distribution to the holders.

59Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

The following tables present the changes in Level 3 instruments:

As at December 31, 2018

Transferred out of Level 3 i)
Purchases ii)
Sales proceeds
Distributions
Gains (losses) recognized in net income

On financial instruments held at end of year
On financial instruments disposed of during the year

Currency translation adjustments

As at December 31, 2019

As at December 31, 2017

Transferred out of Level 3 i)
Purchases ii)
Sales proceeds
Distributions
Gains (losses) recognized in net income

On financial instruments held at end of year
On financial instruments disposed of during the year

Currency translation adjustments

As at December 31, 2018

Real estate
investments
$

Unlisted
securities
$

2019

Total
$

41,161

88,606

129,767

-
12,917

(7,813)

7,298
-

(2,235)

(20,093)
69,962
(1,488)
(383)

(8,930)
1,488
(5,103)

(20,093)
82,879
(1,488)
(8,196)

(1,632)
1,488
(7,338)

51,328

124,059

175,387

Real estate
investments
$

Unlisted
securities
$

2018

Total
$

30,789

72,991

103,780

-
14,869
-

(9,663)

2,088
-
3,078

(30,626)
56,209
(13,556)
(252)

(3,545)
540
6,845

(30,626)
71,078
(13,556)
(9,915)

(1,457)
540
9,923

41,161

88,606

129,767

ii.

During the year the company’s private holdings in equity securities in the financial services industry
were transferred out of level 3 pursuant to public offerings. The fair value of these investments became
available through quotes prices from the active markets however due to restrictions on trading they
have been classified as level 2.

During the year the company made investments in private holdings in the cannabis and biotechnology
industries totaling $61,621; (2018 financial and biotechnology industries – $55,288). There is no
established market for these holdings. The most likely disposal of these investments is through a
disposition or a listing of these holdings on a public stock exchange.

60Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

The table below presents the investments whose fair values are measured using valuation techniques classified
as Level 3 as at December 31, 2019.

Description

Unlisted private equity

holdings
Pharmaceuticals
-Equity securities

Unlisted private equity

holdings
Pharmaceuticals
-Convertible Pref

Unlisted private equity

holdings
Pharmaceuticals

-Equity securities

Unlisted private equity
holdings –
-Financial services

Unlisted private equity
holdings –
Food and beverage

-Equity securities

Unlisted private equity
holdings –
Food and beverage

-Convertible bonds

Unlisted private equity
holdings –
Food and beverage

-Convertible bonds

Unlisted private equity
holdings –
Food and beverage

-Convertible bonds

Unlisted private equity
Holdings
Software developers

Unlisted private equity
holdings –
Other

Fair value
(rounded)
2019
$

Valuation
technique

Significant
unobservable
inputs

Weighted
average
input

Reasonably
possible
shifts +/−

Change
in value
$

Backsolve
option pricing
model

13,000

30,000

Recent
transaction

Backsolve
option pricing

Expected volatility

80%

10%

+/-300

none

3,000

mode Expected volatility

60%

10%

+/-130

9,000

Recent
transaction

none

13,000

22,000

5,000

20,000

1,000

8,000

Comparable
company
approach

Revenue estimate
Revenue multiple
EBITA multiple

31,474
1.97
15.03

$1M
10%
10%

+/-500
+/-1,000
+/-500

Mark-to-Model
Comparable
Bond
Methodologies

Comparable
company
approach

Recent
transaction

Discounted
cash flows

Recent
transactions

Discount rate

24%

+/-288

Discount rate

7.3%

+/-52

Merger arbitration
adjustment
Liquidity discount

Revenue estimate
Revenue multiple

10%
7.7%

1,000
7.4

25%
25%

200
10%

+/-250
+/-450

+/-200
+/-200

none

Discount rate 8.1%-9.7%
5-10 years
Capitalization rate 4.5%-7.4%

Cash flow term

The inputs disclosed cover the range
used for all the real estate holdings in
the REITs. A general analysis of the
change in inputs would not reveal a
fair change in value.

none

REITs and partnerships

15,000

REITs and partnerships

18,000

Real estate investments in
private entities

18,000

Capitalization
model

Rate of return

7.0%

1.0%

+3,000
-2,200

Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

The table below presents the investments whose fair values are measured using valuation techniques classified
as Level 3 as at December 31, 2018.

Description

Unlisted private equity

holdings
Pharmaceuticals
-Equity securities

Unlisted private equity
holdings –
Pharmaceuticals
-Convertible Pref

Unlisted private equity
holdings –
Financial services

Unlisted private equity
holdings –
Food and beverage

Unlisted private equity
holdings –
Software developers
-Convertible bonds

Unlisted private equity
holdings –
Other

REITs and partnerships

Fair value
(rounded)
2018
$

Valuation
technique

Significant
unobservable
inputs

Weighted
average
input

Reasonably
possible
shifts +/−

Change
in value
$

13,500

Comparable
company
approach

Average change in
indices
Median change in
benchmark market
cap

-1.15%

50%

+/-40

-33.94%

10%

+/-190

27,300

28,000

14,000

Recent
Transaction

Comparable
company
approach
Recent
Transaction

Comparable
company
approach

3,000

Black Scholes
option pricing

2,800

9,700

Comparable
company
approach

Discounted
cash flows

none

Average market
cap/BV

none

1.44

Revenue estimate

$24.911M

Revenue multiple
EBITA multiple

1.83
12.74

10%

+/-1,900

$1M

10%
10%

+/-500

+/-700
+/-600

+/-45
+/-100
+/-100
+/-35

YTM
Revenue estimate
Revenue Multiple
Volatility

41.043%
$1.280M
4.69
37.66%

20%
$.250M
10%
20%

Revenue estimate
Revenue multiple

$92.550M
0.89

$5M
10%

+/-40
+/-75

Discount rate 8.0%-18.2%
Capitalization

rate 4.5%-8.5%

Discounted
cash flow term

Rental
growth rate

5-10 years

0%- 10%

The REITs and partnerships
consist of numerous
investments in commercial and
residential properties, each
with different unobservable
inputs tailored to best estimate
their fair value. The inputs
disclosed cover the range used
for all the real estate holdings
in the REITs. A general
analysis of the change in inputs
would not reveal a fair change
in value.

Real estate investments in

private entities

19,500

12,000

Recent
transactions

Capitalization
model

none

Rate of return

7.0%

1.0%

+2,300
-1,700

Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

Assets and liabilities not carried at fair value but for which fair value is disclosed

The carrying amount of cash and cash equivalents, restricted short-term investments, due from brokers, bank
advances, credit facilities, trade and other payables, due to brokers, redemptions payable, and subscriptions
received in advance represent a reasonable approximation of their respective fair value due to their short-term
nature.

17 Disclosure of the composition of the Company

Principal subsidiaries and structured entities

The consolidated financial statements include the accounts of the Company and all of its subsidiaries and
structured entities as at December 31, 2019 and 2018. The principal operating subsidiaries and structured
entities and their activities are as follows.

Name

Country of
incorporation

Senvest Global (KY) L.P.
Senvest Global L.P.

RIMA Senvest Master Fund GP, L.L.C.

Cayman Islands
United States
United States

Senvest Technology Partners GP,

United States

L.L.C.

Argentina Capital Inc.
Pennsylvania Properties Inc.
Senvest Equities Inc.
Senvest Fund Management Inc.
Senvest Management L.L.C.

Senvest Master Fund, L.P.
Senvest Technology Partners Master

Fund, L.P.

Senvest Cyprus Recovery
Investment Fund, L.P.

Coldstream SL

Canada
United States
Canada
United States
United States

Cayman Islands

Cayman Islands
Spain

% Interest held

2019

2018

100
100

100
100
100
-

73
100

100
100
100
100

73
100

Nature of
business

Investment company
Investment company
General partner of Senvest
Master Fund, L.P.
General partner of
Senvest Technology Partners
Master Fund L.P.
Real estate
Real estate
Investment company
Investment company
Investment manager
of the Funds
Investment fund

Investment fund

Investment fund
Real estate

The total non-controlling interest for the year is a gain of $8,937; (2018 – loss of $15,112), which is mostly
attributed to Senvest Management L.L.C. The change in redemption amount of liability for redeemable units for
the year is an increase of $186,254; (2018 – a decrease of $232,312), all of which is attributed to the Funds.

During the year the Company’s subsidiary, Senvest Fund Management Inc. was dissolved and liquidated.

63Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

Set out below is the summarized financial information for each subsidiary that has non-controlling interest
(NCI) that is material to the group. The amounts disclosed are before inter-company eliminations.

Summarized balance sheets

Senvest Management L.L.C.

Assets
Liabilities

Net assets

Accumulated NCI

2019
$

13,313
13,055

258

The participation owned by the parent company is reflected as a liability in the subsidiary’s financial
statements.

Summarized statements of comprehensive income (loss)

Revenue and net investment gains
Expenses

Net income (loss)
Other comprehensive income (loss)

Comprehensive income (loss)

Net income (loss) allocated to NCI

2019
$

19,139
12,480

6,659
(2,191)

4,468

6,659

2018
$

96,954
7,087

89,867

2018
$

(9,698)
12,969

(22,667)
8,250

(14,417)

(22,667)

The participation allocated to the parent company is reflected as a part of the statement of income (loss) in the
subsidiary’s financial statements.

Distribution paid to NCI

Summarized statements of cash flows

Cash used in operating activities
Cash used in financing activities

Net decrease in cash and cash equivalents

2019
$

90,457

2019
$

(18)
-

(18)

2018
$

(1,902)
-

(1,902)

On April 1 2019, Senvest Management L.L.C. redeemed, on an in-kind basis, a net amount of $90,457 of its
equity in Senvest Master Fund L.P. and Senvest Technology Master Fund L.P. and the executive minority owner
of Senvest Management L.L.C. redeemed a like amount from its equity. The $90,457 redemption was invested
back in Senvest Master Fund L.P. and Senvest Technology Master Fund L.P. under the executive’s personal
name. As such there was a reallocation on the Company’s consolidated statement of financial position out of
Non-controlling interest and into Liability for redeemable units. There was no cash withdrawal out of any of the

64
Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

entities as the net effect was solely a transfer of ownership of the investments in Senvest Master Fund L.P. and
Senvest Technology Partners L.P. from Senvest Management L.L.C. to its executive minority owner. The total
equity attributable to common shareholders of the Company remained unchanged as a result of this
transaction.

No guarantees or collateral were provided to the subsidiaries and structured entities except for the lease
liabilities of Senvest Management L.L.C. The amounts in question have been included in trade and other
payables, note 11(b). The Company is not liable for any other contingent liabilities arising in its subsidiaries and
structured entities and will not settle any other liabilities on their behalf.

18 Related party transactions

Key management compensation

Key management includes the Board, the president and chief executive officer, the vice-president, the
secretary-treasurer and the CFO. The compensation paid or payable to key management for employee services
is as follows:

Salaries and other short-term employee benefits
Post-employment benefits – Defined contribution

Management fees

2019
$

8,557
27

8,584

2018
$

7,681
27

7,708

Certain employees and related parties that have invested in the Funds do not pay management fees that are
charged to outside investors. The amount invested by these participants in 2019 totals $191,377
(2018 – $86,727).

19 Commitments

On December 20, 2019, the Company entered into an equity financing commitment. Per the equity financing
commitment letter and the Stock Purchase Agreement (the “Purchase Agreement”), the Investors agreed and
committed to contribute, directedly or indirectly, an aggregate amount of cash equal to $50,000 to fund a
portion, along with other committed capital providers, of the following amounts at closing: (a) the obligations
under the Purchase Agreement to pay the aggregate purchase price and (b) the payment of any fees and expenses
in connection with the closing and the debt financing, pursuant to and in accordance with the Purchase
Agreement. In addition, per the equity financing commitment letter, the parties have agreed that the Investors
shall not be obligated to contribute, purchase equity or debt, or otherwise provide funds in any amount in excess
of its commitment.

In addition to the above, as required by certain of the Company’s other equity investments and other
holdings, the Company has capital commitments of $10,627 and has real estate equity investment capital
commitments of $9,244.

65Senvest Capital Inc.
Notes to Consolidated Financial Statements
December 31, 2019 and 2018

(in thousands of Canadian dollars unless otherwise stated)

20 Segmented and geographical information

The Company operates in a single reportable segment, which is the management of its own investments and
those of the Funds.

The following tables summarize the Company’s revenues by geographical area for the years ended December 31:

United
States
$

14,295
12,157
745

United
States
$

12,543
7,573
106

Canada
$

European
Union
$

Argentina
$

Other
$

1,040
614
526

4,724
234
1,796

-
237
-

-
15
-

Canada
$

European
Union
$

Argentina
$

Other
$

1,184
1,422
442

2,261
671
702

-
216
-

3
873
-

2019

Total
$

20,059
13,257
3,067

2018

Total
$

15,991
10,755
1,250

Revenue
Interest income
Dividend income
Other income

Subsequent Events

Since the latter part of February 2020, the financial markets have been very volatile in response to the
developing COVID-19 pandemic and the equity markets in particular have experienced significant declines and
the fixed income markets have experienced significant volatility due to concerns about credit risk and liquidity
amongst others. The Company is monitoring the situation and its potential impact on itself and on the Funds in
particular. While the extent and duration of the impact of COVID-19 on global and local economies, financial
markets, and sectors and issuers in which the Company invests directly and through the Funds is uncertain at
this point, the outbreak has the potential to adversely affect the value of the consolidated portfolios, a portion of
which will be compensated by proportionate changes in the liability for redeemable units.

66Senvest Capital Inc.
Annual Report
December 31, 2019

Board of Directors

Officers

Victor Mashaal
Chairman of the Board & President

Frank Daniel
Secretary-Treasurer

Richard Mashaal
Vice-President

George Malikotsis
Vice-President, Finance

Senvest Capital Inc.
1000 Sherbrooke street West
Suite 2400
Montréal (Québec) H3A 3G4
(514) 281-8082

Victor Mashaal
Chairman of the Board & President
Senvest Capital Inc.

*Ronald G. Assaf
Business Executive

Frank Daniel
Secretary-Treasurer
Senvest Capital Inc.

*David E. Basner
Business Executive

*Jeffrey L. Jonas
Partner, Brown Rudnick L.L.P.

Richard Mashaal
Vice-President
Senvest Capital Inc.

*Member of the Audit Committee

Investor Information

AUDITORS
PricewaterhouseCoopers L.L.P.
Montréal (Canada)

LEGAL COUNSEL
Howard M. Levine
Blake, Cassels & Graydon L.L.P.
1 Place Ville-Marie
Suite 3000
Montréal (Québec) H3B 4N8

TRANSFER AGENT & REGISTRAR
Computershare Trust Company of Canada
1500 Robert-Bourassa Boulevard
7th Floor
Montréal (Québec) H3A 3S8

Computershare Trust Company of Canada
100 University Street
Toronto (Ontario) M5J 2Yl